· 04 | Renewable Energy in the Asia Pacific INTRODUCTION DLA Piper is proud to release the third...

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RENEWABLE ENERGY IN THE ASIA PACIFICA Legal Overview3RD EDITION

CONTENTS

Introduction ......................................................................................................................................................................04

Australia .............................................................................................................................................................................07

China ...................................................................................................................................................................................15

East Timor.........................................................................................................................................................................21

India .....................................................................................................................................................................................26

Indonesia ............................................................................................................................................................................33

Japan ....................................................................................................................................................................................38

Malaysia ..............................................................................................................................................................................45

Mongolia ............................................................................................................................................................................ 51

Myanmar ............................................................................................................................................................................56

New Zealand ....................................................................................................................................................................63

Philippines ..........................................................................................................................................................................69

Republic of Korea ...........................................................................................................................................................75

Singapore...........................................................................................................................................................................80

Thailand ..............................................................................................................................................................................85

Vietnam..............................................................................................................................................................................91

Business environment explanatory note ..................................................................................................................96

Feed-in tariff rates comparison table (as at 24 June 2013) ...............................................................................97

Key contacts .....................................................................................................................................................................99

Our relationship firms .................................................................................................................................................100

Our global presence .....................................................................................................................................................101

04 | Renewable Energy in the Asia Pacific

INTRODUCTION

DLA Piper is proud to release the third edition of Renewable Energy in the Asia Pacific: A Legal Overview. This edition provides a high-level but comprehensive Renewable Energy Profile (Profile) for 15 countries across the region, namely: Australia, China, East Timor, India, Indonesia, Japan, Malaysia, Mongolia, Myanmar, New Zealand, the Philippines, the Republic of Korea, Singapore, Thailand and Vietnam. In each Profile, we look at the country’s business environment and electricity industry with particular emphasis on the current issues, laws, projects, players and trends within the renewables industry, as well as foreign investment considerations and on-going climate change negotiations post the first commitment period of the Kyoto Protocol.

What’s new in this edition?

Six months have passed since the second edition of Renewable Energy in the Asia Pacific was published. In this edition, we have added two more Profiles: one for the geothermal powerhouse New Zealand and one for Myanmar, which drew international attention after its Foreign Investment Law 2012 was passed alongside the introduction of political and socioeconomic reforms under President Thein Sein. As part of the Myanmar Profile, we have provided a detailed summary of this new foreign investment law.

Of course, we have comprehensively updated each of the existing Profiles, particularly the current issues, renewables overview, projects and companies as well as energy statistics for each industry where available. We have also included each country’s rank in the Global Competitiveness Index.

This edition also includes an updated feed-in tariff table, which indicates the feed-in tariff rates (in local currency and USD) across wind, solar, hydropower and geothermal energy (where available) in each jurisdiction. The table

is a useful comparative tool to see which governments are prepared to follow-up renewable energy targets with generous feed-in tariffs, which are often essential for convincing renewables investors to commit to a market in its initial stages. We have also included the rates for several European countries with more established renewable energy industries to draw comparisons and highlight the likely longer term direction of tariffs.

Big movers

Policy directions and incentives for renewable energy continue to strengthen across the region and there are increasingly positive indications from government and private developers. The biggest mover of the last few months has been Japan. Despite some initial regulatory uncertainty following the election of a new conservative government, and mixed messages about Japan’s nuclear future, several large scale plans have been announced by both domestic and foreign investors. Fukushima prefecture is set to become a renewable energy hub with a number of large solar projects and the largest offshore wind farm in the world planned for its coastline. Goldman Sachs has committed JPY50 billion (US$487 million) for renewables projects in Japan generally. While there has been some reluctance by grid providers to connect renewable-sourced energy to the grid, there continues to be strong interest from international developers for renewable energy projects generally.

China remains dominant in the renewables sector globally, with only the United States’ renewables industry and Germany’s solar industry at a similar level. China accounted for about one-quarter of global renewables expenditure in 2012 (US$64.1 billion) as the Chinese Government looks for a secure, diversified and clean energy mix to power the largest urbanisation in human history.

Governments across the Asia Pacific region are continuing the push for greater renewable energy contributions to domestic electricity demand. While the deal flow has been lower than expected over the last six months, there have been positive signs in several countries that local developers are very active at the approval level. International developers are increasingly taking advantage of the many government and market incentives for renewable energy investment and investing along side locals.


Other movers over the past six months include, Vietnam, Thailand, the Philippines, Malaysia and Indonesia. Vietnam, has furthered its hydropower credentials with the opening of the 2.4GW Son La plant in December 2012.

The deal flow for renewable energy projects in South East Asia, particularly for solar projects in Thailand, the Philippines and Malaysia, as well as geothermal projects in Indonesia, has also improved this calendar year.

Other developments

In contrast, some countries in the Asia Pacific have been less active over the past six months. The Australian renewable energy industry has been in a state of flux, despite a record 13.14% of generation from renewable energy sources in 2012. The election of a new conservative government in September 2013 promises to have a large impact on climate change and renewable energy regulation. India has been relying on new wind and solar to meet ambitious renewables targets in its recently released five year plan, however it has faced delays in projects of late. Mongolia has not shown signs of broadening its energy boom to renewables, despite the 10th wind turbine being erected at its Salkhit wind farm. While delays in the award of the CHP5 IPP coal fired project has concerned some in the power industry, the Mongolian Government has begun to send the right signals to international investors over the last few months generally. The South Korean Government has tried to encourage private investors to take the lead, while Singapore has continued to focus on research and development in the renewables space.

Trends

The progression of development for domestic renewable energy industries is at very different stages across the Asia Pacific region. Government incentives and current energy patterns reflect three dominant trends:

■ the continued dominance of fossil fuels in the energy mix;

■ projections of strong future growth in electricity demand correlated with continued strong economic growth, requiring increased investments in generation capacity and transmission and distribution infrastructure; and

■ governments seeking to promote renewable energy development and adopting comparable incentives to drive the level of investment required to meet renewable energy targets.

The main exception to these trends is New Zealand, which already sources more than 75% of its electricity needs from renewable energy mostly through hydropower and geothermal energy. New Zealand’s renewable energy target is to have 90% of electricity needs met by renewable energy by 2025. By comparison, ‘20% by 2020’ is the standard renewable energy target for most Asia Pacific countries, with renewables generally generating less than 15% of electricity in most countries. While New Zealand is not amongst the group of populous and developing Asian countries with pressing energy security needs, its renewables industry is a global leader particularly in the research and use of geothermal energy, which currently contributes nearly 14% of national electricity use.

Renewables: the big picture

Governments of both developed and developing countries in the region have a host of reasons to use renewable energy to satisfy growing energy needs. In the short term, attracting investment in renewable energy projects presents challenges due to competition from cheaper fossil fuel-sourced energy and high start-up costs for projects that can be located far from population centres. International developers have hesitated in recent times as some countries’ regulatory environments have not provided the perception of a long term commitment to renewable energy that is needed to guarantee returns on investment.

There have been some recent examples worldwide of governments reducing or removing feed-in tariffs which are perceived to be too out of sync with conventional power costs, which may become a politically sensitive issue if consumer electricity prices increase.

Despite these impediments, renewable energy targets, feed-in tariffs, renewable energy laws, national plans promoting more renewable energy and policy papers predicting energy transformations, are the norm across the region. Developing countries see energy security and other long term benefits in investment in grid-connected


Stephen WebbPartner and Head of Renewable Energy Sector GroupT +61 7 3246 [email protected]

and stand-alone renewable energy systems. This is true for large projects, such as China’s mega-dams on the Yangtze and Jinsha Rivers and Vietnam’s Son La project, and also for small-scale projects such as stand-alone systems in East Timor, which are seen as an answer to rural electrification and a requirement for raising living standards generally.

Renewable energy is often seen as the answer to climate change and accordingly the debates over these issues become intertwined. But the benefits of renewable energy go far beyond reduced carbon emissions and climate change mitigation. Renewable energy also has the potential to curb immediate air and ground pollution

concerns, produce self-sufficient energy supplies that are not susceptible to geopolitical volatilities and provide the platform to lift further millions of people into Asia’s booming middle class. As prices for renewable energy continue to come down (one need only look at China’s production line of PV cells and wind turbines to see why), and if government targets are fulfilled, renewables will overtake fossil fuels as the dominant source of electricity across the Asia Pacific in the coming decades. Renewable Energy in the Asia Pacific seeks to capture this sentiment and provide potential and current investors with a broad-based but objective understanding of the push within the Asia Pacific for more renewable energy.

As always, we welcome feedback in relation to this publication and are also happy to discuss any aspect in more detail. Please feel free to contact me on the details below or any DLA Piper team member outlined on page 99 of this document.


PROfIlE

Australia was inhabited by Indigenous persons for thousands of years before the British established a colony in New South Wales in 1788. Australia’s six states formed a federation in 1901. The governance model was (and remains) largely a fusion of US federalism and a UK system of governance. Since World War Two, Australia has been a staunch ally of the United States but now finds its economic security in Asia. Countries like China, Japan

AUSTRAlIA

OvERvIEW

JURISDICTION lANgUAgE

Common law English

BUSINESS ENvIRONmENT

■ Ease of Doing Business Report 2013: 10 out of 185 (up 1 ranking)

■ Global Competitiveness Index 2013: 20 out of 144 (no change)

■ Index of Economic Freedom 2013: 3 out of 177 (no change)

■ Corruption Perceptions Index 2012: 7 out of 176 (up 1 ranking)

POPUlATION INCOmE gNI PER CAPITA (PPP TERmS)

23.0 million High $40,270

and India have fuelled Australia’s resources boom, which saw it largely avoid the global financial crisis. Australia is a multicultural society with one in four of its citizens born overseas. In early 2013, Australia was awarded a non-permanent seat on the UN Security Council for the 2013-14 term. A new conservative government was elected in September 2013.

MONGOLIA

CHINAS. KOREA

N. KOREA

JAPAN

INDIA

NEPAL

SRI LANKA

PAKISTAN

AFGHANISTANIRAN

TURKMENISTAN

UZBEKISTAN

KAZAKHSTAN

BANGLADESH

BHUTAN

LAOS

THAILAND

CAMBODIA

VIETNAMMYANMAR

BRUNEIMALAYSIA

MALAYSIA

INDONESIA

EAST TIMOR

PAPUA NEW GUINEA

PHILIPPINES

AUSTRALIA


ElECTRICITY INDUSTRY OvERvIEW

■ Australia is heavily reliant on fossil fuels for domestic consumption and for export.

■ Australia is currently the world’s largest coal exporter and has huge onshore and offshore gas reserves, primarily within the “mining states”, Queensland and Western Australia. Energy exports earned the economy approximately A$77 billion (approx. US$73.3 billion) in 2010/11.

■ Currently, there are significant fossil-fuel projects at various stages of development in the Galilee and Bowen Basins in Central Queensland, and in the Pilbara in Western Australia, as well as offshore natural gas off the West Australian coast. However, many of these large projects have faced long delays.

Regulators

There are three main energy market regulators in Australia:

■ the Australian Energy Market Operator (AEMO), which “operates the energy markets and systems and also delivers planning advice in eastern and south-eastern Australia”;

■ the Australian Energy Market Commission (AEMC), which describes itself as the “rule maker and developer for Australian energy markets”, notably for the National Electricity Market (NEM); and

■ the Australian Energy Regulator (AER), which operates under the Competition and Consumer Act 2010 (Cth). AER’s work relates mostly to energy markets in eastern and south eastern Australia on issues like price setting, market monitoring, publishing information on energy markets and assisting the Australian Competition and Consumer Commission with energy-related issues.

Electricity laws

■ The National Electricity and Gas Rules established the NEM, which is managed by the AEMO.

■ Together, the National Electricity Rules and the National Electricity Code govern access to transmission and distribution networks and set out the market rules including market operations, power system security, network connection, access and pricing for services in the NEM.

■ These rules have the force of law and are made under the National Electricity Law.

Generation, distribution and transmission

■ On the east coast of Australia there is retail competition through the NEM. The NEM is connected by six major transmission interconnectors, which link the electricity networks of New South Wales, Queensland, South Australia, Tasmania and Victoria. The network consists of nearly one million kilometres of underground and overhead transmission and distribution lines/cables.

■ Because of their geographical isolation, the Northern Territory and Western Australia have their own electricity markets.

■ There is a mix of state government and private ownership of electricity infrastructure. Privatisation of electricity assets owned by state governments has proven controversial in the past, particularly with unions.

Energy White Paper 2012

■ In October 2012, the long-awaited Energy White Paper was released by the previous Labor-led Federal Government. The paper sets out the short and long-term strategic policy framework to address the challenges in Australia’s energy sector. The paper stressed that over the next 20 years, Australia’s energy future will be characterised by three key issues:

■ energy security/reliability and competitive pricing;

■ expansion of energy exports to Asia and other growth markets; and

■ the drive for increased energy efficiency and reductions in greenhouse gas emissions.

■ The Energy White Paper paints an encouraging picture for the current security of domestic electricity supply and export demand, but it also highlights the need to diversify energy supplies and shift towards clean energy sources.

■ The Paper predicts that while fossil fuels will continue to dominate generation and consumption patterns, there will be a shift towards renewable energy with estimates that by 2035 around 40% of Australia’s energy will be supplied by renewable sources.

■ While the Energy White Paper envisages a “transformation” in Australia’s domestic energy supply chains, this is considered to be unlikely to impact on


the significant projects for the export of gas and coal to the established Japanese and Korean markets, nor the booming Indian and Chinese markets.

■ The new Government has begun the process of issuing a new Energy White Paper, which will likely focus on reducing ‘red and green tape’ and perhaps encouraging more coal seam gas mining. The new paper is expected to be released in early 2014.

RENEWABlES INDUSTRY OvERvIEW

■ Australia generated 13.14% of its electricity from renewable energy sources in 2012, which was a new domestic record for annual renewable energy contribution.

■ Australia also amassed A$4.2 billion (approx. US$3.9 billion) in renewable energy investment in 2012.

■ The key Federal Government policy in respect of renewable energy is the Renewable Energy Target (RET), discussed in detail below.

■ A report released by the Australian Bureau of Resource and Energy Economics in August 2012 predicted that solar PV and wind technologies will overtake coal to become the cheapest sources of electricity generation by 2030. The report predicted that without carbon capture and storage, coal will be gradually “priced out” of the market. The report predicts that there will be increasing price competition between more established technologies and newer methods of electricity generation, which in turn will lead to a more competitive generation market. The Energy White Paper (see above), also reached a similar conclusion in regards to the shift in domestic energy sources.

■ Australia has a complex regulatory regime for renewable energy, with a range of Federal and State Government laws and policy mechanisms that apply.

Hydropower

■ Australia’s hydropower generation capacity is over 8.5GW (concentrated mostly in New South Wales and Tasmania), which is far higher than any other renewables source in capacity terms.

■ Hydropower production is expected to reach 18TWh by 2019-2020.

Wind energy

■ Wind energy production increased by over 50% from 2011 to 2012. Current generation capacity is over 2.58GW. South Australia accounts for about half of this installed capacity.

■ Land use planning in Australia is generally regulated at a State Government level. The land use planning regime applying to wind energy varies greatly between State Governments. In recent years some State Governments have introduced new planning regulations which restrict where new wind farms may be situated. A range of reasons has been cited for these amendments including concerns in some sectors of the community about the mental and physical effects of low frequency noise produced by wind turbines (‘wind turbine syndrome’). For example, planning regulations in the state of Victoria give residents who live within 2km of a proposed wind turbine the power of veto over that project. These regulatory amendments have created an additional barrier to wind farm approvals in many areas.

Solar energy

■ Solar energy production increased by over 76% in the five years to 2009/10. Current generation capacity from solar PV is 2.3GW. Solar thermal generation is just 12.3MW.

■ There is great potential for further increases in electricity production from solar power, as Australia has the highest average solar radiation per square metre of any continent in the world.

■ Over one million households have installed solar PV panels in Australia. Much of this investment was spurred by a range of solar power rebate schemes put in place by a number of state governments. In recent years the majority of these schemes have been scaled back, or in some jurisdictions, cancelled due to concerns relating to cost for governments and market distortions.

Geothermal energy

■ Current geothermal production is very limited. There is only one operational facility in Australia – an 80kW plant in Birdsville, Queensland.

■ Several large projects are currently in various stages of development and approval.


Government bodies and their functions

■ The Environment Department is now the chief government department regulating renewable energy and climate change matters. It works alongside a host of other bodies at state government and federal government level, such as the Clean Energy Regulator.

■ The Clean Energy Regulator, which will continue under the new Government, was established as an independent statutory authority under the Clean Energy Regulator Act 2011 (Cth). It has four broad regulatory functions:

■ the carbon farming initiative, a “legislated offsets scheme that allows farmers and land managers to earn carbon credits by storing carbon or reducing greenhouse gas emissions on the land”;

■ the carbon pricing mechanism (CPM), discussed in further detail below;

■ the administration of the National Greenhouse and Energy Reporting Act 2007 (Cth), the national framework for the reporting and dissemination of information about greenhouse gas emissions, greenhouse gas projects, and energy use and production of corporations; and

■ the RET scheme, discussed below.

CURRENT ISSUES IN THE RENEWABlES INDUSTRY

■ The newly elected Federal Government has promised to repeal Labor’s Clean Energy Legislative Package (CELP, or “carbon tax”) as its “first order of business” when Parliament resumes later in 2013. However, while the Liberal National Coalition, led by Prime Minister Tony Abbott, has a majority in the Lower House, the current Senate is hostile towards the new Government. When the new Senate sits from 1 July 2014 however, it is likely to vote with the Government on repealing parts of the CELP as the balance of power is held by conservative minor parties who wish to repeal the “carbon tax” as well. See below for more details on the likely course of events over the coming months.

■ Despite rapid increases in the price of electricity over the last 10 years, data shows that Australia’s electricity price remains below the OECD average. In anticipation

of electricity price rises, the previous Federal Government introduced the Household Assistance Package. This package is set to continue under the new Government, however industry compensation schemes (like the Jobs and Competitiveness Program) will likely be repealed when the CPM is repealed.

■ In May 2013, the Federal Government Budget for the 2013/14 financial year was released. The budget delayed funding across a range of renewable energy initiatives and cut A$2.4 billion (approx. US$2.3 billion) in climate change mitigation and adaptation programs. The Federal Government at the time blamed the reductions in clean energy funding on the volatility of the European carbon market and a drop in the predicted carbon price in 2015 to just A$12.10 (approx. US$11.52), compared with the A$29 (approx. US$27.61) that was modelled by the Australian Treasury.

RENEWABlES lAWS

Renewable Energy (Electricity) Act 2000 (Cth)

■ This Act sets out Australia’s target of having 20% renewable-sourced energy by 2020. The scheme established by the Act for achieving this target (the RET) is to stimulate investment in renewables by requiring liable entities (usually electricity retailers) to purchase and surrender a certain number of Renewable Energy Certificates (RECs) each year.

■ Following a review of the RET, in 2011 the scheme was split into two parts – the Large-Scale Renewable Energy Target and the Small-Scale Renewable Energy Scheme. Under the new scheme RECs were replaced by large-scale generation certificates (LGCs) (generated by large-scale renewables projects) and small-scale technology certificates (SREC) (generated by small-scale renewables systems).

■ The market price of LGCs fluctuates based on supply and demand and in the past they have been between A$10 and A$60 (approx. US$9.52 to US$57.13). SRECs are exchanged at the fixed price of A$40 (approx. US$38.09).

■ In its 2012 annual administrative report (as required under the Act), the Clean Energy Regulator estimated investments in large-scale renewable energy power stations to be around A$12 billion


(approx. $US11.4 billion) and that the generation capacity of the large-scale system was 16,167GWh, slightly below the 2012 target of 16,736GWh. The 2020 target is to generate 41,000GWh of electricity from renewable energy sources.

■ The prior Labor Government was committed to the 41,000GWh target, however, despite tacit approval of the RET by the new Environment Minister Greg Hunt, the RET will face a protracted review in 2014. There are a number of possibilities that could result from this review. The RET could be moved to a floating target, dropped to 27,000GWh (as certain large energy providers are lobbying for), delayed until 2022 (or later) or possibly, the RET may remain the same. The uncertainty has led some in the renewables industry to propose a lesser target that is not subject to such biennial reviews.

■ Critics of the RET note it is merely an electricity target rather than an all-encompassing energy target.

■ For now though, public debate surrounds the repeal of the CELP rather than the future of the RET.

Repealing the Clean Energy Legislative Package: likely course of events

■ The new Government’s goal is to repeal the “carbon tax” later this year (with effect from 1 July 2014), however this will largely be an exercise in political brinksmanship as the current Senate is hostile towards the Government, and will likely vote down any attempt to repeal the CELP.

■ A double dissolution election of both houses of Parliament will likely not be instigated as such elections are historically risky for incumbent governments and the Coalition can simply wait till the new Senate sits from 1 July 2014.

■ Even though the Government will have the numbers to repeal the CELP when the new Senate sits, there are complicating factors which may delay the actual repeal of the CELP and delay any replacement policy being legislated:

■ A carbon unit is considered ‘property’ under Australian law. Accordingly, under the Australian constitution, the Government can only acquire carbon units on “just terms”. Some analysts suggest if the Government were to repeal the carbon price

with effect from the latter half of 2014, it may have to pay-out over A$2 billion (approx. US$1.9 billion) to various polluting companies, so the Government may have to delay the actual repeal of the carbon price until 1 July 2015;

■ Repeal of the CELP does not equate to passage of the Coalition’s Direct Action Plan, particularly given the balance of power in the Senate will be held by conservative Senators who are against the CELP and possibly Direct Action as well; and

■ Once the CELP is repealed, the Labor party may vote for Direct Action, arguing a ‘lesser’ climate change law is better than none at all. If they don’t and/or negotiations with minor parties fail, Australia may be left with neither the CELP nor Direct Action.

■ Nonetheless, and adding further confusion to the debate, the Government has proposed a retrospective repeal of the laws if they are not passed in the current financial year (i.e. with the current Senate) and vowed not to enforce the CPM after 1 July 2014.

■ Importantly, the Coalition is not seeking to abolish all of the CELP. Some programs and initiatives included in Labor’s CELP are set to survive the new Coalition Government (such as the Australian Renewable Energy Agency, the Clean Energy Regulator, Low Carbon Australia, the National Greenhouse and Energy Reporting Scheme and the Carbon Farming Initiative), while others will likely be repealed (the CPM, the Clean Energy Finance Corporation, the Climate Change Authority, the Energy Security Fund and industry compensation schemes for instance). The Climate Change Commission has already been abolished, however the axed commissioners have since formed the Climate Council.

■ Details on Direct Action are limited at present and not expected to be released until July 2014. What is known, is that the policy will be based around an emissions reduction fund of up to A$2.55 billion (approx. US$2.4 billion) and will draw on baseline emissions from the National Greenhouse and Energy Reporting Scheme.

■ The doubt around Australia’s carbon policy future is no longer whether the “carbon tax” will be repealed, but when its repeal will be in effect, what type of policy,


if any, will replace it and finally, how much Australia will be ostracised internationally for moving away from carbon pricing given IMF, OECD and World Bank support for carbon pricing and the possibility of a Chinese ETS by the end of the decade. For now though, the CELP remains law.

Clean Energy Act 2011 (Cth)

■ The Clean Energy Act 2011 (Cth) (Clean Energy Act) was the centrepiece of the Labor-led Federal Government’s CELP. The objects of the Clean Energy Act are:

■ to give effect to Australia’s obligations under the Climate Change Convention and the Kyoto Protocol;

■ to support an effective global response to climate change;

■ to take action to meet Australia’s target of reducing net greenhouse gas emissions to 80% below that of 2000 levels by 2050; and

■ to price greenhouse gas emissions in a way that encourages investment in clean energy.

■ The main tool for achieving these objects is the CPM. Established by the Clean Energy Act, the CPM requires major greenhouse gas emitters to purchase and surrender an amount of ‘permits’ equivalent to the amount of greenhouse gases that they emit each year. Each permit equates to 1 tonne of CO2-e (carbon dioxide equivalent) emitted.

■ The CPM commenced on 1 July 2012. A fixed price has been set on permits during the first three years of the CPM, which has led to the CPM being described as a ‘carbon tax’ in the media. The price of permits was set at A$23 (US$21.90) on commencement of the CPM, rising to A$24.15 (approx. US$23) per tonne on 1 July 2013. In the fourth year of the scheme, commencing on 1 July 2015, the CPM (if it remains law) will become a full ‘cap and trade’ scheme with the price of permits fluctuating according to market forces.

■ A number of changes have been announced to the design of the CPM since commencement, including linkages to the EU emissions trading scheme in 2015 and the scrapping of the proposed ‘floor’ to be set on the price of permits from this time.

■ The introduction of the CPM has been controversial in Australia for a range of reasons. One particular issue has been the comparatively high price set on permits under the Australian scheme based on modelling by the Australian Treasury at the time (prior to the commencement of the CPM), when compared with the rapid and large drop in carbon permit prices that has been experienced in international markets during late 2012 to 2013. As of June 2013, the price of carbon permits in the EU market had dropped markedly to below A$5 (approx. US$4.76), a figure substantially below the A$23 price imposed under the CPM. One of the current Government’s main policies leading into the election was to repeal the CPM.

gOvERNmENT INCENTIvE PROgRAmS

■ RECs, as discussed above, are the main Federal Government incentive for renewable energy investment in Australia. In addition, the CELP also establishes the Australian Renewable Energy Agency (ARENA) and the CEFC. ARENA is an independent authority that aims to improve the competitiveness of renewable energy technologies and increase the supply of renewable energy in Australia. The CEFC administers a A$10 billion (approx. US$9.52 billion) fund dedicated to investing in clean energy, however, the CEFC will likely be abolished by the new Government in 2014.

■ ARENA has been tasked with reviving the Government’s ailing Solar Flagships Program, which is designed to support the construction of large-scale, grid-connected solar power stations. Following Round One of funding offers, the 150MW Moree Solar Farm and 250MW Solar Dawn Project were selected. Both projects were unable to meet financial close. The Solar Dawn Project subsequently faced a withdrawal of funding from a newly-elected conservative Queensland Government and was also rejected for funding by ARENA, effectively ending the project.

■ In New South Wales however, two large-scale solar PV plants with a cumulative capacity of 155MW at Nyngan and Broken Hill reached financial close following a A$166.7 million (approx. US$158 million) commitment from ARENA and A$64.9 million (approx. US$62 million) contribution from the New South Wales Government.


■ In 2011, the Australian Capital Territory Government introduced a feed-in tariff scheme for up to 40MW of large-scale solar generation capacity. In September 2012, Spanish group Fotowatio Renewable Ventures was awarded the first 20MW contract which, if completed, will become the largest solar facility in Australia and the first to be connected to the NEM. Local banks, ANZ and NAB, have provided project finance for the facility.

mAJOR PROJECTS/COmPANIES

■ Hydro Tasmania is regarded as the largest renewable energy generator in Australia. The company has proposed to build a 200MW wind farm on King Island (located between Tasmania and the Australian mainland), which could provide up to 25% of the installed generation capacity intended to be achieved by the RET. Hydro Tasmania put the A$2 billion (approx. US$1.9 billion) project to a vote of the island’s residents in mid-2013. The project received a 58% approval rating, so Hydro Tasmania will likely now proceed with a feasibility study.

■ OneWind Australia (a joint consortium of Denham Capital, Enersis Australia, National Power and Kato Capital), have recently amassed a 1GW portfolio of wind farm projects, including Glen Innes (100MW), Lincoln Gap (250MW) and Cattle Hill (240MW). The three projects have an estimated cost of A$800 million (approx. US$762 million) with financial close anticipated for 2013 or 2014.

■ Some other notable established wind projects in Australia include Crookwell 2 in New South Wales (92MW) and the Waterloo Wind Farm in South Australia (111MW).

■ The Snowy Mountain Hydropower Scheme, which was completed in 1974, is the largest engineering project ever undertaken in Australia. It provides up to 10% of all electricity in New South Wales. The scheme consists of 16 major dams, seven power stations, a pumping station and 225km of tunnels, pipelines and aqueducts.

■ Infigen Energy has decided to put on hold a A$180 million (approx. US$171 million) expansion of its Capital wind farm near Canberra and also not

to pursue a A$150 million (approx. US$143 million) joint venture solar plant with US-based Suntech Power awaiting a more settled regulatory environment.

■ Verve Energy opened Australia’s first large-scale solar PV project in October 2012. The Greenough River solar farm near Geraldton, Western Australia has a 10MW capacity.

fOREIgN INvESTmENT/OWNERSHIP

■ Foreign direct investment in Australia amounted to A$507 billion (approx. US$482 billion) in 2011.

■ The Federal Government reviews foreign investment proposals against the national interest case-by-case through the Foreign Investment Review Board.

■ The Foreign Acquisitions and Takeovers Act 1975 (Cth) provides the legislative framework for the screening regime.

■ All foreign governments and their related entities should notify the Australian Government and obtain prior approval before making a direct investment in Australia, regardless of the value of the investment.

■ Foreign persons should notify the Australian Government before acquiring an interest of 15% or more in an Australian business or corporation that is valued above A$244 million (approx. US$232 million). It is also necessary for persons to notify the Government if they wish to acquire an interest in an offshore company whose Australian subsidiaries or gross assets are valued above A$244 million.

RElEvANT INTERNATIONAl TREATIES

■ Australia ratified the Kyoto Protocol in late 2007. Under the United Nations Framework Convention on Climate Change (UNFCCC) and the Kyoto Protocol, Australia had one of the more modest emissions reduction targets at 108% of 1990 levels by 2008. This target controversially included the “Australia clause”, which set baseline land use, land use change and forestry emissions at 1990 levels. In 1990, Australia’s emissions increased by roughly 30% due to land clearing. As a result, subsequent reduced land


clearing ensured Australia complied with its emissions targets despite fossil-fuel energy consumption increasing significantly.

■ Australia may well adopt a different negotiating stance at the next UNFCCC Conference of the Parties (COP 19) in Warsaw in November 2013, by focusing on Australia’s small (in absolute terms) contribution to global greenhouse gas emissions.

RElEvANT WEBSITES

■ Clean Energy Regulator – http://ret.cleanenergyregulator. gov.au/Home

■ Clean Energy Map – http://www.cleanenergymap.gov.au/#greening-australia-qld/?&_suid=1369715216065024367640 04757191

■ Australian Renewable Energy Agency – http://www.arena.gov.au/

■ Clean Energy Finance Corporation – http://www.cefcexpertreview.gov.au/content/Content.aspx?doc=home.htm

■ Department of the Environment – http:// www.environment.gov.au/

■ Clean Energy legislative package – http://www.climatechange.gov.au/government/clean-energy-future/legislationaspx

REfERENCES

■ Department of Resources, Energy and Tourism, Energy White Paper 2012, accessed at: http://www.ret. gov.au/energy/facts/white_paper/Pages/energy_white_paper.aspx

■ Clean Energy Regulator, About the Renewable Energy Target, accessed at: http://ret.cleanenergyregulator.gov. au/About-the-Schemes/about-schemes

■ Clean Energy Regulator, Renewable Energy Target: 2012 Administrative Report, accessed at: http://ret.cleanenergyregulator.gov.au/Latest-Updates/2013/April/2012-administrative-report-released

■ Reegle, Country Energy Profile: Australia, accessed at: http://www.reegle.info/countries/australia-energy-profile/AU

■ Bureau of Resources and Energy Economics, Clean Energy in Australia 2013, accessed at: http://www.bree.gov.au/documents/publications/energy-in-aust/BREE-EnergyInAustralia-2013.pdf

■ Sarah Dingle, An ill wind, accessed at: http://www.abc.net.au/radionational/programs/backgroundbriefing/2013-05-26/4705822

■ Clean Energy Council, Clean Energy Australia Report 2012, accessed at: http://www.cleanenergycouncil.org.au/resourcecentre/reports/cleanenergyaustralia.html


PROfIlE

Since 1949, the world’s most populous country has been governed by the Communist Party of China (CCP). China has experienced rapid economic growth since Deng Xiaoping and Hu Yaobang’s post-Mao economic reforms (gaige kaifang) that commenced in the late 1970s. As is widely known, China is now predicted to become the world’s biggest economy by the end of this decade. While China’s economic liberalisation has seen

CHINA

OvERvIEW


Civil law Mandarin and many other languages and regional dialects


■ Ease of Doing Business Report 2013: 91 out of 185 (no change)

■ Global Competitiveness Index 2013: 29 out of 144 (down 3 rankings)

■ Index of Economic Freedom 2013: 136 out of 177 (up 2 rankings)

■ Corruption Perceptions Index 2012: 80 out of 176 (down 5 rankings)


1.34 billion Upper middle $8,390

an unprecedented rise in living standards, a number of environmental, income disparity, geopolitical and energy security challenges have arisen. To address these issues, the CCP’s 12th Five Year Plan (2011-2015) has vowed to stimulate domestic demand and invest significantly in renewable energy, while the new Chinese leadership, headed by Xi Jinping and Li Keqiang, have sought to stamp out corruption and promote sustainable development under Xi’s mantra of “the Chinese dream”.

MONGOLIA

CHINAS. KOREA

N. KOREA

JAPAN

INDIA

NEPAL

SRI LANKA

PAKISTAN

AFGHANISTANIRAN

TURKMENISTAN

UZBEKISTAN

KAZAKHSTAN

BANGLADESH

BHUTAN

LAOS

THAILAND

CAMBODIA

VIETNAMMYANMAR

BRUNEIMALAYSIA

MALAYSIA

INDONESIA

EAST TIMOR

PAPUA NEW GUINEA

PHILIPPINES



■ China is the world’s largest energy producer and now also the largest energy consumer of any nation.

■ While data is difficult to verify in a country as expansive as China, it was estimated that in 2011, China’s electricity capacity was 1,055GW (predominantly fossil fuel-based), while electricity generation was approximately 4,700TWh.

■ Some experts believe China’s generating capacity will increase by 250% from present levels by 2020.

■ Surprisingly, in 2012, demand for electricity fell by nearly 50%, however this is expected to be an anomaly as China’s mass urbanisation and industrialisation continues.

■ China is the largest producer and consumer of coal in the world. Unlike Australia for instance, much of China’s coal is consumed domestically, which contributes significantly to air pollution problems. China’s energy market also relies heavily on domestic and imported oil as well as natural gas.

■ In 2006, there were 11.5 million households without electricity. Through the “Electricity for Every Household” program, around 520,000 additional homes have since been provided with electricity.

Regulators

■ China’s energy sector is overseen by a vast bureaucracy across a number of organisations and levels of government. The National Development and Reform Commission (NDRC), the Commission of Economy and the Office of the National Energy Leadership Group implement central government policy. A number of other bodies have been established in the past few years, such as the National Energy Agency (NEA) and the National Energy Commission.

■ The State Electricity Regulatory Commission (SERC) is the main regulatory body in the energy sector. It undertakes a number of functions in relation to market inspection, price inspection, security inspection, customer service inspection and permits for operation. SERC’s powers are subject to the NDRC and the National Energy Administrator.

Reforms

■ At the 2013 National People’s Congress, State Councillor Ma Kai announced the Government’s intention to merge the NEA and SERC.

■ China’s power sector has already undergone significant reforms. In 2002, the CCP launched a series of rules and regulations levying pollutant discharge fees and setting emission standards of air pollution for thermal power plants. Additionally, the State Power Corporation was divided into 11 new corporations, resulting in some competition in the energy generation sector, however state-owned enterprises continue to dominate the sector.

Generation, distribution and transmission

■ There are five state-owned power generation companies: China Guodian Corporation, China Huaneng Group, China Datang Corporation, Huadian Corporation and China Power Investment Corporation.

■ More than 90% of the total installed generating capacities are state-owned.

■ 99% of the assets in the distribution and transmission sectors are owned by the Central Government.

■ More than 80% of electricity is supplied by the State Grid Corporation of China (SGCC) and the China Southern Power Grid (CSPG).

■ Since the 2002 reforms, the SGCC and CSPG operate the grids.

■ Currently, China has six regional power grids. The 12th Five Year Plan has flagged the possibility of a unified and smart grid system to operate nationwide by 2020.

Electricity laws

■ The Electric Power Law 1996 (EPL) applies to the construction, production, supply and utilisation of electric power.

■ The EPL aims to:

■ protect and develop the electricity industry;

■ protect the interests of investors and users/consumers;

■ ensure safe and reliable operation of electricity; and

■ facilitate healthy development of the industry.


■ The EPL mostly uses generic language, such as the need to:

■ incorporate electric power development into the national and social development;

■ promote safe production of electricity;

■ promote the “hook-up” between power-producing enterprises and electric networks (reserving priority in utilisation to the investor);

■ require contracts between suppliers and users of electricity;

■ require unified pricing of electricity; and

■ adopt preferential policies for rural electrification.

■ The Energy Conservation Law 1998 has a broad ambit to promote energy efficiency and has led to over 164 “energy savings standards” across China.

■ Other important legislative instruments include the:

■ Electricity Regulation 2005;

■ Electricity Pricing Reform 2005; and

■ Electricity Supply Regulation 1996.


■ China is the global leader in renewable energy in almost every sense: from total capacity, to current and future expenditure, to energy and emission targets and renewable technology production.

■ China has a total capacity of 152GW of grid-connected renewable energy.

■ The push for renewable energy is underscored by air quality concerns, water and food contamination concerns as well as geopolitical concerns about supply routes through the narrow Malacca Strait (as well as the Lombok and Makassar Straits). As a result, it is estimated that over the next 15 years, China will spend US$1.54 trillion on clean energy projects. Indeed, in 2012 China increased spending on renewable energy by more than 20% to US$65.1 billion, which was approximately one-quarter of total global renewable energy expenditure for 2012.

■ China recently overtook the United States as the largest greenhouse gas emitter in the world and now accounts for about one-fifth of global carbon emissions. China

has voluntarily committed to reducing its carbon intensity per unit of GDP by 40-45% by 2020 compared to 2005 levels, however its emissions are not expected to peak until 2025 or 2030.

■ The renewable energy capacity of China is increasing faster than its coal capacity. However, coal still accounts for 70% of China’s energy consumption and the overall share of electricity generated from renewable sources has increased only slightly.

■ China’s 12th Five Year Plan aims for non-fossil fuel energy production to reach 11.4% of total energy production by 2015. The CCP envisages that 15% of China’s electricity needs will come from renewable sources by 2020.

Hydropower

■ China has the largest total installed hydropower capacity of any country at 213GW, with an estimated potential of 500GW.

■ Rural hydropower capacity is expected to reach 74GW by 2015.

■ The Three Gorges Dam, located on the famous Yangtze River, includes 32 separate 700MW generators. It is regarded as the largest electricity producing facility in the world.

■ Mega-dam constructions have caused significant social unrest with residents opposing forced evictions and with some complaints of insufficient compensation packages. Geologists have expressed concern over building mega-dams in earthquake prone areas, while environmentalists have continually lamented the impact of dams on river ecosystems.

■ The CCP has not publically backed any other large hydropower projects since the Three Gorges Dam, however it appears that mega-dams are being constructed to reach China’s carbon reduction targets. Recently, western media have been given access to the dams planned on the Jinsha River (see below).

■ ‘Dam diplomacy’ has emerged as a significant and complex geopolitical issue for China and its relations with downstream neighbours. The damming of the upper reaches of the Mekong River has unsurprisingly proved unpopular with South East Asian countries in the past. However, there is a growing number of dams within countries such as Laos, that have involved


Chinese financiers and developers. The United States has weighed into the issue and supported countries of the lower Mekong in their claims for increased water flows.

Wind energy

■ Between 2005 and 2012, China increased its wind energy capacity almost 50-fold. Current wind capacity is 63GW (the largest of any nation) and is expected to rise to 100GW by 2015.

■ It is estimated that over the past few years, an average of 36 wind turbines per day have been erected in China. China experienced a 36% increase in wind power generation in 2012 alone.

■ China’s windiest areas, which include Inner Mongolia, Xinjiang, Gansu and Tibet, are located far from population centres and thus require extensive transmission infrastructure.

Solar energy

■ China is now targeting 35GW of installed solar power capacity by 2015, with current capacity below 10GW (the 2015 solar target has been increased four times in the past two years).

■ The Middle Kingdom enjoyed a dramatic 75% increase in new solar capacity in 2012.

■ China accounted for approximately 25% of global solar investment in 2012 spending US$35.1 billion.

■ Low interest rates and extended credit from the Chinese Development Bank, as well as other government subsidies for land, research and development, have underpinned the success of the solar industry.

■ China is the world’s largest manufacturer of solar panels and has 65% of the world’s operational solar heaters.

■ Seven of the top 10 global solar panel makers are Chinese, contributing to an 80% drop in the price of solar PV cells over the last five years.

Geothermal energy

■ As at 2010, China had 24.2MW of installed geothermal generation capacity.

■ China is anticipating growth to 60MW of installed geothermal generating capacity by 2015.

■ Most of China’s known high-temperature resources are located in Yunnan and Tibet, however geothermal exploration has been limited mostly to these provinces.

Biogas/biomass energy

■ Biogas digesters are seen as a solution to the dumping of animal waste in waterways. There have been more than 1,600 large-scale digesters and more than 30 million household biogas digesters constructed in China.

■ China’s estimated installed capacity of biomass was 4GW in 2010 and is expected to reach 30GW by 2030.


■ As was emphasised by China’s former Premier Wen Jiabao, China must strike a balance between economic development and environmental considerations. It is clear that the new Politburo have also sought more sustainable development through climate change mitigation and immense clean energy investment. In an unusually blunt assessment, new Premier Li Keqiang acknowledged the social impetus for climate change action during a press conference at the 2013 Nation’s People’s Congress. He remarked: “we shouldn’t pursue economic growth at the expense of the environment. Such growth won’t satisfy the people”.

■ Accusations from the United States of anti competitive subsidies to support solar sector growth in China led Washington to file a case with the World Trade Organisation in 2011/12. China reportedly provided US$30 billion in credit to its biggest solar manufacturers (about 20 times the United States investment). Subsequently, the US has imposed tariffs between 31% and 250% on Chinese PV cells. Recent media reports suggest that the US may remove these tariffs and has also acted as a mediator between Europe and China with the EU Commission currently considering anti-dumping taxes as high as 67.9% on Chinese PV cells.

■ Much of China’s potential renewables capacity has not been met to date due to the challenges of connecting renewable sources with grids. This problem has been


exacerbated as there is now an excess of solar PV cells and wind turbines. In response to this, the NDRC has increased energy surcharges and a subsidy designed to encourage smaller-scale distributed solar power plants.

■ The CCP will introduce (or has already introduced) regional and city based emissions trading schemes in Beijing, Tianjin, Shanghai, Chongqing and Shenzhen, as well as province-wide schemes in Hubei and Guangdong. Shanghai and Shenzhen commenced their respective schemes mid-2013. These pilot schemes, which cover approximately one-fifth of China’s population, will be used to establish a nationwide trading scheme after 2015.

■ The energy sector is currently facing a scandal of its own involving Liu Tienan. In March 2013, Liu was removed from his position as Director of the NEA, but has continued on in his role as Deputy Director of the far-reaching NDRC. Liu is alleged to have embezzled US$200 million and is currently awaiting formal charges.

RENEWABlES lAWS

■ The Renewable Energy Law 2006 (REL) includes provisions regarding price regulation, differentiated pricing, special funds and tax relief. Importantly, state-owned grid operators are required to purchase all grid-connected activity generated from approved renewable generators in accordance with the REL. For wind, the price is based on bid prices from government tenders, while for biomass and solar, prices are calculated on cost price with a “reasonable profit”. In turn, the grid enterprise can cross-subsidise by charging customers a higher price.

■ The National Climate Change Program, launched in 2007, sets out a number of greenhouse gas mitigation, educational and institutional mechanisms to combat climate change in China. It was the country’s first major climate change policy initiative.


■ The Golden Sun program is targeted at solar energy producers. The program subsidises 50% of grid- connected solar investments and 70% of off-grid solar PV power investments.

■ For wind energy producers, there is an immediate value-added tax rebate of 50% applied to the sale of self-manufactured electric wind power.

■ The NDRC has also introduced a feed-in tariff for biomass, wind, solar and hydropower, with the most generous tariffs for solar energy generators.

■ There are a number of general incentives offered under the REL, such as preferential loans, tax benefits and funding from the Renewable Energy Development Fund for renewable projects.


■ The Xiluodu and Xiangjiaba hydropower stations on the Jinsha River are currently under construction. Once completed, the dams will have a combined capacity of nearly 20GW. These dams are the largest hydropower facilities to be built since the Three Gorges Dam (22GW) and have created thousands of jobs. Opponents of the dams have lamented the relocation of hundreds of thousands of people and indeed Jinsha River damming projects have become a sensitive issue, particularly in Yunnan and Sichuan where the dams are located. There are reportedly “dozens” of other proposed dams on the Jinsha River which has led environmentalists to warn of a potential “dead river system”. Besides environmental and geological impacts of mega-dams, renewable energy in China receives widespread public support, particularly because it alleviates air pollution.

■ China Investment Corporation and China Energy Conservation Investment Corporation are two notable state-owned enterprises investing heavily in renewable energy in China.

■ Currently, there are six 10GW wind farms under construction in Gansu, Inner Mongolia, Hebei, Jilin and Xinjiang.

■ The largest rooftop solar power station in the world is located in Weihai City in China’s Shandong province.

■ Himin Solar Energy Group, one of the world’s biggest producers of solar water heaters is constructing “Solar Valley” in Dezhou, which is China’s clean-tech version of Silicon Valley. Himin Solar is headed by “the Sun King” – Huang Ming.

■ Beijing Jingyuntong Technology Co Ltd raised RMB2.5 billion (US$394 million) via an Initial Public Offering on the Shanghai Stock Exchange, for the purpose of a silicon industrial park in Beijing.


■ Suntech Power Holdings, which was valued at US$9 billion in 2007, is believed to be the largest solar energy company in the world. However, like other solar energy companies, its profits have fallen in recent years due to the oversupply of solar panels on the global market.


■ The Catalogue for Guidance of Foreign Investment, revised for a fifth time by the NDRC in 2011, requires foreign investment be made in a manner that is consistent with Chinese policy and in a way that will promote the development of China. Importantly, alternative energy and energy efficient technology investment are in the “encouraged” category. This is in-line with China’s emphasis on renewables in the 12th Five Year Plan. However, there are still barriers for foreign investment, such as the need to create joint ventures with Chinese companies.


■ China ratified the United Nations Framework Convention on Climate Change (UNFCCC) in 1993 and ratified the Kyoto Protocol in 2002.

■ In a 2013 report, the independent, Australia-based Climate Commission, surmised that both China and the US were on track to meet their commitments to tackle climate change. This came in the wake of an “historic” agreement for ministerial-level cooperation on climate change in April between the world’s two largest economies who together account for over one-third of total emissions.

■ At the 2012 Doha climate talks, UNFCCC Executive Secretary, Christiana Figueres, tentatively noted China’s current leadership in tackling climate change.

RElEvANT WEBSITES

■ National Development and Reform Commission – http://en.ndrc.gov.cn/

■ State Electricity Regulatory Commission – http://www.serc.gov.cn/english/index.htm

■ China’s Three Gorges Dam – http://www.mtholyoke.edu/~vanti20m/classweb/website/home.html

■ China’s 12th Five Year Plan (full text) – http://cbi.typepad.com/china_direct/2011/05/chinas-twelfth-five- new-plan-the-full-english-version.html

REfERENCES

■ China Briefing, An Overview of China’s Renewable Energy Market, accessed at: http://www.china-briefing.com/news/2011/06/16/an-overview-of-chinas- renewable-energy-market.html

■ Reegle, Energy Profile China, accessed at: http://www.reegle.info/countries/china-energy-profile/CN#energy_ framework

■ Lester Ross, Robert Woll and Kenneth Zhou, (2012), China Releases New Foreign Investment Catalogue, accessed at: http://www.mondaq.com/x/161086/International+Trade/China+Releases+New+Foreign+In vestment+Catalogue+2011+Edition

■ Australian Climate Commission, The Critical Decade: Global Action Building on Climate Change, accessed at: http://climatecommission.gov.au/report/global-action-building/

■ Geoff Raby, There’s a catch to Xi’s tiger trap, accessed at: http://www.businessspectator.com.au/article/2013/5/21/china/theres-catch-xis-tiger-trap?utm_source=Sinocism+Newsletter&utm_campaign=3f26083cda-Sinocism05_21_13&utm_medium =email&utm_term=0_171f237867-3f26083cda-29580897

■ The Telegraph (UK), China rushes to build new generation of mega-dams as thirst for power grows, accessed at: http://www.telegraph.co.uk/news/worldnews/asia/china/9541869/China-rushes-to-build-a-new-generation-of-mega-dams-as-thirst-for-power-grows.html

■ Huw Pohlner, Big money, big dams: large-scale Chinese investment in Laos, accessed at: http://www.eastasiaforum.org/2013/05/25/big-money-big-dams-large-scale-chinese-investment-in-laos/

http://en.ndrc.gov.cn/http://wwwhttp://www.mtholyokehttp://cbihttp://www.china-briefinghttp://wwwhttp://www.mondaq.com/x/161086/http://climatecommission.gov.au/ report/global-action-building/http://climatecommission.gov.au/ report/global-action-building/http://www.businessspectator.com.au/ article/2013/5/21/china/theres-catch-xis-tiger-trap?utm_source=Sinocism+Newsletter&utm_campaign=3f26083cda-Sinocism05_21_13&utm_medium =email&utm_term=0_171f237867-3f26083cda-29580897http://www.businessspectator.com.au/ article/2013/5/21/china/theres-catch-xis-tiger-trap?utm_source=Sinocism+Newsletter&utm_campaign=3f26083cda-Sinocism05_21_13&utm_medium =email&utm_term=0_171f237867-3f26083cda-29580897http://www.businessspectator.com.au/ article/2013/5/21/china/theres-catch-xis-tiger-trap?utm_source=Sinocism+Newsletter&utm_campaign=3f26083cda-Sinocism05_21_13&utm_medium =email&utm_term=0_171f237867-3f26083cda-29580897http://www.businessspectator.com.au/ article/2013/5/21/china/theres-catch-xis-tiger-trap?utm_source=Sinocism+Newsletter&utm_campaign=3f26083cda-Sinocism05_21_13&utm_medium =email&utm_term=0_171f237867-3f26083cda-29580897http://www.businessspectator.com.au/ article/2013/5/21/china/theres-catch-xis-tiger-trap?utm_source=Sinocism+Newsletter&utm_campaign=3f26083cda-Sinocism05_21_13&utm_medium =email&utm_term=0_171f237867-3f26083cda-29580897http://www.telegraph.co.uk/news/ worldnews/asia/china/9541869/China-rushes-to-build-a-new-generation-of-mega-dams-as-thirst-for-power-grows.htmlhttp://www.telegraph.co.uk/news/ worldnews/asia/china/9541869/China-rushes-to-build-a-new-generation-of-mega-dams-as-thirst-for-power-grows.htmlhttp://www.telegraph.co.uk/news/ worldnews/asia/china/9541869/China-rushes-to-build-a-new-generation-of-mega-dams-as-thirst-for-power-grows.htmlhttp://www.eastasiaforum.org/2013/05/25/big-money-big-dams-large-scale-chinese-investment-in-laos/http://www.eastasiaforum.org/2013/05/25/big-money-big-dams-large-scale-chinese-investment-in-laos/http://www.eastasiaforum.org/2013/05/25/big-money-big-dams-large-scale-chinese-investment-in-laos/


PROfIlE

East Timor (officially known as the Democratic Republic of Timor-Leste) was a Portuguese colony for nearly 500 years. Following a period of Indonesian occupation, East Timor emerged as the first newly created sovereign state of the 21st century. Despite being one of the poorest countries in the world, East Timor has built a strong foundation for ongoing stability and is making

EAST TImOR

OvERvIEW


Civil law Tetum, Portuguese, Bahasa Indonesia, English and various local languages





■ Corruption Perceptions Index 2012: 113 out of 176 (up 30 rankings)


1.2 million Lower middle $5,200

positive steps towards development. In 2012, both the UN and International Stabilisation Force withdrew from the country following successful presidential and parliamentary elections, which saw Taur Matan Rauk become president and a Xanana Gusmão-led coalition take office. The current government has set a target of East Timor becoming an upper middle income country by 2030.

MONGOLIA

CHINAS. KOREA

N. KOREA

JAPAN

INDIA

NEPAL

SRI LANKA

PAKISTAN

AFGHANISTANIRAN

TURKMENISTAN

UZBEKISTAN

KAZAKHSTAN

BANGLADESH

BHUTAN

LAOS

THAILAND

CAMBODIA

VIETNAMMYANMAR

BRUNEIMALAYSIA

MALAYSIA

INDONESIA

EAST TIMOR

PAPUA NEW GUINEA

PHILIPPINES



■ East Timor has approximately 80MW of installed electricity capacity, of which 19MW is in the capital, Dili.

■ Dili has an electrification rate of 85%, yet rural electrification rates range from between 5% and 18%, with estimates of total nation-wide electrification at just 22% (one of the lowest electrification rates of any country in the world). Only Dili and Baucau have a constant electricity supply, though power outages are common.

■ The majority of East Timor’s power supply is based on imported oil for diesel power generation, while fuel wood supplies the majority of energy used by East Timorese.

■ Nearly all of the electricity grid was destroyed during the Indonesian withdrawal in 1999.

■ The East Timor Government has commissioned a new 150kV, 715km long transmission line. The line will circumvent the country linking the Hera Generating Station, the Betano Generating Station, nine substations and the Dili control centre. This infrastructure is essential to achieve the Government’s aim of providing 100% of households with electricity by 2015 and is the largest construction project in the country’s history.

■ In its five year legislative agenda (2012 – 2017), the Gusmão Government committed to the continued upgrade and expansion of the national grid. An additional 10 substations have also been proposed to deal with an expected increase of 210MW in generating capacity.

Electricity laws

■ There have been a number of attempts to commence electricity regulation by the United Nations Transitional Administration in Timor-Leste (UNTAET) and now the East Timorese Government. These include:

■ UNTAET Directive No. 2001/10 on Fees and Charges for Electricity and Related Services;

■ UNTAET Directive No. 2002/07 on Amendment on the Schedule of Fees and Charges for Electricity and Related Services; and

■ Government Decree Law No. 13/2003 establishing the Bases for the National Electricity System (the Basic Law).

■ UNTAET Directive No. 2002/07 sets a connection fee of US$10 to US$100 depending on the type of premises power is supplied to. It also sets a tariff of US$0.117 for each kWh of electricity supplied.

■ The Basic Law is the main legal regime for the energy sector. It is a more comprehensive regime than the UNTAET Directives in that it creates a national electricity system that goes beyond consumer-focussed regulations.

■ Perhaps the most important aspect of the Basic Law is its provision for the establishment of a Universal Service Operator (USO) for the generation, distribution and transmission of electricity. The Basic Law is not prescriptive as to what type of utility company the USO will be. When established, the USO will have public utility status bringing with it various public and private rights, responsibilities and duties.

■ The Basic Law provides that if a private body corporate is appointed as the USO, it must be through a concession contract. Concession contracts must be announced and open to an international tendering process.

■ Other key points of the Basic Law include the:

■ appointment of a Regulatory Authority (however government ministries and the State Secretariat for Energy Policy (SSEP) currently act as de facto regulators);

■ establishment of binding producers after a tendering process by the Regulatory Authority;

■ establishment of non-binding producers who may obtain either domestic or commercial licences; and

■ establishment of tariff regulations governing the “criteria and methods for formulating and fixing tariffs and rates for electricity”.

Distribution

■ The state-owned Electricidade de Timor-Leste (EDTL) has a monopoly on the supply and distribution of electricity to Dili and 11 district capitals. EDTL is largely funded by donor countries including Australia, Japan, Norway and Portugal.


International assistance

■ The World Bank has funded two projects aimed at improving electricity supply, including financing the repair of the Comoro power station and work on Dili’s power distribution infrastructure.

■ The Asian Development Bank is also actively involved in financing projects in the country.


■ Despite a lack of regulation, the East Timorese Government aims to have at least half of its energy needs met from renewable energy sources by 2020. It is estimated that the country will need an additional 50MW to 100MW of renewable energy generation capacity to meet this target.

■ In its five year legislative agenda, the Government identified renewable energy and rural electrification as its two key energy priorities. The Government has earmarked remote areas like Atauro and Oecussi Ambeno to take precedence in solar and wind installations.

■ In August 2012, the Prime Minister announced his new cabinet. Januário Pereira is now the Secretary of State for Electricity (which includes renewable energy) whilst policy in the energy sector generally will be within the remit of Alfredo Pires, who takes up the newly created position of Minister of Petroleum and Natural Resources. The Ministry of Finance also plays an active role in many large renewable energy developments, well led by Minister Emília Pires.

■ In a Council of Ministers meeting on 9 May 2012, the Council was presented with a Renewable Energy Master Plan for the Development of Electricity in East Timor. The report concluded that the country has vast potential for renewable energy production and that by 2020 it is expected that at least 50% of national energy needs will be provided by renewable energy. Analysts have suggested this will cost US$600 million.

■ A report produced by the Asian Development Bank regards hydropower and wind as the most promising renewable energy sources for East Timor. However, cheap stand-alone solar PV systems are seen as a solution to rural electrification for houses that cannot be connected to the grid.

■ NGOs have been actively involved in East Timor. For instance, the Alternative Technology Association has (since 2003) sent volunteers to install solar and wind installations in schools, hospitals, offices and other community buildings. This not-for-profit organisation has a strong focus on training Timorese people to install and manage their own solar power and lighting, as well as encouraging capacity building.

■ Renewable energy feasibility research has been undertaken by government organisations (for example, the SSEP), as well as international development groups like the Norwegian Agency for Development Cooperation and the Netherlands Development Organisation.

Hydropower

■ In 2009, the Government commenced a national program to install hydropower plants.

■ HydroTimor oversees the development of hydropower in the country.

■ East Timor has a total potential of between 80MW and 252MW of hydro capacity, with the 27MW Ira Lalaro hydropower project deemed to be the most feasible project.

■ The steep topography of East Timor prevents the construction of artificial reservoirs for hydropower electricity generation.

■ Micro and mini hydropower projects may become an interim power source for villages unlikely to be connected to the national grid within the next 10 to 15 years.

Wind energy

■ Studies have shown that there is great potential for wind power generation (approximately 72MW) in East Timor given the high coastal wind speeds and favourable seasonal conditions.

Solar energy

■ East Timor has high rates of solar radiation and is accordingly well-suited to solar PV installations.

■ It is estimated that between 10,000 and 50,000 solar PV systems will be needed for households that will not be connected to the national distribution network or micro grids in the next 15 years.


■ Capital subsidies will be needed to reduce start-up costs, however operation and maintenance costs are low.

Biogas/Biomass energy

■ The majority of energy in rural and remote areas is sourced from biomass fuels.

■ 78MW of biomass, biogas and waste-to-energy projects are currently being developed by the Government.


■ Infrastructure shortages are a major hindrance to development across all sectors in East Timor, including renewable energy.

■ East Timor will require financial support either from the Asian Development Bank, a foreign government or a NGO to construct a viable renewables industry. An alternative would be for the Government to consider guaranteed feed-in tariff rates, as has occurred in other Asia Pacific jurisdictions.

■ The current practice of using wood fuels for cooking and heating has led to widespread deforestation.

RENEWABlES lAWS

■ There is no renewable energy governance as such in East Timor, despite a Draft Base Law for Renewable Energy being proposed in 2010. Under the East Timorese Constitution a “draft law” indicates that the National Parliament has granted legislative authorisation to the Government. However, draft laws terminate when a legislative term ends, which occurred recently. Whether the Draft Base Law for Renewable Energy will be reissued under the new government remains to be seen.


■ The Private Investment Law No. 14/2011 offers various incentives for a company involved in foreign investment, including:

■ income and sales tax exemption to the value of 100% for up to 10 years depending on the location of the project;

■ customs import duty exemption to the value of 100% in relation to all capital goods and equipment used in the construction/management of the project for a period of up to 10 years depending on the location of the project; and

■ the possibility of negotiating a special investment agreement, which defines a special legal regime for a particular project because given its scale or corresponding economic, social, environmental or technological impact, is of great interest to East Timor.


■ The Government has committed to complete construction on the Lariguto wind farm as well as the Bobonaro wind farm and to connect them to the national grid.

■ The Government has also vowed to establish a solar centre in Hera and conduct feasibility studies on thermoelectric power and biomass fuel options in Manatuto, Viqueque and Lautem.

■ The Gariuai mini hydropower station which opened in 2008 was the first hydropower facility with an installed capacity of 0.3MW. The plant, which is located in Baucau, is projected to produce 1.5GWh annually of electricity.

■ The Ira Lalaro hydropower project has the potential to meet a significant amount of East Timor’s electricity needs. It is considered the most cost effective hydropower project, in part due to the Ira Lalaro lake which would provide natural storage for the plant.

■ Other hydropower projects are run-of-river type plants at Gleno, Belulic and Laclo.

■ A 10MW to 15MW wind power project was identified in Foho Bagarkoholau, 10km south of Dili.


■ The Private Investment Law No. 14/2011 establishes a legal framework to attract and promote foreign investment. Article 8 of the law establishes a presumption that foreign investment is permitted in any sector unless the investment in the relevant sector is specifically prohibited or restricted from foreign ownership or operation by the State. Article 10 sets a


minimum foreign investment amount for access to the incentives and benefits established under the law at US$1.5 million (50% of such investment must be in cash).

■ In 2011, East Timor’s Parliament established the National Investment Agency to further streamline and encourage foreign investment.


■ East Timor ratified the United Nations Framework Convention on Climate Change in 2006 and the Kyoto Protocol in 2008. The country is a non-annex one party so it does not have any binding emissions target.

■ Despite declaring its intentions to join the Association of South East Asian Nations (ASEAN) and despite support for its bid from Indonesia, East Timor has thus far failed in its bid to join the ASEAN community.

RElEvANT WEBSITES

■ East Timor Government website – http://timorleste.gov.tl/?lang=en

■ Timor-Leste Strategic Development Plan 2011 – 2030 – http://www.tls.searo.who.int/LinkFiles/Home_NATIONAL_STRATEGIC_DEVELOPMENT_ PLAN_2011-2030.pdf

■ Program of the Fifth Constitutional Government (2012 – 2017) – http://timor-leste.gov.tl/?cat= 39&lang=en#toc 335313446

REfERENCES

■ East Timorese Government, Power Sector Development Plan for Timor-Leste, accessed at: http://www.adb.org/publications/power-sector-development-plan-timor-leste

■ East Timorese Government, Timor-Leste Strategic Development Plan 2011 – 2030, accessed at: http://www.tls.searo.who.int/LinkFiles/Home_NATIONAL_ STRATEGIC_DEVEL0PMENT_PLAN_2011-2030. pdf

■ Reegle, Energy Profile East Timor, accessed at: http://www.reegle.info/countries/east-timor-energy-profile/TL

■ Avelino Coelho, Renewable Energy in Timor-Leste, accessed at: http://prezi.com/_2dnr8q-d34b/renewable-energy-in-timor-leste/

http://www.tls.searo.who.int/http://timor-leste.gov.tl/?cat= 39&lang=en#toc 335313446http://timor-leste.gov.tl/?cat= 39&lang=en#toc 335313446http://www.adb.org/publications/power-sector-development-plan-timor-lestehttp://www.adb.org/publications/power-sector-development-plan-timor-lestehttp://www.tls.searo.who.int/http://www.reegle.info/countries/east-timor-energy-profile/http://prezi.com/_2dnr8q-d34b/ renewable-energy-in-timor-leste/http://prezi.com/_2dnr8q-d34b/ renewable-energy-in-timor-leste/


PROfIlE

Led by Mohandas Gandhi and Jawaharlal Nehru, India gained its independence in 1947 after a long period of British rule. India is now the largest democracy in the world and regarded as a key emerging market given its enormous, youthful population and continued economic growth. Nonetheless, the Indian Government continues to face issues of widespread poverty, overpopulation, environmental degradation, corruption, energy shortages and continued tensions with neighbouring Pakistan.

INDIA

OvERvIEW


Common law Hindi, English and regional languages





■ Corruption Perceptions Index 2012: 94 out of 176 (up 1 ranking)


1.24 billion Lower middle $3,620


■ As at 30 April 2013, India’s total installed electricity generation capacity was just over 223.6GW, of which:

■ coal (58.4%), oil (0.5%) and gas (9.0%) accounted for 67.9%;

■ hydropower accounted for 17.7%;

■ nuclear accounted for 2.1%; and

MONGOLIA

CHINAS. KOREA

N. KOREA

JAPAN

INDIA

NEPAL

SRI LANKA

PAKISTAN

AFGHANISTANIRAN

TURKMENISTAN

UZBEKISTAN

KAZAKHSTAN

BANGLADESH

BHUTAN

LAOS

THAILAND

CAMBODIA

VIETNAMMYANMAR

BRUNEIMALAYSIA

MALAYSIA

INDONESIA

EAST TIMOR

PAPUA NEW GUINEA

PHILIPPINES

AUSTRALIA


■ renewable energy (including small hydropower projects) accounted for 12.3%.

■ This reflects that as of April 2013, approximately 70% of the installed generation capacity is based on conventional sources of energy and 30% is based on non-conventional sources of energy.

■ In the 12th Plan (2012 – 2017), India has a capacity addition target of 72.34GW, 10.9GW, 5.3GW for the thermal, hydropower and nuclear sectors respectively.

■ The Indian National Electricity Policy 2005 (NEP), established under the Electricity Act 2003 (the Electricity Act), is the overarching policy for the development of India’s energy sector. The NEP outlines the importance of meeting electricity demands, securing supply, mitigating climate change, promoting renewable energy sources and protecting the interests of consumers and stakeholders.

■ India is already the world’s fourth highest energy consumer behind China, the US and Russia. However, electrification rates remain low, with about one-quarter of the population (roughly 400 million people) not having access to electricity.

■ With a rapidly expanding economy and an ever- increasing demand for electricity, India is facing significant energy security issues. Energy demand is expected to rise by 16GW each year until 2020.

■ Electricity prices are regarded by some analysts as unsustainably low. This has resulted in the poor financial positions of the state-owned distribution companies.

■ Theft of electricity is also prevalent, which reduces incentives for investment in the energy sector.

Generation

■ Just 31% of total installed electricity capacity is provided by the private sector in India, with central and state government entities dominating generating capacity.

■ The Central Government entities include the National Thermal Power Corporation, the National Hydroelectric Power Corporation Limited and the Nuclear Power Corporation of India Limited (NPC). Each state also has at least one generation company.

■ Entities are generally not required to have a licence to generate electricity except in relation to nuclear projects and certain hydropower projects. The private sector is able to commission coal, gas or oil, hydropower, wind, solar and other renewable energy-based projects of any size. However, only central government owned and controlled entities are permitted to build and operate nuclear energy stations. Currently, only the NPC generates electricity using nuclear energy.

Distribution and transmission

■ The distribution and transmission system in India is a unique three-tier operation consisting of distribution networks, state grids and regional grids. In order to facilitate the transmission of power among neighbouring states, the state grids are interconnected to form regional grids. These regional grids are divided according to five geographical areas: western, northern, eastern, north-eastern and southern.

■ Much like in China, the regional grids are being gradually integrated to form a national grid to enable inter-regional transmission of power.

■ A non-discriminatory open access obligation is imposed on the distribution and transmission entities to encourage competition among generators, distributors and traders in electricity from regions that have surplus electricity to regions with an electricity

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