Regulations mandating the use of palm oil in diesel fuel could help ease Indonesia’s dependence on energy imports and stabilise the local currency, while improving prospects for local palm oil producers.
In late August President Joko Widodo ratified a regulation mandating the compulsory use of 20 per cent blended biodiesel (B20), which uses palm oil as a feedstock, for all vehicles and heavy machinery.
To support greater use of the fuel, in early September the government also announced an amendment to regulations governing the Estate Crop Fund, allowing it greater scope to bridge the price gap between biodiesel – 7,600 rupiah (US$0.50) per litre – and standard diesel – 5,150 rupiah (US$0.34) per litre.
The fund, which generates capital from levies imposed on palm oil exporters and had an annual budget of around 14.2 trillion rupiah (US$972 million) in 2017, was previously limited to supporting sustainability projects, such as crop replanting and welfare support for small farmers.
It also provided subsidies for biodiesel, but was restricted to public service obligation sectors. Now the fund has the freedom to meet B20 demand in all sectors.
In addition to transport and industry, greater use of B20 could also be seen in the power sector.
In mid-September Ignasius Jonan, minister of energy and mineral resources, said he expects state electricity producer PLN to convert some of its fossil fuel power stations to use biodiesel as feedstock to encourage greater energy self-sufficiency.
The conversion of some PLN generational capacity, in particular its lower output 2000-MW power stations, could be undertaken within two years, according to Jonan.
The utility firm had already flagged its willingness to incorporate B20 into its feedstock mix, with PLN officials saying the company would buy up to 2.2 million kl of biodiesel to fire its existing diesel-fuelled power stations.
B20 initiatives to reduce energy imports, support palm oil industry
The drive to expand biodiesel use across sectors comes as the government looks to boost Indonesia’s energy self-sufficiency and reduce its reliance on energy imports that, due to the higher oil price environment, are taking a toll on the economy.
According to official estimates, biodiesel has the potential to reduce the energy import bill by around US$6 billion per year.
This would ease the current account deficit, which is projected to reach US$25 billion – approximately 2.7 per cent of GDP – this year and alleviate pressure on the rupiah, which is currently at levels not seen since the Asian economic crisis in 1997.
The measure is one of several steps the government has taken to stabilise the rupiah and reduce imports. In early September, for example, it imposed higher import tariffs – up to 10 per cent in some instances – on more than 1100 products, many of which are already manufactured locally.
In addition to rebalancing public finances, the B20 programme also aims to boost domestic consumption of palm oil, on the back of a decline in prices this year.
Crude palm oil (CPO) prices have fallen nearly 14 per cent since the start of 2018, according to a recent report from Moody’s, and could be further dampened in the short term if Indonesia and Malaysia, which together account for 85 per cent of the world’s CPO output, are unable to reduce current stockpiles.
Indonesian palm oil output hit four million tonnes in August, a four-year high, according to local media reports.
In the same month domestic palm oil consumption increased from 950,000 tonnes to 1.05 million tonnes, while exports dipped by two per cent to 2.8 million tonnes.
Although Moody’s expects demand for palm oil in key markets, including China and India, to drive CPO prices up over the medium term, Indonesia’s palm oil industry could face additional pressure from a proposal currently before the European Parliament that promises to phase out the use of palm oil in biofuels by 2030.
If ratified, Indonesia may need to seek new markets to soak up excess output.
This Indonesia economic update was produced by Oxford Business Group.
THE Department of Energy (DoE) is hoping that a new round of contracting will spur more petroleum exploration ventures and close the resource development gap with regional neighbors.
The DoE will launch the Philippine Conventional Energy Contracting Program (PCECP) on Thursday.
DoE Secretary Alfonso G. Cusi said his office was “aggressively pursuing” the implementation of the contracting program to set a strong “Explore, Explore, Explore” program.
“We have been grossly trailing behind our neighbors in terms of petroleum exploration and development activities. It is high time that we step up. We need to attain energy security and sustainability to minimize our vulnerability to global oil price shocks,” he said in a statement during the weekend.
“Harnessing our indigenous energy resources would also go far in helping us meet the country’s increasing energy demand as we continue to usher in economic progress,” he added.
The program offers two modes of application that potential investors may pursue.
First, interested parties may wish to bid on the 14 pre-determined areas identified by the DoE all over the country — one in Cagayan, three in east Palawan, three in Sulu Sea, two in Agusan-Davao, one in Cotabato, and four in west Luzon.
Thursday’s launch will officially open the application period, which will be for 180 days.
The DoE said applicants may opt to nominate and publish other areas of interest to them. Through this mode, applications could be submitted at any time of the year, and subject to a “challenge” period of 60 days.
Accepted applications will be evaluated by the DoE’s centralized review and evaluation committee based on the criteria under Department Circular No. DC2017-12-0017, which adopts the PCECP mode of awarding petroleum service contracts and creating the panel.
Before the launch, the DoE conducted road shows to boost awareness of the program, including one in Singapore in August.
In October, President Rodrigo R. Duterte signed Service Contract No. 76, the first service contract under his term. The contract covers area 4 of eastern Palawan and was awarded to Israeli firm, Ratio Petroleum Ltd. The DoE said the deal signalled the administration’s push to revive the country’s upstream petroleum industry.
At present, 23 petroleum service contracts are active in the Philippines with the following developers: Shell Philippines Exploration B.V.; Total E&P Asia Pacific Pte. Ltd.; Philippine National Oil Co.-Exploration Corp.; Nido Petroleum Pty. Ltd.; Philodrill Corp.; PXP Energy Corp.; and Galoc Production Co.
The Malampaya deepwater gas-to-power project off the Palawan coast is so far the largest and most successful natural gas industrial project in the Philippines. — Victor V. Saulon
An investor at Saigon Securities Inc’s trading office in Hà Nội. – VNS Photo Trương Vị
HÀ NỘI – Banks and petroleum companies drove the Vietnamese stock market up on Friday while caution still weighed on overall sentiment ahead of the US-China talks at the G20 summit.
The benchmark VN Index on the Ho Chi Minh Stock Exchange inched up 0.12 per cent to close at 898.19 points.
The southern market index had lost 2.28 per cent in the previous three straight days. It declined a total of 1.76 per cent this week.
The HNX Index on the Hà Nội Stock Exchange gained 1.98 per cent to end at 103.01 points, recovering from a three-day decline of 2.27 per cent.
The strong growth on Friday helped the northern market index finish this week equal to last week’s end of 103.01 points.
Shares of banks and energy firms were the main drivers of the stock market thanks to share purchasing plans and rebounding oil prices.
The two industry indices grew by 1.8 per cent and 2.6 per cent, data on vietstock.vn showed.
HDBank (HDB) and VPBank (VPB) led the banking sector up, soaring 7 per cent and 6.8 per cent, respectively.
HDBank general director Nguyễn Hữu Đặng has registered to buy 500,000 HDBank shares and the deal is expected to complete by the end of this month.
VPBank chairman Ngô Chí Dũng and his mother have offered to buy 21 million VPBank shares between November 21 and December 21.
HDBank and VPBank shares had hit their lowest prices of VNĐ28,000 and VNĐ19,000 per share on Thursday since listing on the Ho Chi Minh Stock Exchange in January 2018.
Other bank stocks with strong gains included MBBank (MBB), Bank for Investment and Development of Vietnam (BID), Asia Commercial Bank (ACB) and Vietinbank (CTG).
Petroleum stocks benefited from a rebound of oil prices.
Brent crude advanced 1.8 per cent to trade at $67.86 a barrel, having totalled a three-day gain of 3.6 per cent from its one-month low of nearly 20 per cent.
Among local petroleum stocks, PetroVietnam Gas (GAS) surged 5.1 per cent, PV Drilling and Well Services (PVD), PV Technical Services (PVS) and PV Coating (PVB) gained between 1.7 per cent and 3.8 per cent.
However, investor sentiment was still weak due to “low liquidity” and “net selling of foreign investors” while investors were keeping eyes on the upcoming US-China talks at the G20 summit held in Argentina later this month, according to BIDV Securities JSC (BSC).
Nearly 195 million shares were traded on the two local exchanges, worth VNĐ3.93 trillion (US$174.7 million), lower than the figures made on Thursday.
Foreign investors posted a net sell value of VNĐ123.3 billion, down 75.4 per cent from Thursday’s figure of VNĐ501.5 billion. – VNS
Singapore’s renewable energy developer and operator The Blue Circle has signed a strategic partnership agreement with Ayala Corporation’s power subsidiary AC Energy. Under the new partnership, the two companies will jointly develop and construct TBC’s pipeline of nearly 1,500MW of wind projects across South East Asia, more than 700MW of which will be built in Vietnam.
TBC founder, chairman and CEO Olivier Duguet said that “Ayala Corporation is one of the most respected names in South East Asia, a family owned multi-sector group founded in 1834 and still run by entrepreneurs. Our strategic partnership builds on our combined expertise, strong financing capabilities, and a robust development pipeline.”
“Their philosophy, along with their aggressive expansion into renewable energy in the region, fits perfectly with ours, and we are very glad to have them as strategic partners going forward.”
AC Energy currently owns a 25% equity stake in TBC and has been granted rights to invest at the project level.
AC Energy CEO Eric Francia said: “We are excited to partner with The Blue Circle as we expand rapidly across the region. Our strategic partnership builds on our combined expertise, strong financing capabilities, and a robust development pipeline.”
The two companies intend to begin construction works on 200MW of wind energy projects in Vietnam next year.
In addition to the projects in the Mekong region, TBC has developments under construction in the Philippines, Indonesia and Laos.
TBC will work with AC Energy to develop them to the energy production stage.
It launched a procurement portal, PowerSelect, which also houses electricity futures data.
Previously, Singapore firms had to wait for one to two months to find an electricity retailer, because they still need to brief and negotiate with retailers face-to-face individually as well as receive and compare quotations. But weeks after the liberalisation of Singapore’s electricity market, Singapore Exchange (SGX) subsidiary Energy Market Company (EMC) launched PowerSelect, a procurement portal which has a 15-minute live auction feature that aims to shorten the time and the process of businesses choosing between electricity retailers.
EMC said in an announcement that this feature works best for firms that prefer fixed price plans or discount off tariff plans (DOT). With PowerSelect, businesses can set a starting bid and already establish contract parameters. The winning bid will be determined through the 15-minute live auction, which aims to fast-track the whole procurement process.
Businesses with special requirements can purchase electricity through invitations to tender. “Under this method of procurement, electricity retailers prepare customised proposals for the customers’ consideration. The retailers are incentivised to put forward their best offers upfront as they have no visibility of other retailers’ proposals,” EMC added.
PowerSelect also houses data from the wholesale and futures electricity markets to help businesses make decisions around their electricity purchases. It is supported by 11 electricity retailers in Singapore, namely ES Power, Geneco, GreenCity Energy, Hyflux Energy, I Switch, PacificLight Energy, Sembcorp Power, Sunseap Energy, and Tuas Power Supply.
EMC added that it will explore the possibility of extending the portal to small electricity consumers like households in future.
Activists in Indonesia have called on three South Korean financial institutions to withdraw their funding for new coal-fired power plants to be built in Java.
The plants will be part of a complex that is already the biggest polluter in Southeast Asia, whose proximity to the metropolis of Jakarta could put the health of 30 million people at risk.
The funding bucks a rising trend worldwide by governments and financial institutions to divest from coal projects and put their money in renewables instead.
Building the new plants also makes little economic sense in light of dire warnings that the world must completely end coal-fired power generation by 2050 to avoid a global temperature rise of more than 1.5 degrees Celsius (2.7 degrees Fahrenheit).
JAKARTA — Environmental activists in Indonesia have called on South Korean funders to withdraw their support for new coal-fired plants that they warn will be the most polluting in the Southeast Asian country.
The Suralaya power complex, about 100 kilometers (60 miles) west of the capital, Jakarta, already has eight coal-fired plants in operation, churning out 3,400 megawatts, or 18 percent of the electricity for the islands of Java and Bali.
The government plans to add two more plants, with a generating capacity of 1,000 MW each, as part of the infrastructure-centered economic development policy being pushed by the administration of President Joko Widodo.
Funding for the new plants, billed at $1.67 billion, will come from loans from the Export-Import Bank of Korea (KEXIM), the Korea Development Bank (KDB Bank) and the Korea Trade Insurance Corporation (K-sure).
Greenpeace Indonesia energy campaigner Didit Haryo said the group had sent an open letter appealing to the South Korean institutions to “immediately withdraw” their funding for the project.
“The impact of the new plants is too big and is very bad for their investments,” he said. “We’re urging them to think about investing their money in renewable energy projects instead.”
Greenpeace Indonesia also sent the letter to the South Korean Embassy in Jakarta; none of the recipients had responded as of Nov. 9, Didit said.
Suralaya coal power plants. Image by Satari/Wikimedia.
Pollution problem
The project’s South Korean connection comes from the consortium picked to build the new plant, comprising Indonesian state-owned contractor PT Hutama Karya and its South Korean partner, Doosan Heavy Industries and Construction.
The Suralaya complex is run by PT Indo Raya Tenaga, also known as Indonesia Power, one of the country’s few independent electricity producers. Indonesia Power and the contracting consortium signed the agreement for the expansion project on Sept. 10 in Seoul.
The complex is already the single-biggest electricity generator in Indonesia, burning through 35,000 tons of coal a day, and was built primarily to serve the steel mills and heavy industries nearby.
Because of its sheer output, Suralaya emits more nitrous oxides, or NOx, than any other power facility in Southeast Asia, according to satellite data analysis by Greenpeace. Nitrous oxides are a class of compounds that contribute to air pollution and harm human health.
The pollution from Suralaya is particularly bad because when the first set of plants came online in 1984, there were no regulations or technology in place to limit NOx emissions, Didit said.
“Even before the two new plants are added to the power complex, the Suralaya power plants already emit the highest level of NOx pollutants in Java,” he said.
Greenpeace’s analysis showed that pollutants from Suralaya travel as far as the Greater Jakarta area, which, with a population of more than 30 million, is the biggest metropolitan area in Southeast Asia.
“Imagine if two more units, each of 1,000 megawatts, are added,” Didit said. “It won’t just be the people in Suralaya who will be affected. People in Jakarta will also be affected, because right now the pollution from the existing plants already reaches Jakarta. So clearly the amount of pollution reaching Jakarta will be even greater.”
He said it should be clear to the South Korean institutions that their support for the Suralaya expansion project bore great risks.
“By continuing to finance coal plants in Indonesia, your institutions are committing our planet to extreme climate change and are also committing the citizens of Indonesia to death and illness as a result of air pollution from new coal-fired power plants,” the activists said in their open letter.
Campaigners from Greenpeace Indonesia and Walhi hold an open letter addressed to South Korean investors and embassy in Jakarta, Indonesia. Image by Hans Nicholas Jong/Mongabay.
Risky investment
Greenpeace is also arguing its point from a financial perspective. Any investments in new power plants in Indonesia, it says, is already inherently risky because of the weakening of the country’s currency, the rupiah.
The rupiah is the second-worst performing currency in Asia this year, behind only the Indian rupee, sliding 9 percent against the U.S. dollar so far this year. Indonesia is among several emerging markets struggling with a current-account deficit and capital flight, prompted initially by Turkey’s lira crisis.
The weakening of the rupiah has increased the cost of imports, prompting the government to tighten import controls. One of the sectors affected is energy: up to 80 percent of the components needed to build power plants have to be brought in from overseas.
In September, the government announced that it would delay construction of 15,200 MW of power plant projects that would have required the import of $10 billion worth of equipment. Most of the affected projects are in Java, including the Suralaya expansion project, which is now slated to fall under the government’s 2021-2026 development plan, instead of the current five-year plan.
Critics have also questioned the government’s power-plant building spree, which it has had to scale back from its initial aim of adding 35,000 MW of generating capacity to the national grid by 2019. The original target assumed electricity consumption would increase by 8 percent a year; so far this year, it’s only grown by 4.7 percent, and isn’t projected to exceed 6 percent by the end of the year.
“This means that these projects are not needed to meet energy needs in our country and should be cancelled,” Greenpeace said in its letter.
Green activists protest at a coal-fired power plant in Cirebon city, West Java, against Indonesia’s electricity project that heavily depends on the fossil fuel. Image by Afriadi Hikmal/Greenpeace.
End of coal
The South Korean banks’ financing of the Suralaya expansion project bucks a rising trend worldwide in which governments and financial institutions are divesting from fossil fuel projects.
Several countries have committed to phasing out their coal-fired power plants for renewable alternatives, including China, the world’s biggest consumer of the fossil fuel. Financial institutions such as Deutsche Bank, Danske Bank, Allianz and Dai-ichi Life are also either ending or restricting their funding and underwriting of coal projects.
The latest company to join the movement is Standard Chartered Bank, which announced last month that it would no longer fund coal-fired power plants. Since 2010 it has loaned $1.8 billion for coal power projects.
Greenpeace said the South Korean institutions’ support for Suralaya put it at odds with South Korea’s own domestic coal policy. Chungnam province, home to half of the operating coal plants in the country, has joined an alliance of governments committed to phasing out coal, called the Powering Past Coal Alliance.
Chungnam, the first province in Asia to join the alliance, announced the early shutdown of 15 aging coal plants by 2025, and a complete phase-out of the fossil fuel by 2050.
Two South Korean pension funds — the Korean Teachers Pension and the Government Employees Pension System — also recently announced their divestment from coal, with plans to boost existing stakes in renewable energy projects and make investments in new ones.
“We’re witnessing the beginning of the end of coal in [South] Korea through game-changing decisions by Chungcheongnam-do [Chungnam province] to phase-out coal and two South Korean pension funds to end coal financing,” Greenpeace East Asia climate and energy campaigner Mari Chang said. “These decisions challenge the Moon government to also ramp up action in line with the Paris goals.”
Ending the world’s reliance on coal is seen as crucial to have a real chance at limiting global warming to less than 1.5 degrees Celsius (2.7 degrees Fahrenheit). Global carbon dioxide emissions must be halved by 2030 before falling to net zero by mid-century, at the latest, to stay within that limit, according to a special report by the U.N.’s Intergovernmental Panel on Climate Change (IPCC) at a meeting in South Korea in October.
For that to happen, global coal power use has to fall by two-thirds by 2030 and be almost fully phased out by 2050. Renewables can fill the gap, supplying 70 to 85 percent of the world’s electricity by 2050, or potentially even more.
“The IPCC report has sent a clear signal that coal must not be part of our future,” Chang said. “This means [South] Korea’s top public financial institutions — KEXIM, K-sure, and KDB Bank — must end their overseas coal investments.”
If there are to be no more coal power plants by 2050, it makes little sense to start building a new one now, given it will have a lifespan of less than 30 years, said Dwi Sawung, an energy campaigner with the Indonesian Forum for the Environment (Walhi).
“It’ll be such a waste to have a new plant shortly before it has to be retired,” he said.
The projects, worth $477m, are an addition to the projects that will produce 958MW by 2020.
Malaysia will tender $477m of solar projects with a capacity of 500MW through its Large Scale Solar (LSS) Programme 3 in January 2019.
Minister Yeo Bee Yin shared that the projects are part of the ongoing LSS projects that will produce 958MW of electricity between the end of this year until 2020.
The Star also reported that the projects came under the purview of Sustainable Energy Development Authority (SEDA) and were in line with the 20% renewable energy target for the nation by 2020.
Other renewable energy projects will be launched under the feed-in-tariff programme (FIT) next year to produce 114MW of electricity. About 74MW would come from small-scale hydro projects, 10MW from biomass, and 30MW from biogas.
The Department of Energy issued the guidelines for the operationalization of the Renewable Energy Trust Fund that will be used for the research, development and promotion of renewable energy sources. The RE fund, according to Department Order 2018-10-0018, will be obtained from the emission fees collected from power generating companies under the Philippine Clean Air Act, 1.5 percent of the net annual income of the Philippine Charity Sweepstakes Office, 1.5 percent of the net annual income of the Philippine Amusement and Gaming Corp. and 1.5 percent of the net annual dividends remitted to the national treasury by Philippine National Oil Co. and its units.
Other sources of the fund include grants, contributions, donations which will tax deductible, 1.5 percent of the proceeds of the share of the government collected from the department and use of indigenous non-RE sources, any revenue generated from the utilization of the RETF and proceeds from the fines and penalties imposed under Republic Act No. 9513.
