Greening Southeast Asia : Enablers and Barriers

Pierre Noel & Antoine Guardiola

SIEW Think Tank Roundtable

Singapore, 1 November 2018

1

2

A gas-intensive region, but ‘golden age of gas’ is behind us …

Source: BP

2017

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

1980 1990 2000 2010

Natural Gas Share of TPES

ASEAN-6

2017

0

20

40

60

80

100

120

140

1980 1990 2000 2010

Mtoe Natural Gas Consumption MNR

MYS

VNM

PHP

THAI

IDN

3

…while coal is on the rise…

Source: BP

0%

10%

20%

30%

40%

50%

60%

70%

80%

1970 1980 1990 2000 2010

Primary Fuel Mix (ASEAN-5)

Natural Gas

Coal

Oil

Renewables

2017

0%

10%

20%

30%

40%

50%

60%

1980 1990 2000 2010

Coal share (ASEAN-5)

IDN THA

MYS VNM

PHP MNR

2017

Natural gas versus coal

4

0

10

20

30

40

2018

Coal-based

LNG-based

0

10

20

30

40

10% 30% 50% 70% 90%

c/kWh2014

Enabler: much cheaper LNG

0

1

2

3

4

5

6

7

Jan

-01

Jan

-04

Jan

-07

Jan

-10

Jan

-13

Jan

-16

LNG/coal ratio

Jan

-18

Plant load factor

Cost of electricity generation (LCoE)

Barrier: no carbon taxLCoE and Carbon tax in Malaysia

7

8

9

10

11

12

0 5 10 15 20 25 30 35 40 45 50

Carbon tax ($/tCo2)

20180

1

2

3

4

5

6

7

Jan

-01

Jan

-04

Jan

-07

Jan

-10

Jan

-13

Jan

-16

LNG/coal ratio

Jan

-18

“Minister Yeo Bee Yin today confirmed there are no plans to introduce a "carbon tax" in the upcoming Budget 2019.”

malaysiakini.com, 20 Oct 2018

8

12

16

20

24

0 20 40 60 80 100 120 140

c$/kWh

Carbon tax ($/tCo2)

2014

Barrier: competition with China in manufacturingA

pr-

15

Jul-

15

Oct

-15

Jan

-16

May

-16

Au

g-1

6

No

v-1

6

Mar

-17

Jun

-17

0

2

4

6

8

10

12

14

-20%

0%

20%

40%

60%

80%

100%

120%

140%

$/mmbtuNatural gas (supplied by CGDs)

vs ‘furnace oil’

IPNG Premium to FO=RHS FO Price IPNG PriceSource: IISS based on data courtesy of Philip Capital

Deployment of renewables

8

Sources: EPPO, Bloomberg, ST, PLN

0

2

4

6

8

2009 2012 2015 2018

Baht/kWh

FiT PV farmLCoE PV farm (Bloomberg)Biomass (bid)Solar/Biomass (bid)Solar/ESS (bid)Solar/Biogas (bid)Gas (10$/MMTbu)Gas (7.85$/MMtbu)Gas (15.5$/MMTbu)

Enabler: cheap renewables

Thailand Malaysia

02468

101214161820

Jaka

rta

Jate

ng

Lam

pu

ng

Sth

. Su

mat

ra

Suls

elra

ba

Sum

ut

Kal

tim

Kka

lbar

Bab

el

NTB

NTT

cUSD/kWh

FiT

Average cost of electricity generation

LCoE Solar+battery (1-hr) ASEAN[Poyry consulting]LCoE Solar+battery (2-hr) ASEAN[Poyry consulting]

Akuo Solar 50 MW

Sidrap Wind 75 MW

Indonesia

0.0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

2015 2016 2017 2018

MYR/kWh

Lowest large-scale bidding auction

Generation cost per unit

LCoE Bloomberg PV Crystalline Base

FiT Solar PV non-individual [72kW, 1MW]

Lowest large-scale solar bidding auction 2016

Barrier: electricity subsidies

“we will not deprive the people just because we want to drive the green agenda.”

Minister Yeo Bee Yin, 20 Oct 2018

malaysiakini.com

0

200

400

600

800

1000

1200

1400

1600

2008 2009 2010 2011 2012 2013 2014 2015 2016

Rp/kWh Indonesia

Basic Cost of Electricity Production

Average Electricity Sales Price

Politicians want this low

MinFinwants this

down

Strong pressure to keep costs downs

11 Source: PLN, MEMR

46%

48%

50%

52%

54%

56%

58%

60%

62%

2003 2008 2013

Coal plants average capacity factor

120

170

220

270

320

370

420

470

520

570

620

2008 2011 2014 2017 2020 2023 2026

TWh

Tho

usa

nd

s

Power demand revised down

RUPTL 2009-2018RUPTL 2011-2020RUPTL 2013-2022RUPTL 2015-2024

Barrier : overcapacity

2017

• Overcapacity aggravates the threat from renewables

• Stranded assets and contracts

• Power monopolies block (or delay) renewables

• Governments face dilemma

12

Conclusion: three key issues

1. Tax carbon, or coal

• Lest renewables displace gas, with little impact on emissions

2. Phase-out subsidies

• Reduce direct barrier to ‘greening’

• …and pressure to keep cost down

3. Address stranded assets

• One-off cost to unlock the transition