POWER August 2014 - 67

POWER POLICY
Indonesia, Malaysia, Myanmar, Cambodia,
Vietnam, and the Philippines.
However, the feat is not without significant
challenges, as an official with the ASEAN
Secretariat confirmed in May: It requires
connecting around 9% of the world's people
who live on just 3% of the world's land mass,
and the new transmission must traverse
roughly three times more ocean than land in
order to do so.
Another significant ASEAN objective is
to encourage regionwide energy market integration
to achieve balanced and equitable
economic growth for all countries. But as
well as improving physical infrastructure
in certain parts of the region, the proposed
ASEAN Energy Market Integration (AEMI)
concept that could become a reality by 2030
involves a liberalized flow of energy products
and investments across ASEAN, reforms
in domestic energy market structures,
and a harmonization of energy standards
and rules.
And, at the same time, ASEAN is looking
to build a gas pipeline to link the gas
reserves of Indonesia, Malaysia, Singapore,
Vietnam, Myanmar, the Philippines,
Brunei, and Thailand. Backed by major
oil and gas companies and slated to be operational
by 2020, the Trans-ASEAN Gas
Pipeline that will traverse more than 3,000
kilometers and transport 3,095 million cubic
feet per day of gas is one of the largest
networks of its type in the world. The project
is making progress: To date, 10 crossborder
gas pipelines (at a cost of $14.2
billion) have been completed, and six more
remain. Eleven bilateral connections have
already been established.
However, experts warn that one of the bigger
unresolved challenges in implementing
the initiative is that different countries have
different rules, which makes private companies
reluctant to invest in the network. While
ASEAN has been working to speed up harmonization
of policy, some countries have
begun discussing alternatives such as building
LNG-receiving terminals rather than connecting
pipelines.
Phasing Out Fossil-Fuel Subsidies
Another issue that experts contend Southeast
Asian countries must grapple with to
cement investor interest concerns their
continued subsidies for fossil fuels. Despite
reform efforts in Indonesia, Malaysia,
and Thailand, fossil fuel subsidies
amounted to $51 billion in 2012 (and
$12 billion for electricity) and continue
to distort energy markets, says the IEA.
Subsidized energy prices seriously burden
government resources and restrict investment
in infrastructure by depriving energy
companies of the revenues needed for new
investment, it adds.
For example, Indonesia's state budget for
2014 designated $5.85 billion in national
electricity subsidies. This January, however,
despite protests from businesses, the government
said it would gradually increase power
tariffs for large-scale industrial users to completely
eliminate subsidies for the sector by
the year's end. In Malaysia, where higher
gas prices (and costly imports of LNG) have
made subsidies for power generation untenable,
the government is also looking to increase
tariffs.
In the Philippines-the only country in
the region that does not subsidize power
companies-reliability is sketchy and prices
are high. Average retail tariffs in that nation
of 106.4 million people stand at $0.2026/
kWh-making them the ninth-highest in the
world, and the second-highest in Asia after
Japan. ■
-Sonal Patel is a POWER associate editor
(@POWERmagazine, @sonalcpatel).
1
August 2014 | POWER
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