The ongoing Covid-19 pandemic continues to wreak havoc, with activities being paused, travel restricted, and supply chains disrupted. Starting over would probably take us three to five years. What then will happen to halted projects? Are investments in the energy sector still endorsed? Is the energy transition in Southeast Asia still bound to happen? Yatin Premchand, Managing Director of Management Consulting at Black & Veatch, grants us a short interview around these questions.
There’s no sense denying that things are moving a little slower than they used to. We have seen project delays, and therefore, a drop in investments in the energy industry at a national, regional, and even global level. With restrictions in place, there is a refocus on foreign interest in seeing how projects can be better evaluated, Premchand notices. The demand for transportation and manufacturing has plunged, and with it, power generation; generation which could have been scheduled and dispatched was postponed, notes Premchand, and this has then essentially pushed the market to evaluate resiliency and reliability.
Surprisingly, there is still a lot of interest from banks, funds, and developers despite the slow movement in the sector. These actors are getting together to try and figure out more proactive ways to move projects forward. As Premchand notes, “at the end of the day, a delay in the project today will actually impact the onboarding of new energy in the next year or so, so there will be a wider economic impact for banks, developers, and national governments.”
This interest also extends to benefit the energy transition with the discussion apparently shifting from “we can still build coal” to considering lower carbon alternatives, not driven out of climate related concerns linked to coal power but because of supply chain challenges, as an example. Premchand observes developers in Asia exploring “the reality of different solutions versus coal” like how decarbonisation can be less human-intensive and less resource-intensive, certainly a positive nudge to the zero-carbon goal.
With that, I think there is no other way than looking at the energy transition with respect to a cleaner way of building plants and limiting our supply chains.Yatin Premchand
Likewise, we are seeing more attention on distributed generation as utilities strive to maintain a certain level of reliability and resilience. “With that, I think there is no other way than looking at the energy transition with respect to a cleaner way of building plants and limiting our supply chains,” explains Premchand. In essence, the pandemic will not steer the conversation away from the energy transition; rather, it will impact the thought pattern on how variable energy generation can be integrated into the mix, how we look at the O&M side, how to address the risks around fuel supply chains, and how to look at balancing the changed load profile.
Nevertheless, we cannot deny that there are possible project risks even with the overall optimism for renewables. Of course, there are administrative and regulatory risks that come with the supply chain disruptions, hence, the delays in permits and approvals. There are also technology risks tied with the return on investment. Premchand recommends developers to look at getting plants up and running through a proven technological investment that can ensure the project will still be viable in the next 25 years, instead of strictly getting tied with the cost but ignoring the project’s viability to operate for a longer period.
The pandemic has indeed led the industry to change gears, but the it is still looking at a clear path to the energy transition. Investors have a lot to evaluate, but the interest remains and it is something the industry can hold on to while we navigate our way out of this crisis.