In looking at the different stages of development in the ASEAN electricity market, Singapore Electricity Roundtable panelist Sarah Fairhurst, Partner, The Lantau Group (TLG) of Hong Kong, grouped the market into three. There are those with electricity markets in place (eg Singapore and the Philippines); those in the process of market implementation (eg Malaysia and Vietnam); and countries with a traditional IPP (independent power producer) market (eg Thailand, Laos/Cambodia and Indonesia).
On Singapore, Ms Fairhurst summed up the city-state as having a reliable but expensive electricity supply with the highest electricity tariff in Asia, as its fuel mix is greatly dependent on gas--a major challenge it has to overcome.
The Philippines was seen as a former "poster child" for market reform in a developing country, but may have lost that status as a good role model today due to a poor regulatory system, issues with new build and open access uncertainties.
Malaysia continues to struggle with its changing optimal fuel mix shifting to coal, which is not ideal for everybody due to environmental issues.
As for Vietnam's electricity market, Ms Fairhurst said that this was being stifled by the lack of clarity of governmental regulations and mismatches between tariff and cost.
Thailand, on the other hand, was seen as grappling with issues such as fuel mix, fuel price liberalisation and aggressive plans for new build.
Indonesia was facing a mismatch between tariffs and costs, as even government subsidies have had limited impact on reducing the country's electricity producers' financial stress.
Despite the various differences in the ASEAN power sectors, very often, common themes would emerge, particularly with reference to concerns over affordability, fuel mix diversity, and uncertainties in new investments due to unpredictable forecasts.
Ms Fairhurst observed that most governments are looking for secure supplies of power at the least cost. Countries use differing solutions to deal with rises in price. Some economies raise electricity tariffs in tandem with fuel price increases, while others such as Malaysia and Thailand would implement significant subsidies resulting in market distortions and wasteful consumption, all of which are not sustainable measures.
She explained that a sensible approach was to seek the least-cost fuel to supply new power, ie coal. However, this energy source was seen as a major hurdle as it often perceived to be environmentally-unfriendly, as evident by public demonstrations against the use of coal in the Philippines and Thailand. The complexity of the problems is heightened by the fact that market reforms would need to be underpinned by robust regulation based on decisions driven by detailed analysis and consultation.
Potential for greater connectivity to Singapore and the region
Ms Sarah said she took a broad view of interconnectivity--that this should be seen as a broader way to think about connecting related systems so both could work more efficiently to accrue benefits from interconnected commercial arrangements and physical interconnections.
A good example would be the Queensland-New South Wales Interconnector (QNI) where the physical interconnection has led to benefits in terms of a reduction in pool prices and volatility, and a drop in the costs of ancillary services.
Discussions on the Trans-ASEAN Power Grid brought up possible benefits of increased market competition, lowered consumer prices and increased energy security, yet these have not materialised as such "big bang" implementations are difficult to achieve due to a misalignment of various parties' interests.
Interconnectivity can be achieved through market mechanisms without physical constructions, for example, through LNG backhauls resulting in cost savings from deferment of capital investments and transportation cost reductions. A specific example would be the possibility of Malaysia being able to defer some investment in the Melaka LNG Terminal by backhauling LNG from the Singapore LNG terminal through netting the quantity from the Petronas export to Singapore.
Ms Sarah concluded by sharing that the barriers to interconnectivity are rarely physical, but international cooperation to explore ways to work towards mutual benefit is a good start. It is often difficult to find a single player whose individual benefits are greater than the costs, and this is where a broad perspective and coalition of interests can be helpful.
By :Lan Yi Wen, EMA