Frost and Sullivan expects that transformation in the key areas of capacity augmentation and distribution grid automation will drive the transmission and distribution sector in the Asia Pacific region for the year.
2014: Investments in T&D Network Rides Heavily on Expanding Capacity Additions
Asia Pacific's growing demand for electricity is likely to increase power generation by 4.1% in 2014. This needs to be actively supplemented by Transmission & Distribution (T&D) grid expansion to ensure reliable power supply. The majority of the T&D investments are likely to be concentrated in Southeast Asia in 2014.
The growing economies such as Vietnam, Indonesia and Myanmar are likely to focus more on the transmission grid expansion and reliability. Rural electrification and increasing the overall electrification ratio will be their top priority.
"For instance, as a result of favourable regulations, the Vietnam power T&D sector opens up several opportunities for private investors in 2014. During this period, capital will be spent mostly on building and enhancing the 220 kV and 500 kV network. Investments are also expected in the 110 kV network to strengthen the links between the transmission and the distribution system," said Avanthika Satheesh, Senior Research Analyst, Energy & Environment Practice, Frost & Sullivan Asia Pacific.
2014: Electricity Tariff is on the Upswing Especially in Southeast Asia
"As Singapore moves towards the cheaper and diversified LNG sources of fuel for power generation, it is expected that its wholesale market electricity prices are likely to fall by end of 2014. However, its current electricity prices are already one of the highest in the region, due to its market based pricing model," Satheesh noted.
"For the rest of the countries in the Asia Pacific region such as Thailand, Vietnam and South Korea, electricity tariffs are expected to rise due to reasons such as variations in fuel adjustment rates, rise in crude oil prices and in certain economies, currency depreciation," she added.
One exception will be Japan, where electricity prices are expected to decrease in 2014 is Japan. At present, electricity tariffs in Japan are very high due to the shortfall of electricity after the closure of nuclear power plants. However, prices are most likely to decline by the end of 2014 as new coal power plants and LNG plants are likely to get commissioned.
2014: Cash Crunch Situation faced by Utilities in Australia and Japan Likely to Improve
The T&D electrical equipment market has been on the decline in Japan as the utility companies have reduced their capital and operational expenditure drastically to meet the power demand, by buying expensive fossil fuels for thermal power generation. In 2014, this situation should improve as the country is likely to start operating two new coal fired power plants and twelve LNG fired power plants by the end of 2014.
The trade-off between reliability and high capital expenditure is a challenge faced by the utility companies and regulators in the last couple of years in Australia. It is reported that in Australia, the average age of T&D system assets is between 30 and 35 years. This calls for continuous replacement of assets to maintain the health of the grid. The market had experienced a drastic fall of capital expenditure by utility companies in 2013, as utility companies were not allowed to pass on the bills to the consumers by the regulation authority.
The capital expenditure in T&D sector is likely to marginally improve in 2014 by 3.7% which will be AUD 9.98 billion. CAPEX is likely to increase as a result of shifting focus to replacement with a slow decrease in augmentation expenditure. However, this spending will still be much lesser than the capital spending in 2012.
2014: Smart-meter Installations and Distribution Grid Automation Takes a Major Part of Smart Grid Investments
"Several smart grid test-beds were developed across the Asia Pacific region in 2013. Projects in Japan, Taiwan, South Korea, Singapore, and Malaysia are in the various stages of testing," explained Satheesh.
For 2014, key investments in the sector would be focused on smart-meter installations by regional electricity utilities and implementation of tested and approved smart technologies in selected smart cities. Key highlights include:
In Southeast Asia, total electricity meter installation would reach 160 million units, and total smart meter penetration rate will be around 2.5% by end of 2014.
Widespread smart-meter installations are expected to kick-start in Thailand by PEA in 2014. The Smart Grid development project (2013-2017, Thailand) focuses on Substation Automation, renewable energy integration and battery storage.
In Vietnam, smart distribution automation will be initiated in 2014 by the Danang Power Company.
Thailand has immediate opportunities in the smart metering in the next year with pilot and trial projects in the PEA regions.
2014: No Major Initiatives on Strengthening ASEAN Grid
The concept of continentalisation, i.e. greater integration between supply and demand in the region, was planned and the ambitious ASEAN grid was chartered. However, not much progression on this major initiative is expected to happen during 2014.
Technical challenges and business regulations are the key challenges that need to be urgently addressed by the countries involved in developing the ASEAN grid.
