By Olivier Duguet
The recent oil prices slump represents a unique opportunity for South East Asia to move towards energy price transparency by cutting expensive energy subsidy programmes which have been around for decades.
The Paris-based International Energy Agency (IEA) estimates the global cost of subsidising energy consumption (mainly in developing economies) is US$500 billion a year.
Current cheaper oil should reduce this bill to about US$400 billion a year, leaving governments with the choice of continuing oil, gas and electricity subsidies to encourage consumption or dismantle these very costly programmes for national budgets and restore economic fairness.
The choice is particularly important for South East Asia’s high growth and fuel dependant economies.
Energy demand from ASEAN’s 600 million inhabitants has risen two and a half times since 1990 and is now equivalent to three quarter of the energy demand of India.
Indonesia alone spent US$29.2 billion in 2013 to make fossil fuels cheaper for final consumers.
Total subsidies from three other ASEAN countries - Vietnam, Thailand and Malaysia – amounted to over US$10 billion for 2013, according to IEA’s World Energy Report.
The electricity support schemes have in return required subsidies of power generation fuels to keep state-owned utilities financially viable.
The difference between market and subsidised prices, which accounted for 2.16% of the GDP in ASEAN-5, has contributed to major imbalances in many countries and banned utilities to invest in new technologies and capacity building.
In 2012, the US$51 billion spent by ASEAN countries in subsidising fossil fuels was equivalent to 11% of all general government budgets in the region.
Vietnam, amongst others, has electricity prices capped and differentiated for different users. More than US$2.5 billion is spent yearly to subsidise electricity prices from national utility EVN, distorting any competitive advantage renewable energy sources could have in a sun and wind resourceful country.
Indonesia, under its new President, has just started to slash its fuel subsidies but is still artificially reducing the price of 60 to 75 million tonnes a year of coal used in its 12 GW of coal-fired power plants.
Thailand spent US$6.8 billion in 2012 in fossil fuel consumption support schemes, second only to Indonesia, according to IEA records.
Low income earners have to be protected against wild gyrations of fuel prices of course, but giving consumers the good price signal is crucial for the future of renewables.
The current plunge of oil prices will be one of the very last chances to implement true energy prices around South East Asia and enable renewables to compete directly with non-subsidised fuels.
Wind resources, even though not evenly distributed in the region, are the most cost competitive and easy to deploy of today’s renewable energy sources.
Recent economic weaknesses in China, Europe and Japan, coupled with market share war amongst oil producers, have pushed fuel prices to unexpected lows which may not last long before world economic growth resumes.
Bringing back energy prices transparency is what renewable power needs to thrive in a future low carbon world.
Background
Olivier Duguet is the Chief Executive Officer of The Blue Circle, a Singapore-based company which focuses on developing wind and solar energy projects in Thailand, Vietnam and Cambodia.
With twenty years’ experience in the renewable energy sector in Europe and Asia, Mr Duguet set up his company in 2013 to bridge the gap in project development in the Mekong Region, by bringing international project development experience, financial expertise and capabilities, together with local market understanding.
Last month (October 2014) The Blue Circle announced it installed its first 100 metre meteorological mast in Ninh Thuan province, Southern Vietnam, supported by the United States Agency for International Development (USAID), under its regional Private Financing Advisory Network-Asia programme (PFAN-Asia). This is the first meteorological campaign to measure wind energy potential in Southern Vietnam.
In July, the company announced a partnership with Annex Power, a leading renewable energy group in South East Asia, to jointly develop wind power plants in Thailand. The Blue Circle will identify greenfield sites, pursue project development milestones up until financing and operating of the generating assets.
For further information, please contact:
The Blue Circle
Olivier Duguet Tel: +65 62594921 olivier.duguet@thebluecircle.sg
Sustain Ability Showcase Asia
Ken Hickson Tel: +65 81397472 Kenhickson@sustain-ability-showcase.com
Singapore - October 16th, 2014
The Blue Circle Pte Ltd, the Singapore-based renewable energy developer operating in the Mekong region (Vietnam, Thailand and Cambodia), has installed its first 100 metre meteorological mast in Ninh Thuan province, Southern Vietnam.
The United States Agency for International Development (USAID), under its regional Private Financing Advisory Network-Asia programme (PFAN-Asia), supported this initiative by supplying all the measurement equipment to be installed for this first meteorological campaign to measure wind energy potential in Southern Vietnam.
PFAN-Asia assists developers in Southeast Asia to mobilise and scale up investments in clean energy. The goals of the PFAN-Asia programme are to mobilise US$1 billion in funds for clean energy investments and reduce greenhouse gas emissions by 40 million tons. PFAN-Asia provides networking, technical assistance and advisory support to key stakeholders, in this case one of Asia’s premier wind developers.
The project, on which the 100 metres tower was first erected in September, has been granted a renewable energy policy approval by the People’s Committee of Ninh Thuan province for the development of a 30 MW wind farm on an exclusive 542 hectares plot of land in the south of the province.
The installed 100 metres mast will play a critical role in the wind measurement campaign started by The Blue Circle to accurately assess the wind energy resource in the area. The study will last two years and is expected to lead to a forecasted US$70 million investment in the wind power plants.
The meteorological mast installed by Nam Kinh Trading Services is the first of its kind in South Vietnam at a height of 100 metres and will help by spreading best practises in wind measurement in the whole region. The equipment has been installed in line with International Energy Agency (IEA) recommendations and to The Blue Circle’s stringent specifications.
Dan Potash, Chief of Party of PFAN-Asia: “Working with private sector partners, USAID is helping to carry out bankable resource assessments, leading to significant and sustainable clean energy projects. The Ministry of Energy of Vietnam estimates that there is more than 10,000 MW of near-term economically viable wind power in the country. PFAN-ASIA and USAID believe that it is very important that the first wave of wind power installations achieve predicted results”.
“We are proud that USAID through its PFAN-Asia programme chose to support The Blue Circle initiative in Vietnam. It shows dedication from USAID to develop renewable energy in the region that desperately needs clean power at a reasonable cost,” added Olivier Duguet, Chief Executive Officer of The Blue Circle Pte Ltd.
About The Blue Circle
The Blue Circle is a developer of wind and solar energy projects in Thailand, Vietnam and Cambodia. The Singapore-based company looks to bridge the gap in project development in the Mekong Region by bringing international project development experience, financial expertise and capabilities together with local market understanding. Its growth strategy is twofold: through the development of its own projects and through acquisition or partnership with local developers. By being vertically integrated, The Blue Circle can identify greenfield sites, pursue project development milestones up until financing and operating of the generating assets.
For further information, please contact:
The Blue Circle
Olivier Duguet Tel: +65 62594921 olivier.duguet@thebluecircle.sg
PFAN-Asia
Daniel Potash Tel: +66 927909923 dpotash@deloitte.com
Sustain Ability Showcase Asia
Ken Hickson Tel: +65 81397472 Kenhickson@sustain-ability-showcase.com
The Blue Circle, a renewable energy developer operating in the Mekong region (Vietnam, Thailand and Cambodia) and based in Singapore, announced a partnership with Annex Power, a leading renewable energy group in Southeast Asia, to jointly develop wind power plants in Thailand.
Onshore wind power development will be more and more based on the use of wind sites of lower quality in terms of average annual wind speed than those that were available at the start of the large scale wind power market deployment. This is particularly true in Europe where the best sites are increasingly already taken.
Electricity of Vietnam Group (EVN) is allowed to self determine to increase electricity prices by less than 10% but minimum time between the 2 price hikes is 6 months, Vnexpress.net reported.
The Prime Minister Nguyen Nguyen Tan Dung has approved Decision No. 69 providing mechanisms to adjust average retail electricity prices, which will come into force from Jan 10, 2014. Accordingly, the minimum time between the two electricity price adjustments is extended to 6 months, replacing the current requirement of 3 months. It means that electricity prices would be adjusted by maximum of 2 times per year, starting from Jan 10, 2014.