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dam-l THE GAS-FIRED THREAT TO SE ASIAN HYDRO POWER

>
>Copyright 1998 Wilmington Publishing Limited   
>                                Water Power & Dam Construction 
>
>                                      August 31, 1998 
>
>SECTION: Pg.14 
>
>LENGTH: 1405 words 
>
>HEADLINE: THE GAS-FIRED THREAT TO SE ASIAN HYDRO POWER. 
>
>BODY: 
>
>
>Hydro power is in danger of being overtaken by gas-fired generation, because
>perceptions of its economic and
>social costs and benefits are skewed, argues Tim Sharp. 
>
>As recent Asian Development Bank (ADB) and Asia-Pacific Economic Cooperation
>(APEC) Energy Working
>Group (EWG) meetings make clear, Southeast Asian hydro power is at a
>cross-roads. 
>
>It must either sell itself as environmentally benign or be considered as no
>more commercially and socially viable
>than nuclear energy. 
>
>At stake is a cascade of eight dams on the Lower Mekong, now all but
abandoned
>due to environmental issues,
>plus many others on Mekong tributaries in the Lao PDR and Myanmar (see bottom
>Table on p15). If the Lao
>dams are abandoned, the country's development strategy, which relies very
>heavily on earnings from power
>exports to Thailand and Vietnam, will be wrecked. 
>
>Other hydro projects in the region that would be more or less affected by the
>same situation could include several
>large projects in Myanmar along the Salween River. Only China's cascade of
>another eight dams along the Upper
>Mekong in Yunnan province seem likely to be unaffected (see top Table on
p15).
>This is because China's demand
>for power is so vast that all energy sources urgently need to be tapped. 
>
>The Asian economic downturn is depressing growth in power demand, but the
>chief threat facing hydro in the
>region is that the increasing availability of low cost natural gas will make
>hydro uncompetitive. 
>
>As the ADB somewhat bleakly observed at the fourth meeting of the Greater
>Mekong Sub-region's (GMS) electric
>power forum in Hanoi last October, 'the prospects for hydro power export
>projects in the region depend largely on
>the availability of cheap gas for Thailand'. 
>
>The implication is that if low cost gas is available (and it is), even a very
>modest hydro programme becomes
>non-viable. The threat becomes even more pressing when the present context of
>deregulation and privatisation of
>power supplies is taken into consideration. 
>
>For the foreseeable future, power in Southeast Asia will probably be supplied
>mainly under what the APEC EWG
>calls a 'contract-based' system. 
>
>Although this is a mid-point between 'natural monopoly' utilities on the one
>hand and fully 'competitive power
>provision' on the other, a contract-based system still requires independent
>power producers (IPPs) to operate
>within free markets. This being so, IPPs must necessarily favour the primary
>fuel that offers the best commercial
>viability. 
>
>As was pointed out by the World Bank at APEC's EWG workshop on the
security of
>fuel supplies for the power
>industry (held in Hawaii on 3-4 February 1998), the most commercial fuel is
>natural gas (see Table below). 
>
>Overall, in the Bank's ranking, hydro rates little above nuclear power and
>well below gas or oil, although the Bank
>emphasises that the local situation is always crucial. 
>
>Stark contrast 
>
>Price is of course a consideration, and gas scores better than all other
fuels
>in this regard, although there is a wide
>range in financing costs. 
>
>This reflects the fact that LNG-based gas projects are difficult to finance
>(1) whereas pipeline-based ones (5) are
>easy. 
>
>But gas is also far more attractive to IPPs for other reasons: significantly,
>environmental concerns and security of
>supply particularly favour gas. 
>
>A final aspect of the threat is that gas favours 'in-house' generation of
>domestic power demand. It is easy to
>transport and domestic power generation produces the greatest value added for
>the consuming country. 
>
>Large hydro in Southeast Asia, in stark contrast, is almost entirely
predicted
>on power exports. This is of course
>fine for the exporting country which in this case reaps the value added, but
>not for the consuming country which
>does not. So what should be done by a cash-poor, consuming country like
>Thailand, whose power sector is
>rapidly privatising? 
>
>For all three reasons cited above - price, broad-based desirability and
>greatest value added - it seems it should
>abandon regional hydro in favour of low cost gas. 
>
>Moreover, this argument applies to any country in a similar situation and
>could affect power exports from other
>primary energy sources besides hydro. 
>
>Not only are export-predicted hydro projects across Southeast Asia threatened
>by gas: plans for regional
>inter-connection of grids, at least for the foreseeable future, are also
>affected. Interconnection relies to a great
>extent on the profits, and reliability, available because power is exported
>from large hydro projects. 
>
>The antidote 
>
>The essential antidote must be to rehabilitate hydro's unjustifiably battered
>environmental reputation. After all, a
>strong environmental case would also tend to increase hydro's attractiveness
>with regard to economics and
>financing. 
>
>An excellent start would be to revisit the environmental impact matrix
>prepared by the International Solar Energy
>Society (ISES) for the United Nations Conference on Environment and
>Development in Rio de Janeiro back in
>June 1992. 
>
>The matrix compared the environmental impact of 14 energy options across 34
>categories of impact within the total
>energy cycle - raw materials extraction and plant construction, energy
>production, consumption and waste
>disposal. 
>
>The 14 options range from energy efficiency (the least impact) through solar
>and the other renewables, to hydro,
>gas, oil, coal and nuclear, the five fuels covered by the World Bank table
>above. 
>
>Of these five, coal produced the most impact (ISES score 256), then oil (235)
>and then gas (221). Note the very
>small spread between the fuels. 
>
>Thus from an environmental impact perspective across the full fuel cycle, gas
>is not much better than either oil or
>coal. 
>
>Nuclear came next (217), very close to but marginally better than gas. 
>
>Hydro scored 158, almost 60 points below its nearest rival and nearly 100
>points better than coal. As a
>benchmark, energy efficiency scored 121. 
>
>Thus hydro, over its full energy cycle, clearly belongs with the renewables
>rather than with the thermal fuels and
>nuclear, at least from an environmental perspective. 
>
>If these results are then plotted within the World Bank grading scheme, the
>comparison is instructive. There is
>very little agreement between the two perceptions, though both agree on the
>comparative merits of gas, oil and
>coal. What is more, gas is highly over-rated by the World Bank from an
>environmental standpoint while hydro and
>nuclear are highly under-rated. 
>
>ISES admitted that it had been forced in many cases to resort to rule of
thumb
>in order to accommodate all energy
>options within a single matrix. Even so, it systematically assessed, however
>roughly, the environmental impact of
>all 14 energy options over 34 categories of environmental impact within the
>full energy cycle. 
>
>Speculation 
>
>It is interesting to speculate what impact this re-evaluation of
environmental
>concerns among the five fuel options
>would have on other elements of the World Bank table. For if, as seems
likely,
>a high environmental grade for
>hydro would improve at least its financing grade and quite probably its
>economic score too, then those same
>grades for gas, oil and coal would have to drop while those for nuclear would
>have to improve. In short, an
>entirely new perception of the relative merits of the five options is
>possible. 
>
>The hydro power industry should also consider that even as the ADB's GMS
>project and ASEAN's
>interconnection scheme - both hydro export-based - falter under the twin
>burdens of environmental criticism and
>economic downturn both of which favour gas, many interest groups want them to
>proceed. 
>
>The groups include the World Bank, which is quietly urging Mekong riparian
>countries to push ahead with the
>GMS, the ADB, APEC, ASEAN and of course the national governments themselves.
>All groups can see the
>benefits of what they are trying to achieve. However, at present, under what
>now seem likely to be highly skewed
>perceptions, other options appear more economically and socially feasible. 
>
>Skewed perceptions? 
>
>The question of whether perceptions of gas or hydro are skewed requires full
>and careful study. It would greatly
>benefit the hydro power industry to initiate such a project. For unless it
>takes a far more aggressive, proactive
>stance to establish its own environmental credentials it will be swept
away by
>the common misperception that gas
>is superior.
>
>


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Aviva Imhof, Mekong Program Coordinator
International Rivers Network
1847 Berkeley Way, Berkeley CA 94703 USA
Tel: + 1 510 848 1155 (ext. 312), Fax: + 1 510 848 1008
Email: aviva@irn.org, Web: http://www.irn.org
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