BMI: Thermal power top for SEA
KUALA LUMPUR: BMI anticipated conventional thermal power to remain Southeast Asia’s largest power sector over the coming 10 years despite formalised ambitions and commitments by markets to reduce the dependence on fossil fuels.
The unit of Fitch Solutions said coal and gas are the top power types for the sub-region, with coal-fired and gas-fired power generation contributing about 43 per cent and 29 per cent to the power mix in 2023 respectively.
“While Asean member states have net-zero carbon emission targets by 2050, we believe that the momentum towards these targets will not be strong enough to substantially reduce coal and gas’ share in the power mix,” it said in a note yesterday.
BMI said thermal coal was used extensively in Southeast Asia’s power sector, with major coal producing markets located within the sub-region as well, such as in Vietnam and Indonesia.
It noted the majority of natural gas used in the region for power generation was also sourced domestically, for example the Philippines with its Malampaya Gas Field, Thailand with projects in the Gulf of Thailand, and Myanmar with projects in the Andaman Sea.
“Given the current supply and reserves as set out by our mining and oil and gas teams, we expect domestically available resources and increasing production to sustain the majority of Southeast Asia’s thermal coal and natural gas demands from the power sector,” BMI said.
“While there are markets looking to increase natural gas imports, mainly the Philippines and Vietnam, any significant increase in imports will happen in the latter half of our forecast period, with little potential to replace the domestic supply that the region has and is continuing to expand,” it added.
In the event that tight fossil fuel supplies and energy prices remain elevated in 2024, BMI believed that governments would increase electricity prices and plan power cuts, eventually alleviating as governments gradually commission more power capacity.
In 2023, Southeast Asia’s markets are confronted with the issue of energy security, with intensified climate impacts and tight fossil fuel supplies in 2023 highlighting market challenges.
BMI said other than the strong supply of domestically available fossil fuel, conventional thermal power is able to provide a constant baseload of power to sustain rapidly expanding operations in emerging markets.
It noted that in 2023 there were multiple power outages and planned power cuts reported across prominent Southeast Asian markets, such as the Philippines, Thailand and Vietnam.
Over the longer term, BMI also believed that the developments in energy storage and the falling cost of solar and wind power would provide opportunities for renewables to gradually replace fossil fuel power in baseload generation.
Meanwhile, Southeast Asian markets are registering strong progress, developing a regional power grid by connecting national power grids, which will facilitate more integration of renewables, it added.
In 2023, various electricity trade agreements were signed in the region, alongside publicly announced interests to strengthen cross-border electricity trade by governments and private companies.
“We believe that power pooling will benefit the region’s ambitions to grow their renewables sector, capitalising on markets with accessible and available land resources for large-scale onshore wind and solar photovoltaics projects,” BMI said.
While Asean member states have net-zero carbon emission targets by 2050, we believe that the momentum towards these targets will not be strong enough to substantially reduce coal and gas’ share in the power mix.
BMI