Monday, February 16, 2015

Brunei's Renewed Focus on Alternative Energy

On 13th February 2015, the Oxford Business Group produced this economic news update:

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Brunei Darussalam's Renewed Focus on Alternative Energy
Economic News Update | 13 February 2015

Plans to revive a stalled renewable energy deal between Brunei Darussalam and neighbouring Sarawak that would see hydropower exported from the Malaysian state to the Sultanate have thrown a focus on its efforts to increase renewable energy sources.

Bruneian officials confirmed at the end of January that they would soon be receiving the business plan and details of a proposal to jointly develop hydroelectric dams in northern Sarawak, with a 40km power transmission line to Brunei Darussalam. This forms part of a wider plan to reduce the Sultanate’s reliance on fossil fuels by increasing its solar capacities and creating feed-in tariff mechanisms.
Electricity Exports

Tapping Sarawak’s considerable sustainable energy resources offers a shortcut to raising renewable energy’s contribution to the Bruneian economy, which has been dependent on gas to generate electricity. Sarawak has the goal of reaching installed hydropower capacity of 20,000 MW, and previous bilateral discussions have proposed the export of some 150 MW to Temburong. The Sultanate could also position itself as a hub to further export power across the region.

A study, conducted under a memorandum of understanding between Sarawak Energy Bhd, Brunei Darussalam’s Prime Minister’s office and the Department of Electrical Services (DES), was completed five years ago. Under the proposals, the first phase of power exports would move from Tudan to the Sultanate via a border point at Sungai Tujuh. Limbang, where a 200MW hydroelectric dam project is under review, was suggested for the second phase.

The proposal highlights the rising need to increase renewable energy’s role in the Sultanate. In a report from 2013, Minsoo Lee, the Asian Development Bank’s (ADB) senior economist in the Macroeconomics and Finance Research Division pointed out that the Sultanate had spent $470m in fuel subsidies two years earlier, which amounted to more than $1,000 per person.

“For Brunei, the benefit of these projects is that the country will be getting power from renewable energy,” the Minister of Energy at the Prime Minister’s Office, YB Pehin Dato Yasmin Umar, said, adding that it would conduct its own due diligence before investing in the project.
The Energy Plan

Although unable to reach the ASEAN bloc target of renewable energy accounting for 15% of collective energy supply by 2015, the government has made some inroads. In its March 2014 “Energy White Paper”, the Energy Department at the Prime Minister’s Office (EDPMO) laid out the goals of reaching 124 GWh of renewable power generation by 2017 and 954 GWh by 2035.

So far, Brunei Darussalam has very little renewable generation, consisting mainly of a small solar power plant that produces about 1.7 GWh a year. The country lacks hydropower, a main source of alternative energy.

To meet this target the EDPMO is planning to introduce a feed-in tariff to encourage investment in renewable energy systems. The policy should help to spur development of distributed solar generation within the country and enable homeowners with installed solar panels to sell their excess electricity back to the government.

The government is planning to take a leading role in identifying land for utility-scale solar projects and developing a waste-to-energy project using municipal solid waste. The project is expected to generate 10-15 MW of power.

It also laid out plans for a 45% reduction in energy intensity from a base of 390 tonnes of oil equivalent per $1m of GDP in 2005 to 215 tonnes of oil equivalent per $1m of GDP by 2035 to promote sustainable development. Part of the reason behind its bid to reduce energy intensity is to meet an anticipated rising demand from a high-value downstream oil and gas sector and other economic activities.
Choosing a Path

Despite the potential for renewable energy growth, critics say deeper reform is needed to encourage greater investment in the sector. Milo Sjardin, head of Asia-Pacific Bloomberg New Energy Finance, told local media in August that the Sultanate must first reduce subsidies to achieve efficient use of energy before making costly investments in renewable energy. “It does not make sense ... Brunei should start with energy efficiency because PVs can’t compete yet,” he said. However, he believes that by 2030, when the cost of PVs is expected to drop 25%, investing in the technology will be more viable.

Indeed, while an abundance of fossil fuel reserves has kept energy in good supply and affordable, economic and environmental goals demand a shift to alternative sources of energy. To ensure ambitious goals are met, departments could work closer with the private sector and investment authorities to encourage the growth of new plants and initiatives.

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