 |
Table of Contents |
 |
|
|
Sixth Meeting of the Experts Group on Power Interconnection and Trade (EGP-6)
Greater Mekong Subregion
Hanoi, Socialist Republic of Viet Nam (SRV)
13-14 December 2001
Summary of Proceedings
Introduction
1. The Sixth Meeting of the Experts Group on Power Interconnection and Trade (EGP-6), was held in Hanoi, Socialist Republic of Viet Nam (SRV), on 13-14 December 2001. The Meeting was co-organized by the International Cooperation Department (ICD), Ministry of Industry (MOI), SRV, and the Asian Development Bank (ADB).
2. The participants included delegations from Kingdom of Cambodia, the People's Republic of China (PRC), the Lao People's Democratic Republic (Lao PDR), the Union of Myanmar, the Kingdom of Thailand, and the Socialist Republic of Viet Nam. Representatives from the World Bank, Mekong River Commission Secretariat (MRCS), ASEAN Centre for Energy (ACE), Pritchard Udovenya International Lawyers, Tokyo Electric Power Co. (TEPCO), the Advisory Panel, Norconsult and ADB also attended. The list of participants is attached as Appendix 1.
3. The Meeting was devoted largely to Session II, the presentation and review of Norconsult's Draft Final Report for the Study on the Regional Indicative Master Plan on Power Interconnection in the GMS (the "Master Plan Study"). Session III discussed the Draft Work Plan of the EGP as submitted by EGP members.
4. The Agenda and Program of the Meeting is attached as Appendix 2.
I. Opening Session
5. Mr. Prutichai Chonglertvanichkul, Assistant Director of EGAT (Thailand) and the Chairman of the EGP, introduced the distinguished guests of the EGP-6 meeting to deliver the opening remarks, namely, Dr. Tran Minh Huan, Director General, ICD-MOI, and Mr. Khalid Rahman, Manager, Energy Division (West), ADB.
6. Dr. Tran Minh Huan warmly welcomed the participants to the Meeting and expressed appreciation to ADB for financial support to the GMS Program, and to the EGP members for their contributions to advance energy cooperation in the GMS. He looked forward to the planned activities of the 6th EGP meeting, namely the review of the Master Plan draft final report and the discussion of the EGP Work Plan to 2004.
7. Mr. Khalid Rahman recalled the activities in the last EGP meeting in Kunming, namely, the review of the Interim Report of the Master Plan Study, and the adoption of the Inter-Governmental Agreement on Power Trade (IGA-PT). He extended deep condolences to the family and colleagues on the passing of Mr. Harald Lillefjaere, the team leader of the consultants. He then outlined the main tasks of the EGP-6 meeting, that is, to review the findings of the draft final report of the Master Plan, and to discuss the EGP Work Plan to 2004. He noted that the recent GMS Ministerial Conference held in Yangon emphasized the pivotal role of infrastructure links in optimizing regional development, and the development of the interconnection Master Plan is an essential step in this direction. He thanked the EGP members and panel of experts for providing guidance to the consultants, which should help prioritize potential interconnection projects. He concluded by thanking the Government of the SRV for hosting the meeting to further enhance cooperation and power trade within the GMS.
Objectives of the Meeting
8. Mr. Prutichai welcomed the participants and thanked the Government of SRV for hosting the meeting. He also thanked ADB and WB for continued support for EGP activities. He enumerated the activities of the EGP in the promotion of power interconnection and trade in the GMS. He mentioned the contributions of the EGP in the review of the Master Plan study, in the conduct of workshops to coordinate technical and commercial issues of interconnection, and in the review of the IGA. He outlined the plan for the EGP meeting, which was to discuss the draft final report of the Master Plan study, followed by discussion of the EGP work plan. He concluded with the remark that the proper power market model for the GMS should be one suitable to its regional tradition and culture.
II. Study on the Regional Indicative Master Plan on Power Interconnection in the GMS
Presentation of Overall View of the Study
9. Mr. Lars Fosser (Norconsult), team leader, presented an overall view of the Master Plan Study and outlined the sections covered in the review of the draft final report. He then introduced his Norconsult colleagues: Mr. Truls Holtedahl; Mr. Gerard Doorman; Mr. Asbjorn Vinjar; and Mr. Hans Woldstad. He enumerated the milestones in the preparation of the Master Plan study report leading to the Final Report.
Long Term Power Demand Forecasts
10. Mr. Truls Holtedahl presented a brief review of regional aspects related to the power markets in the GMS. This was before he indicated the main modifications in the country and the regional demand forecasts in the Final Report on power demand, as a result of the comments and discussions in Kunming last June. The main changes related to adjustments in load factors and the application of some country coincidence factors. For Yunnan Province there was also an increase in energy projections related to industrial demand. As a result of the changes, total regional demand in 2020 was up 2.2% compared to the forecast in the Draft Report. Based on load patterns for each country, the coincident sub-regional peak load has been calculated. Since the annual peak loads of each country did not occur simultaneously, interconnection of the power systems was expected to give savings in generating capacity investments for the sub-region. The calculations indicated a peak load reduction of about 2.5 %. He indicated that this figure would be subject to modifications up and down, as a result of further studies of country load patterns and an increased focus in the future on demand side management in the countries. He then enumerated lessons from forecasting experience in 45 countries.
11. The meeting comments focused on the soundness of the forecasting methodology used, and how this reflected changing consumer patterns. Among specific comments were the following:
- Mr. Sodavath (Cambodia) asked why there was marked increase in power sales in Cambodia from 1995 to 1996; Mr. Holtedahl explained this was due to a switch from self-generation by large users, to power supplied by Electricite du Cambodge (EdC).
- Mr. Hotte asked whether a forecasting methodology was developed for the study, and whether this was recommended for others. Mr. Holtedahl replied that the study used sector-wise open disaggregated method for all GMS countries except Myanmar; the forecasts were then adjusted based on historical, verifiable economic parameters.
- Mr. Rahman asked whether self-generation resulted in exclusion of consumers from demand forecast. Mr. Holtedahl said the forecast assumed gradual integration of self- generation in demand forecast.
Compatibility of Transmission Systems and Technical Coordination
12. Mr. Lars Fosser presented existing practices related to technical issues like design criteria, voltage and frequency control, generation control, protection and communication. He presented comparisons between GMS countries on the status of their existing technical practices, particularly on communication, protection and control. He noted that to be able to establish a joint design and operation of the interconnected network, some of these technical standards would have to be harmonised between the countries.
13. Among observations/ comments on the preceding presentation were the following:
- Mr. Hotte suggested refraining from mention of specific frequency (49 hz) since this could send a risky signal to isolated systems that the value is the same for them.
- Mr. Kim asked whether giving a range would help, but Mr. Hotte said this should be studied before specifying numbers.
- Mr. Prutichai asked whether a control center was needed for the interconnection between Thailand, Lao PDR and Viet Nam. Mr. Fosser replied that at the beginning of the interconnection this was unnecessary.
Generation Expansion Scenarios
14. Mr. Gerard Doorman first commented on the changes that have been made with respect to the generation expansion plans after the Interim Report. These included, among others, the revaluation of costs, elaboration of benefits of interconnections, inclusion of more Lao projects for export, and tentative use of gas in Cambodia. He continued with a brief review of the generation expansion candidates for each country. For Thailand, these include combined cycle gas turbine (ccgt) and coal, along with imports from Lao PDR and Myanmar. For Lao PDR, domestic needs would be met by small/ medium scale hydro, imports from Thailand, Viet Nam and Yunnan, and Independent Power Producer (IPP) offtake. Cambodia would rely on oil-fired thermal, domestic hydro, and IPP offtake. Viet Nam would rely on domestic hydro, coal based thermal, gas-fired ccgt's, and imports. Yunnan would have large and small-scale hydro and domestic coal. Myanmar was outside the study due to limited data, but the study included Thasang (3,600 MW) and Hugyee (300 MW) hydro for export to Thailand.
15. He explained the methodology regarding generation expansion planning. Afterwards, the resulting generation expansion plans for each scenario were presented. Two scenarios were presented for each country, the limited power cooperation and the extended power cooperation scenarios. The results of the simulations for each plan were shown and Mr. Doorman commented on these simulations. In the presentation, Mr. Doorman elaborated on the differences between the scenarios in a number of respects, like generation by fuel and gas demand. Among conclusions was that under extended cooperation, thermal generation in Thailand and Viet Nam would be replaced by hydro in other GMS countries. From 2005 to 2020, extended cooperation would result in substantial savings in thermal generation. Other savings included lower costs, reduced operating reserves, increased reliability and reduced climate gas emissions (the latter valued at $1.1 billion).
16. The meeting comments reflected a wide range of concerns, from the viability of thermal and gas plants, to the need for tighter screening of projects in the scenarios. Among specific comments on the preceding presentation were the following:
- Mr. Houmphone (Lao PDR) noted Lao PDR's planned hydropower export projects to Thailand, and received clarification on timetable of PPAs from the Thai delegates.
- Mr. Vy (Viet Nam) asked what would be done with old thermal plants whose marginal costs were high; Mr. Doorman replied that the old plants would decline in significance in the scenarios, with the addition of new plants.
- On the issue of gas prices, which varied widely by country in the scenarios, Mr. Hoda cited the various factors that affect prices, such as length of transmission from source.
- Mr. Lien expressed concern that the extended cooperation scenario was just a listing of possible generation candidates. He said there should be more benefit-cost consideration to further screen projects and to better match supply with demand.
- Mr. Hotte suggested that installed capacity be given more attention through provision of summary of installed capacity by country and by type of source on annual basis.
- On Mr. Rahman's query on accounting of benefits, Mr. Doorman noted that benefits from reduced reserve requirements were not accounted for.
- Mr. T. Lean (Cambodia) suggested interconnection not only with Viet Nam but also with Thailand and Lao PDR under the extended cooperation scenario.
- Mr. Hoda cited the need to revisit economic aspects of gas and oil supplies in the GMS that could affect power sources in the scenarios.
- Mr. Naim inquired if the presence of external/ private financing in power generation could reduce the need for interconnections. Mr. Doorman noted that other interconnection benefits such as reduced emissions should be considered.
- Mr. Crousillat (WB) noted that variations in the viability of certain projects could markedly change results of simulations.
- Mr. Chavalit (Thailand) gave a number of observations on the expansion plans for Thailand. One is that the assumed gas share of 75% was too high for Thailand (70% would be acceptable).
- Mr. Prutichai commented that there is no need to have common criteria for power generation expansion study for the GMS countries.
- Mr. Hoda suggested that the share of natural gas in thermal power generation in Viet Nam appeared low based on the current estimation of natural gas resources.
Transmission Development Scenarios
17. Mr. Hans Woldstad first presented the steps in transmission system planning and outlined the main tasks. He noted the load flow studies done for the two scenarios. He then presented the results of the transmission system planning for the two scenarios with and without future interconnections, for each GMS country. This was done in cooperation with Mr. Fosser, who presented the results of the power system dynamics/stability studies. Focus was placed on the differences in transmission system developments for the two scenarios. For Scenario 2, Extended Power Cooperation, transmission lines across borders (interconnections) were required to utilize generation resources in a neighboring country. The justification of establishing a sub-regional 500 kV grid was listed as follows:
- reduction in generation costs
- reduction in overall generation requirements due to non-coincident peak loads
- economies in transfers of energy
18. Mr. Woldstad noted the transmission system losses between the two scenarios for some generation projects. It was observed that generation expansion in Lao PDR (for export to Thailand and Viet Nam) and in Myanmar (for export to Thailand) would increase transmission loss differences up to 2015, but these losses would be reduced thereafter. Even if some generation projects apparently were somewhat more expensive than thermal candidates, they may still be listed for development if they reduce the cost dependency of fuels such as natural gas, coal and oil. The need for such robustness in power supply would therefore require interconnections.
19. Among observations/ comments on the preceding presentation were the following:
- Mr. Hotte observed that for a transmission development problem identified, a solution was usually assumed. It was not clear if these solutions were subjected to detailed analysis, including a comparison with possible alternatives. Mr. Woldstad explained the processes of arriving at alternatives/ solutions. Mr. Hotte suggested that these be explained and made explicit in the report.
- Mr. Prutichai observed that some transmission lines proposed would lead to areas with low demand based on forecasts. Also, when transmission alternatives proposed fell short, the study proposed new lines. He said a technical alternative could be considered, unless for technical reasons, the additional line was neeed.
- Mr. Tuan (Viet Nam) asked about the basis for the use of DC types in the proposed power interconnections, and the consultant should consider the necessity of the third 500 kV line from Pleiku to Tan Dinh substation (Viet Nam) which was excluded in the VN PDP. Mr. Hotte further observed possible inconsistencies in two scenarios and suggested the need to explain why a single or a double circuit is justified in certain cases.
- Mr. Houmphone (Lao PDR) requested the consultant to study the benefit that Lao PDR can get from the project transmission line Jinghong to Thailand via Lao PDR. He strongly recommended that a converter station be located in Luang Nam Tha (Lao PDR) for allowing the joint export of power from Northern Laos to Thailand.
Economic Comparison of Scenarios
20. Mr. Woldstad also presented the cost estimates of power interconnections. He first listed the cost categories and the methodology for determination of costs. He showed the components of generation system costs and the transmission system cost base. He noted that the study also quantified differences in transmission costs. Mr. Doorman then presented the estimated generation system costs for the two scenarios. He showed the total discounted costs with base case assumptions and at 10% and 14% discounted rates, with their sensitivities to cost increases. Additional benefits of extended cooperation, such as reduced operating reserves, increased reliability and reduced climate gas emissions were enumerated. He then presented conclusions on the overall economic viability of Extended Power Cooperation versus Limited Power Cooperation. The former also increases robustness against fuel price variations.
21. The meeting comments generally concerned estimation of additional benefits from the scenarios, which was not done in the study. Among specific comments were the following:
- Mr. Hoda noted that the economic savings of the extended cooperation scenario are marginal. He suggested consideration of other benefits such as reduced greenhouse gases, reduced power outages, etc. which could be substantial.
- Mr. Lien suggested that the report give a clearer picture of the benefits and costs for each scenario, and present more convincing case for the better scenario.
- Mr. Naim cautioned about the possibility of overstating the greenhouse gas benefits of hydro projects, given the latter's own environmental costs.
- Mr. Crousillat noted that the inclusion on non-economic generation projects resulted in sub-optimal plan, and hence, the case for an extended power exchange was unnecessarily weak. Corrections were proposed.
- Mr. Hoda suggested that as the economic benefits of Thasang hydropower project are significant, on which very little information is available, more detailed information needs to be obtained.
- Mr. Charpentier noted that benefits and costs could be identified for individual transmission projects. Mr. Doorman replied however that economic analysis could be done more readily on a system-wide basis. Mr. Hotte said that as a master plan, it would be more useful to look at projects as part of a viable system over a time frame.
- Mr. Rahman noted that a least cost generation plan for the region would affect the make-up of interconnection plans and would lead to completely different scenarios and attendant benefits. On Mr. Rahman's query, Mr. Doorman clarified that the generation plans were based on individual country plans and not developed as a stand alone independent plan.
Indicative Master Plan on Power Interconnection
22. Mr. Woldstad gave a summary of the Indicative Master Plan on Power Interconnections, comprising 13 transmission projects. He described briefly the main justification and risks associated with each project belonging to this plan.
23. The meeting noted concerns about how achievable the listed projects were. Among observations in this regard were as follows:
- It was suggested (Mr. Hoda) that generation projects also be presented side by side with the transmission projects in the master plan, particularly on commissioning dates, so that an overall view is reflected.
- Mr. Crousillat noted the complexities involved in master plan formulation, where there are multiple decision-makers. He suggested a reality check of certain components be done based on actual developments in the countries. Mr. Lien said the study should consider how realistic the implementation dates are. Mr. Kim added that financing availability would be crucial in this respect.
- Nevertheless, U Aung Khaing (Myanmar) suggested revising some references to avoid political matters in the draft final report. He requested inclusion in the master plan not only of Tasang HPP but also Hutgyi HPP (300 MW).
Availability of Financial Resources
24. Mr. Truls Holtedahl commented on the availability of financial resources. He noted that generally speaking, the sources available for corporate financing related to power investments in developing countries are as follows:
- Internal funding: normally expected to cover 20%-40% of project cost
- Utility's internally generated funds
- Government contribution (grant or fresh equity to the utility)
- Debt: normally 60%-80% of project cost
- Multilateral development institutions
- Bilateral agencies
- International commercial banks
- International bond markets
- Local banks
- Local bond markets
25. Mr. Holtedahl explained that the extent to which these sources would be available for interconnection projects, depends on circumstances varying from country to country in the GMS. Among these were the level of economic development, wealth accumulation, the maturity of the domestic banking system and financial markets, the financial soundness of the power sector, and the credit standing of the country internationally.
26. On the basis of past experience in the GMS, certain trends with respect to financing in the countries, and general economic development, assumptions have been made with respect to the sources and shares of financing that have been applied in the financial plan for the proposed interconnections up to 2020. Mr. Holtedahl presented cases of power sector financing and showed slides of most likely financing sources for power projects each GMS country. He presented a financial plan with assumed sources and shares of financing for interconnections by country. Accordingly, Mr. Holtedahl noted that the main sources of funding should be internally generated funds by the utilities, bonds, and multilateral development banks, each of them between 22-24% of total financing needs. The Export Credit Agencies (ECAs) and foreign commercial banks combined were expected to contribute amounts in the same order of magnitude. In terms of domestic and international funding, the split is 50%/50%.
27. EGP members expressed concerns about mobilizing external financing under a new GMS power market regime. More specifically:
- Mr. Hotte inquired as to the extent of private financing for interconnection projects. Mr. Charpentier said a clearer picture on this could be obtained in next week's workshop.
- Mr. An (Viet Nam) expressed concerns about interconnection operations in a power market, such as power dispatch and pricing. An issue raised was pricing of power under a PPA, and whether this would allow for recovery of investment. Mr. Houmphone noted that in Lao PDR, a number of projects were on hold due to uncertainties in financing and uncertainties in the status of PPAs under a power pool system.
Project Profiles for Proposed Interconnections
28. Mr. Lars Fosser presented project profiles for the proposed interconnections, namely:
- First 500 kV Power Transmission Interconnection between Lao PDR, Thailand and Vietnam based on the development of the Nam Ngum, Nam Ngiep and Nam Theun River Basins in Lao PDR;
- Second 500 kV Power Transmission Interconnection between Lao PDR, Thailand, Vietnam and Cambodia based on the development of the Nam Ngum, Nam Ngiep and Nam Theun and Sekong River Basins in Lao PDR;
- Power Transmission Interconnection from Malutang Hydro Power Plant in Yunnan Province of PRC to Vietnam;
- Power Transmission Interconnection fro Tasang Hydro Power Plant in Myanmar to Thailand.
29. The meeting suggested improvements in the profiles, as follows:
- Mr. Hotte suggested that the profiles include the rationale for the interconnections that were identified in the master plan, such as economic transfers gained with the sale power from Viet Nam to Thailand.
- Mr. Hoda suggested inclusion of the cost of the FS and estimated time of implementation in the profiles.
Institutional and Regulatory Arrangements
30. Mr. Asbjørn Vinjar commented on the chapter by chapter changes in the report on Institutional and Regulatory Arrangements, as a result of the comments and discussions in Kunming last June. In addition Mr. Vinjar highlighted adjustments needed in the Institutional and Regulatory Arrangements to promote cross border co-operation. He presented conclusive remarks that included the primary and secondary objectives. The primary objective was to optimize sustainable utilization of natural and human resources in a subregional context. The secondary objective was to attract investors from the international financial market. Both objectives require freer power trade, also across borders. He then enumerated the needed safeguards to establish efficient subregional power cooperation.
31. Comments from the participants (Messrs. Crousillat, Hotte and Hoda) revolved around the master plan study's proposed roles for the national electricity and regulatory agencies, the national transmission agencies, and the need for an autonomous regulatory body. Views were exchanged between the participants and Mr. Vinjar on the optimal set up, particularly with respect to mobilizing private resources for power projects. Relatedly, specific comments were as follows:
- On pricing policy, Mr. Hotte said that the report was biased towards a spot market approach. The emphasis in GMS would likely be bilateral or long-term agreements, with the spot market mechanism taking only residual.
- Mr. Charpentier asked whether the proposed national electricity/ energy administrative unit and regulatory agency could hamper private sector growth. Mr. Vinjar replied that this would not be the case as long as the legal framework is clear on the private sector's role.
- Mr. Prutichai commented that while there was a target date to interconnect the entire subregion, this would not mean all GMS countries would implement competitive markets in their national systems by that time.
- Mr. Vinjar said the optimal set up would be a competitive power market in the subregion; Mr. Chavalit said that regional power market should create more choices for buyers and sellers to trade and it is not necessary to have only one power pool. Mr. Pruticahi said the regional power market could be adapted to the countries' needs.
- Mr. Hoda inquired regarding the role of cooperating body to be created among the GMS energy and regulatory agencies which can not be fulfilled by the national transmission center, power exchange center, and the coordination center in addition to the entity responsible for national energy administration.
III. Presentation of Work Plan
32. Mr. Kim facilitated the discussions on the EGP Work Plan for 2002-2004. He began with the review of the current work plan (1998-2001) comprising five activities and their status. He then enumerated the proposed work plans by EGP members (Cambodia, Lao PDR, Thailand and Viet Nam). He mentioned the possible future role of the EGP in the following areas: Regional Power Trade Coordinating Committee (RPTCC); Experts Groups for technical, and commercial/ financial issues; and the budget of the RPTCC and Experts groups.
33. Mr.Kim asked the participants for their views on the work plan. Ms. Minogue (WB) clarified the proposed interim arrangements regarding the set up of the RPTCC under the IGA. Mr. Charpentier said that given preceding discussions on competitive markets, it would be useful to do first, the training/ workshop on structure options for the regional power trade. He proposed for GMS countries to set up a trust fund that would initiate work on regional interconnection and trade. Country contributions to this trust fund would also show potential donors to and investors in GMS power trade, the countries' commitment to regional power market development. Ms. Minogue cited examples of similar funds, while Mr. Khang (Viet Nam) noted that the 10th Ministerial Meeting on GMS cooperation has also discussed the issue of establishing the GMS Fund, because some GMS delegations have raised this issue. However, specific results or decision have not been reached. Mr. Rahman supported WB's proposed trust fund, which he said, would indicate GMS countries' ownership of the activities, and which would facilitate getting donor funding. The meeting agreed that EGP members could develop additional proposed activities, which would be discussed after the WB workshop.
Adoption of EGP-6 Minutes
34. The EGP members reviewed the draft minutes and after incorporation of suggested changes, the body therefore approved the minutes of the EGP-6 meeting.
Closing Remarks
35. Mr. Prutichai thanked all parties for their contribution to the meeting and reiterated his appreciation to ADB and WB for their support. In the spirit of the holiday season, he wished everyone happiness and health. The meeting also discussed the venue for the next meetings. It was agreed that the EGP-7 meeting to be held middle of next year would be in Thailand. The Myanmar delegation was asked to consider hosting the EGP-8/ EPF-9 meeting by year-end 2002.
36. Mr. Rahman noted the fruitful discussions on the draft final report of the Master Plan. He called on the consultants to incorporate the comments and suggestions in the final report. He noted the need to assess the resources and determine the timing to implement the proposals. He noted the importance of suggestions on the future EGP work plan, which would be discussed further. He thanked the participants for their positive contributions, and expressed his appreciation to the Government of SRV for hosting the meeting.
37. Dr. Huan noted that the discussions were fruitful and interesting. He hoped that the consultants would implement the suggested changes to improve the report. He agreed that the work plan should reflect the GMS countries' commitment to pursue cooperation in power development. He enjoined everyone to see Hanoi and enjoy its cool weather at this time of year.
 Back
Seventh Meeting of the Experts Group on Power Interconnection and Trade | Next
Appendix 1 |
Regions and Countries 
Top of page