Large gas-fired power plants have a future in Southeast Asia. As countries continue on their journey to full electrification and more sustainable operations, combined cycle facilities will play a critical role in stabilizing ever-more complex grids, complementing variable renewable energy assets and, in some cases, transitioning to hydrogen as a zero-emissions fuel source over the long term.
While the region’s power industry clearly intends to improve levels of environmental sustainability, the pace of transition away from baseload coal and gas-fired power generation will be challenging. Operational and financial sustainability factors also must be managed head-on.
When asked about the biggest threats to grid operations and performance, the top four concerns reveal underlying operational issues that go beyond financial challenges post-COVID-19. Network capacity not keeping pace with demand, underinvestment in more reliable transmission networks, introduction of too much intermittent renewable energy and not enough energy storage capacity are all top of mind for the industry in the region (Figure 8). While many countries around Southeast Asia have done an incredible job over the past 20 years narrowing the electrification gap, these findings point to a greater focus on grid stabilization issues in the years ahead.
The future of gas and coal
This is where gas-fired generation plays a critical role regionally. When asked about the future of fossil-fuel generation beyond 2035, two-thirds of all respondents believe gas will feature as a significant component of the grid. With financing an ever-increasing challenge, more than 80 percent do not see any role for coal after 2035.
Before we get to 2035, however, gas undoubtedly will remain prominent. Although domestic gas production and supply is declining in the region, the long-term cost model for liquefied natural gas (LNG) importation as a fuel source looks favorable. A lot of capital is also tied-up in Southeast Asia’s relatively young gas-fired power infrastructure. The large majority of the region’s 90-plus GW of facilities are well within their operational lifespans with approximately a one-third of generation capacity less than 10 years old. Investors will seek to improve the returns and revenues from these facilities and extend their lifecycle.
Investments expected to improve existing asset efficiencies
In the face of impacts from COVID-19, more industry respondents believe that investment will be reprioritized to existing assets (36 percent) compared to new assets (30 percent) or deferment (24 percent). In addition, two-thirds of respondents see COVID-19 having no impact on the generation mix or that the changes to the mix will be slowed; the transition to renewables is unlikely to outstrip what will be a continued demand for baseload gas-fired generation.
This bodes well for investment in existing gas-fired facilities and does not dissuade against investment in new gas-fired facilities such as integrated LNG-to-power facilities. Electric utilities and independent power producers will be looking for increased operational efficiency gains, long-term cost savings and new revenue sources post-pandemic, all while maintaining an important focus on a more balanced generation portfolio. With expertise in both LNG and gas power technologies, Black & Veatch is uniquely positioned to help clients achieve maximum returns on investments by providing integrated LNG-to-power solutions.
Gas plus storage will increase operational efficiencies and revenues
Gas turbines have long played a central role in helping supply meet demand, given their ability to quickly flex, ramping up or down following demand peaks and valleys. Highly flexible gas turbine plants offer unlimited energy storage while on-line. Investing in additional battery energy
storage systems (BESS) at existing or new assets will enhance this capability further for non-spinning reserve support, just as variable load and generation from more wind and solar begins impacting the grid.
Combined cycle facilities augmented with BESS will function as a new kind of reserve that springs to life immediately to smooth and optimize turbine performance levels. This will translate to less turbine starts and stops, leading to longer operating life (measures in years) and reduced wear and tear (measured in lower costs).
Attractive for owners is that when not called to operate for the gas turbine, the BESS also can participate in an ancillary services market for grid support, providing power quality services, frequency regulation, and primary and secondary frequency reserves. Such future capabilities depend on local electricity market rules and may require potential reform, primed for enhancement as we emerge from the pandemic.
Either way, we expect owners of gas-fired facilities to explore retrofitting assets with BESS while also considering converting simple- to combined-cycle configurations or repowering facilities with more advanced gas turbines that extend the life of the facility, especially given these facilities’ role in grid resilience and stabilization over the mid- to long-term. Additionally, opportunities exist for asset management services that not only monitor but diagnose opportunities to improve fuel performance, operations and maintenance of generating assets.
Hydrogen as a fuel source for generation
The global decarbonization drive has intensified in recent years. Natural gas still is viewed as an important bridging fuel on this journey but, in recent years, green and blue hydrogen have emerged as a potential replacement fuel that would take advantage of existing infrastructure. “Green” hydrogen is produced through the electrolysis of water using an electric from a carbon free source such as renewable, nuclear or hydroelectric power. “Blue” hydrogen is produced through natural gas reforming with carbon capture. With many original equipment manufacturers developing turbines to use increasingly efficient levels of hydrogen and pioneering work underway in select locations — such as Black & Veatch’s role on the United States’ first major hydrogen generation conversion project — optimism exists about hydrogen’s role in Southeast Asia.
Sixty-two percent of the survey respondents believe hydrogen will take off as a clean and affordable alternative to existing gas generation. A healthy 28 percent remain on the fence, meaning that understanding how to convert gas facilities and its feasibility will be high on owners’ agendas (Figure 12). Not one respondent believed there was definitely no future for hydrogen.
Similar to the process that will be necessary to integrate sustainable emerging technologies, these journeys will mandate working with a variety of stakeholders across the oil, gas, chemical and transportation industries in new ways. Gas has a future in Southeast Asia’s electric industry, but the industry must keep pace with change and evolve and improve the operationally effectiveness of its assets.
About the Author
Lee Mather is vice president and director of Black & Veatch’s global conventional generation power business in Asia. Based in Indonesia, Mather has more than 20 years of experience working for Black & Veatch across multiple global locations. He oversees the growth of Black & Veatch’s services and EPC solutions for power generation facilities in the region.