APEC Initiative for Quality of Electric Power Infrastructure Development June 2015 Agency for Natural Resources and Energy Ministry of Economy, Trade and Industry (METI), Japan

Energy demand is expected to increase in the medium to long term in the Asia-Pacific region, which leads to large investment in developing energy infrastructure. Electricity demand in Southeast Asian countries is expected to increase constantly by 140% between 2012 and 2035, which leads to cumulative investment of about US$ 990 billion in power sector. 1. Background Figure. ASEAN average annual investment in power generation capacity and T&D networks (Source: IEA Southeast Asia Energy Outlook (2014)) 2

On the other hand, with a view to addressing climate change, it is important to develop energy infrastructure not in terms of short- term financial interest but in terms of long-term and appropriate perspectives considering lifecycle cost, CO2 emissions reduction and resilience. 1. Background (cont.) Figure. CO2 emissions and energy intensity, 2011 and 2035 (Source: IEA Southeast Asia Energy Outlook (2014)) 3

4 2. Bad Practices of Infrastructure Development CASE 1 A power generation project awarded to a contractor proposing the lowest price in Indonesia. As a result, delay to the construction period occurred and also the required power output was not achieved. CASE 2 50% of cost overrun occurred at a hydro power plant in Pakistan, which led to two years behind in operation. CASE 3 A gas power plant in Nigeria only generated 80MW of electricity compared to the required performance of 335MW.

3. APEC Guidebook on Quality of Infrastructure Development and Investment At the APEC Ministerial Meeting on November 2014, Ministers recognized that (i) lifecycle cost (LCC), (ii) environmental impacts, and (iii) safety such as resilience to natural disasters constitute the key elements of infrastructure quality, and agreed the APEC Guidebook on Quality of Infrastructure Development and Investment. Initial cost Maintenance cost Operation cost Demolition cost Disposal cost etc. LCC CO2 NOx SOx Particulate matter Waste disposal etc. ENVIRONMENTAL IMPACTS Natural disaster (e.g. earthquake and tsunami) Cyber security etc. SAFETY 5

6 In 2015, APEC Ministers Responsible for Trade (MRT) emphasized “the importance of quality infrastructure in mitigating environmental risks and enhancing resilience to natural disasters.” The MRT also encouraged officials to explore initiatives to secure quality of infrastructure across various sectors. 4. Secure Quality of Infrastructure across Various Sectors

5. Objectives Based on the spirit of the Guidebook, with a view to developing high quality electric power infrastructure in the Asia-Pacific region, Japan proposes to launch an initiative for the Quality of Electric Power Infrastructure Development. 1. Survey on the current state and outlook of power demand in the APEC region 2. Formulating a guideline for developing high quality electric power infrastructure 3. Capacity building for disseminating the guideline 7

6. Possible Elements to be Considered PRE-QUALIFICATION Performance How efficient do energy facilities work ? 8 Power generation efficiency Transmission capacity How long do energy facilities continue to operate? How much do energy facilities reduce external impact? How much do energy facilities lower lifecycle cost? Operation availability Resilience to natural disasters Cyber security Business continuity management (BCM) Air pollution management (e.g. CO2, NOx, SOx) Waste management Industrial health and safety Symbiosis with local communities Lifecycle consideration (e.g. cost for construction, maintenance, repair, decommissioning and fuel) Availability Durability Resilience Environmental consideration Safety Lifecycle cost PLAN DESIGN CONSTRUCTION OPERATION MAINTENANCE END OF LIFE

7. Tentative Schedule MayCirculate a proposal for the initiative to APEC Energy Working Group (EWG) members ( >>> endorsed on 8 June) 22 JuneHold APEC Infrastructure Development Workshop to explain the overview of the initiative AugustHold a workshop OctoberAPEC Energy Ministers welcome the initiative and instruct the EWG to formulate the guideline at the APEC Energy Ministerial Meeting (EMM) 2016 AutumnEWG members agree to the guideline AutumnAPEC Ministers welcome the guideline at the APEC Ministerial Meeting Year-endHold seminars to disseminate the guideline 9

10 8. Upcoming Workshop in Tokyo Date25, 26 August 2015 PlaceTokyo, Japan Objectives(1) To share the importance of high quality electric power infrastructure (2) Discuss possible elements to be incorporated into the guideline Participants- Government officials in charge of energy infrastructure procurement - International institutions - Experts Agenda and an administrative circular will be provided soon!

Thank you for your attention 11