ASEAN integration: We need energy security and competitive rates
With a combined GDP of US$ 2.1 trillion in 2011, a wealth of natural resources and an enterprising and increasingly well educated workforce, the ten member states that make up ASEAN possess the necessary assets to become a pillar of the global structure.
The world’s most powerful economies are focusing increasingly on ASEAN’s excellent performance and growth potential. There is one important and critical question coming up: Can developing ASEAN secure the energy it needs to fuel the expected economic expansion?
Energy security rests on three pillars: the adequacy and reliability of energy supply, environmental sustainability, and affordable access. Failure on any of these fronts could derail economic development and the desired inclusive growth. ASEAN has an array of options to manage its energy appetite. But tackling issues such as outmoded subsidies requires political will and green innovation requires imagination. Subsidies impose a tremendous burden on public budgets, exceeding 2 percent of GDP in Indonesia and Vietnam and are undermining the desired level playing field as ASEAN integrates.
In this context, it is unfortunate that we see a looming power crisis in the Philippines starting in summer 2015 and stretching into 2016.
The private sector has offered solutions to the Department of Energy and is committed to address the shortfall jointly, by focusing on the following measures:
1. Energy efficiency needs to be implemented and enforced NOW
Data is available that 20% of power can be saved if everybody embarks on Energy Efficiency. Given 11,500 MW, this equals 2,300MW. This if far beyond the estimated shortfall of 400 – 800MW
2. Mobilization of self-generating capacity of large end- users / Interruptible Load Program (ILP)
The private sector is accumulating data on the ILP by convincing companies with large embedded generation plants to run those for 10 hours a day during the shortfall. It is expected that 700MW can be made available.
3. Power price caps in the spot market should be abolished because they are a disincentive to energy generation investments
Investors will only invest if there is a fair return on investment possible; this is – at the moment – undermined by the WESM cap.
4. The approval process for generating new plants should be streamlined
Approximately 162 permits and signatures are required before a power plant can be built; this means, in the Philippines it takes 5 years to get a plant on stream compared to 3 years in other countries.
5. The government should develop a sustainable energy mix policy and FIT implementation. In order to drive investments and look at sustainable feedstock, the government has to create a long-term vision on the energy mix, looking at coal, LNG, geothermal and renewable energy sources.
6. The government should fast track the tender for banked gas. By 2016, Malampaya will have additional gas available to power a 200MW plant. PNOC owns banked gas enough to power another 200MW.
Why is the private sector keen to cooperate with government to solve the power crisis? We have bad experience with previous governments buying expensive power off the rack, which further burdens power consumers and is a disincentive for new investments, the country badly needs.
And this potential power crisis happens close to the time when the AEC kicks in. There are three key areas of focus for ASEAN members: trade in goods, trade in services and inward investment or FDI.
FDI is a key component of resource flows to ASEAN countries. Over the last decade, FDI flows into ASEAN members grew at an annual average rate of 19 percent.
Within the overall framework, each ASEAN country has adopted its own strategy to attract FDI. As in the EU, efforts to create a ‘level playing field’ between the countries in the single market leaves national governments with freedom to provide their own tax and other incentives to investors. Internationally, there is plenty of interest to invest into the energy future of the Philippines. Managing demand growth while aggressively exploring cleaner supply options must be part of the joint vision.
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