An Ipsos Paper on Renewable Energy in South East Asia July 2012

7/31/2019 An Ipsos Paper on Renewable Energy in South East Asia July 2012

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Ipsos in ASEAN

Meeting the Energy Challenge in

South East Asia

A Paper on Renewable Energy

JULY 2012


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Foreword by

Peter Snell, CEO

Ipsos Business ConsultingIt is probably fair to say that the majority of people on the

planet now have an awareness of the need for action on climate

change by cutting greenhouse gas emissions. Governments

around the world are actively grappling with the challenge of

balancing their responsibilities on climate change with the need

to ensure that there is a secure energy supply. Here in Asia,energy security is perhaps as large a challenge as climate

change for both government and industry.

Asia continues to experience impressive economic growth,

which in turn is causing energy demands to grow hugely. This demand is likely to

continue to be met by fossil fuels in the short to medium term. This means rising

levels of greenhouse gases as well as intense competition for energy resources. We

are already witnessing Asian economies becoming dependent upon energy imports.

As the oil & gas reserves around Asia start to become outstripped by demand, theneed for energy imports will likely continue to rise. The stability of the region will

become increasingly important to the energy security policy of Asian economies.

There can be little doubt about the need for a concerted effort from government and

industry to meet the energy challenge facing the world. Energy companies are

already making substantial investments in technology advancements and energy

infrastructure in an effort to address these energy issues. An important part of

energy security is developing the contribution that can be made from renewable

energy sources. This paper looks at the issue of renewable energy within the ASEAN

region. South East Asia is a significant economic bloc that continues to deliver strong

growth for its communities. The issue of energy security is as great here as any other

part of the globe. This paper from Ipsos seeks to make a contribution towards the

debate surrounding the importance of renewable energy in ASEAN. My team around

the region work with some of the worlds best known energy companies and would

be happy to engage in further dialogue with any parties interested in the subject of

energy demand and energy security in South East Asia.


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Contents

Executive Summary.....................................................................................................4

Renewable Energy Targets in ASEAN ..........................................................................5

Renewable Energy Market ..........................................................................................6

The Philippines...........................................................................................7

Thailand......................................................................................................9

Indonesia..................................................................................................11

Malaysia...................................................................................................14

Vietnam....................................................................................................17

Singapore.................................................................................................19

Market Opportunities in the Renewable Energy Sector............................................20

Suggested Further Reading........................................................................................25

About the Authors......................................................................................................26


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Executive Summary

South East Asia is widely recognised as a leading location for direct investment, with anexisting strong and diverse industry base. One of the most exciting areas of opportunity

in the region is Renewable Energy (RE). South East Asia is a huge potential market for RE.

In addition to the 6 countries which we have examined, further huge opportunities will

likely exist in other ASEAN territories, such as Myanmar, Cambodia and Laos.

We can point to three key factors influencing the development of RE technologies and

their market opportunities:

Government policy (tax breaks, feed-in tariffs etc.)

Funding (public & private)

Cost of technology (economies of scale etc.)

Of the 6 markets surveyed, only the Philippines (geothermal energy) and Thailand (solar

power) even approach commercial viability in terms of RE at the present time. However,

this situation is changing rapidly, as all ASEAN governments are committed to developing

renewable sources of energy.

The current RE situation across ASEAN presents a mixed bag. Not only are the various

countries at different stages of RE development, but development of individual sources

of RE varies within each country.

All of the 6 markets offer huge potential. From Indonesia, with its vast population, of

some 240 million down to Malaysia with less than 30 million, these are sunshine coun-

tries with long coastlines and vast renewable resources. Even tiny Singapore aspires to

becoming the RE research & development hub for the region and beyond.

RE is a new sector and consequently government rules and regulations are in a state of

flux. Individual countries are still learning from more developed markets and from each

other. However, if investors were to wait for regulatory stability, they could well be too

late to reap optimal rewards. At this stage, the safer opportunities are to be found in so-

lar power in Malaysia and Thailand. However, many consider Indonesia, where rules and

regulations are in their infancy and investment is more of a gamble, just too big to be ig-

nored.


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Renewable Energy Targets in

ASEAN

Global renewable energy investors are increasingly looking towards South East Asia as a new

destination for investment in renewable energy (RE). At the same time, the governments of the

Philippines, Indonesia, Thailand, Malaysia and Vietnam are setting aggressive targets for RE to be

achieved in the next 20 years.

The target for renewable energy capacity amongst these ASEAN countries (plus Singapore) is set

to increase rapidly from its initial 2010 base. In 2010, existing RE capacity was estimated at 9,800

MW. Contrast this with the 2030 target of 53,900 MWa more than fivefold increase.

Figure 1: Target RE Capacity in Key ASEAN Countries

The Governments of six key ASEAN countries (Indonesia, Thailand, Vietnam, Philippines, Malaysia and Singapore) have set

aggressive targets to increase installed RE capacity over the next 20 years at a rate equivalent to 5 6 times greater than 2010

capacity.

There are a variety of reasons for ASEAN governments to push for expansion of the RE sector, not

least of which are the increased demand for electricity, the high price of oil, growing concerns

about fossil fuel combustion, and high investment costs associated with expansion of existing

electricity grids. There is also recognition that investing in RE will create jobs as well as revenuefor the country.

On top of all this, ASEAN is fortunate in having abundant natural resources throughout its

territories, enabling it to make great strides towards efficient use of renewable and alternative

energy from a range of sources.

Renewable Energy Technology

Microhydro, geothermal, biomass & biogas are the main RE technologies currently utilised in the

ASEAN region. In 2010, microhydro accounted for approximately 38% of the RE installed base

followed by geothermal (32%), biomass & biogas (29%), while solar, wind and waste energiesshared less than 1%.

Source: data consolidated from Government official sources by Ipsos Business Consulting


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In 2030, if plans outlined for RE development in ASEAN are followed, microhydro and

geothermal are expected to remain the main sources of RE, given the abundance of available

resource. Solar and wind energy will significantly increase, driven preliminary by Malaysia

(solar) and Vietnam (wind). Biomass & biogas energy will continue to grow, led by Thailand

and Vietnam, while waste energy will remain small as there is no significant push fromgovernments in terms of policy support or incentives.

Figure 2: Existing and Target Installed Capacity by RE Technology

Microhydro and geothermal energies are and, will remain to be, the main RE sources for ASEAN 6. In parallel, solar and wind

energies will be heavily utilized while, increase capacity in waste-to-energy, biomass and biogas energies are expected to be on-

par with the overall RE growth

Renewable Energy Market

The Philippines is by far the most developed market with an existing capacity of 5,439 MW,

or 56% of total installed RE capacity across the six key ASEAN countries. Furthermore, the

government plans to double Philippine RE capacity by the year 2030.

Thailand is the second largest market, with a 19% share (1,813 MW) of total installed RE

capacity, and it also plans to double existing capacity by 2030. The third largest RE market is

Indonesia with an 18% share, or 1,735 MW. With its huge natural resources, especially for

geothermal, the Indonesian government has an ambitious plan to increase capacity tenfold

by 2020.

Source: data consolidated from Government official sources by Ipsos Business Consulting


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Malaysia (currently 510 MW) and Vietnam (278 MW) are still nascent RE markets, though

their respective governments have aggressive 14-fold and 50-fold growth targets for 2030.

Singapore has no actual target to increase its RE, given its limited resources.

Figure 3: Renewable Energy Targets by ASEAN Market

The Philippines

The Philippine Department of Energy has formulated a National Renewable Energy Program

(NREP), and enforced the Renewable Energy Act of 2008 to promote development, usage

and commercial exploitation of RE resources. This affirms the Government's commitment to

accelerate exploration and development of RE.

Currently RE contributes about 40% of the country's primary energy supply of 40.73 MTOE, of

which 57.5% is sourced locally.

The Philippines: Renewable Energy in the Power Sector

In terms of installed capacity, the power sector comprises some 16,359 MW, of which 33%

involves RE (5,439 MW). Microhydro provides the majority of RE (63%), followed by

geothermal (36%) .

Existing

Capacity

Target

Capacity


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Going forward, the NREP aims to significantly increase microhydro and wind, given its vast

resources of hydro and wind power (10,500 MW and 76,600 MW, respectively). On a per

technology basis, the NREP intends to:

Increase geothermal capacity by 75%

Increase hydropower capacity by 160%

Deliver an additional 277 MW of biomass power

Build a wind power grid to provide an additional 2,345 MW capacity

Mainstream an additional 284 MW of solar power capacity, and work towards achieving an

aspirational target of 1,528 MW

Develop the countrys first ocean energy facility

Figure 4: Existing and Targeting Renewable Energy by Technology - The Philippines

The Philippines can be considered the most developed RE market in South East Asia, with more

than 30% of its power generated from renewable resources more than any other country inthe region. On top of this, there is also high potential for the Philippines to achieve its RE targets.

Unit: MW

Source: National Renewable Energy Program (NREP)


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In a Xinhua interview with President Benigno Aquino in March 2012, he stated that approved

service contracts, in line with the NREP, already amounted to some 7,067 MW. With pending

applications totaling 3,771 MW and existing capacity of around 5,000 MW, the Philippines is

hopeful to hit its target of 15,000 MW by 2030. However, this will depend on government

implementation of previously promised supporting schemes.

The push toward use of RE reflects the fact that electricity prices in the Philippines are the highest

in Asia, which has driven away investment. RE is expected to bring costs down, which is essential

for the Philippines to attain energy security and economic sustainability.

The Philippines: Key Watch-points

Prospects for RE are promising while the Renewable Energy Act continues to be implemented. RE

targets, policies, programs and road maps have already been set, incorporating fiscal and non-

fiscal incentives as well as institutional support and a one-stop service for investors. However,

challenges remain as to the details of policies, programs, guidelines and support currently under

development. These include feed-in tariffs guaranteeing fixed payments for every kilowatt hour

of renewable energy fed into the grid, renewable portfolio standards, net metering and an RE

trust fund.

Currently, the renewable energy sector in the Philippines is thought to be in danger of dropping

behind countries such as Malaysia and Thailand because of delays in implementing the feed-in

tariff scheme. This delay is likely to be the cause of delays in pipeline projects from committing

the investment required.

That said, the Philippines has the potential to achieve its RE targets, given rising demand for

energy, pressure to increase the competiveness of the country and cut the cost of electricity, and

its vast stock of RE resources.

Thailand

Thailand has recently upscaled its RE target from 20% to 25% of total energy consumption to be

achieved by the year 2022. As of 2011, the figure stands at 12.2%.

RE potential in Thailand centres around solar energy, which has been estimated at 50,000 MW,

followed at a distance by biomass (4,400 MW) and wind (1,600 MW). Microhydro, municipal solidwaste and biogas account for a further 1290 MW.

Critical driving forces behind RE growth comprise energy security, government commitment to a

low-carbon society, and job creation in a new sunrise industry. RE will be bolstered by

government funding on Research and Development and Demonstration (R&D&D), and by

encouraging policies and incentives for private-led investment.

Thailand: Renewable Energy in the Power Sector

In Thailand, RE generation is promoted by the Energy Policy and Planning Office under the aegis

of the Ministry of Energy.


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Thailand had some 1,813 MW of installed RE capacity in 2009, of which more than 80% came

from biomass, with the rest made up from solar, microhydro, wind and waste energy. The

Thai government has set a target of trebling RE capacity to 6,000 MW by 2030.

The RE technologies that will get a significant boost over currently installed capacity are solarand wind, which are expected to increase share from their insignificant 2009 levels to 15%

and 13% respectively by 2030.

Figure 5: Existing and Targeting Renewable Energy - Thailand

To achieve its RE target, the Thai Government has launched several support schemes,

including adders/feed-in premiums, Board of Investment tax incentives (8-year tax holiday),

direct subsidies (10% to 30% on biogas, municipal solid waste, and solar-heated water

projects), soft loans, government joint investment schemes etc.

With this intense level of government support and investment, Thailand is expected to reach

its RE target much earlier than the year 2030. This is evident from the status of projects in

the pipeline. As of October 2010, total RE installed capacity in the pipeline stood at some

10,000 MW, almost double its 2030 target, of which 15% was already sold to the grid, 48%

was signed off via Power Purchase Agreement (PPA), 11% was waiting for PPA approval, and

the remaining 26% was at the proposal stage .

Unit: MW

Source: Ministry of Energy, Thailand


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Table 1: Status of Renewable Energy Projects categorized by Technology - Thailand

Thailand: Key Watch-points

A recent move to maintain the momentum of RE investment has been a policy revision to

replace the adder scheme with fixed-price feed-In tariffs, which will initially apply to solar

photo-voltaic (PV) roof-top installations. Other new concepts ready for launch include

Distributed Green Generation (DGG) and Compressed Bio-gas (CBG) for vehicles. Also, new

implementation plans awaiting final decision include renewable heat Incentives and zoning

for RE.

Unlike other markets where RE is being promoted on energy security grounds, Thailand

growth is commercially motivated, and is driven primary by government incentives and

supporting policies which have so far met with a positive response from private investors. Inthe future, the Thailand RE sector will continue to attract investment, not only from its

current technology base, but also from new industries (e.g. DGG and CBG).

Indonesia

With the issue of a 2006 presidential decree, the Indonesian Government set a 2025 target of

15% non-fossil energy within the overall mix, up from its current level of around 5% (mainly

hydro and geothermal). The 15% target comprises 5% biofuel, 5% geothermal and 5%

combining wind, solar, biomass and hydro power.

The drive towards development of RE reflects rising demand, together with available

renewable resources. Indonesia is the largest country in South East Asia with a population

approaching 240 million. With its economy continuing to grow, the requirement for energy is

increasing, especially the immediate need for fossil fuel. However, the country has struggled

to boost oil production, which has dwindled in recent years due to ageing wells and a lack of

fresh investment. Use of non-fossil sources of energy is still relatively small, so the

government aims to develop and utilise these alternative sources for dealing with the energy

crisis and building resilience.

Source: Ministry of Energy as of October 2010


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Indonesia has a large new and renewable energy potential, which includes;

Geothermal - 27,510 MW

Mini-hydropower - 500 MW

Biomass - 49,810 MW

Solar - 4.8 kWh/m2/day

Wind - 9,109 MW

Ocean - 35 MW

However, development of RE in Indonesia has been progressing more slowly than in

neighboring countries. This is mainly because of inappropriate application of subsidies for

certain types of energy which have cost the government 13% of its budget, thus causing delay

in the development of more viable alternative and renewable energy sources.

Indonesia: Renewable Energy in the Power Sector

RE policies and their development and promotion are implemented by the National Energy

Council and the Department of Energy and Mineral Resources. Government agencies have

been working to ease foreign investment barriers in order to attract more investment to the

RE sector. However, solid incentive and promotion policies have not been evident.

Currently, Indonesia has about 1,735 MW of RE capacity installed, of which almost 70%

comes from geothermal sources, and the rest from biomass technology and other renewable

resources.

Indonesias vast geothermal resources could eventually supply 40% of its energy demand.

The Indonesia government has a target of 9,500 MW of electricity to be generated by

geothermal technology for the year 2025, which will account for about of 80% of its total RE

energy mix by that date.


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Figure 6: Existing and Targeting Renewable Energy - Indonesia

To achieve its target, the government has passed a law allowing foreign investor to invest in

geothermal energy without partnering with state-owned companies such as Pertamina.

However, foreign investors are still required to have a local partner with at least a 5% stake.

Efforts are also being made to increase incentives for RE, especially for geothermal energy.

The state-owned electricity company, PLN, recently established a feed-in tariff of USD 0.097

per kilowatt-hour for geothermal plants, and is willing to increase the rate where plants are

remote from the power grid. However, the tariff is not seen as sufficient to promote

investment effectively.

Recently, the Government of Indonesia issued a Renewable Energy Feed-in Tariff for

biomass, biogas and municipal solid waste to purchase up to 10 MW of renewable energy.

Unit = MW

Source: National Energy Council (Dewan Energi Nasional, DEM)


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ABB in Indonesia:

Spotlight on the Indonesian RE sector

With its continuing momentum to develop the renewable sector, ABB in Indonesia has

secured its position as a key player within the renewable energy market. ABB is unique in that

it delivers integrated solutions to clients, which aim to reduce both the interface risk and cost

for customer. This has enabled ABB to become one of the worlds leading suppliers of

products and solutions for wind, solar and hydro power. ABBs winning strategy is to offer the

customer a complete product range alongside a system integration service. It may enable

ABB to offer guarantees on the power output thereby offering assurances to the customer on

the value to be delivered, as opposed to the more traditional model of competing mainly on

price.

In an interview with Ipsos Business Consulting, ABB in Indonesias executive for Business

Development Renewable Energy & Energy Efficiency, Mr. Iga Rinadi, spoke about the

significant potential for the development of renewable energy in Indonesia, in particular the

solar energy sector. Mr. Rinadis analysis was that the market will dramatically change with

future Government support The Indonesian market will develop quickly once there are clear

policies relating to Feed-in-Tariff and tax incentives. We saw that this was the case of

Thailand, where the renewable energy sector not only continues to grow but there are also

benefits to the clean development mechanism market, which is boomingsaid Mr. Rinadi.

There are still some significant challenges for the Indonesian renewable energy sector to

overcome. Mainly, there are three issues that still need to be addressed. Mr. Rinadi noted

that First, it is very difficult to get sufficient funding especially from local financial institution,

due to high interest rates. A second issue to be tackled is the development of clear and stable

regulation on incentives and supporting scheme, with the third challenge being the need to

develop appropriate awareness of the potential for renewable energy among the local

community. The importance of getting the local communities involved in renewable energy

projects should not be under-estimated. In the long-run, we need a commitment and

understanding from the community in order to maintain an efficient operation of a renewable

energy plant

Notwithstanding these challenges, Indonesia still offers huge opportunities for a path to

growth within renewable energy. Indonesias debt-to-GDP ratio is still very low, which

indicates that Indonesia will continue to attract foreign private investors. It is worth noting

that whilst many regulations and incentives for renewable energy are still work in progress, a

notable number of private investors do not wait for Government actions. That is why we see

many instances of investors conducting studies at the moment. This is particularly true for

wind and solar projects. Once the regulations are in-place, we can expect to see rapid

development for the renewable sector in Indonesia.

The Indonesian Government is committed to build solar power plants starting with The

tourist islands project and is now expanding into Remote islands as well as The 100 island

projects. The market is starting to heat up even though the Feed-in Tariffs for solar has not

yet been announced. We see many private investors already conducting investment feasibility

studies said Iga Rinadi, ABB in Indonesia.

ABB in Indonesia

ABB in Indonesia is an integral part of the ABB Group, one of the worlds leading engineering companies.Core business is to help customers use electrical power effectively and to increase industrial productivity in

a sustainable way.

Today, ABB in Indonesia is a fast growing company with several offices, factories, workshops, and branch

offices. From Sabang to Merauke, ABB is continuously expanding its local activities.


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The new FiT incentive varies between USD 6.7 cents/kWh to USD 1/kWh with an additional

incentive for some islands in remote areas, where a lack access to electricity ranges from

factor of 1 to 1.5. Additional incentives are also available for biomass & biogas technology

(USD 10cents to 14cents/kWh), as well as for municipal solid waste (USD 1 to 1.4/kWh).

However, the duration of the new tariff is not clearly specified in the Power Purchase

Agreement. Currently, almost all power purchase timeframes are based on business-to-

business negotiation with state utility companies. This uncertainty over contract timeframes

deters some potential investors.

Other incentives provided by the government to promote the RE sector include exemption

from value-added tax and import duty for equipment and machinery used in RE projects.

Indonesia: Key Watch-points

Given the huge investment required to establish geothermal plants, the critical factor for

Indonesia to achieve its RE target is its ability to attract foreign investment. The solution lies

in establishing a stable, reliable and attractive government support package, as well as

removing the fuel and electricity subsidies for consumers.

The recent announcement on the new FiT incentives is a positive sign that the Government is

likely to continue the momentum for the solar and wind energy.

Malaysia

In 2005, the Malaysian government set an RE target for 2010 of 350 MW of RE connected to

the grid or 1.8% of the total power generation mix. To date, it has achieved only one-sixth of

that target. With effect from June 2010, the government set a new RE target with its

National Renewable Energy Policy and Action Plan, which aims to increase the RE

contribution to the nation's electricity supply to 11% by 2030.

The push towards RE in Malaysia is designed to meet the countrys fuel diversification policy

in which the government specifies RE as the fifth fuel, relieving its dependence on oil,

natural gas, hydropower and coal.

A recent study conducted by the Government specified the potential of RE options:

Biomass - 1,340 MW

Biogas - 410 MW

Microhydro - 500 MW (total hydro potential of 22,000 MW)

Solar PV - 6,500 MW

Municipal waste - 400 MW


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The Malaysian government has assigned a quota system for feed-in tariffs. The RE quota for

2012 is 190 MW, and it will be similar the following year. In 2014, it will increase to 250 MW.

By the end of 2011, applications for feed-in tariffs in the biomass and solar PV categories for

renewable energy projects were fully taken up.

The rationale behind setting quotas for feed-in tariffs is to enable the Sustainable Energy

Development Authority to manage the funds required for all the different RE projects, and to

avoid over-subscription. Feed-in tariffs are not financed from tax revenues, but from a RE

fund contributed to by electricity consumers. Tariff systems are also run on a discretionary

basis whereby they may be lowered for new power plants, taking into account market

conditions, and maturity and cost of technology.

This system creates a mechanism for financially viable private investment in the RE sector, as

well as encouraging all parties to use energy efficiently and reduce consumption. Heavy

electricity consumers have to contribute more to the RE fund.

Malaysia: Key Watch-points

The Malaysian government has admitted that development of RE has been slow in the past

because it has lacked a legal framework to govern the industry and provide security for

businesses generating RE. However, with the RE Act of 2011 and the feed-in tariff system,

the RE sector is expected to grow significantly.

The feed-in tariff system, together with discretionary adjustments to annual quotas, leads to

expectations that RE technology costs will go down over time, especially in the case of solar

PV. However, the quota system could limit the investment and defer the sector

attractiveness when compared to Thailand, where there is no quota system.

Vietnam

Despite vast natural resources distributed throughout Vietnam, the country has only

exploited 2% of its renewable energy potential. The government has now recognised the

importance of RE in supplying sustainable energy, and more recently in tackling climate

change, and has set a target for the proportion of electricity generated from RE to increase

from its present 3.5% of total to 4.5% in 2020, and 6% in 2030.

This drive towards RE reflects its perception as a new source of power to meet rising energy

demands, which are expected to increase fourfold by 2030. With its limited fossil fuel,

resources, Vietnam has to turn to alternative sources of energy to retain an independent

power supply. RE will also be used to increase electrification in rural areas, where solar and

biogas plants will be sited. It all adds up to a new industry sector, with concomitant job

creation and economic development.

A recent study conducted by the government sees potential for RE options to generate:

Microhydro power - >4,000 MW


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Wind energy - 1,800 MW (8% of required area has been identified)

Solar energy - 4-5 kWh/m2/day

Biomass energy - >800 MW

Waste to energy - 350 MW

Biogas energy - >150 MW

Geothermal energy - 340 MW

Vietnam: Renewable Energy in the Power Sector

There are several government agencies involved with RE projects. The main agency

controlling legal regulations and approval of projects is the Prime Minsters office.

Currently, Vietnam has about 278 MW of RE installed capacity, with the main technologies

being biomass and microhydro (2008 installed capacity was 150 MW and 121 MW

respectively).

By 2030, Vietnam aims to increase its total RE capacity to 13,900 MW. Wind power will be

the main source, and is expected to increase from a near-zero base to about 6,000 MW.

Microhydro is set to increase to 5,700 MW and biomass to 2,000 MW.

Figure 8: Existing and Targeting Renewable Energy - Vietnam

Unit = MW

Source: The Power Master Plan VII


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The target set by the Prime Ministers office is seen as very challenging for Vietnam.

Development of the RE sector has been progressing very slowly, especially when it comes to

promoting incentives and drafting relevant regulations. On top of that, the lack of financial

stability of the Vietnamese government is a primary concern, and foreign exchange reserves

are too low (USD 16.5 billion in July 2011). As a result, any government guarantee on foreign

currency availability and transfer for power projects is of little value.

Recently, the Vietnamese government issued incentives to promote wind energy. One of the

main factors in the incentive package to encourage wind power is the feed-in tariff. This is

equal to 7.8 US cents/kWh. The EVN (Electricity of Vietnam) is obliged to purchase electricity

from wind power projects at a cost of USD 6.8 cents/kWh. The electricity support price from

the state budget for investors to build wind power projects is 1.0 US cents/kWh (from the

Vietnam Environment Protection Fund). In addition, the incentive mechanism includes

reductions and exemptions from income tax, import tax, VAT, land use and environment fees.

Vietnam: Key Watch-points

Feed-in tariffs for wind power in Vietnam are seen as low in comparison with those offered

by the Thai governments (USD 22 - 36 cents/kWh). The Vietnamese government needs to

restructure incentives and supporting programs if it is to achieve its targets.

Singapore

As a result of its small size, Singapore has limited resources available for alternative energy.In spite of this, the Singapore government aims to develop solar energy to address the

challenges of climate change and energy security.

Solar energy in Singapore has a potential average solar yield/unit of installed capacity of

1,150 kWh/kWp/year. To date, R&D in solar energy has been focused on pilot projects

funded by government grants. There are 4 Independent Power Plants with a total capacity

of 251 MW, generating 2% of total power demand.

As of Dec 09, total grid-connected solar capacity was approximately 1.8 MWp. There are

plans to increase this to 4 MWp under the Government Scheme

Singapore aims to establish itself as the R&D centre for RE. The government has developed

its solar capacity scheme to encourage RE design, integration and adoption.


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Market Opportunities in the Renewable Energy Sector

There are various factors influencing market development of RE technologies. The three

most important factors are:

Policy intervention by governments to provide clear rules and regulations, as well as

sufficient incentives and support schemes to attract investment. Government plays an

intensive role when markets have to be kick-started, but less effort is required once

things have progressed to the commercial stage.

Availability of funding, which ranges from grants, government investment, venture

capital, private equity to public offering and private financing.

Cost of technology, which is expected to decrease over time with economies of scale, as

well as transfer of technology, knowledge and skills into low-cost manufacturing

countries. A striking example is solar PV technology, where the cost per unit has

dropped significantly, resulting in lower investment being needed for solar energy. This

has caused a rapid expansion in solar energy plant, especially in Thailand.

Figure 9: Factors influencing market development stage of RE technologies


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In ASEAN markets, most RE technologies are still at the nascent stage. Only the Philippines

and Thailand come close to commercial viability for geothermal and solar energy. Each

country in ASEAN prioritises different RE technologies according to its natural resources,

which results in different stage of market development. For example, although the

geothermal energy market in the Philippines has been developed, other technologies such aswind, solar and ocean energy are still at a very early stage.

On the other hand, it is clear that RE markets in ASEAN will change over the next 10-20 years

as governments are committed to develop alternative sources of power.

Figure 9: Share of RE by Technology

The above figure identifies key markets for different technologies by indicating current RE

shares for each country against projected shares in approximately 20 years time.

For geothermal, it is clear that Indonesia and Philippines will be the key markets as a result of

their vast resources. The microhydro market will develop significantly in Vietnam, and the

Philippines will also continue to grow its microhydro and wind contribution from their current

bases. Solar energy is expected to grow significantly in the Malaysian market, whilst

continuing to expand in Thailand along with biomass & biogas technologies.

Another important factor to consider when prioritising investment in RE in ASEAN is the

degree of government support schemes and incentives. Sectors which are heavily supported

by the government will attract private investment and develop at a faster rate. The most

common incentive adopted is the feed-in-tariff, which guarantees the price of electricity to

be purchased by the state electricity utility.

Feed-in tariffs vary across technologies and markets. The higher the tariff, the more

attractive the sector is for private investment. Other initiatives attracting private investmentare tax incentives, net metering, public investment loans & grants, etc.

Source: Data consolidated from the Government official sources by Ipsos Business Consulting

Long term projection


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To prioritise the most attractive RE sectors in ASEAN, we consider two main factors. The first

is the gap between existing capacity and government RE targets, which implies the degree to

which policy intervention is needed, as well as growth opportunity for incremental

investment. The second is the availability of incentives and support schemes.

Based on these two axes, we can segment market opportunity into four groups:

Good to Grow

Good to grow comprises a group of RE sectors with high potential to attract investment and

development at a fast pace. This group not only offers high incentives and governmental

support schemes, but also has to move quickly to meet RE targets in the near future. Solar

energy in Malaysia is the only sector in this group.

Tapping into this segment requires speed to market. The solar energy market in Malaysia

exemplifies this, as can be seen from the number of global PV equipment players who have

recently entered the market. For example, Bosch has established a new solar energy

manufacturing site, and Panasonic has announced plans to construct a new site to produce

solar power products.

Figure 11: Market Opportunity Prioritization

Remarks: The Thailand FiT incentives are calculated based on the adder plus based electricity rate of USD 11 cents/kWh. The

Philippines FiT incentives are still at the proposal stage and pending government approval. Should the FiT incentives be

approved, most of RE sectors in the Philippines would likely fall into the A Private Affair box.


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However, the downside of the Malaysian market is the quota system, which is expected to

limit the growth in the first 5 years, as the permits restrict power generation within the range

of 35 100 MW per year. This makes the market too small to attract investors in short term.

A Private Affair

Solar and waste energy in Thailand and the biomass sector in Indonesia are the core areas for

A Private Affair or sectors that are on the verge of becoming commercially viable . The main

factor putting this group on many investors radar is intensive support from the domestic

government, especially with feed-in tariffs (or adders on top of electricity tariffs in

Thailand). These are the best-supported RE technologies in terms of feed-in tariffs. These

schemes are likely to attract private investors, and increase economic activity in relevant

equipment trades and services.

Thailand and the Indonesia mainly source RE equipment for solar, waste and biomass energythrough imported technologies from Europe and the U.S. Example of current market players

include GE Energy, which plans to introduce its cadmium telluride (CdTe) thin-film

photovoltaic technology to the Thai solar energy market within the next two years, Kyocera

Kyocera is Japans second largest solar panel producing company. The company recently won

a major contract to build a solar farm in Thailand, Greenearth Biomass Energy will assess a

unique biomass waste-to-energy gasification technology and market opportunity in

Indonesia.

Support Needed

Despite vast availability of resources, the geothermal sector in Indonesia still requires strong

support from the Government to enable the sector to be commercially viable. Currently,

geothermal resources are identified and developed as side benefit from the work of oil and

gas exploration. There is very little support from the government to reduce risk for the

exploration of geothermal resources. However, it must be pointed out that the situation

appears to be moving in a positive direction. Recently the Indonesias Ministry for Energy

and Mineral Resources sets aside USD39 million to mitigate geothermal exploration risk,

thereby helping to boost investment in the geothermal projects.

Similar to wind and microhydro sectors in Vietnam are also struggling to grow, due to similar

reason. They are considered uncompetitive compared with neighboring countries. For

example, Indonesia and Vietnam provide feed-in tariffs for wind energy in the range of USD 7

to 10 cents/kWh, while Thailand has double-incentive feed-in tariffs ranging from USD 22 to

36 cents/kWh.


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General Electric (GE) is one of the active players in the geothermal sector in Indonesia and in

wind energy in Vietnam. It has recently signed a major memorandum of understanding with

the Indonesian government for joint development of local geothermal plant projects. It also

has a contract with local developer Cong Ly Company Ltd. to provide wind turbines, plus

operations and maintenance services, for Phase One of the Bac Lieu Wind Farm, totaling 16MW of power generation capacity.

Niche Market

It could be argued that most of the RE sectors in ASEAN could still be classed as niche

markets. Sectors within the Niche Market grouping typically have relatively low targets to

achieve, and receive limited support from government. They are viewed as relatively slow to

develop (with the exception of the geothermal sector in the Philippines. This remains classed

as niche due to its development being exclusively undertaken by the PNOC-EDC - which

operates the majority of existing geothermal contract areas - and Philippine Geothermal

Incorporated (PGI), a subsidiary of the Union Oil of California (UNOCAL). The overall market

will remain robust as most will be growing from a zero base.

However, most of the regulation regarding the supports and incentives remain a work in

progress. Many sectors have high potential to become a commercially viable sector (which

would put them in A Private Affair quadrant) or the most attractive sector to grow (the

Good to Grow quadrant). The sectors with the best potential to move into the

commercialization stage include solar and wind energy in Indonesia, subject to an additional

FiT to be offered on top of existing FiT incentives.

Those in this group display similar characteristic across the region. Many local firms can

manufacture products such as basic turbines, traditional boilers and electrical devices, while

more sophisticated equipment such as generators, high-pressure modern boilers, hi-tech

turbines, automatic controls and other high-end technological equipment will continue to be

imported from developed countries such as Japan, Germany and the U.S.

The Way Forward

The ASEAN RE market will continue to attract investment and remain robust over the next 3to 5 years. RE is perceived as a new opportunity area for job creation and increased

economic activity, both in terms of foreign direct investment and positive domestic economic

impact, as most on-site installations are in rural areas where there is limited access to

electricity.

Early market entrants are likely to gain an initial advantage, though risks and instability may

attend government policies and regulations. However, with growing demand for electricity in

many countries, coupled with various government commitments on low-carbon economy,

growth in RE is a certainty for the region.


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Suggested Further ReadingDeploying Renewables in Southeast Asia Trends and potentials (2010)

http://www.iea.org/papers/2010/Renew_SEAsia.pdf

Grounding Green Power: Bottom-up perspectives on smart renewable energy policy

in developing countries

http://pdf.wri.org/working_papers/grounding_green_power.pdf

Thailands Renewable Energy and its Energy Future: Opportunities & Challenges

http://www.nstda.or.th/attachments/7918_CASAVA-2.pdf

Alternative Energy Industry in Singapore

http://www.edb.gov.sg/edb/sg/en_uk/index/industry_sectors/

alternative_energy.html

Renewable Energy Market Assessment Report: Indonesia

http://ita.doc.gov/td/energy/Indonesia%20Renewable%20Energy%20Assessment%

20(FINAL).pdf

Investing in the Philippines Renewable Energy Sector

http://www.dti.gov.ph/uploads/DownloadableForms/renewable_energy.pdf

Renewable Energy in Vietnam: Promising sector report

http://www.cleantechholland.nl/dsresource?objectid=18857

IMPORTANT NOTE: All content within this Ipsos paper is provided for general information only, and should not be

treated as a substitute for undertaking your own detailed market intelligence study for renewable energy in South

East Asia. Ipsos is not responsible or liable for any actions taken by a reader based on the content of this Paper.

You are recommended to seek professional advice about renewable energy opportunities within South East Asia

before taking any action. Ipsos is not liable for the contents of any external internet sites listed, nor does it

endorse any commercial product or service mentioned or advised on any of the sites.


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About the Authors

Colin Kinghorn

Head of Consulting for Thailand, Indonesia and Vietnam

Email: [email protected]

Tel: +662 237 9262 | Fax: +662 237 9267

Colin leads a strong team of market intelligence professionals based in Bangkok, Ho

Chi Minh City and Jakarta that provide a wide range of services to clients operating

within the energy arena. Prior to joining Ipsos Business Consulting, Colin has worked

in Ireland, Spain, Australia, Laos and Thailand. He is also a former member of the

Board of Directors of a UK Housing Company as well as a past Chairman of the

Institute of Internal Auditors. Colins experience includes advising manufacturing

and engineering clients around the world, with strong focus on South East Asia. Hehas also provided consulting services to Ofgem the United Kingdoms Gas & Electricity

Industry regulator.

Pornprapun Sriyotha

Business Development Manager

Email: [email protected]

Tel: +662 237 9262 ext 312 | Fax: +662 237 9267

Pornprapun is a Business Development Manager in South East Asia. She has an

extensive background in consulting engagements within the B2B markets, specifically

in relation to manufacturing, energy and the building materials segment. A key part

of Pornprapuns role at Ipsos is to work closely with our clients and determine ways in

which Ipsos can assist them to identify the optimum strategy to exploit viable

opportunities within those markets that they operate.

Ipsos Business Consulting

Ipsos Business Consulting (IBC) is the market intelligence and strategy consulting

division of Ipsos. IBC assists clients globally to enter, evolve and expand in emerging

and developed markets through fact based market analysis. IBC has been assisting

clients with their growth strategies since 1994 and has a strong track record with

more than 3,000 consulting engagements covering markets globally.

Contact your local Ipsos Business Consulting office to

request a quote.

www.ipsos.com/businessconsulting


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Market Intelligence for the

Energy SectorThe demand for energy in the Asia Pacific is being driven by huge population growth and a

strong emerging middle class in most Asian economies. The challenge of meeting this

growing energy demand, alongside the pressure to respond to issues such as climate change,

create unique challenges in responding to the issue of Energy Security. Asian countries are

increasingly looking to widen the Energy sectors that supply their country. With most of the

international players having a presence in Asia, we find a highly competitive market place that

requires a business model with growth strategies built upon market facts relating to both

emerging and developed markets.

Ipsos Business Consulting experience of Asia spans 3 decades. We have a strong track

record in providing our clients with market intelligence and growth strategy consulting coveringkey markets.

How Ipsos Can Assist Energy Clients

Ipsos Business Consulting is able to assist

clients looking to enter, expand and evolve in

energy markets around the globe with specific

experience of studies in the following sectors:

Power Generation

Wind Farms

Solar Energy

Gas Turbines

LPG / CNG

Diesel Power Generation

Petrochemicals

Chemicals

Power Distribution

Power Solutions

We offer a range of market intelligence and

growth consulting services to international and

local clients in developed and emerging

markets. Our team of market intelligence

professionals are located in key strategic

locations including Jakarta, Kuala Lumpur,

Bangkok, Ho Chi Minh City, Beijing, Shanghai,

Seoul, Hong Kong, Tokyo, Mumbai, Delhi andDubai.

Ipsos assists clients with:

Market Analysis

Market sizing and growth forecasts for

emerging markets

Market intelligence for natural gas

supply

Market assessment for brown fieldenergy solutions

Customer Intelligence

Customer intelligence for gas turbines

industry

Competitive analysis of AQCS market

Competitive Environment Analysis

Competitor profiling of Power

Equipment suppliers Competitive analysis of geothermal

energy sector

Value Chain And Opportunity Analysis

Market opportunity assessment for solar

energy

Market entry studies for wind turbines

Value chain analysis within power

distribution sector industry


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The contents of this document constitute the sole and exclusive property of Ipsos (Thailand) Ltd. and/or its affiliated companies(Ipsos). Ipsos retains all right, title and interest in and to any Ipsos trademarks, trade secrets, copyright, patents, databases,software and computer programs, technologies, methodologies, products and know-how included in or arising out of this proposalor used in connection with Ipsos' preparation of this proposal. No license is hereby granted or implied.

This Ipsos Business Consulting paper is protected by copyright and may not be physically reproduced without the expressedpermission of the Ipsos (Thailand) Ltd Business Consulting Division. Subscribing organizations may extract or synthesize data ortext of their choosing for internal or limited public use.

Our offices in Asia Pacific

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An Ipsos Paper on Renewable Energy in South East Asia July 2012

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