market evolution: the situation in asia pacific
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Market Evolution: The Situation in Asia Pacific. Allan Dawson Chief Executive Officer Energy Market Company. Agenda. Asia - hot spot of global growth, energy investment and change Australia and New Zealand more mature electricity markets Regional overview China, India Japan, Korea - PowerPoint PPT PresentationTRANSCRIPT
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Allan DawsonChief Executive Officer
Energy Market Company
Market Evolution: The Situation in Asia Pacific
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Agenda
Asia - hot spot of global growth, energy investment and change
Australia and New Zealand more mature electricity markets
Regional overview China, India Japan, Korea Philippines, Indonesia, Singapore Australia and New Zealand
Summary of key themes
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Asia - Overview
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Asia: Hot spot of growth
Asia (especially India and China) are key global growth areas
Total energy consumption is high but per capita consumption is low
Developmental disparities within the region Electricity sector reform is progressing … slowly
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Investment RequirementsRegions 2001-2010 2011-2020 2021-2030
Total 2001-2030
OECD North America OECD EuropeOECD Pacific
1,062650381
1,179717333
1,247697287
3,4882,0641,000
Total OECD 2,903 2,228 2,231 6,552
RussiaOther transition
economies
269168
391221
389233
1,050622
Total transition economies
438 612 622 1,672
ChinaOther Asia (including
India)Middle EastAfricaLatin America
578489268248339
787689332392440
888876444567558
2,2532,0551,0441,2081,337
Total developing countries
1,923 2,641 3,332 7,897
Inter-regional transportation
97 129 134 360
Total World 4,551 5,610 6,320 16,481
Annual Average 455 561 632 549
Source: International Energy Agency (IEA) World Energy Investment Outlook 2003
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Electricity Investment
Source: International Energy Agency (IEA) World Energy Investment Outlook 2003
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Electricity Market Reform
Diversity in regional development reflected in: Level of electrification Quality and reliability of supply Level of subsidies
Most nations are somewhere along the reform path: Reforming legislation Establishing new institutions and markets Introducing competition to supply and demand
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Electricity Market Reform
Main driver for liberalisation is encouraging private sector participation and attracting investment
Another driver is improving country’s competitiveness by introducing competition into a key sector of economy
There is also desire to reform state-owned incumbents to improve efficiency
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China
Industry overview Large and growing economy Electricity market is second largest after US Installed generation capacity in excess of 350GW but
per capita consumption low Facing supply shortage and associated blackouts Transmission system is fragmented Surplus supply cannot be moved to where it is needed
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China
Investment requirements US$1.9 trillion investment required for electricity
generation by 2030 Significant investment to build transmission corridors
to move electricity to energy-hungry regions Major supply reliability issues Central government has put in measures to help
taper investment in high energy consuming industries
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China
Reforms: Pilots Trial market project in 1999
5 provinces + Shanghai Objective to allow separation of generation and
grid interests and encourage competitive supply The experiment was short lived in all pilot areas
because: Increased demand in 2001 that absorbed excess
supply Monopoly utilities created unfair competition
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ChinaReforms: Next wave State Power Corp was broken up in 2002 into 5 generation
companies and 2 grid companies State regulator established in 2003 – State Electric
Regulatory Commission Recent unexpected power shortages have led government to
consider market orientated policies to attract new investment The measures the government is pursuing or has
implemented include: Regulatory changes Electricity pricing reform Investment reform
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India
Industry overview 100GW of generation capacity by 2012 Private participation is essential if growth targets to be
met Quality, access, theft and subsidies are big issues Industrial consumers pay the bulk of the money collected Little price signals or incentives for efficient production
and transmission or investment State corporations dominate the sector They are in various stages of being disaggregated and
will provide building blocks for a market
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India
Reforms: Corporatisation 1990s – Corporatisation of State Electricity Supply
Boards Structured so they could be broken up into potentially
competing generation, transmission and distribution companies
Private sector participation in supply
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IndiaReforms - Electricity Act 2003 Eases requirements for private entry into generation Opens transmission and distribution to private participation Requires all transmission utilities to provide non-
discriminatory open access Proposes a new tariff framework based on competitive
bidding Designed to encourage competition in electricity supply
but basic framework for power markets is yet to be determined
Requires contracts for new projects to be determined by competitive bidding
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Japan
Sector dominated by 9 regional franchises J-Power only major player that operates in multiple
regions Large consumers are contestable Mid-sized consumers will become contestable in 2005 Full deregulation is scheduled for 2008 New energy exchange will be established so generators
can price electricity sold onto the national grid IPO of J-Power is the biggest in Japan for 6 years
(US$3.4b)
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Korea
KPX established in 2001 to operate the one-way bidding pool based on marginal costs and capacity payments
Marginal costs are determined by a committee, so generators can submit only capacity offers, not price offers
A two-way bidding pool (TWBP) has not yet been established as planned
Government is rethinking plan to introduce competition in the power distribution sector
Genco privitisation programme well behind schedule
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Philippines Legislation passed in 2001 Renegotiation of PPAs Regulator and market operator established Market rules written and systems currently being
developed and implemented Net pool with distributed utilities required to trade at least
10% of its total demand from spot market Locational marginal pricing methodology Expect market trials to commence in June/July 2005 and
commercial operations in December 2005/ January 2006 Process to sell transmission operator and gencos
continues
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Indonesia
Legislation passed 2002 Tariffs to be increased to economic levels by 2005 Requirement to establish a trial market by 2007 Renegotiation of PPAs
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Singapore
Market liberalisation programme began in 1995 Reform designed to promote the supply of
competitively-priced electricity New arrangements for wholesale trading commenced
on 1 January 2003 Prices established every half-hour for approximately
400 locations Recent participation of demand side in reserves market Retail contestability for large and medium sized
customers Full retail competition deferred at this stage
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Key themes in Asia
Investment requirements are astonishing Electricity market reform is progressing …slowly Reform delays in most jurisdictions About face by Thailand and Malaysia Investment climate for asset sales yet to improve Attention also focused on energy security and
diversification due to oil price increase If oil prices and shortages bite, focus on reform likely
to resume
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Australia
NEM operating since 1998 Zonal market but now considering nodal pricing Bass link will allow participation by Tasmania in 2005 Reform underway in Western Australia FRC - 5.5m customers are contestable Likely changes to regulatory structure
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New Zealand
NZEM operating since 1996 Establishment of Electricity Commission represents a
major regulatory shift Minister and Commission have strong involvement now
whereas before it was a voluntary self-regulated market Implications:
Mandatory pool ‘Dry-year’ supply contracted by Commission making
it a regulator and market participant Commission likely to adopt new approaches for
transmission investment and transmission pricing