Southeast Asian Countries and the Power Sharing Grid
Several Southeast Asian countries have started to address the energy crisis by developing clean energy transition plans. Although they were initially regarded as slow starters in the global effort to reduce greenhouse gas emissions, they have accelerated the decarbonization process by developing their own road maps. One of the most common pathways for SEA countries to achieve decarbonization is through the establishment of renewable energy sources. However, this process can be very challenging due to the lack of reliable power supply and the complexity of implementing the pricing structures. In order to address the energy crisis, the region's policymakers have started to implement new measures to promote the development of renewable energy sources.
Various initiatives have been launched to encourage the expansion of renewable energy. For instance, the Singapore government's first power import project is expected to start in 2019. The Philippines' first green energy auction also awarded 76% of its capacity to solar, and the country's newly elected president is leaning toward nuclear and gas power. And due to the increasing number of renewable energy projects, the countries in Southeast Asia have started to open their electricity grid to foreign and private investors. Despite the increasing number of renewable energy projects, the countries in Southeast Asia are still heavily reliant on coal for their electricity needs. This energy source accounts for over 17% of the region's power generation. Due to the continued expansion of the power demand, the region is expected to face a power shortage during the next few years. As Thailand started to delay the closure of its Mae Moh coal plants, Vietnam and Indonesia started to introduce coal as a new energy source in their draft renewable energy bills. These developments raise the question of whether coal is still playing a role in the region's energy transition or if it's at the last possible moment.
Southeast Asia Renewable Energy (RE) Data Explorer
Through the partnership of NREL and USAID, the RE Data Explorer has been able to provide a comprehensive view of the renewable energy landscape in Southeast Asia. This latest version of the tool is designed to help policymakers and investors make informed decisions regarding the region's renewable energy projects. Through this initiative, the governments of Southeast Asia can now access high-quality solar resource data sets that are designed to help them make informed decisions regarding the scaling up of renewable energy (RE) projects. These data sets can be used to support various decision-making processes related to the region's energy transition.
The region's governments need to have reliable and accurate data sets to effectively implement their renewable energy policies. And having high-quality data sets can help them make informed decisions regarding the scaling up of renewable energy projects. The latest version of the tool also comes with enhanced features that are designed to help investors and policymakers make informed decisions regarding the region's renewable energy projects.
Southeast Asia’s power demand recovery continues but faces challenges amid fuel prices surge.
Power Demand growth trend in Q2-2022
The power demand recovery in Southeast Asia continued in the second quarter of 2022. Despite the positive effects of the recovery, the region is still facing challenges due to the rising fuel prices. According to official data released by the power market, power demand growth in Vietnam, Thailand, and Singapore slowed down in the second quarter of 2022. Also, power prices in the region remained high during the second quarter due to the high fuel prices.
Malaysia experienced the fastest power demand growth during the second quarter of 2022. The country's power demand increased by 14% during the month of June 2022 compared to the same period in the previous year. The government's efforts to reopen international borders and economic activities also contributed to the country's power recovery. Malaysia's power demand recovery rate is lower than that of other markets across the region. This is mainly due to the country's 0.9% surplus in power demand during the first six months of 2022. Its power demand recovery prospects are still uncertain.
Despite experiencing slower growth compared to the previous year, Singapore's power demand is still expected to reach a positive level in the second quarter of 2022. The country's monthly demand growth slowed down to 1.6% in 2022 from 5.5% in 2021. This is mainly due to the high power prices and the rising inflation. In spite of the negative effects of the pandemic, the average power demand during the H1 of 2019 exceeded the pre-crisis level by 5.3%. The lower vaccination rates and the lack of severe cases helped boost economies.
In the second quarter of 2022, Vietnam led the region's power demand growth with a monthly contraction of 2.7%. This was due to the country's external economic factors, which affected its export-driven recovery. The country's power demand also fluctuated during the second quarter due to the external shocks. And even after experiencing poor performance in the second quarter of 2019, the overall power demand in H1 ended up surpassing the pre-pandemic level. The country's robust economic growth and the improving trade relations with other countries have contributed to the country's power demand growth.
In April, Thailand's power demand increased by 4.4% compared to the previous year. The country's power demand is expected to continue growing due to the government's efforts to reopen international borders and the recovery of its business activities. However, its consumption from January to April 2022 was lower than the pre-pandemic level due to the high cost of imported fuels.
Hike in Electricity Tariffs
In response to the rising fuel costs, the major power utilities in the region announced their intention to raise electricity tariffs in the second quarter of 2022. This was the first time they have raised their prices in over two years due to the COVID-19 pandemic.
The power demand growth in the region moderated during the second quarter of 2022. However, it is still expected to continue growing due to the robust economic recovery. The rising cost of energy is putting a strain on the budgets of governments. As a result, they have to increase the use of imported fuel for power generation. Some countries, such as Thailand and the Philippines, have to import expensive fuels to meet their power needs. The prolonged conflict in Ukraine and Russia has also exacerbated the country's limited gas supply. The rising cost of fuel and the government's efforts to reopen international borders and stimulate economic activities also increased the pressure on the electricity tariff adjustment of state-owned utilities.
Conclusion
Despite being regarded as a slow start in the energy transition, Southeast Asia has accelerated its efforts to reduce its greenhouse gas emissions. Most of the region's countries have already developed their own road maps that aim to achieve net-zero emissions by 2050. One of the most common pathways for reducing greenhouse gas emissions in Southeast Asia is through the implementation of renewable energy. However, the region's rapid emergence and growth of renewable energy has created significant challenges that need to be resolved in order to prevent intermittency. And due to the increasing number of renewable energy plants, the power grid system in Southeast Asia has started to accommodate the growing number of renewable energy projects. Various initiatives have been made to encourage the expansion of renewable energy. For instance, the Philippines' first green energy auction resulted in the awarding of 76% of the country's solar capacity. Vietnam's latest draft of the PDP8 suggests that the country's government will prioritize the development of wind and gas-based energy sources. After the increasing number of renewable energy plants, the power grid system in Southeast Asia is still struggling to meet the region's growing power needs due to its reliance on coal. This is because the increasing power demand is forcing the authorities to consider the use of fossil fuel generation. As Thailand delayed the closure of its coal-fired power plants, Vietnam also placed significant coal resources in its draft legislation. In addition, Indonesia's proposed renewable energy bill included coal as an alternative energy source. These developments raise the question of the future of coal-fired power plants. It was also noted that nuclear power is becoming more prevalent in the region as a potential alternative energy source. Several countries, such as Indonesia, Vietnam, and the Philippines, have indicated their intention to build nuclear power plants in the second quarter of 2022. Besides nuclear power, the future of coal-fired power plants is also a major concern for Southeast Asia. As the region's energy dilemma continues to evolve, the authorities will have to consider the various perspectives of nuclear and renewable energy.
Pic Courtsey-Nuno Marques at unsplash.com
(The views expressed are those of the author and do not represent views of CESCUBE.)
