As the region gears up to meet ambitious economic goals, supplying energy needs is putting strains on resources, the environment and regulatory mechanisms. We explore some key regional developments in energy laws.
With the energy sector in a state of transition due to an increased emphasis on the shift to renewable sources, Singapore is, to a large extent, at the epicentre of energy thought leadership in the Southeast Asian region.
Partner at DWF in Singapore
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The key body responsible for energy regulation in Singapore is the Energy Market Authority (EMA), a statutory board under Singapore’s Ministry of Trade and Industry with the aims of:
(1) promoting effective competition in the energy market;
(2) ensuring a reliable and secure energy supply; and
(3) developing a dynamic energy sector.
The EMA has adopted a fairly progressive stance and actively collaborates with industry to further Singapore’s energy agenda. While Singapore’s energy needs pale in comparison to that of its neighbours, the domestic focus is very much on increasing energy efficiency, leveraging new technology, and trying to create a level playing field for non-government participants.
Electricity generation in Singapore is largely fuelled by imported natural gas, which contributes to 95% of the country’s needs. Imported LNG is regasified for electricity generation, and the EMA’s Power System Control Centre plays a critical role in Singapore’s gas-to-electricity journey. From a regulatory perspective, various regulations, codes of practice and licences implemented by the EMA govern the gas industry, including the Gas Network Code, which came into effect in 2008.
The opening up of the retail electricity market by the Singapore government from 1 April 2018 has been viewed as a key step towards facilitating a more competitive utilities sector. Aside from the actively consumer-led dynamic that this initiative is intended to enable, the open electricity market has encouraged customers to consider their usage footprint with a view to adopting an energy-efficient approach.
The take-up has been encouraging, with 40% of households switching to buying electricity from a retailer of their choice as of 31 August 2019. The leveraging of smart metering and similar energy management measures further this plan, in addition to more innovative concepts such as the creation of a digital marketplace to facilitate the trading of green credits, and peer-to-peer energy trading.
While Singapore may focus its initiatives on deriving better energy efficiency, the Southeast Asian region constitutes a number of economies that require significant energy consumption in order to support economic growth.
Although there is a willingness to embrace the transition to renewables in a considered way, the ability of developing nations to migrate to a largely renewable model is constrained by their short-term need for accelerated growth.
Therefore, a number of Southeast Asian economies must look to carefully balance their reliance on conventional and renewable energy sources. As an additional dynamic, the environmental lobby is particularly strong in a number of Southeast Asian jurisdictions, and energy majors have encountered difficulties in getting projects off the ground due to local opposition.
Obtaining financing for coal-fired power projects has become a significant challenge following the development of the new Sector Understanding in accordance with Organization for Economic Co-operation and Development commitments. Conversely, while there is considerable financing interest in low-carbon and renewable offerings, the ability to find bankable renewable opportunities remains a challenge.
Having committed to the Paris Agreement along with a number of its Southeast Asian counterparts, Singapore has set aggressive targets to address the threat of climate change. Several initiatives have been implemented to that end, including enhancements to the Energy Conservation Act (ECA), which require users to appoint an energy manager, report and track energy use and emissions, and submit energy efficiency improvement plans to the National Environment Agency.
More specifically, the carbon tax scheme put in to effect by the Carbon Pricing Act, 2018, which came into operation on 1 January 2019, implemented amendments to the ECA to impose taxes on certain greenhouse gas emissions of facilities in Singapore.
In parallel, tax incentives such as the Accelerated Depreciation Allowance Scheme allow the early write-off or depreciation of capital expenditure on energy-efficient or energy-saving equipment to replace older, less efficient equipment, and the Investment Allowance – Energy Efficiency Scheme allows an additional 30% investment allowance for energy-efficient investments against taxable income.
In addition to the implementation of policies to encourage the adoption of cleaner energy in Singapore, the government launched the SolarNova Programme to help promote and aggregate demand for solar photovoltaics (PV) across government agencies, thereby helping to drive the growth of Singapore’s solar industry. Government-supported R&D initiatives to address intermittency issues by leveraging battery storage technology have also been encouraged with the aim of boosting the viability of solar energy as a solution of choice.
Outside of Singapore, Southeast Asian jurisdictions are implementing regulations to facilitate the future of energy transformation. However, to address matters of supply and demand there have also been moves to manage development. For example, in a recently issued notification, Vietnam identified that feed-in tariffs would be replaced by competitive auctions for ground-mounted solar projects. Feed-in tariffs will, however, still apply for rooftop solar and certain pre-approved ground-mounted projects.
Inconsistent implementation of energy regulations in Indonesia has somewhat hampered the development of renewable energy projects and there is likely a need for a material review of policy if Indonesia is to meet its target of having 23% of its electricity generated from renewable sources by 2025.
Malaysia enacted its Renewable Energy Act about 10 years ago in order to encourage investment in the renewables sector. Reforms involved the introduction of feed-in tariffs, but this and the few other initiatives that have been undertaken have not yet achieved the outcome that might have been hoped. The Malaysian government will, however, now launch a Renewable Energy Transition Roadmap 2035, with the objective of raising the share of renewables in the Malaysian market to 20% by 2025.
Finally, along with evolving energy dynamics, the development of the sharing economy and the push by governments across the region to focus on the development of electric mobility solutions, there is considerable interest in the establishment of infrastructure to support the implementation of clean public transportation systems.
In a region where the demand for oil, largely for the purpose of serving regional transport needs, is set to grow from the current 6.5 million barrels per day to 9 million bpd by 2040, according to the International Energy Agency, regional governments are driving this agenda in a material way, with initiatives to facilitate the operation of electric public transportation and the building of corresponding infrastructure set to high priority.
Singapore has already taken significant strides on this front and entered into an agreement with a European entity to develop charging infrastructure for electric buses that it intends to start putting on the road from 2020. The authorities have also supported wider initiatives to facilitate a network of charging stations across the country for electric cars.
There will undoubtedly be further refinement of regulation in the Southeast Asian region to address the transitionary needs of a progressively diverse energy ecosystem. In this context, Singapore is likely to continue to play an important role as an innovator, facilitator and legislator in the sector.
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