Power sector evolves with growing demand-
The electricity sector in Southeast Asia is continuously evolving to meet the region’s growing demand for power amid burgeoning population and expanding economies. While gas has traditionally been the preferred fuel of choice for power generation, the role of coal has expanded in recent years, renewables are growing fast and green shoots are emerging in the nuclear power space. Further, power market integration remains a key priority for the ASEAN countries to foster regional co-operation, facilitate energy trade and enhance energy security. There were significant developments in line with these trends in the Southeast Asia (SEA) region during 2017. Southeast Asia Infrastructure presents a round-up of key trends and developments in ASEAN’s power sector during the year…
Shift towards renewable energy continues
In line with the global trend of increasing focus on renewable energy, the SEA countries are also looking at green options to meet their energy needs, amid declining fossil fuel resources. Significant policy-related developments took place in many countries. For instance, in December 2017, the Philippines’ Department of Energy and the National Renewable Energy Board finalised the framework for renewable energy market regulations that entail the introduction of renewable energy certificate trading in the country.
Thailand also took steps towards renewable energy trading. BCPG Public Company, the renewables arm of oil and gas company Bangchak Corporation and energy firm Power Ledger plan to develop a decentralised energy exchange platform that enables the sale of surplus renewable energy generated at residential and commercial developments. Decentralised distributed generation is picking up pace in Singapore too where 90 per cent of installed solar capacity (130 MW in the first quarter of 2017) came from solar photovoltaic systems at non-residential and institutional units.
Similarly, Vietnam introduced feed-in tariffs for solar power projects in April 2017 besides providing other sops such as preferential lending rates, import duty exemptions, and corporate income tax and land use incentives to boost the renewable sector. Malaysia launched two large-scale solar tenders during the year under which solar power capacity aggregating nearly 1,000 MW was awarded to bidders. Thailand notified the 300 MW hybrid power purchase agreement scheme that encourages energy storage with renewable energy generation. The Thai government recently awarded equipment contracts to build the 270 MW Theparak wind project – one of the largest in the country.
Coal set to replace gas
Countries across the world are moving away from coal, but the SEA region’s dependence on coal is increasing owing to abundant availability and favourable cost economics. According to the International Energy Agency, coal will overtake gas as the primary fuel supplying electricity by 2020. As per Southeast Asia Infrastructure Research, nearly 52 GW of coal-based projects are at various stages of development in the region as of November 2017. Coal-based power is growing rapidly especially in Indonesia, Malaysia and the Philippines. The countries are looking at advanced supercritical and ultra-supercritical technologies to mitigate emissions from the growing number of coal-based plants.
ASEAN Power Grid initiative progresses further
The ASEAN member countries are increasingly focusing on establishing well-connected, competitive and resilient energy transmission networks. A key component of this energy integration is the creation of an interlinked grid network – the ASEAN Power Grid (APG) – amongst the ASEAN member countries. It also aims to enhance energy security through the establishment of a network of interconnections between the ASEAN member states. A key milestone was reached in September 2017 when the agreement for the first multilateral power exchange project under the APG was signed between Malaysia, Laos and Thailand. The agreement will enable Malaysia to purchase up to 100 MW of hydropower from Laos through the existing transmission network of Thailand from January 1, 2018, onwards under Phase 1 of the Laos-Thailand-Malaysia-Singapore Integration Project.
A few countries plan to use nuclear power
Energy generation from nuclear power is gradually emerging as an option in the Philippines, Indonesia, Malaysia, Thailand and Cambodia but projects are unlikely to come up at least over the next 10 years. Preliminary deals for cooperation in nuclear power were signed by SEA countries with China and Russia during the year. In March 2017, the International Atomic Energy Agency delivered the final report on Malaysia’s infrastructure development for a nuclear power programme to the government. In April 2017, China and Thailand signed an agreement to cooperate in the peaceful use of nuclear energy. A similar agreement was signed between Cambodia and China too. In May 2017, Russia’s Rosatam State Atomic Energy Corporation signed a deal with the Philippines on atomic energy use that includes cooperation in nuclear power plant construction and operation. Further, Indonesia’s National Atomic Energy Agency was also in discussions with Rosatam during the year as the latter offered to develop turnkey nuclear plants in the country.
Other developments
Subsidy reforms are gradually picking up pace in SEA countries to ensure that energy pricing is closer to the cost of supply. In Indonesia, the government announced a tariff increase for 900 VA consumer category as part of its plan to progressively reduce electricity subsidies in January 2017. Similarly, in Vietnam, the government allowed EVN to raise the average retail price of electricity by 3 per cent to 5 per cent without seeking permission from the Ministry of Industry and Trade in July 2017.
Another key development was the acquisition of Singapore-headquartered Equis Energy’s assets (including 1.9 GW of operational and under-development solar and onshore wind power projects across Indonesia, the Philippines, Thailand, India, Japan and Australia) by a consortium of Global Infrastructure Partners, Canada’s Public Sector Pension Investment Board and the CIC Capital Corporation. The consortium will acquire 100 per cent of equity interests of Equis Energy in the wind and solar energy portfolios for $3.7 billion – one of the largest deals in the renewable energy space.
Some other developments are the suspension of construction of coal-based power projects aggregating 9.8 GW in Myanmar owing to local protests and the Indonesian government’s plan to revise the 35,000 MW Programme that aims to add 35 GW of generation capacity by 2019. Given Indonesia’s current progress and future economic growth projections, power needed to meet demand is likely to be only 20,000-22,000 MW.
The way forward
Going forward, SEA countries are expected to introduce policies to further drive investments in the renewable energy space. The dependence on coal is also expected to continue as countries strive to achieve universal electrification rates. The region is also expected to follow the global trend of promoting electric vehicles and energy storage besides technologies for further digitising the grid.
