ASEAN power policies will disrupt coal market

ASEAN power policies will disrupt coal market

TOKYO (AFP): Policy reforms in the electric power sectors of the Philippines, Indonesia, Thailand and Malaysia over the next decade and beyond will disrupt coal supply and demand across Asia, a Japanese study shows.

The study by the Institute of Energy Economics also warns that the entry of independent power producers, including those with foreign capital, would eventually lead to higher electricity charges in both Indonesia and Thailand.

The institute said "various problems and upheavals" would occur as the independents moved into the electric utility sectors of the four biggest members of the Association of Southeast Asian Nations (ASEAN).

Projects involving independent producers not linked to existing government corporations are expected to account for 30 percent of power-generating capacity in Indonesia, Thailand and Malaysia by early next decade.

In the Philippines, where such projects are being introduced at a more rapid pace, the ratio is expected to reach 40 percent, rising to 60 percent by 2005.

"Demand for coal is projected to show a rapid increase, mainly in Indonesia and the Philippines, while large-scale imports of foreign coal in and after 2005 are planned in Thailand," the institute said.

Import

All three countries plan to import from Indonesia and Australia. At the same time, growing demand for coal is projected in Japan and the newly-industrialized economies of South Korea, Taiwan, Hong Kong and Singapore.

"It is feared that demand for coal for power generation, which is expected to expand rapidly in the future, will have a considerable adverse effect on coal supply and demand in the Asian region at large," the study warned.

Of the four countries, Indonesia is expected to show the sharpest increase in demand with consumption projected to jump from five million tons in 1993 to about 17 million tons in 1998 and almost 35 million tons in 2003.

Consumption in the Philippines is forecast to soar from about one million tons this year to more than 12 million tons in 2000 and about 17 million tons in 2005, the institute said.

Thailand's coal consumption -- excluding that by the independents -- is seen rising from 12 million tons to 15 million tons and 17 million tons in the same period. Malaysia's consumption is meanwhile expected to double from about three million tons in 1995 to six million tons in 2000.

At the same time, oil demand is projected to decline gradually in all four ASEAN economies with the consumption in 2000 expected to be almost half the 1995 level. Demand for oil may recover later, although this depends on power demand and how far independent producers can penetrate local markets.

As for electricity charges, the institute noted that Indonesia's independent producer wholesale prices had been set at between U.S. 6.5 cents and 8.5 cents a kilowatt hour. While on a downtrend, this is higher than the electric power corporation's average retail price of 6.2 cents a kilowatt hour.

Indonesia's electricity charges have been kept low at the retail level for political reasons but prices are expected to be raised in the future, an "unavoidable" development if independent producers are to expand.

"Under such circumstances, however, the government finds itself under the necessity of allowing the uptrend of the retail price from a long-term perspective," the study said. "This need is based on the viewpoint that sufficient power supply -- even at high prices -- is preferable to shortages."

In Thailand, "the electricity retail price may remain stable over the short term but it is also bound to move upward on a long-term basis," the institute said, pointing to the increasing activities of independent producers.

Such a scenario raises the problem of adjusting the country's new power rate system within the current system, the institute said.