Energy-hungry economies in Southeast Asia are pursuing reforms as most have limited resources at home, but they still face major challenges to diversify energy sources while still sustaining economic growth, say policy planners and experts.
In Thailand, which relies heavily on imported energy, the new military government intends to introduce third-party access to the gas transmission system and transfer its ownership to a company partly owned by the national energy conglomerate PTT Plc. The PTT monopoly on gas transmission has long been a target of activists such as the Group of 40 senators, whose views are closely aligned with those of the military regime.
Third-party access would allow gas suppliers to contract directly with users in the power and industrial sectors, said Thomas Parkinson, a partner at the Lantau Group, a Hong Kong-based economic consultancy specialising in energy and infrastructure.
"These higher marginal prices might stimulate the domestic gas supply industry to bring more gas to market, thereby backing out imported LNG (liquefied natural gas)," he said.
Thailand's Energy Regulatory Commission (ERC) hopes to finish drafting a third-party access (TPA) code for gas pipelines and LNG service stations by March and put it into practice later on.
If the code attracts new players, the entire transmission network would operate more efficiently, with more competition leading to lower prices for gas users, commissioner Veeraphol Jirapraditkul has said.
While gas transmission and pricing have been contentious, Thailand's long-term plans for electricity generation have also encountered opposition since coal will still play a role.
Governments elsewhere in Asean have been able to convince the public that new technology has made coal plants cleaner. State-of-the-art air quality systems can reduce all emissions other than carbon to levels similar to those of combined-cycle gas turbine power plants, Mr Parkinson noted.
Despite opposition from environmental activists, Energy Minister Narongchai Akrasanee said recently that two new coal-fired generators with a combined capacity of 3,100 megawatts would be included in the new Power Development Plan (PDP) for 2015-36.
"Mae Moh-style air quality issues should be a thing of the past," said Mr Parkinson, referring to the pollution caused by the 2,400 MW coal-fired plant in Thailand's northern Lampang province. A court in March this year ordered the Electricity Generating Authority of Thailand (Egat) to compensate local people suffering from pollution from the plant.
Given the strong resistance to coal, gas is expected to remain the dominant energy source for Thailand, said Mr Parkinson.
But while debates about fuel sources attract a lot of attention, he says the more troubling issue is the direct and indirect use of energy subsidies in Asia, which have pushed up energy consumption.
"Any rational policies should strip out the subsidies and price energy properly at marginal cost. This would help to reduce demand and take some of the pressure off the need to build more generation," he said. "We should use more targeted methods to support the poor."
According to the Asian Development Bank (ADB), fossil fuel subsidies account for 4% of gross domestic product (GDP) in Bangladesh and Pakistan, 2% in India, Indonesia and Vietnam, and 0.7% in the Philippines.
"Yet, the main beneficiaries are not the poor," said Anthony Jude, chair of energy committee and senior adviser at the ADB, who also favours properly targeted subsidies for the people who really need help.
"Reducing general fuel subsidies will curb energy demand growth and encourage behavioural change to reap efficiency benefits," he added.
FOSSIL FUEL DOMINATION
The ADB has forecast that Asia's oil imports will triple by 2035 with higher reliance on supplies from the Middle East. Only three economies in Asia — Kazakhstan, Azerbaijan and Brunei — will be energy self-sufficient by 2035.
Fossil fuels, mainly coal and gas, will continue to dominate demand in the region, said Mr Jude.
"If developing Asia is to continue to grow at around 6% annually and lift millions more out of poverty, it needs to massively increase energy supply," he said. "Primary energy demand will remain fossil fuels and its continued increase is likely to spell environmental disaster."
The ADB forecasts that developing Asia's share of global carbon dioxide emissions will rise to 47% by 2035 from 37% in 2010.
"Addressing energy challenges in developing Asia requires policy actions on both the demand and supply sides, regional cooperation and integration," said Mr Jude.
Energy demand and economic growth rates tend to be similar, and the increase in demand in developing countries can be dramatic over the long term. In Malaysia, for example, ExxonMobil projects overall energy demand will rise by 50% in 2040 from 2010 levels, with a 60% surge in demand for natural gas.
While state-owned Petronas dominates the Malaysian oil and gas sector, 15 major oil companies from around the world are active in the country as the government encourages investments in the upstream sector to meet future needs.
Petronas heavily subsidises gas sales to the power sector, and gas pricing reform in Malaysia is likely to create incentives for Petronas to sign new supply contracts.
Diraja Mahdzir Khalid, Malaysia's deputy minister of energy, green technology and water, has said that the country's three goals are ensuring adequate supply, efficient utilisation of resources and minimal impact on the environment.
Currently natural gas accounts for 52% of the fuel used in electricity generation in Peninsular Malaysia. Coal makes up 42% and hydropower and renewable energy the rest. By 2020, the share of coal is projected to surge to 64%. However, Malaysia's conditional commitment to cut carbon intensity by up to 40% from 2005 levels means coal plants must be clean.
All existing coal-fired power plants in Peninsular Malaysia use "super critical clean coal" technology. Among them is the 2,100-MW Manjung power station which complies with World Bank standards, while the upcoming Janamanjung 5 plant will utilise ultra-supercritical boiler technologies for improved efficiency and low emission discharge, the minister said.
Malaysia also wants to increase the share of renewable energy in the overall mix, but weather conditions are not always ideal for the likes of solar and wind power. The government set an ambitious target of 985 MW of generation from renewable sources by 2015, but approvals so far total just 500 MW and actual installations only 188 MW.
Kuala Lumpur introduced a feed-in tariff (FiT) system in December 2011 to encourage development of renewable energy. To date, authorities have approved 4,500 applications for 805 MW of FiT quotas.
Malaysia also has a Green Technology Financing Scheme (GTFS), which absorbs two percentage points of the interest charged on funds secured from participating lenders. The government also guarantees 60% of the amount financed through Credit Guarantee Corp Malaysia Bhd with the remaining 40% to be borne by the private finance initiatives.
Since the programme's inception, 131 out of 309 green energy projects have been approved for funding from financial institutions. Loan approvals have improved from 12% to 42%.
IS COAL THE FUTURE?
But for all the talk of green energy, coal is not going to go away. Indonesia and Vietnam, for example, have plentiful coal reserves and both export to other Asean countries. Indonesia in 2013 had coal reserves of 490.6 million tonnes, good for another 64 years, while Vietnam's reserves totalled 48.3 million tonnes, compared to 18.2 million in Thailand, 8.5 million in the Philippines and 3.1 million in Malaysia.
Coal demand in Indonesia, Vietnam, the Philippines and Malaysia is expected to increase significantly in the next 20 years, according to Rodrigo Echeverri, general manager for regional sales at the coal producer PT Adaro Indonesia.
Indonesia exports around 80% of its domestic coal production, and 30% of those exports go to China.
Mr Echeverri said self-sufficiency was good for Asean now but the future is a concern given the growing consumption of coal in the region, including the expected higher intra-Asean flows in coming years.
Indonesia, meanwhile, has one of the lowest levels of access to electricity in Asia. Hence, it is certain to use more of its coal resources to develop the economy and improve living conditions in addition to supplying energy to support development of the neighbouring countries. At the same time, Indonesian mines now operating might plateau in the next five years if no further investment is made
In Vietnam, weak port infrastructure and delays of coal projects have slowed efforts to bring more coal capacity online. Securing project financing has also been a challenge while political tensions with China have resulted in delays or cancellations of projects with Chinese investment, he added.
As coal-fired capacity will continue to grow in Asean given its relatively low cost, Mr Echeverri said it would be critical to find the right balance between demand and supply growth to maximise benefits for the entire region.