Energy Efficiency
An ASEAN Perspective
October 2022
Contents
Introduction Indonesia Malaysia Philippines Singapore Thailand Vietnam Bird & Bird Plus Contacts
1 2 4 7 10 13 16 19 21
Introduction
What is energy efficiency?
At its most primary level, energy efficiency refers to the process of understanding energy use, in order to implement effective solutions to lower energy consumption and to minimise energy cost. Energy efficiency ("EE") typically comes under the banner of energy management, which is a much broader concept encompassing the planning and operation of energy generation and storage, and the targeted use of mechanisms such as demand management and demand response.
EE has been said to be the fifth fuel after coal, hydrocarbons, nuclear and renewable energy. In truth, it is the best fuel, which enables adopters to conserve resources, protect the climate and save cost without sacrificing on timely access to the energy they need. Given the escalating energy crisis and the rising energy price, the best fuel is the one that is not used. EE should take precedence as the foremost fuel in the path to net zero and decarbonisation.
In our experience, countries can only sustain their net zero goals and decarbonisation objectives if there is political will, legislative changes and economic structures in place to reduce the carbon footprint of their energy supply, enhance their EE framework, and encourage reductions in energy demand.
Outline of this paper
The EE and conservation target under The ASEAN Plan of Action of Energy Cooperation Phase II is to reduce energy intensity by 32% in 2025 based on 2005 levels.1 In this paper, we will focus on the EE landscape across the following Association of Southeast Asian Nations ("ASEAN") jurisdictions:
1. Indonesia
4. Singapore
2. Malaysia
5. Thailand
3. Philippines
6. Vietnam
The following issues will be addressed: 1. What is the national strategy, if any, to promote energy efficiency?
2. Is there a central agency which regulates energy efficiency?
3. What are the applicable laws or binding policies?
4. What are some examples of national projects to promote energy efficiency?
5. What is the common contracting mechanism for energy efficiency projects?
6. Is there any state funding to promote energy efficiency projects?
7. What are some hallmarks of a bankable energy efficiency project?
1 See https://aseanenergy.org/asean-plan-of-action-for-energy-cooperation-apaec-phase-ii-2021-2025/.
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Indonesia
"Energy efficiency shall be the responsibility of all in the country"
What is the national strategy, if any, for energy efficiency?
The Government of Republic of Indonesia ("GOI") stated that EE shall be the responsibility of all in the country. This includes Indonesian society and businesses in Indonesia. The aim of EE in Indonesia is to ensure sustainable national developments, a reduction in greenhouse gas emissions and encourage the use of sustainable energy. One of the objectives in the sustainable national development is to lower energy production costs.
The additional goal in Indonesia related to sustainable energy is to further reduce the reliance on imported energy. In addition, the GOI's obligation as a member of the international community, based on the United Nations Framework Convention on Climate Change, is to reduce greenhouse gas emission. EE efforts, as mandated by the GOI, are occurring at all stages from procurement to management, utilisation, and conservation of energy, among others, by applying advanced energy technology and an efficient energy program.
Using advanced technology, energy is being generated by the conversion of fuel-based sources to renewable energy-based power plants, with the GOI pushing for the utilisation of renewable energy in households, industrials, and office buildings. The GOI has eased licensing and importation measures, specifically on renewable energy-based utilities and batteries. An efficient energy program is required for a business using more than 6,000 tonnes of oil equivalent annually, which will be audited by a registered auditor on a regular basis. The GOI will impose sanctions on those businesses which fail to carry out the efficient energy program.
Is there a central agency which regulates energy efficiency?
There is no specific agency. However, the GOI has formed a Directorate General of Renewable and Conservation of Energy under the Ministry of Energy and Mineral Resources, which is authorised to regulate EE.
What are the applicable laws or binding policies?
There are several applicable regulations including:
Law No. 30 of 2007 regarding Energy;
Government Regulation No. 70 of 2009 regarding Energy Conservation;
Presidential Regulation No. 22 of 2017 regarding General National Energy Plan;
Energy and Mineral Resources Minister Regulation No. 14 of 2012 regarding Energy Management; and
Energy and Mineral Resource Minister Regulation No. 26 of 2021 on Rooftop Solar Power Plants Connected to the Electricity Grid for Public Interest License Holders.
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What are some examples of national projects to promote energy efficiency?
Energy management programs and activities for industries and buildings that consume more than 6,000 tonnes of oil equivalent annually;
Ministerial policies stipulating minimum energy performance standards (MEPS) and energy efficiency labels for end-use household appliances such as fans, refrigerators and rice cookers;
Renewable energy projects such as the Sidrap Wind Farm project, and the wind farm in Sukabmi, West Java, one of the largest wind farms in Southeast Asia;
Biodiesel 30 percent (B-30) and Biodiesel 100 percent (B-100); and
Support of the development and operation of waste-to-energy plants in 12 cities through the Presidential Regulation No. 35 of 2018.
What is the common contracting mechanism for energy efficiency projects?
A common contracting mechanism for energy efficient projects that is currently being applied in the business sector is a corporate power purchase agreement, where a business can lease a solar power plant to generate electricity for its operations.
Is there any state funding to promote energy efficiency projects?
There is no state funding. However, the GOI is now providing tax incentives to businesses that promote EE projects and supports this initiative with lower interest rates to businesses that invest in energy efficient projects.
The Financial Service Authority (Otoritas Jasa Keuangan, "OJK") has issued its regulation on Indonesia Sustainable Finance where a financial institution is required to apply sustainable finance principles, including responsible investment and social and environmental risk management, and to have a Sustainable Finance Action Plan. The goal is to support the GOI's target on greenhouse gas emission reduction.
The Indonesian Sustainable Finance Initiative ("IBKI") was launched in 2018 by a number of Indonesian banks, and supported by OJK and WWF Indonesia, to support sustainable financing and to effectively contribute to the GOI's target on greenhouse gas emission reduction. To date, the IBKI is comprised of 13 banks which represent over 60% of total national banking assets.
What are some hallmarks of a bankable energy efficiency project?
Investment in EE projects in Indonesia is in the early stage of development. According to the press release of the Ministry of Energy Resource dated 31 August 2022, the GOI continues to make efforts to create a green economy by developing bankable projects, incorporating supporting factors for green growth investment, designing innovative economic instruments and policies, and implementing good governance to maintain a conducive sustainable renewable investment.
In an EE project, particularly a power plant project, a Power Purchase Agreement with the National Power Company (PT Perusahaan Listrik Negara) is a crucial agreement where the tariff, payment structure and rights of termination, among others, should be well negotiated.
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Malaysia
"Malaysia aims to promote energy efficiency to ensure productive use of energy and minimise waste in order to contribute to sustainable development and increased welfare and competitiveness"
What is the national strategy, if any, for energy efficiency?
As a developing country, Malaysia's energy demand growth rates have out-numbered the growth rates of its Gross Domestic Product. Since 2000, Malaysia's energy intensity has increased, which has prompted the country to address and improve its efficiency of energy usage. The then Ministry of Energy, Green Technology and Water ("MEGTW") issued a National Energy Efficiency Action Plan ("NEEAP") in 2015 to address issues pertaining to energy supply and management of energy demands efficiently. The NEEAP is supported by 4 main thrusts, namely:
Thrust 1: Thrust 2:
Thrust 3:
Thrust 4:
Implementation of Energy Efficiency Action Plan
Strengthen Institutional Framework, capacity development and training for Implementation of Energy Efficiency initiatives
Establishment of Sustainable Funding Mechanisms to Implement Energy Efficiency Initiatives
Promotion of Private Sector Investment in Energy Efficiency Initiatives
The NEEAP contains specific EE programmes covering 3 sectors to be implemented over a 10 year period. The programmes can be grouped into 5 key initiatives related to the design of the programmes, namely:
Promotion of 5-star rated appliances;
Minimum Energy Performance Standards ("MEPS");
Energy audits and energy management in buildings and industries;
Promotion of co-generation; and
Energy efficient building design. However, the NEEAP is only confined to electricity usage and does not cover the other aspects of the energy sector.
Is there a central agency which regulates energy efficiency?
The NEEAP involves the following key government bodies and/or agencies:
Economic Planning Unit of the Prime Minister's Department: to allocate sufficient resources for the implementation of EE programmes;
Energy Commission: to regulate the electricity and gas supply industry at the reticulation stage from the technical, safety and economic aspects and advise the Minister of the MEGTW (now Ministry of Science, Technology and Innovation) on all matters related to electricity and tariffs including EE promotion; and
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The MEGTW (now Ministry of Science, Technology and Innovation): to formulate and implement EE policy and to prescribe the relevant practices and measures to be adopted for the purposes of the efficient use of electricity.
Other governmental bodies and/or agencies that may be involved include the Ministry of Works and the Ministry of Housing and Local Government in respect of the relevant areas governed by them.
What are the applicable laws or binding policies?
The Electricity Supply Act 1990 allows the Minister to prescribe the standards, specifications, practices and measures to be adopted and any other matters in respect of the efficient use of electricity. The Efficient Management of Electrical Energy Regulations 2008 requires any private installation licensee or consumer whose total net electrical energy generation or total electrical energy consumption of 3 million kWh or more for a period of not exceeding 6 consecutive months to appoint a registered electrical energy manager. The electrical energy manager will be responsible to audit and analyse the total consumption of electrical energy, advise on the development and implementation of measures to ensure efficient energy usage and management and to monitor the effectiveness of such measures. The electrical energy manager is required to be registered with the Energy Commission.
The Electricity Regulations 1994 was amended in 2013 to implement the MEPS. Under the Regulations, any domestic appliances or low-voltage appliances generally sold directly to the public or any low-voltage appliances which do not require any specific skills in handling them must meet the MEPS as prescribed in the Regulations. In addition, labelling will be mandatory in respect of appliances covered by the MEPS. In 2012, the Uniform Building By-Laws were amended to require new or renovated non-residential buildings with air-conditioned space exceeding 4,000 square metres to be designed to meet the requirements of Malaysian Standard MS 1525 with regards to the Overall Thermal Transfer Value ("OTTV") and the Roof Thermal Transfer Value ("RTTV"). Those buildings must be provided with an Energy Management System.
What are some examples of national projects to promote energy efficiency?
The following are examples of past and on-going national projects to promote EE:
Promotion of 5-star rated appliances by implementing a requirement of star energy rating of appliances and mandatory labelling which includes the "5-Star Refrigerator Campaign" and "5-Star Air Conditioner Campaign" which will see an expected savings of 9,700 GWh of energy within 10 years;
Promotion of efficient lighting (e.g., CFL, T5 and LED) through awareness enhancement programmes, enforcement of MEPS and labelling and enhancement of awareness on the benefit of using smart meters;
Facilitating energy audits and implementation of energy saving measures and energy management initiatives in buildings and industries, which, among others, offer free energy audits to large and medium commercial and industries buildings;
Cogeneration system to meet the heating and cooling demand in industries and commercial buildings as well as power generation;
Implementation of the Uniform Building By-Law on energy efficient building design by the Ministry of Urban Well Being, Housing and Local Government; and
The Sustainability Achieved via Energy Efficiency ("SAVE") programme was launched in 2021 which grants discounts and/or vouchers to domestic households that purchase energy efficient appliances that have received a 4 or 5-star EE label from the Energy Commission.
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What is the common contracting mechanism for energy efficiency projects?
Similarly to other countries in ASEAN, Malaysia commonly adopts the Energy Performance Contracting ("EPC") structure. The EPC initiative started in 2013 by the Malaysian government to promote EE in government buildings. Under the EPC structure, government buildings are allowed to engage energy services companies ("ESCOs") to improve EE and the costs of investment to implement EE improvements will be provided by the ESCO, while the government buildings are only required to pay the ESCO the cost of investment from the savings made. EPC has also been expanded to the private sectors whereby the ESCO will commit its own expenses to build or retrofit private buildings with efficient appliances and equipment and the building owner will commit to pay the ESCO a portion of the achieved energy cost savings on a periodical basis throughout the contract period.
ESCOs carrying out business in Malaysia are also required to be registered with the Energy Commission. For the purposes of the registration, one of the requirements is that the ESCO has employed a full time Registered Electrical Energy Manager as prescribed under the Efficient Management of Electrical Energy Regulations 2008 and has access to suitable monitoring and testing equipment and instruments required for EE management works.
Is there any state funding to promote energy efficiency projects?
The Government has introduced the Green Technology Financing Scheme ("GTFS") to support the development of Green Technology in Malaysia. The scheme was introduced and extended in 3 phases as follows:
GTFS 1.0 with initial financing of RM1.5 billion which was subsequently increased to RM3.5 billion (2010 to 2017);
GTFS 2.0 with total financing of RM2 billion (2019 to 2020); and
GTFS 3.0 with total financing of RM2 billion which includes the issuance of Sustainable and Responsible Investment (SRI) Sukuk and green bonds (2021 to 2022).
GTFS 1.0 and 2.0 offer a credit guarantee support of 60% for the loan capital with a 2% subsidy to the interest rates offered by commercial banks for the first 7 years whereas GTFS 3.0 offers up to 80% guarantee coverage or RM400 million (whichever is lower) with no interest subsidy.
Besides funding, the government has also introduced the Green Investment Tax Allowance for the purchase of green technology assets and a Green Income Tax Exemption on the use of green technology services until 2023 as form of incentives for corporations to adopt Green Technology which includes EE.
What are some hallmarks of a bankable energy efficiency project?
According to the Malaysian Investment Development Authority, the total investment in EE projects stands at RM9.15 billion between 2001 and 2019 whereby RM8.12 billion consists of domestic investments and RM1.03 billion of foreign investments. A large bulk of the investment is in energy conservation for own consumption.
Investor's rights and interests are protected under the laws of Malaysia. Generally, parties are free to negotiate and mutually agree on the terms governing each party's rights and obligations. Some key areas for the parties to consider include termination, events of default, payment, rights of access, rights of ownership and possession. More care will need to be taken to ensure that the rights of ownership and possession in respect of any energy saving equipment are not adversely affected by virtue of the operation of law or by reason of any change in circumstances.
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Philippines
"The vision is to build an energy-efficient nation, and to make energy efficiency and conservation a way of life for all Filipinos"2
What is the national strategy, if any, for energy efficiency?
The national strategy for EE and conservation is embedded in the Philippine Energy Plan 2020-2040, which adopts an Energy Efficiency and Conservation Roadmap as a framework for the formulation and implementation of policies and programs, technology and standards development and other activities in the medium- to long-term.
The Energy Efficiency and Conservation Roadmap for 2020-2040 focuses on strengthening and sustaining EE and conservation policies and initiatives in the government, transport, industrial, commercial and residential sectors, through the following, among others:
Studies on and assessment of distribution lines of electric cooperatives with a view to ensuring efficiency and resiliency of power infrastructure;
Information, education and communication campaigns on EE and conservation policies, programs and best practices to break down information barriers which may discourage improvements in energy productivity;
Integration and mainstreaming of EE and conservation in government agencies and local government units through enforcement of the Government Energy Management Program and capacity building activities to assist in formulation of localised EE and conservation policies;
Development of an enhanced demand side management mechanism; and
Collaboration with stakeholders for expanded financing models on EE and conservation projects.
The declared objective of the Energy Efficiency and Conservation Roadmap is to achieve a measurable reduction in energy intensity and consumption per year versus business as usual by 2040.
What are the applicable laws or binding policies?
Republic Act No. 11285, otherwise known as the Energy Efficiency and Conservation Act ("EEC Act"), was passed in 2019 with a view to institutionalising EE and conservation as a national way of life, promoting and encouraging development and utilisation of efficient renewable energy technologies and systems, and reinforcing related laws for a comprehensive approach to EE, conservation, sufficiency, and sustainability in the country.3
The EEC Act provides a policy framework for EE and conservation with the following key features:
Creation of an Inter-Agency Committee for the evaluation and approval of government EE projects and their corresponding financial arrangements;
2 The Philippine National Energy Efficiency and Conservation Program, as cited in An Energy Efficiency Roadmap for the Philippines 2014-30. See https://policy.asiapacificenergy.org/node/2974. 3 EEC Act, Section 2.
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Delineation of responsibilities, among various public and private entities, which previously pertain to the Department of Energy;
Establishment of a certification system for energy conservation officers, energy managers, and energy auditors;
Introduction of Energy Labelling (for products) and Minimum Efficiency Standards (for various sectors);
Integration of energy management systems into the operations of different energy-consuming establishments;
Implementation of a Demand Side Management by distribution utilities; and
Promotion of fiscal and non-fiscal incentives for private sector EE projects.
The implementing rules and regulations of the EEC Act was subsequently promulgated by the Department of Energy ("DOE") under Department Circular No. 2019-11-0014. Other relevant issuances of the DOE include the following:
[DC2022-04-0013] Certification Guidelines for Energy Audit Conducted by Firm, Partnership, Corporation, and Sole Proprietorship (FPCS);
[DC2022-03-0005] Guidelines for the Recognition of Testing Laboratories for the Examination, Testing & Verification of the Energy Efficiency of Energy-Consuming Products (ECPs) & the Fuel Efficiency of Transport Vehicles, Including the Issuance of Certificate of Endorsement to the Board of Investments ("BOI") for Fiscal Incentives;
[DC2022-03-0004] Guidelines for the Endorsement of Energy Efficiency Strategic Investments to the Board of Investments for Fiscal Incentives;
[DC2021-05-0011] Guidelines for the Endorsement of Energy Efficiency Projects to the Board of Investments for Fiscal Incentives;
[DC2020-12-0026] Guidelines on Energy Conserving Design of Building; and
[DC2020-09-0018] Guidelines in the Administration, Classification and Certification of Energy Service Company ("ESCO").
See also other implementing guidelines and policy issuances of the mandated government agencies under the EEC Act, including the Department of the Interior and Local Government ("DILG"), Department of Environment and Natural Resources ("DENR"), and Department of Trade and Industry ("DTI").
Is there a central agency which regulates energy efficiency?
The DOE has been designated as the lead implementing agency under the EEC Act responsible for the planning, formulation, development, implementation, enforcement, and monitoring of energy management policies and other related EE and conservation plans and programs.4
The EEC Act further mandated the creation of an Inter-Agency Energy Efficiency and Conservation Committee ("IAEECC") for the evaluation and approval of government EE projects and their corresponding financial arrangements and provide strategic direction in the implementation of the Government Energy Management Program. The IAEECC is composed of the Secretaries of DOE (acting as Chairperson), DTI, DILG, Department of Finance ("DOF"), Department of Budget and Management ("DBM"), Department of Transportation ("DOTr"), Department of Public Works and Highways ("DPWH"), and the Department of Science and Technology ("DOST").
4 EEC Act, Section 5.
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What are some examples of national projects to promote energy efficiency?
Projects implemented in line with the Energy Efficiency and Conservation Roadmap and EEC Act include the following:
Adoption and implementation of the Government Energy Management Program as a governmentwide program to reduce the government's monthly consumption of electricity and petroleum products through electricity efficiency and conservation, including in fuel use of government vehicles,5 and which mandates that each government entity shall formulate an EE and conservation program;
Information, Education and Communication Campaign on EE and conservation policies, programs and best practices by the DOE, namely: #EPowerMo which provides the basics on energy utilisation; #EnergyAbility which is an invitation to make EE a "way of life"; and #EnerhiyangAtin which aims to establish energy security, self-sufficiency and accountability from all energy users and industry players;
Promulgation of Minimum Energy Performance for Sectors ("MEPS") for various sectors such as commercial, industrial, and transport sectors, buildings and energy consuming products; and
Promulgation of requirements for EE ratings and labeling for products, equipment, and transport vehicles. Non-compliant energy-consuming products are prohibited from being sold in the Philippines.
What is the common contracting mechanism for energy efficiency projects?
EE projects are usually undertaken by ESCOs under performance-based contracts, under which compensation for services is included as part of the project cost based on the monetary equivalent of energy savings of end-users.
Typically, the ESCO develops, designs, and arranges financing for EE projects, installs and maintains the equipment, measures, monitors, and verifies the energy savings, and assumes the risk that the project will save the amount of energy guaranteed.6
Is there any state funding to promote energy efficiency projects?
Government funding is available for government-initiated projects.
The "Energy Efficiency and Conservation Program" is specifically included as an item in the annual budget of the DOE. The implementing rules of the EEC Act mandates each government entity to allocate an appropriate amount from its approved annual budget for the implementation of its prioritised and planned energy management program. The DBM is also directed to give due preference to funding government EE projects and to incorporate EE as a factor in evaluating the annual performance of different government agencies.
No government funding is specifically allocated to private sector projects. Certain EE and conservation projects may, however, qualify for fiscal incentives under the EEC Act and pursuant to guidelines issued by the DOE and BOI.
5 EEC Act, Section 4. 6 See https://www.doe.gov.ph/energy-efficiency/energy-service-companies-escos-accreditation.
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Singapore
"Singapore works towards reducing its greenhouse gas emissions by using less carbon-intensive fuels, and by improving energy efficiency"
What is the national strategy, if any, for energy efficiency?
In order to reduce its greenhouse gas emissions, Singapore has switched from carbon-intensive fuel oil to natural gas for electricity generation. Natural gas now constitutes more than 95% of Singapore's fuel mix for electricity generation. However, there are limits to how much further Singapore can reduce its emissions. Therefore, improving EE is key to decarbonisation.
Singapore has identified the following areas of focus in its EE strategy:
Promoting the adoption of energy efficient measures and technologies;
Building its capability to sustain and drive EE efforts and developing a local knowledge base in energy management;
Raising awareness among the public, households and industry / businesses; and
Supporting research and development efforts to enhance Singapore's capability in energy efficient technologies.
As for households, the Singapore Government has implemented the following initiatives to empower houseowners to make better choices and influence usage behaviour:
Mandatory Energy Labelling Scheme ("MELS") and Minimum Energy Performance Standards ("MEPS") are key policies undertaken to improve EE of a range of household appliances;
MELS, introduced in 2008, requires suppliers of major energy-consuming household appliances to affix their products with energy labels. This will help customers compare EE and make more informed purchasing decisions; and
MEPS sets standards for minimum energy performance or maximum energy consumptions thus removing appliances which are energy inefficient from the market and raising the average EE of household appliances.
Is there a central agency which regulates energy efficiency?
EE is deemed to be so critical in Singapore's path to decarbonisation that a "Whole-of-Government" approach has been adopted to implement measures to improve the EE and to reduce the energy use of various sectors. Measures are being systematically implemented across all key sectors: power generation, industry, transport, building and households as well as water and waste management.
The National Environment Agency ("NEA") actively promotes EE in the industrial, household, and public sectors through legislation, incentives, and public education. The Building and Construction Authority ("BCA") and the Land Transport Authority ("LTA") promote EE in the buildings and transport sectors, respectively.
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What are the applicable laws or binding policies?
The Energy Conservation Act 2012 ("ECA") mandates EE requirements and energy management practices to promote energy conservation, improve EE and reduce environmental impact.
In main, energy intensive companies in the industry sector are required under the ECA to register with the NEA within 6 months of qualifying as a registrable corporation and to implement mandatory energy management practices. A corporation is a registrable corporation if it meets the following qualifications:
It has operational control over a business activity which has attained the energy use threshold (54TJ of energy used per calendar year) in at least 2 out of the 3 preceding calendar years; and
The business activity is carried out at a single site and is attributable to one of the following sectors: manufacturing and manufacturing-related services; supply of electricity, gas, steam, compressed air and chilled water for air-conditioning; and water supply and sewage and waste management.
Once registered, corporations will be required to implement the following energy management practices:
Appoint an energy manager;
Monitor and report energy use and greenhouse gas emissions annually; and
Submit EE improvement plans annually.
A registered corporation under the ECA must, for each relevant business activity under its operational control, conduct an EE opportunities assessment for the relevant business activity, and submit an assessment report to NEA before the expiry of the respective assessment period.
What are some examples of national projects to promote energy efficiency?
A number of national initiatives are already underway, and have been implemented island-wide, including:
Deployment of advanced electricity meters for all households by 2024. These meters enable households to monitor their electricity usage via the SP Utilities mobile app;
Use of smart LED lighting and solar energy in existing HDB (public housing) towns which will cut energy use by 15% by 2030;
Installation of centralised cooling systems in new HDB towns and community clubs which is a more energyefficient solution than conventional air-conditioning systems;
Introduction of a S$24 million Climate-Friendly Household Programme to encourage households living in 1- to 3-room HDB flats to purchase energy efficient appliances;
Introduction of a Mandatory Energy Labelling Scheme ("MELS") to help consumers compare the EE of regulated goods to make informed purchasing decisions;
Promulgation of Minimum Energy Performance Standards ("MEPS") to raise the average EE of various household appliances such as refrigerators, air-conditioners and clothes dryers; and
Pilot of a Customised Household Energy Efficiency Report for households in a precinct (Jurong) with advanced electricity meters. This report helps consumers to better understand their electricity consumption patterns, with personalised tips on how they can save energy.
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What is the common contracting mechanism for energy efficiency projects?
The Energy Savings Agreement ("ESA") or Energy Performance Contract ("EPC") are the most common forms of contract for EE projects.
An ESA is signed by the owner or operator of a site, and an energy services company ("ESCO"). An ESCO is a company which specialises in the provision of energy efficient technology and services including financing, design, construction and management of EE projects. Most ESCOs are accredited by the NEA which is charged with enhancing the professionalism and quality of services offered by ESCOs, including energy auditing services.
The ESCO will typically conduct an audit to track the energy usage and to identify the EE savings solutions in relation to the site. If the owner or operator agrees to implement such solutions, the owner or operator will engage the ESCO to provide the solutions for the site in exchange for sharing the energy cost savings with the ESCO.
A good number of EE projects in Singapore incorporate an initial investment grade audit. This is a standalone contract to identify a package of measures that could be implemented through an EPC in which efficiency savings pay for the cost of the entire project and is intended as the preliminary step that will be followed by an EPC with the same provider to implement the projects as further negotiated in the performance contract.
Is there any state funding to promote energy efficiency projects?
The Energy Efficiency Fund ("E2F"), administered by the NEA, is an umbrella scheme consisting of 5 different grants to support businesses with industrial facilities to improve EE. The E2F grants relate quite sensibly to 5 highly practical means to accelerate EE in Singapore:
Energy Efficient Technologies grant support companies to adopt energy efficient equipment or technologies. The grant supports manufacturing companies to upgrade their equipment ahead of the carbon tax increase;
Low-Global Warming Potential (GWP) Refrigerants Chillers grant support companies to adopt low-GWP refrigerants for water cooled chillers;
Energy Management Information System ("EMIS") grant support companies to install EMIS to monitor and manage energy consumption in a structured manner;
Energy Assessment grant support companies to conduct detailed energy audit to identify potential areas for EE improvements; and
Resource Efficient Design grant support companies to conduct design workshops to improve resource efficiency (e.g., energy, water) for new industrial facilities or industrial facilities with major expansion.
What are some hallmarks of a bankable energy efficiency project?
A bankable EE project in the Singapore context shares many common traits with investment grade bankable projects in Asia.
Investors are attracted to Singapore's stable and predictable operating environment and sound legal framework these provide investors with confidence that they stand a good chance of recovering their investment and gaining a reasonable return.
In general, investors scrutinise the contracting structures closely to ensure a long term and stable revenue stream. Consequently, a lot of care goes into the drafting and negotiating of the key provisions relating to tariffs, termination rights and payments (by owner and operator) and the security for payment. As for the other provisions which are highly negotiated or contentious, these include the events of default by the ESCOs and the events which will qualify as force majeure events under the EPC.
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Thailand
"The Energy Efficiency Development Plan aims to reduce 30% energy intensity by 2037"
What is the national strategy, if any, for energy efficiency?
The Energy Efficiency Development Plan 2018 2037 ("EEDP2018") is the national strategy for EE of Thailand. The EEDP2018 is part of the National Strategic Plan B.E. 2018 2037 ("NSP"). The NSP was issued under the National Strategic Preparation Act B.E. 2560 (2017) as required by Section 65 of the Constitution of Thailand B.E. 2560 (2017). It aims to reduce 30% energy intensity by 2037 under the mandatory measures, the promotional measures and the supportive measures focusing on the 5 major sectors, i.e. transportation, industry, commercial buildings, residence and agriculture. These measures are summarised below.
Mandatory Measures
The mandatory measures are put in place as legislation enforcement under the following legislations:
The Energy Conservation Promotion Act B.E. 2535 (1992) ("ECPA") on designated buildings and factories to comply with the energy management systems;
The Ministerial Regulation Prescribing Type or Size of Building and Standard, Criteria and Procedure in Designing Building for Energy Conservation B.E. 2563 (2020) issued under the ECPA ("Building Energy Code") on specific types of factories and buildings for energy conservation;
The Energy Efficiency Resource Standard ("EERS") on energy business operators for implementation of energy conservation measures and technical support;
The regulatory requirements related to energy for factories, households and agricultural sectors to use efficient machinery and equipment that will reduce energy consumption; and
The excise tax rates for vehicles that emit a lower CO2 emission level.
Promotional Measures
The promotional measures consist of the measures that encourage:
Voluntary EE labelling for EE equipment/appliances, buildings and vehicles, including newly constructed EE residences;
Replacement of EE equipment, including providing financial support for the replacement;
Promotion of EE innovations and technologies and the use of big data for information management;
Cooperation of all the relevant agencies in the transportation sector for EE; and
Use of energy-efficient equipment and machinery in conjunction with the use of alternative energy in the agriculture sector.
Supportive Measures
The supportive measures provide support to the mandatory measures and the promotional measures for the purposes of energy conservation. These include provision of knowledge on energy conservation via educational institutions, and promotion of research and development to improve EE and reduce technological costs.
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Is there a central agency which regulates energy efficiency?
The National Energy Policy Council ("NEPC") established under the ECPA is Thailand's central agency which regulates the EE. The NEPC is chaired by the Prime Minister. Its other members are the Ministers from various Ministries, including the Minister of Energy. The duties and responsibilities of the NEPC include proposing policies, targets, or measures related to energy conservation to the Cabinet, giving recommendation to the Ministry of Energy on issuance of rules and regulations related to energy conservation, managing the Energy Conservation Promotion Fund ("ENCON Fund") established under the ECPA.
The Ministry of Transport and the Ministry of Industry are also play important roles in the promotion and implementation of energy conservation measures for the transportation and industrial sectors respectively.
What are the applicable laws or binding policies?
Thailand is bound by several international treaties and policies on energy and energy conservation, such as the APEC Leaders' Declaration on Climate Change, Energy Security and Clean Development, the United Nations Framework Convention on Climate Change ("UNFCCC") and the Kyoto Protocol.
Thailand has introduced several national strategies and plans relating to energy and energy conservation in addition to the EEDP2018. These include the National Strategy 2018-2037 to achieve the Sufficiency Economy Philosophy, the Power Development Plan 2018-2037 ("PDP2018") to improve EE and enhance energy security in Thailand.
The main legislation that supports and promotes EE is the ECPA. The "Designated/Controlled Factories and Buildings" under the ECPA are required to fully comply with the requirements under the ECPA, which include appointing a qualified person responsible for energy, establishing an energy management system, and submitting the energy management audit and certification report every year. Several ministerial regulations were also issued for implementation of the ECPA.
The Building Energy Code mandates an energy-efficient design for new or retrofitted targeted buildings, e.g. hotels, entertainment services buildings, hospitals, office buildings, department stores, condominiums, with a total area in all stories of 2,000 square meters or more, in relation to building materials, air-conditioning systems, lighting, hot water, renewable energy and the building's structure.
What are some examples of national projects to promote energy efficiency?
A number of national projects and initiatives have been implemented in Thailand to promote the EE, including:
Introduction of the Building Energy Code for new and retrofitted targeted buildings to use effective equipment, building design and other systems in compliance with the Building Energy Code;
Use of "Electricity Saving Label No. 5" on energy-saving products to provide basic information to customers, such as electricity usage, EE and the cost per year;
Enforcement of the EERS on the Metropolitan Electricity Authority ("MEA"), the Provincial Electricity Authority ("PEA") and the Electricity Generating Authority of Thailand ("EGAT");
Reduction and exemption of import tariffs on completely built-up (CBU) battery electric vehicles (BEVs);
Implementation of the Minimum Energy Performance Standards (MEPS); and
Providing series of investment promotion incentives to businesses that reduce environmental impacts, support sustainable development, and contribute to the development of the Bio, Circular and Green economy (BCG) model and electric vehicles (EV) by the Board of Investment of Thailand ("BOI").
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What is the common contracting mechanism for energy efficiency projects?
An Energy Performance Contract ("EPC") is the most common form of contract signed by an Energy Service Company ("ESCO") and its customer for providing its energy solutions services, e.g., construction, engineering, design, installation, maintenance, arranging for financing, in EE projects. There are several types of EPC models, e.g., the Guaranteed Saving Model, the Shared Saving Model and the Guaranteed Rebate Model, in which the sharing of benefits and obligations between the ESCO and their clients can be different. The ESCO will decide on the best type of contract it is to use, based on its assessment of a project's level of risk. An ESCO Performance Guarantee Contract will also be required if ESCO provides a performance guarantee in EE project.
Is there any state funding to promote energy efficiency projects?
The ENCON Fund is the Thai government's key financial mechanism that supports EE operations/projects of private sectors, government agencies, state enterprises and educational institutions. The ENCON Fund is also the main funding source for two other successful EE funding schemes: the Energy Efficiency Revolving Fund and the Energy Service Company Revolving Fund. The contributions to the ENCON Fund are made by petroleum producers for selling in Thailand, petroleum importers for consumption in Thailand and purchasers or receivers of gas from a concessionaire.
The private sector can obtain support from the ENCON Fund only if it is a legal entity established under Thai laws or foreign laws and its activity is directly related to energy conservation without political or profit oriented objectives.
What are some hallmarks of a bankable energy efficiency project?
For an EE project to be bankable, financial institutions normally consider the project's design, the model of the EPC, and other key provisions of the EPCs (tariffs, termination rights, payments, events of default and force majeure events).
Financial institutions also expect the project to have EE expert project facilitators (e.g. specialised consulting companies, energy agencies and/or ESCO associations) who can advise and work on behalf of the inventors in relation to initiating, making or approving the investment decision and helping the project to overcome difficulties in the initial project development phase from the EE perspective to ensure and increase confidence of all parties concerned in the validity and success of the project.
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Vietnam
"Improving energy efficiency is a top priority for Vietnam, as it seeks to deal with an 8-10% annual growth rate for energy demand"
What is the national strategy, if any, for energy efficiency?
For the purpose of stimulating the economical and efficient use of energy at the national level, the Prime Minister, on 13 March 2019, issued Decision No. 280/QD-TTg approving the National Energy Efficiency Programme for the period of 2019-2030 ("VNEEP3"). The VNEEP3 is currently deemed as the national strategy for EE.
Main EE objectives under the VNEEP3 for the period of 2019-2030 include to:
Save 8-10% of the national energy consumption;
Reduce power loss to less than 6.0%;
Reduce the average energy consumption for the industrial sectors and subsectors compared to the period of 2015-2018, specifically to these industrial sectors: (i) Steel industry: from 5.00% to 16.50%, depending on the type of products and production technologies; (ii) Chemical industry: minimum 10.00%; (iii) Plastic manufacturing industry: from 21.55% to 24.81%; (iv) Cement industry: minimum 10.89%; (v) Textile and garment industry: minimum 6.80%; (vi) Beer alcohol beverage industry: from 4.6% to 8.44% depending on the type of products and production scale; (vii) Paper industry: from 9.90% to 18.48% depending on each type of products and production scale;
Reduce 5% of fuel and oil consumption in transportation compared to the forecast of the industry's fuel consumption demand until 2030;
Achieve 90% of industrial parks and 70% of industrial clusters accessing and applying solutions to the economical and efficient use of energy; and
Implement an energy labelling programme for 50% of all kinds of building materials that require thermal insulation used in construction works.
To achieve such objectives, VNEEP3 has listed the main tasks that need to be conducted:
Reviewing, developing, and finalising mechanisms and policies on the economical and efficient use of energy;
Providing technical and financial assistance to promote business, production and investment projects on the economical and efficient use of energy for the following activities: producing, manufacturing, renovating and transitioning markets of vehicles, equipment, machinery, production lines, public lighting, energy-saving household appliances, etc.;
Building Vietnam energy data centre, databases, application of information technology on energy and the economical and efficient use of energy;
Enhancing capacity for the economical and efficient use of energy;
Strengthening inspection and supervision, forcing and guiding the implementation and evaluation of the results of adoption of legal regulations on the economical and efficient use of energy;
Communication to raise community awareness about the economical and efficient use of energy; and
Strengthening international relations and cooperation in the field of economical and efficient use of energy.
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Consistent with the implementation of VNEEP3, the Central Committee of the Communist Party of Vietnam also adopted Resolution No. 55/NQ-TW dated 11 February 2020 regarding the orientation of Vietnam's national energy development strategy to 2030 and outlook to 2045 ("Resolution 55"). Among others, Resolution 55 emphasises the importance of EE usage in the territory of Vietnam and aims to thoroughly apply best practices on energy saving and efficiency at the national level.
Is there a central agency which regulates energy efficiency?
The Ministry of Industry and Trade of Vietnam ("MOIT") is the principal Government authority managing the energy sector, which includes EE, at the national level.
The Program Steering Committee of the VNEEP3 will overarchingly manage the implementation of VNEEP3 at the national level and the respective Departments of Industry and Trade will manage the implementation of the programme at the local provincial level.
The Programme Steering Committee has been established with the structure as follows: Deputy Prime Minister is the head of the Committee, the Minister of the MOIT is the standing deputy of the Committee, the members of the Programme Steering Committee are representatives of ministries and association relating to the EE, including Ministry of Construction, Ministry of Transport, Ministry of Agriculture and Rural Development, Ministry of Science and Technology, Ministry of Education and Training, Ministry of Labour Invalids and Social Affairs, Ministry of Information and Communication, Ministry of Planning and Investment, Ministry of Finance, Ministry of Natural Resources and Environment and representatives of the Science and Technology Association.
What are the applicable laws or binding policies?
Law No. 50/2010/QH12 on Economical and Efficient Use of Energy dated 17 June 2010 ("Law on Economical and Efficient Use of Energy") establishes the Vietnamese policies and framework to promote EE across various sectors, energy users and energy-consuming devices, and responsibilities of the State management.
Its subordinate legislation, Decree No. 21/2011/ND-CP sets out important practical application of such law, such as statistical indicators on energy usage, major energy users, efficient energy usage in State-funded agencies, energy labelling for devices and equipment, measures to promote efficient energy usage, and the examination and inspection of the economical and efficient use of energy.
Specific fields and sectors are regulated by specific circulars, for example: energy labelling for automobiles, passenger cars, motorcycles, energy saving plans at facilities, etc.
What are some examples of national projects to promote energy efficiency?
Several initiatives to promote the efficient use of energy are currently ongoing, such as:
Funding for industrial enterprises to replace outdated equipment and adopt energy-efficient technologies and practices through the Vietnam Energy Efficiency for Industrial Enterprises Project ("VEEIE");
Incentivising enterprises to engage in EE certified projects by providing partial credit guarantees and offering assistance to the MOIT in enforcing policies and administration systems through the Vietnam Scaling Up Energy Efficiency Project ("VSUEE");
Implement energy management system software to optimise energy usage at key energy-consuming enterprises;
Promote energy saving for Da Nang City residents by funding for optimisation of energy usage in buildings, raising awareness at education institutions, installation of energy efficient equipment and devices, etc; and
USAID Vietnam Urban Energy Security Project which aims to improve Vietnamese policies and regulations on EE, mobilise public and private investment of renewable energy generations and EE gains, and increase adoption of innovative solutions.
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What is the common contracting mechanism for energy efficiency projects?
The market relating to EE in Vietnam is under early development. Specifically, regarding the energy service company ("ESCO") business model, the deputy director general of the Department of Energy Efficiency and Sustainable Development has stated that ESCOs will play an important role in EE and in accomplishing the objectives of the VNEEP3.
Vietnam is raising its awareness to ESCO models and the energy performance contract ("EPC") contracting mechanism. There have only been a few EE projects in Vietnam involving ESCO as a party that have commenced.
Is there any state funding to promote energy efficiency projects?
The Energy Efficiency and Economic Promotion Fund ("EEEP Fund"), which is the national fund for supporting the application of economical and efficient use of energy in Vietnam, is under the process of establishment. The EEEP Fund will mobilise all domestic and foreign resources for the implementation of efficient and economical energy in Vietnam.
The MOIT is assigned to conduct research, cooperate with other ministries and the equivalent for setting out the finance management mechanisms and propose to the Government for the establishment of the EEEP Fund within the period of 2019 2025.
Currently, Vietnamese EE projects are being piloted by the VSUEE and VEEIE. Under these programs, enterprises and ESCOs are eligible for loans with preferential interest rates for up to 10 years by proving the services they provide relate to EE and meeting the requirement imposed by the relevant banks.
What are some hallmarks of a bankable energy efficiency project?
The EE market in Vietnam is early in its development, and only a few EE Projects have been or are being implemented in industrial sectors. Combining with a lack of legal framework for EE Projects, there is insufficient data to determine hallmarks of bankable energy efficiency projects in Vietnam.
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