Power trends and energy challenges for Southeast Asia
(Picture credit: EMA)
The power-charged third session of the Singapore Energy Summit saw Energy Ministers from Southeast Asia "in the hot seat", with moderator Ambassador K Kesavapany, Director of the Institute of Southeast Asian Studies, snapping out questions on energy policies and concerns for the region.
The dialogue on energy security and trends in the region's power industry kicked off with the Ministers detailing the major drivers shaping the energy mix in ASEAN, from the potential for new gas abundance to challenge coal dominance in the region, to the impact of the Fukushima crisis on the Southeast Asian nuclear renaissance.
Additional steps were clearly needed to enhance regional energy cooperation, inter-connectivity and prospects for an emerging energy community in Southeast Asia.
Malaysia to increasingly rely on LNG imports
Dato' Sri Idris Jala, Minister in the Prime Minister's Office, Malaysia, shared that the development of oil, gas and energy is key to driving Malaysia towards achieving its goal of doubling its national income by 2020. Deciding on the optimal energy mix, he added, is central to shaping energy policy in the country. It must take into account cost-competitiveness, supply reliability, and environmental and safety concerns.
Speaking further on Malaysia's energy fix, Minister Idris Jala stated that the country relies on gas to provide 46 percent of its current power generation mix, but will need to increasingly rely on LNG imports to account for depleting gas reserves. He continued by saying that Malaysia's current reliance on coal will continue as long as prices are attractive.
Nuclear a viable option for ASEAN
Minister Idris Jala revealed that nuclear may become a viable option for both Malaysia and the ASEAN region, but only in the very long run. In the meantime, he cautioned against knee-jerk rejections of nuclear power in the wake of the Fukushima crisis.
Minister Idris Jala emphasised that renewables were key to Malaysia's future energy mix, with feed-in-tariffs being discussed in Parliament. He pointed out, however, that support for renewables needs to be gradually reduced over time.
Regional cooperation needed
In closing, the Malaysian Minister stressed the need for collaboration among ASEAN countries in the areas of access, pricing and removal of barriers in order to cooperate on an ASEAN electricity market.
Philippines' self-sufficiency driver
Mr Jose Rene Almendras, Secretary of Energy of the Philippines, highlighted self sufficiency as the main driver of the country's energy policies. The Philippines is currently 57.5 percent self-sufficient in terms of total energy consumption and 66.8 percentin terms of power generation, said Minister Almendras.
Philippines second-largest geothermal producer
Giving further detail on the energy mix, he shared that up to 66.8 percent of the country's electricity is generated from renewable energy sources and that the Philippines is the world's second-largest geothermal producer after the US, with 43 percent of its electricity generated from geothermal.
He compared 2010 and 2011, which showed a reduced reliance on imported fuels, with the use of coal declining by 7.56 percent and oil by a significant 88.4 percent. At the same time, consumption of indigenous resources such as natural gas has witnessed strong uptake of as much as 10 percent, said Minister Almendras.
The potential of importing LNG
Going forward, the Philippines joins other ASEAN countries in exploring the opportunity of importing liquefied natural gas (LNG). As for renewable resources, he revealed that the Philippines aspires to fully utilise its geothermal potential, especially in the small islands. Hydroelectricity will continue to be a growing source, with plans for feed-in-tariffs (FiTs) for mini-hydro and run-of-the-river hydro.
However, there is limited potential for the uptake of intermittent sources such as wind and solar, as the radiation pattern is not favourable and cost remains a major hurdle, said the Philippines Energy Secretary. In total, energy consumption has declined by 4 percent from 2010 to 2011, much of which was attributed to a reduction in the use of air-conditioning due largely to the change in weather patterns.
Finally, it was learned that the Philippines will continue to pursue more activities in the exploration and production of oil and gas resources.
Underpinning key points in Singapore's energy policies
Singapore's S Iswaran, Minister in the Prime Minister's Office and Second Minister for Home Affairs and Trade & Industry, emphasised four key points underpinning energy policies in the context of both Singapore and ASEAN. He first spoke of growing energy demand, which is a proxy for economic growth, and said that energy demand in ASEAN is projected to increase by 84-85 percent by 2035, according to the International Energy Agency (IEA).
Moving on, he noted that the region will shift towards becoming a net energy importer. Thirdly, the economic rationale to address the issue of climate change is weak in the absence of a global carbon pricing mechanism. However, Minister Iswaran shared that there is a defensive case for rationalising the energy pricing mechanism in the region.
Renewables could play growing role
Finally, Singapore needs to remain attuned to regional developments in nuclear power, which could potentially form an important part of the energy mix in some ASEAN countries. While Singapore is alternative energy-disadvantaged, he emphasised that renewable energy is nevertheless the fastest-growing energy sector in Singapore and will play a growing role in its energy mix.
A trio of opportunities
Minister Iswaran went on to highlight three opportunities for ASEAN energy collaboration, which were: Firstly, the scope for collaboration in R&D exists in areas such as energy efficiency, in particular, building designs and solar.
Secondly, there are prospects for cross-border electricity trading which will depend on infrastructure development, appropriate regulations and alignment of electricity markets. Thirdly, greater regional inter-connectivity, in the form of an ASEAN power grid and/or trans-ASEAN gas pipeline, needs to be promoted in a pragmatic fashion by building on existing bilateral energy relationships.
Key energy priorities
The panel discussion was followed by a lively Q&A and discussion among the panel participants. On the prospects for increased regional inter-connectivity, Minister Iswaran and Minister Idris Jala agreed on the need for a comprehensive political agreement as the basic prerequisite. Minister Idris Jala pointed out that many operational issues, such as alignment of pricing and liberalisation, would need to be addressed as well.
Minister Iswaran stressed that a pragmatic approach towards building inter-connectivity would require private-sector involvement supported by government incentives and increased inter-connectivity in smaller sub-groups of countries where it makes economic sense before aiming for a network spanning ASEAN.
Minister Almendras spoke of the geographical difficulties of connecting the Philippines to an ASEAN grid, pointing out that it would become feasible only when peninsular Malaysia is connected to East Malaysia.
Of subsidies and rebates
Participants also posed questions regarding measures to eliminate fuel subsidies while ensuring economic activities. Minister Idris Jala stressed the importance of subsidising energy for the poor to promote social equity. He also mentioned the need to impose a progressive pricing mechanism for the more affluent population. However, elimination of subsidies needs to be implemented in a measured way with revisions done semi-annually. Furthermore, the case for immediate subsidy reduction is rather weak amidst rising energy and food prices.
That said, once Malaysia starts importing LNG, the prospects of supporting foreign producers will weaken the case for subsidies. For Singapore, Minister S Iswaran mentioned that a competitive market leads to efficiency and responsible individual behaviour, while targeted rebates such as the U-Save rebates help to address the social dimension.
On the role that governments can play in the uptake of alternative and renewable energy sources, Minister Almendras stated that Philippines had adopted the FiTs model, which fixes the electricity price to encourage renewable energy sources such as mini-hydro and biomass, as well as the Renewable Portfolio Standard which fixes the quantity.
Governments must provide "tipping point" for renewables
He stressed that a one-size-fits-all approach to renewable energy uptake is inappropriate and renewable energy policy needs to be adapted to unique local circumstances. Minister Idris Jala emphasised that renewable energy cannot be left entirely to market forces, and governments need to provide the "tipping-point" for renewable energy uptake. Feed-in-tariffs are thus examples of "good" energy subsidies as long as it is ensured that they are reduced over time.
Minister Iswaran said that for Singapore, the economic reality is that the costs of renewable sources are still much higher than the grid parity and that we should refrain from subsidising costly options, and instead promote competitive sources.
Singapore's current approach is to study the possibilities and become a "living laboratory" for renewable energy.
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