Boosting energy efficiency in Southeast Asia-

With rapid economic expansion, rising urbanisation and industrialisation, along with progress in providing universal access to electricity, Southeast Asia’s energy demand has been steadily increasing over the last three decades. According to the International Energy Agency (IEA), primary energy demand in the region grew from 223 million tonnes of oil equivalent (mtoe) in 1990 to 549 mtoe in 2011. The figure is estimated to have further increased to 583 mtoe in 2013. This upward trend looks set to continue in the years ahead, which means that countries in the region will require more and more energy to keep up with the demand.

In the coming years, Southeast Asian countries’ increasing reliance on imports of natural gas, coal, and crude oil to cater to demand will reduce energy security at the national level. Concomitantly, the growing demand, coupled with the region’s dependence on conventional sources of energy, will increase greenhouse gas (GHG) emissions, thus aggravating the current adverse impact on the environment. Although Southeast Asian countries are gradually incorporating renewable sources in their energy mix, it will be some time before these sources make up a significant share of the mix. Therefore, there is an urgent need for the region to find the “fuel” of the future.

Amidst declining energy reserves, energy efficiency – the active implementation of energy saving measures by households, industries, and commercial establishments – has emerged as a vital strategy for reducing demand substantially. The IEA illustrates how the rate of increase in primary energy demand in Southeast Asia could slow down significantly under two hypothetical scenarios:

  • The Efficient ASEAN Scenario assumes that the best available technologies and practices to improve energy efficiency are systematically adopted by the region. Demand would rise at an annual average growth rate of 1.9 per cent to reach around 870 mtoe in 2035.
  • The New Policies Scenario factors in the policies and measures adopted as of mid-2013 and governments’ commitments that may affect Southeast Asian energy markets. Demand in this scenario would increase at an average rate of 2.5 per cent to reach 1,004 mtoe in 2035.

Many Southeast Asian countries are thus taking the necessary steps to strengthen efforts at achieving energy efficiency. Most countries have energy conservation policies and schemes, as well as standards and labelling programmes (SLPs) in place. However, governments are now looking at expanding their ambit. While Thailand, Singapore, Indonesia, and the Philippines are frontrunners in this regard, others are gradually catching up.

Thailand: Building on the success of early initiatives

Thailand‘s energy intensity, in terms of the total primary energy consumed per dollar of GDP, stood at around 38 per cent above the regional average of 15.16 British thermal units (Btu) per $1,000 in 2011 (based on the 2005 dollar value and market exchange rate). The Thai government has proactively promoted energy efficiency since the 1990s to meet its rising energy demand. In 1992, the Energy Conservation Promotion Act mandated, among other provisions, that large energy consumers conduct audits and submit plans for energy efficiency improvements. This provision applies to companies with a peak energy demand of 1 MW: they consume more than 20 terajoules (TJ) of energy annually.

Subsequently, various funds, the key one being the Energy Conservation Promotion Fund, were created to finance energy efficiency initiatives among end-users. Another fund, the Energy Efficiency Revolving Fund set up in 2002, provided credit to financial institutions that, in turn, offered loans at low interest rates for energy efficiency projects. As of 2010, the revolving fund had financed nearly 450 energy efficiency and renewable energy projects totalling $453 million. During the 1992–93 period, the government also implemented a demand-side management (DSM) plan that was funded by the Global Environment Facility, as well as the Australian and Japanese governments. The plan was quite successful and entered into its second phase in 2000: it reduced peak demand by 2,600 MW and generated energy savings of 15,700 GWh by 2012.

Based on its past experience, Thailand is now scaling up its efforts to improve energy efficiency. Under its Twenty-Year Energy Efficiency Development Plan (2011–30), it aims to decrease energy intensity by 25 per cent vis-à-vis the 2005 baseline, which would lower energy consumption by 20 per cent, or by about 30,000 kilotonnes of oil equivalent, as of 2030. The plan focuses on a combination of initiatives to meet the target, including:

  • Minimum Energy Performance Standards (MEPS) for buildings, vehicles, and appliances;
  • Energy efficiency labelling; and
  • Standard Offer Program (SOP) under which subsidies will be provided to industries with verified energy savings or peak load reductions. SOP is an attractive mechanism for promoting energy efficiency; it is often compared to feed-in tariffs that are offered to renewable energy developers and can effectively drive industrial units to implement energy efficiency technologies.

 

Singapore: Multiple policies and guidelines to promote energy efficiency

As a nation lacking in abundant natural resources, Singapore is particularly susceptible to rising energy costs. Thus, it places strong emphasis on energy efficiency. In 2012, the Singapore government enacted the Energy Conservation Act with the aim of improving its energy intensity by 35 per cent by 2030, vis-à-vis 2005 levels. Under the act, the National Environment Agency in April 2013 mandated energy management standards for large industrial entities that consume more than 54 TJ annually. These entities are required to appoint an energy manager, report their energy use and GHG emissions, and submit annual energy efficiency improvement plans.

The launch of the Mandatory Energy Labelling Scheme (MELS) and MEPS in 2008 and 2011, respectively, have been quite successful in constricting energy use by households. MELS essentially helps households to make better energy choices by providing energy consumption labels on appliances like air conditioners, refrigerators, and clothes dryers, while MEPS removes inefficient models of air conditioners and refrigerators, which do not comply with specified minimum energy efficiency levels, from the market. In addition, the Infocomm Development Authority of Singapore has developed the Singapore Standard for Green Data Centres, which sets down guidelines for enhancing the energy efficiency of data centres. The standard was revised in 2013 to ensure its alignment with International Standard ISO 50001 for Energy Management.

Other measures that promote energy-friendly buildings include the Code on Envelope Thermal Performance for Buildings and the Legislation on Environmental Sustainability for Buildings. In addition, Singapore’s Land Transport Authority introduced the Fuel Economy Labelling Scheme in 2012 under which cars and light goods vehicles are required to affix a label displaying their fuel economy information.

The Philippines: Sustaining efforts on the right path

The Philippines’ energy intensity is lower than the regional average by more than 38 per cent, which can be attributed to the government’s efforts to promote energy efficiency over the past decade. The National Energy Efficiency and Conservation Program (NEECP), launched in 2004, provides a framework for the adoption of measures that promote the efficient and judicious use of energy. A host of initiatives have been undertaken under the NEECP such as the Government Energy Management Scheme, Philippine Energy Efficiency Project, SLP for electrical appliances, heat rate improvement in power plants, as well as loss reductions in transmission and distribution lines. In 2011, the government boosted its energy efficiency campaign under the theme “Bright Now! Do Right. Be Bright” which aimed at spreading awareness amongst consumers.

The ongoing Philippine Industrial Energy Efficiency Project (2011–17) aims to introduce the ISO 50001 Energy Management System Framework along with the system optimisation approach for industries. The programme is projected to lead to savings of 1.4 million tonnes (mt) of carbon dioxide through savings in fuel and electricity.

The Department of Energy’s Philippine Energy Plan 2012–2030 also focuses on low carbon growth and energy efficiency with a target of reducing current total energy demand by 10 per cent. Around 30 million barrels of fuel oil equivalent of energy was saved in 2012, which is equivalent to 1,341 MW of power generation capacity.

Indonesia: Making the necessary moves towards energy conservation

Indonesia’s energy demand is driven by its rapidly growing and energy-intensive industrial sector, particularly in the petrochemicals, fertiliser, and cement industries. Like its neighbouring countries, the Indonesian government is also moving ahead with its energy efficiency plans.

In 2005, the Indonesian government announced the National Energy Conservation Master Plan (Rencana Induk Konservasi Energi Nasional or RIKEN) to decrease the country’s energy intensity by an average of 1 per cent per year till 2025. The following year, the National Energy Policy and the National Energy Management Blueprint set out specific steps for achieving various energy conservation targets:

  • Mandatory implementation of best practices in energy use for government buildings;
  • Formation of a state-owned energy service company to provide energy efficiency related advisory services to industries;
  • Implementation of SLP for electrical appliances;
  • Creation of the Energy Conservation Clearinghouse for data and information exchange; and
  • Formulation of energy codes for buildings.

 

Recently, the Indonesian Export Financing Agency, in collaboration with the Asian Development Bank, launched its first energy efficiency financing project by providing a loan of $1.31 million to PT Tiga Pilar Sejahtera Food to support the latter’s energy efficiency initiatives. In the near future, more companies are expected to participate in the programme for meeting the funding needs of energy conservation projects.

Vietnam: Enlisting foreign assistance to catch up

Vietnam has the highest energy intensity in the region, exceeding the latter’s average by 67 per cent. This is mainly due to use of old technologies in power generation as well as end-use segments. In 2006, the government launched a dedicated energy efficiency programme called the Vietnam National Energy Efficiency Programme (VNEEP). The second phase (2012–15) of the programme was approved by the government in October 2012. It aims to achieve energy savings of 5–8 per cent of total energy consumption compared to the forecasted energy demand in the National Electricity Development Plan, 2011–2020, or 11–17 mtoe. The programme calls for the implementation of Vietnamese construction standards for energy efficient buildings; the development of high performance, energy saving equipment; and capacity building. Progress has been made in the aforementioned areas. In January 2013, the government made it mandatory for all lighting and other electrical appliances to carry an energy efficiency label. In October 2013, it approved the required energy efficiency standards for new buildings.

Moreover, Vietnam has partnered with several countries to meet its energy efficiency objectives. It has signed a long-term cooperation agreement with Denmark to help small- and medium-sized enterprises in Vietnam to adopt efficient practices. Australia is also supporting Vietnam’s Ministry of Industry and Trade in developing lighting and appliance energy efficiency standards, registration, labelling, testing, compliance, and monitoring mechanisms. The Japan government is supporting Vietnam through a joint crediting mechanism to set up energy efficiency demonstration projects during the 2014–16 period.

Malaysia: Ambitious game plan to transform into a “green” nation

The Malaysian government is preparing a National Energy Efficiency Action Plan and working on a law to mandate energy efficiency. The government is pinning its hopes on these two instruments to transform Malaysia into a more energy efficient nation.

In September 2013, the Malaysian Ministry of Energy, Green Technology and Water announced the final draft of the National Energy Efficiency Action Plan that outlines energy efficiency strategies for the country. The plan aims to generate estimated savings of 50,594 GWh of electricity over the next 10 years, based on reduction in electricity demand by 6 per cent, which will result in a total capacity saving of 2,268 MW. The total reduction of GHG over the plan period is projected to be 40 mt of carbon dioxide equivalent.

Apart from conventional energy efficiency strategies such as the rating and labelling of appliances, MEPS, and the energy audit of buildings, the plan proposes the introduction of rebates and support programmes to fund a number of prescribed energy efficiency activities or “Standard Measures”. Standard Measures are technologies or projects that are pre-evaluated for their energy savings and cost–benefit, and the necessary financial support based on the payback period is provided to applicants. Earlier, in July 2011, the Sustainability Achieved via Energy Efficiency Program was introduced under Malaysia’s Economic Transformation Program. It provides cash rebates for the purchase of energy efficient refrigerators, air conditioners, and chillers, thereby creating a market for energy efficient appliances.

Other ASEAN countries: Taking the first steps

Brunei has set a nationwide target to reduce its energy intensity by 25 per cent and 45 per cent by 2030 and 2035, respectively (based on the 2005 level). To achieve these targets, the government is in the process of devising energy conservation schemes and incentives for consumers. The National Standard and Labelling Order that will encourage consumers to use energy efficient items is expected to be implemented in the second quarter of 2014. Also, an Energy Efficiency and Conservation Building Code will likely be introduced this year.

The Myanmar government has a target to reduce total primary energy consumption by 5 per cent and 8 per cent by 2020 and 2030, respectively (based on the 2005 level). The country is already taking steps to substitute liquid fuels with natural gas in the industrial and transport sectors.

In the Laos People’s Democratic Republic, energy efficiency and conservation are at a nascent stage, as a national strategy has yet to be drafted. However, some DSM projects are under way with assistance from multilateral and bilateral donors. Meanwhile, the Cambodian government is also developing a national energy efficiency policy, strategy, and action plan, with the support of the European Union Energy Initiative.

A long road ahead

As discussed above, many Southeast Asian countries are taking substantive steps to move towards a more energy efficient economy; however, the pace is rather slow. According to the IEA, from 1980 to 2011, Southeast Asia’s energy intensity improved by only 12 per cent, compared to the worldwide average of 26 per cent, China’s 74 per cent, and India’s 44 per cent.

Going forward, Southeast Asian countries will need to invest a significant sum towards meeting their national energy intensity reduction targets. ADB has estimated that the amount will be approximately $10,640 million by 2020. However, the respective governments would need to overcome several barriers impeding the adoption of energy efficient solutions, such as high initial costs, the lack of compliance monitoring by authorities, the absence of a specific legal framework for energy efficiency, as well as the continuance of fossil fuel and electricity subsidies. Furthermore, commercial enterprises and industries are reluctant to invest in energy conservation, as it requires a high initial investment and yields limited savings in the short term. Some enterprises may simply not have adequate financial resources for the initial investment. Therefore, it is necessary for enforcement authorities to demonstrate profitable and technically feasible energy efficiency projects, as well as devise innovative incentive/financing mechanisms. To this effect, Southeast Asian countries also need to expand the market for energy service companies that provide financing for private investments in energy efficiency. The authorities will also have to monitor the compliance of industrial/commercial units to ensure that they meet their respective energy saving goals.

Finally, the countries will need to have a well-defined policy and legal framework to reinforce their commitment to energy efficiency and ensure serious implementation by all stakeholders. And last, but not least, governments will have to gradually reduce subsidies on electricity tariffs and fossil fuels in order to reduce wasteful usage and promote prudent consumption.