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Engaging the private sector to advance 3A Energy Strategy in East Asia
Energy Strategy Reviews 2 (2013) 136e137
Contents lists available at ScienceDirect
Energy Strategy Reviews journal homepage: www.ees.elsevier.com/esr
ENERGY VISION
Engaging the private sector to advance 3A Energy Strategy in East Asiaq,qq Dr. Weerawat Chantanakome, Chief Executive Officer Brunei National Energy Research Institute (BNERI), Brunei
Most East Asian economies remain buoyant despite the global economic downtrend. Economic growth means key energy themes such as rural electrification, energy security and clean development, continue to preoccupy leaders in this region. To meet a 3A Energy Strategy (accessible, available and acceptable) future energy, governments are expected to take leadership roles. They must provide a policy environment that makes it possible for the private sector to engage so that the 3A goals can be achieved more efficiently and sustainably.
1. Rationale With a remarkable growth in the past few decades, and diverse development levels, East Asia energy issues are at the center of the world energy market. East Asia is attracting much attention in the world due to its stable economic growth amid stagnant global economic growth as a consequence of recent financial crisis. Such growth is much needed given the low income level in many member countries, such as Cambodia, Laos and Myanmar. Strong economic growth in East Asia buoyed energy trade, energy investments, technology cooperation and fossil fuel demand. Major concerns are how to feed the growing region and what will be the impact of an escalating demand on the global energy market and greenhouse gas q This is an open access article under the CC BY-NC-ND license (http://creativecommons.org/licenses/by-ncnd/3.0/). qq Energy Vision contributions are by invitation only, and written by a high profile leader from a prominent industrial organization, international agency, nongovernmental organization, consultancy or research institution in energy. The contributions present personal visionary statements on future energy challenges and solutions.
emissions. The Fukushima nuclear accident further complicates the issue. With the slow down of nuclear energy development in Japan, fossil fuels, in particular natural gas, will be used more intensively to fill the gap. For East Asia as a whole, fossil use is rising, and so are the emissions. Energy strategies in East Asia require a comprehensive roadmap and balanced considerations among energy security, economic growth and environmental protection. High level of government involvement and high level of cooperation on energy market integration have proved fruitful strategies to fulfill the three 3A criteria proposed by the World Energy Council. These are accessible e affordable modern energy for all; available energy, that is, reliable and secures delivery of energy; and acceptable e meeting social and environmental goals. The private sector, however, must also play an increasingly important role to help achieve the 3A strategy in efficient and sustainable ways. 2. Access to energy For East Asia much progress has been booked on increasing energy access, but there is still a long way to go to achieve a
2211-467X/$ e see front matter Ó 2013 The Author. Published by Elsevier Ltd. All rights reserved. http://dx.doi.org/10.1016/j.esr.2013.07.003
common goal of universal access to modern energy. Many developing countries in East Asia have made progress in their electrification rates in both rural and urban areas over the past few decades. Grid extensions were the primary means of electrification. Millions of people previously without access to electricity now enjoy electrification. Nonetheless, about 600 million people remain unelectrified in developing Asia, representing an impressive market especially for off-grid renewable applications. ASEAN alone has an electrified population of more than one hundred million. Electrification rates in East Asian are as low as 24% in Cambodia and 13% in Myanmar. In contrast, several nearby countries have reached almost full electrification: Malaysia (99.4%), Thailand (99.3%) and China (99.3%). Also nearby, India still has 400 million people without access to electricity and Indonesia likewise has 80 million people without electrical connections. It is selfevident that it makes sense to exploit the renewable energy potential in this region to further increase access to modern energy service in rural areas. Government alone cannot fulfill the needs due to limited financial resources in these developing countries. The private sector can play a big role.
Energy vision / Energy Strategy Reviews 2 (2013) 136e137
Governments need to create an enabling environment, including, but not limited to, market mechanisms, to engage the private sector. 3. Increasing the role of the private sector in achieving the goals of 3As The role of the Government is crucial in setting the criteria and enabling accessibility, affordability and acceptability of energy supplies. However, in providing energy services, finances of public sector in most developing Asian countries are overstretched to deliver basic economic and social services. On the other hand, the private sector in these countries has the financial resources and has shown willingness to participate in the provision of energy services given the right framework and incentives. Massive private sector investments on renewable energy projects have been observed in India, China and Thailand while an increasing trend has been observed in other Southeast Asian countries. Governments could potentially further unleash the private sector financial resources in meeting the 3A goals and promote sustainable energy sector development. While the roles of the public and private sector in the energy industry in East Asia are diverse (in some countries, energy utilities are dominantly owned by the public sector while it’s the converse in other countries), there is an emerging trend of increasing public private partnerships in the areas of rural electrification, renewable energy development, and investments in energy efficiency and carbon financed projects. Various models of public private partnerships could help to improve energy services in remote villages through modern grid, mini-grid and off-grid options in many East Asian countries. Think of the development of low carbon model towns and demonstration projects that have been anchored on private sector investments on renewable energy and energy efficiency. Despite the apparent uncertainty of the future of the Clean Development Mechanism (CDM) under the Kyoto Protocol, carbon financing remains an important consideration in private sector investments on clean energy projects. With the ongoing national efforts on climate change, such as introducing of carbon prices in China,
the number of private carbon financed projects continues to rise in the region.
4. Meeting social and environmental goals Energy security has high priority, but little attention is paid to climate change in East Asia. The electricity grid is expanded, as steady economic growth helps the region to meet rising energy demand. Due to lack of strong government commitment, neither nuclear power nor renewable energy is developed timely. Fossil fuels have been increasingly used nowadays to meet energy demand. But fossil fuel consumption using today’s technologies will lead to considerable increases in greenhouse gas emissions and other pollution, creating new longerterm threats to the region’s living standards and economic vitality. With the continuous growth of energy demand, greenhouse gas emissions may rise until later stages, when technology advances eventually kick in. In some countries, there exists a situation of light-handed government and little global or regional cooperation. Such countries are preoccupied with their own security of energy supply. Without a proper policy framework, uncertainty in the energy markets will lead to slower economic growth, higher fiscal burden, and under-investment in the energy sector. For the immediate term, development of renewable power generation can be practical and cost effective. Many isolated places, mainly islands, to name a few, Brunei, Malaysia, Indonesia and the Philippines, are relying on expensive diesel generation. These places could be turned to green and sustainable energy without additional costs. With a proper design and strategic investment, these places could be developed as low carbon areas, which will turn the lagged energy systems to models. Toward emissions reduction, choices of clean and green energy technologies and sources will be driven by higher energy prices. Setting a carbon price high enough to affect choices without compromising economic growth would be a fundamental way to improve the accessibility of the future energy. A new framework for agreement on setting a price for carbon is critical, since without strong international cooperation and government involvement greenhouse gas emissions will not be managed, stabilized
137
and reduced. East Asia has been working well on energy efficient improvement individually and collectively due to its lower level of political sensitivity and feasibility in both technologies and cost-benefit. Energy efficiency can save energy and reduces negative environmental impact without compromising economic growth. Energy efficiency still has a large potential to be improved in the future. Raising public awareness can play an important role in more efficient energy use, through changes in urban planning, energy efficiency measures, and technology development, while the positive role of the private sector is widely understood.
5. Diversification of energy supplies The Fukushima nuclear accident has worsened the energy supply challenges in East Asia. In addition to Japan at least four countries, Indonesia, Malaysia, the Philippines and Thailand, have suspended their nuclear energy plans after the accident. The public attitude towards nuclear energy has become more skeptical. Scepticism may have longer impact on the development of nuclear energy than the accident itself. Strong government involvement in energy planning and maximum cooperation and integration by the private sector remain essential. Governments retain energy security as a top priority. Diversifying supplies and suppliers will help sustain economic growth. Clear energy intensity reduction goals set by government requirements can boost energy efficiency. Government agendas include longterm energy security measures, while promoting cleaner fuels, and renewable energy in rural areas. Many East Asian countries leap forward in power production and clean energy. Although the region has abundant coal resources, the overall energy gap between indigenous demand and supply has been widening and will continue to widen in the future. The increasing shift to coal will have significant environmental impact. Even if energy resources are sufficient in the global market, much of the fuel is likely to be imported from other regions, and being secure or affordable is not guaranteed. Available online 17 September 2013
Contents lists available at ScienceDirect
Energy Strategy Reviews journal homepage: www.ees.elsevier.com/esr
ENERGY VISION
Engaging the private sector to advance 3A Energy Strategy in East Asiaq,qq Dr. Weerawat Chantanakome, Chief Executive Officer Brunei National Energy Research Institute (BNERI), Brunei
Most East Asian economies remain buoyant despite the global economic downtrend. Economic growth means key energy themes such as rural electrification, energy security and clean development, continue to preoccupy leaders in this region. To meet a 3A Energy Strategy (accessible, available and acceptable) future energy, governments are expected to take leadership roles. They must provide a policy environment that makes it possible for the private sector to engage so that the 3A goals can be achieved more efficiently and sustainably.
1. Rationale With a remarkable growth in the past few decades, and diverse development levels, East Asia energy issues are at the center of the world energy market. East Asia is attracting much attention in the world due to its stable economic growth amid stagnant global economic growth as a consequence of recent financial crisis. Such growth is much needed given the low income level in many member countries, such as Cambodia, Laos and Myanmar. Strong economic growth in East Asia buoyed energy trade, energy investments, technology cooperation and fossil fuel demand. Major concerns are how to feed the growing region and what will be the impact of an escalating demand on the global energy market and greenhouse gas q This is an open access article under the CC BY-NC-ND license (http://creativecommons.org/licenses/by-ncnd/3.0/). qq Energy Vision contributions are by invitation only, and written by a high profile leader from a prominent industrial organization, international agency, nongovernmental organization, consultancy or research institution in energy. The contributions present personal visionary statements on future energy challenges and solutions.
emissions. The Fukushima nuclear accident further complicates the issue. With the slow down of nuclear energy development in Japan, fossil fuels, in particular natural gas, will be used more intensively to fill the gap. For East Asia as a whole, fossil use is rising, and so are the emissions. Energy strategies in East Asia require a comprehensive roadmap and balanced considerations among energy security, economic growth and environmental protection. High level of government involvement and high level of cooperation on energy market integration have proved fruitful strategies to fulfill the three 3A criteria proposed by the World Energy Council. These are accessible e affordable modern energy for all; available energy, that is, reliable and secures delivery of energy; and acceptable e meeting social and environmental goals. The private sector, however, must also play an increasingly important role to help achieve the 3A strategy in efficient and sustainable ways. 2. Access to energy For East Asia much progress has been booked on increasing energy access, but there is still a long way to go to achieve a
2211-467X/$ e see front matter Ó 2013 The Author. Published by Elsevier Ltd. All rights reserved. http://dx.doi.org/10.1016/j.esr.2013.07.003
common goal of universal access to modern energy. Many developing countries in East Asia have made progress in their electrification rates in both rural and urban areas over the past few decades. Grid extensions were the primary means of electrification. Millions of people previously without access to electricity now enjoy electrification. Nonetheless, about 600 million people remain unelectrified in developing Asia, representing an impressive market especially for off-grid renewable applications. ASEAN alone has an electrified population of more than one hundred million. Electrification rates in East Asian are as low as 24% in Cambodia and 13% in Myanmar. In contrast, several nearby countries have reached almost full electrification: Malaysia (99.4%), Thailand (99.3%) and China (99.3%). Also nearby, India still has 400 million people without access to electricity and Indonesia likewise has 80 million people without electrical connections. It is selfevident that it makes sense to exploit the renewable energy potential in this region to further increase access to modern energy service in rural areas. Government alone cannot fulfill the needs due to limited financial resources in these developing countries. The private sector can play a big role.
Energy vision / Energy Strategy Reviews 2 (2013) 136e137
Governments need to create an enabling environment, including, but not limited to, market mechanisms, to engage the private sector. 3. Increasing the role of the private sector in achieving the goals of 3As The role of the Government is crucial in setting the criteria and enabling accessibility, affordability and acceptability of energy supplies. However, in providing energy services, finances of public sector in most developing Asian countries are overstretched to deliver basic economic and social services. On the other hand, the private sector in these countries has the financial resources and has shown willingness to participate in the provision of energy services given the right framework and incentives. Massive private sector investments on renewable energy projects have been observed in India, China and Thailand while an increasing trend has been observed in other Southeast Asian countries. Governments could potentially further unleash the private sector financial resources in meeting the 3A goals and promote sustainable energy sector development. While the roles of the public and private sector in the energy industry in East Asia are diverse (in some countries, energy utilities are dominantly owned by the public sector while it’s the converse in other countries), there is an emerging trend of increasing public private partnerships in the areas of rural electrification, renewable energy development, and investments in energy efficiency and carbon financed projects. Various models of public private partnerships could help to improve energy services in remote villages through modern grid, mini-grid and off-grid options in many East Asian countries. Think of the development of low carbon model towns and demonstration projects that have been anchored on private sector investments on renewable energy and energy efficiency. Despite the apparent uncertainty of the future of the Clean Development Mechanism (CDM) under the Kyoto Protocol, carbon financing remains an important consideration in private sector investments on clean energy projects. With the ongoing national efforts on climate change, such as introducing of carbon prices in China,
the number of private carbon financed projects continues to rise in the region.
4. Meeting social and environmental goals Energy security has high priority, but little attention is paid to climate change in East Asia. The electricity grid is expanded, as steady economic growth helps the region to meet rising energy demand. Due to lack of strong government commitment, neither nuclear power nor renewable energy is developed timely. Fossil fuels have been increasingly used nowadays to meet energy demand. But fossil fuel consumption using today’s technologies will lead to considerable increases in greenhouse gas emissions and other pollution, creating new longerterm threats to the region’s living standards and economic vitality. With the continuous growth of energy demand, greenhouse gas emissions may rise until later stages, when technology advances eventually kick in. In some countries, there exists a situation of light-handed government and little global or regional cooperation. Such countries are preoccupied with their own security of energy supply. Without a proper policy framework, uncertainty in the energy markets will lead to slower economic growth, higher fiscal burden, and under-investment in the energy sector. For the immediate term, development of renewable power generation can be practical and cost effective. Many isolated places, mainly islands, to name a few, Brunei, Malaysia, Indonesia and the Philippines, are relying on expensive diesel generation. These places could be turned to green and sustainable energy without additional costs. With a proper design and strategic investment, these places could be developed as low carbon areas, which will turn the lagged energy systems to models. Toward emissions reduction, choices of clean and green energy technologies and sources will be driven by higher energy prices. Setting a carbon price high enough to affect choices without compromising economic growth would be a fundamental way to improve the accessibility of the future energy. A new framework for agreement on setting a price for carbon is critical, since without strong international cooperation and government involvement greenhouse gas emissions will not be managed, stabilized
137
and reduced. East Asia has been working well on energy efficient improvement individually and collectively due to its lower level of political sensitivity and feasibility in both technologies and cost-benefit. Energy efficiency can save energy and reduces negative environmental impact without compromising economic growth. Energy efficiency still has a large potential to be improved in the future. Raising public awareness can play an important role in more efficient energy use, through changes in urban planning, energy efficiency measures, and technology development, while the positive role of the private sector is widely understood.
5. Diversification of energy supplies The Fukushima nuclear accident has worsened the energy supply challenges in East Asia. In addition to Japan at least four countries, Indonesia, Malaysia, the Philippines and Thailand, have suspended their nuclear energy plans after the accident. The public attitude towards nuclear energy has become more skeptical. Scepticism may have longer impact on the development of nuclear energy than the accident itself. Strong government involvement in energy planning and maximum cooperation and integration by the private sector remain essential. Governments retain energy security as a top priority. Diversifying supplies and suppliers will help sustain economic growth. Clear energy intensity reduction goals set by government requirements can boost energy efficiency. Government agendas include longterm energy security measures, while promoting cleaner fuels, and renewable energy in rural areas. Many East Asian countries leap forward in power production and clean energy. Although the region has abundant coal resources, the overall energy gap between indigenous demand and supply has been widening and will continue to widen in the future. The increasing shift to coal will have significant environmental impact. Even if energy resources are sufficient in the global market, much of the fuel is likely to be imported from other regions, and being secure or affordable is not guaranteed. Available online 17 September 2013