The article below appeared on 7th June, 2017 in The Analyst, a weekly column by Peter Stewart in the Interfax publication Natural Gas Daily.
Billed as the Russian equivalent of the Davos forum, the St. Petersburg International Economic Forum (SPIEF) conference is a platform for big ideas. The integration of Asian electricity grids and the potential for Russia to become an ‘energy bridge’ between Asia and Europe were among the biggest of the big ideas discussed at the three-day event.
Proposals to build a huge electricity transmission grid in northeast Asia have been labelled as either “visionary” or “pie in the sky” in the past, depending on the viewpoint of the observer. The latest scheme – known as the Energy Super-Ring or Asian Super Grid – involves integrating the national power grids of Mongolia, Russia, China, Japan and South Korea.
Progress so far has been tentative. China’s State Grid Corp., South Korea’s state-backed power and nuclear utility Kepco, Russia’s Rosseti and Japan’s Softbank Group signed a memorandum in March 2016 on how the integration might be achieved. Although Mongolia did not sign the 2016 memorandum, the plan is to integrate the country into the system as well. Mongolia’s Energy Minister Purevjav Gankhuu, who spoke on the panel, called for “clear action” to give the project momentum, noting that a feasibility study had still not been concluded despite 12 years of discussion about this and similar schemes.
The aim of the project is to integrate the increasingly complex energy supply sources across the five countries, which have a combined land area of 2.87 billion hectares, and ensure common standards across regional and national grids to allow scope for maximum integration. The Far East is rich in hydrocarbon resources – including oil, gas and coal – but also has enormous potential for renewable energy, including hydropower, wind and solar generation. For example, Russia claims its Asian coast has 350 days of sunshine per year.
The SPIEF panel, chaired by World Energy Council (WEC) Secretary General Christophe Frei – who has led a series of discussions for WEC on its Energy Trilemma index – included Oleg Budarin, the chairman of Rosseti, which has been promoting the scheme. Budarin said it was important to ensure that technologies and standards are aligned at the start of the project, rather than trying to retrofit systems later on. “Early integration is much more efficient,” he said.
From centralised to distributed systems
The enormous change under way in the power sector – from centralised to distributed systems, which will see customers will play an increasingly important role – was highlighted as a key driver of the need for systems integration. The rise of local and renewables-based generation – especially through new technologies such as blockchains, which allow electricity contracting to be done at a more local level – will require the power system to become more integrated. “Our ally is the consumer. They should vote for integration,” said Budarin.
The panellists agreed that homogenous transmission systems and convergent pricing would optimise conditions for power transmission between regions, but also outlined a number of challenges. The huge geographical area, and the uneven distribution of demand between urban and rural areas, will be a particular challenge for planners.
Meanwhile, the idea that a more interconnected system is more resilient is too simple, panellists said. For example, cyberattacks can spread more quickly if grids are interconnected. “You always have to manage complex systems in the right way,” said Frei.
Russia will play a key role in the progress towards grid integration in the region. Its policy has been increasingly directed eastwards in recent years, led mainly by demographic trends that are driving the growth in energy demand towards emerging markets in Asia.
The Power of Siberia pipeline was announced in May 2014 and is slated to export 38 billion cubic metres per year of gas from eastern Siberia to northeastern China. Several plans have been proposed to expand the flow of gas from Russia – not only from eastern Siberia but also the country’s resources in western Siberia – into China, and potentially onward into South Korea and Japan. Although these plans have been scaled back and in some cases postponed since oil prices peaked in mid-2014, the core Power of Siberia project is on track to be completed by around 2019.
Russia is also diversifying its energy policy to encourage the development of renewables and to encourage the use of ‘smart’ technologies such as smart grids and meters.
More than 120 panel discussions were held over the three days of the SPIEF, around one-third of which touched on the theme of energy and a dozen of which dealt directly with the upcoming revolution in energy systems around the world.
Should the Asian Super Grid go ahead, it would unlock huge opportunities for investment in the five main countries involved. A total of 475 investment agreements amounting to RUB 1.82 trillion ($32 billion) were concluded at the 2017 SPIEF conference, compared with 356 in 2016 and 205 in 2015. A recent Eastern Economic Forum in Vladivostok resulted in around 200 agreements worth RUB 1.70 trillion, with predominantly Chinese, Japanese and South Korean companies.