RENEWABLE ENERGY IN THE ASIA PACIFIC A Legal Overview

3RD EDITION

www.dlapiper.com | 01

CONTENTS

Introduction...... 04

Australia...... 07

China...... 15

East Timor...... 21

India...... 26

Indonesia...... 33

Japan...... 38

Malaysia...... 45

Mongolia...... 51

Myanmar...... 56

New Zealand...... 63

Philippines...... 69

Republic of Korea...... 75

Singapore...... 80

Thailand...... 85

Vietnam...... 91

Business environment explanatory note...... 96

Feed-in tariff rates comparison table (as at 24 June 2013)...... 97

Key contacts...... 99

Our relationship firms...... 100

Our global presence...... 101 INTRODUCTION

Governments across the Asia Pacific region are continuing the push for greater renewable energy contributions to domestic electricity demand. While the deal flow has been lower than expected over the last six months, there have been positive signs in several countries that local developers are very active at the approval level. International developers are increasingly taking advantage of the many government and market incentives for renewable energy investment and investing along side locals.

DLA Piper is proud to release the third edition of is a useful comparative tool to see which governments Renewable Energy in the Asia Pacific: A Legal Overview. are prepared to follow-up renewable energy targets with This edition provides a high-level but comprehensive generous feed-in tariffs, which are often essential for Renewable Energy Profile (Profile) for 15 countries convincing renewables investors to commit to a market across the region, namely: Australia, China, East in its initial stages. We have also included the rates Timor, India, Indonesia, Japan, Malaysia, Mongolia, for several European countries with more established Myanmar, New Zealand, the Philippines, the Republic renewable energy industries to draw comparisons and of Korea, Singapore, Thailand and Vietnam. In each highlight the likely longer term direction of tariffs. Profile, we look at the country’s business environment and electricity industry with particular emphasis on the Big movers current issues, laws, projects, players and trends within Policy directions and incentives for renewable energy the renewables industry, as well as foreign investment continue to strengthen across the region and there are considerations and on-going climate change negotiations increasingly positive indications from government post the first commitment period of the Kyoto Protocol. and private developers. The biggest mover of the What’s new in this edition? last few months has been Japan. Despite some initial regulatory uncertainty following the election of a Six months have passed since the second edition of new conservative government, and mixed messages Renewable Energy in the Asia Pacific was published. about Japan’s nuclear future, several large scale plans In this edition, we have added two more Profiles: one have been announced by both domestic and foreign for the geothermal powerhouse New Zealand and one investors. Fukushima prefecture is set to become a for Myanmar, which drew international attention after renewable energy hub with a number of large solar its Foreign Investment Law 2012 was passed alongside projects and the largest offshore wind farm in the the introduction of political and socioeconomic reforms world planned for its coastline. Goldman Sachs under President Thein Sein. As part of the Myanmar has committed JPY50 billion (US$487 million) for Profile, we have provided a detailed summary of this new renewables projects in Japan generally. While there foreign investment law. has been some reluctance by grid providers to connect Of course, we have comprehensively updated each of renewable-sourced energy to the grid, there continues the existing Profiles, particularly the current issues, to be strong interest from international developers for renewables overview, projects and companies as well renewable energy projects generally. as energy statistics for each industry where available. China remains dominant in the renewables sector We have also included each country’s rank in the globally, with only the United States’ renewables industry Global Competitiveness Index. and Germany’s solar industry at a similar level. China This edition also includes an updated feed-in tariff table, accounted for about one-quarter of global renewables which indicates the feed-in tariff rates (in local currency expenditure in 2012 (US$64.1 billion) as the Chinese and USD) across wind, solar, hydropower and geothermal Government looks for a secure, diversified and clean energy energy (where available) in each jurisdiction. The table mix to power the largest urbanisation in human history.

04 | Renewable Energy in the Asia Pacific Other movers over the past six months include, Vietnam, ■■ governments seeking to promote renewable energy Thailand, the Philippines, Malaysia and Indonesia. development and adopting comparable incentives Vietnam, has furthered its hydropower credentials with to drive the level of investment required to meet the opening of the 2.4GW Son La plant in December 2012. renewable energy targets. The deal flow for renewable energy projects in South The main exception to these trends is New Zealand, East Asia, particularly for solar projects in Thailand, the which already sources more than 75% of its electricity Philippines and Malaysia, as well as geothermal projects needs from renewable energy mostly through hydropower in Indonesia, has also improved this calendar year. and geothermal energy. New Zealand’s renewable energy target is to have 90% of electricity needs met Other developments by renewable energy by 2025. By comparison, ‘20% In contrast, some countries in the Asia Pacific have been by 2020’ is the standard renewable energy target for less active over the past six months. The Australian most Asia Pacific countries, with renewables generally renewable energy industry has been in a state of flux, generating less than 15% of electricity in most countries. despite a record 13.14% of generation from renewable While New Zealand is not amongst the group of populous energy sources in 2012. The election of a new and developing Asian countries with pressing energy conservative government in September 2013 promises security needs, its renewables industry is a global leader to have a large impact on climate change and renewable particularly in the research and use of geothermal energy, energy regulation. India has been relying on new wind which currently contributes nearly 14% of national and solar to meet ambitious renewables targets in its electricity use. recently released five year plan, however it has faced Renewables: the big picture delays in projects of late. Mongolia has not shown signs of broadening its energy boom to renewables, despite Governments of both developed and developing the 10th wind turbine being erected at its Salkhit wind countries in the region have a host of reasons to use farm. While delays in the award of the CHP5 IPP renewable energy to satisfy growing energy needs. coal fired project has concerned some in the power In the short term, attracting investment in renewable industry, the Mongolian Government has begun to send energy projects presents challenges due to competition the right signals to international investors over the last from cheaper fossil fuel-sourced energy and high few months generally. The South Korean Government start-up costs for projects that can be located far from has tried to encourage private investors to take the lead, population centres. International developers have while Singapore has continued to focus on research and hesitated in recent times as some countries’ regulatory development in the renewables space. environments have not provided the perception of a long term commitment to renewable energy that is needed to Trends guarantee returns on investment. The progression of development for domestic renewable There have been some recent examples worldwide of energy industries is at very different stages across the governments reducing or removing feed-in tariffs which Asia Pacific region. Government incentives and current are perceived to be too out of sync with conventional energy patterns reflect three dominant trends: power costs, which may become a politically sensitive issue if consumer electricity prices increase. ■■ the continued dominance of fossil fuels in the energy mix; Despite these impediments, renewable energy targets, feed-in tariffs, renewable energy laws, national plans ■■ projections of strong future growth in electricity demand correlated with continued strong economic growth, promoting more renewable energy and policy papers requiring increased investments in generation capacity predicting energy transformations, are the norm across and transmission and distribution infrastructure; and the region. Developing countries see energy security and other long term benefits in investment in grid-connected

www.dlapiper.com | 05 and stand-alone renewable energy systems. This is true concerns, produce self-sufficient energy supplies that are for large projects, such as China’s mega-dams on the not susceptible to geopolitical volatilities and provide Yangtze and Jinsha Rivers and Vietnam’s Son La project, the platform to lift further millions of people into Asia’s and also for small-scale projects such as stand-alone booming middle class. As prices for renewable energy systems in East Timor, which are seen as an answer to continue to come down (one need only look at China’s rural electrification and a requirement for raising living production line of PV cells and wind turbines to see standards generally. why), and if government targets are fulfilled, renewables will overtake fossil fuels as the dominant source of Renewable energy is often seen as the answer to climate electricity across the Asia Pacific in the coming decades. change and accordingly the debates over these issues Renewable Energy in the Asia Pacific seeks to capture this become intertwined. But the benefits of renewable sentiment and provide potential and current investors with energy go far beyond reduced carbon emissions and a broad-based but objective understanding of the push climate change mitigation. Renewable energy also has within the Asia Pacific for more renewable energy. the potential to curb immediate air and ground pollution

As always, we welcome feedback in relation to this publication and are also happy to discuss any aspect in more detail. Please feel free to contact me on the details below or any DLA Piper team member outlined on page 99 of this document.

Stephen Webb Partner and Head of Renewable Energy Sector Group T +61 7 3246 4208 [email protected]

06 | Renewable Energy in the Asia Pacific KAZAKHSTAN

MONGOLIA

UZBEKISTAN

N. KOREA TURKMENISTAN

S. KOREA JAPAN CHINA

AFGHANISTAN IRAN

PAKISTAN NEPAL BHUTAN

INDIA BANGLADESH

MYANMAR VIETNAM LAOS

THAILAND

CAMBODIA PHILIPPINES

SRI LANKA

AUSTRAMALAYSIA LIA BRUNEI MALAYSIA

INDONESIA

PAPUA NEW GUINEA EAST TIMOR

AUSTRALIA

Overview

Jurisdiction Language

Common law English

Business Environment

■■ Ease of Doing Business Report 2013: 10 out of 185 (up 1 ranking)

■■ Global Competitiveness Index 2013: 20 out of 144 (no change)

■■ Index of Economic Freedom 2013: 3 out of 177 (no change)

■■ Corruption Perceptions Index 2012: 7 out of 176 (up 1 ranking)

Population Income GNI Per Capita (PPP TERMS)

23.0 million High $40,270

Profile Australia was inhabited by Indigenous persons for and India have fuelled Australia’s resources boom, which thousands of years before the British established a colony saw it largely avoid the global financial crisis. Australia in New South Wales in 1788. Australia’s six states formed is a multicultural society with one in four of its citizens a federation in 1901. The governance model was (and born overseas. In early 2013, Australia was awarded remains) largely a fusion of US federalism and a UK a non-permanent seat on the UN Security Council for system of governance. Since World War Two, Australia the 2013-14 term. A new conservative government was has been a staunch ally of the United States but now finds elected in September 2013. its economic security in Asia. Countries like China, Japan

www.dlapiper.com | 07 ELECTRICITY INDUSTRY OVERVIEW ■■ These rules have the force of law and are made under the National Electricity Law. ■■ Australia is heavily reliant on fossil fuels for domestic consumption and for export. Generation, distribution and transmission ■■ Australia is currently the world’s largest coal exporter ■■ On the east coast of Australia there is retail and has huge onshore and offshore gas reserves, competition through the NEM. The NEM is connected primarily within the “mining states”, Queensland and by six major transmission interconnectors, which Western Australia. Energy exports earned the economy link the electricity networks of New South Wales, approximately A$77 billion (approx. US$73.3 billion) Queensland, South Australia, Tasmania and Victoria. in 2010/11. The network consists of nearly one million kilometres ■■ Currently, there are significant fossil-fuel projects of underground and overhead transmission and at various stages of development in the Galilee and distribution lines/cables. Bowen Basins in Central Queensland, and in the ■■ Because of their geographical isolation, the Northern Pilbara in Western Australia, as well as offshore Territory and Western Australia have their own natural gas off the West Australian coast. However, electricity markets. many of these large projects have faced long delays. ■■ There is a mix of state government and private Regulators ownership of electricity infrastructure. Privatisation of electricity assets owned by state governments has proven There are three main energy market regulators in controversial in the past, particularly with unions. Australia:

■■ the Australian Energy Market Operator (AEMO), Energy White Paper 2012 which “operates the energy markets and systems and ■■ In October 2012, the long-awaited Energy White also delivers planning advice in eastern and south- Paper was released by the previous Labor-led Federal eastern Australia”; Government. The paper sets out the short and long-term ■■ the Australian Energy Market Commission (AEMC), strategic policy framework to address the challenges which describes itself as the “rule maker and developer in Australia’s energy sector. The paper stressed that for Australian energy markets”, notably for the National over the next 20 years, Australia’s energy future will be Electricity Market (NEM); and characterised by three key issues:

■■ the Australian Energy Regulator (AER), which operates ■■ energy security/reliability and competitive pricing; under the Competition and Consumer Act 2010 (Cth). ■■ expansion of energy exports to Asia and other AER’s work relates mostly to energy markets in eastern growth markets; and and south eastern Australia on issues like price setting, market monitoring, publishing information on energy ■■ the drive for increased energy efficiency and markets and assisting the Australian Competition and reductions in greenhouse gas emissions. Consumer Commission with energy-related issues. ■■ The Energy White Paper paints an encouraging picture for the current security of domestic electricity supply Electricity laws and export demand, but it also highlights the need ■■ The National Electricity and Gas Rules established the to diversify energy supplies and shift towards clean NEM, which is managed by the AEMO. energy sources.

■■ Together, the National Electricity Rules and the ■■ The Paper predicts that while fossil fuels will continue National Electricity Code govern access to transmission to dominate generation and consumption patterns, there and distribution networks and set out the market rules will be a shift towards renewable energy with estimates including market operations, power system security, that by 2035 around 40% of Australia’s energy will be network connection, access and pricing for services in supplied by renewable sources. the NEM. ■■ While the Energy White Paper envisages a “transformation” in Australia’s domestic energy supply chains, this is considered to be unlikely to impact on

08 | Renewable Energy in the Asia Pacific the significant projects for the export of gas and coal to Wind energy the established Japanese and Korean markets, nor the ■■ Wind energy production increased by over 50% from booming Indian and Chinese markets. 2011 to 2012. Current generation capacity is over ■■ The new Government has begun the process of issuing 2.58GW. South Australia accounts for about half of this a new Energy White Paper, which will likely focus on installed capacity. reducing ‘red and green tape’ and perhaps encouraging ■■ Land use planning in Australia is generally regulated more coal seam gas mining. The new paper is expected at a State Government level. The land use planning to be released in early 2014. regime applying to wind energy varies greatly between State Governments. In recent years some RENEWABLES INDUSTRY OVERVIEW State Governments have introduced new planning regulations which restrict where new wind farms may ■■ Australia generated 13.14% of its electricity from renewable energy sources in 2012, which was a be situated. A range of reasons has been cited for new domestic record for annual renewable energy these amendments including concerns in some sectors contribution. of the community about the mental and physical effects of low frequency noise produced by wind ■■ Australia also amassed A$4.2 billion turbines (‘wind turbine syndrome’). For example, (approx. US$3.9 billion) in renewable energy planning regulations in the state of Victoria give investment in 2012. residents who live within 2km of a proposed wind

■■ The key Federal Government policy in respect of turbine the power of veto over that project. These renewable energy is the Renewable Energy Target regulatory amendments have created an additional (RET), discussed in detail below. barrier to wind farm approvals in many areas.

■■ A report released by the Australian Bureau of Resource Solar energy and Energy Economics in August 2012 predicted that solar PV and wind technologies will overtake ■■ Solar energy production increased by over 76% in the coal to become the cheapest sources of electricity five years to 2009/10. Current generation capacity from generation by 2030. The report predicted that without solar PV is 2.3GW. Solar thermal generation is just carbon capture and storage, coal will be gradually 12.3MW.

“priced out” of the market. The report predicts that ■■ There is great potential for further increases in there will be increasing price competition between electricity production from solar power, as Australia more established technologies and newer methods of has the highest average solar radiation per square metre electricity generation, which in turn will lead to a more of any continent in the world. competitive generation market. The Energy White ■■ Over one million households have installed solar PV Paper (see above), also reached a similar conclusion in panels in Australia. Much of this investment was regards to the shift in domestic energy sources. spurred by a range of solar power rebate schemes put in ■■ Australia has a complex regulatory regime for place by a number of state governments. In recent years renewable energy, with a range of Federal and State the majority of these schemes have been scaled back, Government laws and policy mechanisms that apply. or in some jurisdictions, cancelled due to concerns relating to cost for governments and market distortions. Hydropower Geothermal energy ■■ Australia’s hydropower generation capacity is over

8.5GW (concentrated mostly in New South Wales ■■ Current geothermal production is very limited. There and Tasmania), which is far higher than any other is only one operational facility in Australia – an 80kW renewables source in capacity terms. plant in Birdsville, Queensland.

■ ■ Hydropower production is expected to reach 18TWh by ■■ Several large projects are currently in various stages of 2019-2020. development and approval.

www.dlapiper.com | 09 Government bodies and their functions of electricity price rises, the previous Federal Government introduced the Household Assistance ■■ The Environment Department is now the chief Package. This package is set to continue under the new government department regulating renewable energy Government, however industry compensation schemes and climate change matters. It works alongside (like the Jobs and Competitiveness Program) will likely a host of other bodies at state government and be repealed when the CPM is repealed. federal government level, such as the Clean Energy

Regulator. ■■ In May 2013, the Federal Government Budget for the 2013/14 financial year was released. The ■■ The Clean Energy Regulator, which will continue budget delayed funding across a range of renewable under the new Government, was established as an energy initiatives and cut A$2.4 billion (approx. independent statutory authority under the Clean US$2.3 billion) in climate change mitigation and Energy Regulator Act 2011 (Cth). It has four broad adaptation programs. The Federal Government at the regulatory functions: time blamed the reductions in clean energy funding ■■ the carbon farming initiative, a “legislated offsets on the volatility of the European carbon market and scheme that allows farmers and land managers to a drop in the predicted carbon price in 2015 to just earn carbon credits by storing carbon or reducing A$12.10 (approx. US$11.52), compared with the greenhouse gas emissions on the land”; A$29 (approx. US$27.61) that was modelled by the Australian Treasury. ■■ the carbon pricing mechanism (CPM), discussed in further detail below; RENEWABLES LAWS ■■ the administration of the National Greenhouse and Energy Reporting Act 2007 (Cth), the national Renewable Energy (Electricity) Act 2000 (Cth) framework for the reporting and dissemination of information about greenhouse gas emissions, ■■ This Act sets out Australia’s target of having 20% greenhouse gas projects, and energy use and renewable-sourced energy by 2020. The scheme production of corporations; and established by the Act for achieving this target (the RET) is to stimulate investment in renewables by ■■ the RET scheme, discussed below. requiring liable entities (usually electricity retailers) to purchase and surrender a certain number of Renewable CURRENT ISSUES IN THE RENEWABLES Energy Certificates (RECs) each year. INDUSTRY ■■ Following a review of the RET, in 2011 the scheme ■■ The newly elected Federal Government has promised was split into two parts – the Large-Scale Renewable to repeal Labor’s Clean Energy Legislative Package Energy Target and the Small-Scale Renewable Energy (CELP, or “carbon tax”) as its “first order of business” Scheme. Under the new scheme RECs were replaced by when Parliament resumes later in 2013. However, while large-scale generation certificates (LGCs) (generated the Liberal National Coalition, led by Prime Minister by large-scale renewables projects) and small-scale Tony Abbott, has a majority in the Lower House, the technology certificates (SREC) (generated by small- current Senate is hostile towards the new Government. scale renewables systems). When the new Senate sits from 1 July 2014 however, ■■ The market price of LGCs fluctuates based on supply it is likely to vote with the Government on repealing and demand and in the past they have been between parts of the CELP as the balance of power is held by A$10 and A$60 (approx. US$9.52 to US$57.13). conservative minor parties who wish to repeal the SRECs are exchanged at the fixed price of A$40 “carbon tax” as well. See below for more details on the (approx. US$38.09). likely course of events over the coming months.

■■ In its 2012 annual administrative report (as required ■■ Despite rapid increases in the price of electricity over under the Act), the Clean Energy Regulator the last 10 years, data shows that Australia’s electricity estimated investments in large-scale renewable price remains below the OECD average. In anticipation energy power stations to be around A$12 billion

10 | Renewable Energy in the Asia Pacific (approx. $US11.4 billion) and that the generation with effect from the latter half of 2014, it may have capacity of the large-scale system was 16,167GWh, to pay-out over A$2 billion (approx. US$1.9 billion) slightly below the 2012 target of 16,736GWh. The 2020 to various polluting companies, so the Government target is to generate 41,000GWh of electricity from may have to delay the actual repeal of the carbon renewable energy sources. price until 1 July 2015;

■■ The prior Labor Government was committed to the ■■ Repeal of the CELP does not equate to passage 41,000GWh target, however, despite tacit approval of of the Coalition’s Direct Action Plan, particularly the RET by the new Environment Minister Greg Hunt, given the balance of power in the Senate will be the RET will face a protracted review in 2014. There held by conservative Senators who are against the are a number of possibilities that could result from CELP and possibly Direct Action as well; and this review. The RET could be moved to a floating ■■ Once the CELP is repealed, the Labor party may target, dropped to 27,000GWh (as certain large energy vote for Direct Action, arguing a ‘lesser’ climate providers are lobbying for), delayed until 2022 (or change law is better than none at all. If they later) or possibly, the RET may remain the same. The don’t and/or negotiations with minor parties fail, uncertainty has led some in the renewables industry Australia may be left with neither the CELP nor to propose a lesser target that is not subject to such Direct Action. biennial reviews. ■■ Nonetheless, and adding further confusion to the ■■ Critics of the RET note it is merely an electricity target debate, the Government has proposed a retrospective rather than an all-encompassing energy target. repeal of the laws if they are not passed in the current

■■ For now though, public debate surrounds the repeal of financial year (i.e. with the current Senate) and vowed the CELP rather than the future of the RET. not to enforce the CPM after 1 July 2014.

■■ Importantly, the Coalition is not seeking to abolish all Repealing the Clean Energy Legislative Package: likely of the CELP. Some programs and initiatives included course of events in Labor’s CELP are set to survive the new Coalition ■■ The new Government’s goal is to repeal the “carbon Government (such as the Australian Renewable tax” later this year (with effect from 1 July 2014), Energy Agency, the Clean Energy Regulator, Low however this will largely be an exercise in political Carbon Australia, the National Greenhouse and brinksmanship as the current Senate is hostile towards Energy Reporting Scheme and the Carbon Farming the Government, and will likely vote down any attempt Initiative), while others will likely be repealed to repeal the CELP. (the CPM, the Clean Energy Finance Corporation, the Climate Change Authority, the Energy Security Fund ■■ A double dissolution election of both houses of Parliament will likely not be instigated as such and industry compensation schemes for instance). elections are historically risky for incumbent The Climate Change Commission has already been governments and the Coalition can simply wait till the abolished, however the axed commissioners have since new Senate sits from 1 July 2014. formed the Climate Council.

■■ Details on Direct Action are limited at present and not ■■ Even though the Government will have the numbers to repeal the CELP when the new Senate sits, there are expected to be released until July 2014. What is known, complicating factors which may delay the actual repeal is that the policy will be based around an emissions of the CELP and delay any replacement policy being reduction fund of up to A$2.55 billion (approx. legislated: US$2.4 billion) and will draw on baseline emissions from the National Greenhouse and Energy Reporting ■■ A carbon unit is considered ‘property’ under Scheme. Australian law. Accordingly, under the Australian constitution, the Government can only acquire ■■ The doubt around Australia’s carbon policy future is no carbon units on “just terms”. Some analysts suggest longer whether the “carbon tax” will be repealed, but if the Government were to repeal the carbon price when its repeal will be in effect, what type of policy,

www.dlapiper.com | 11 if any, will replace it and finally, how much Australia ■■ The introduction of the CPM has been controversial in will be ostracised internationally for moving away Australia for a range of reasons. One particular issue from carbon pricing given IMF, OECD and World has been the comparatively high price set on permits Bank support for carbon pricing and the possibility of a under the Australian scheme based on modelling Chinese ETS by the end of the decade. For now though, by the Australian Treasury at the time (prior to the the CELP remains law. commencement of the CPM), when compared with the rapid and large drop in carbon permit prices that Clean Energy Act 2011 (Cth) has been experienced in international markets during late 2012 to 2013. As of June 2013, the price of carbon ■■ The Clean Energy Act 2011 (Cth) (Clean Energy Act) was the centrepiece of the Labor-led Federal permits in the EU market had dropped markedly to Government’s CELP. The objects of the Clean Energy below A$5 (approx. US$4.76), a figure substantially Act are: below the A$23 price imposed under the CPM. One of the current Government’s main policies leading into the ■■ to give effect to Australia’s obligations under election was to repeal the CPM. the Climate Change Convention and the Kyoto Protocol; GOVERNMENT INCENTIVE PROGRAMS ■■ to support an effective global response to climate ■■ RECs, as discussed above, are the main Federal change; Government incentive for renewable energy investment ■■ to take action to meet Australia’s target of reducing in Australia. In addition, the CELP also establishes net greenhouse gas emissions to 80% below that of the Australian Renewable Energy Agency (ARENA) 2000 levels by 2050; and and the CEFC. ARENA is an independent authority that aims to improve the competitiveness of renewable ■■ to price greenhouse gas emissions in a way that encourages investment in clean energy. energy technologies and increase the supply of renewable energy in Australia. The CEFC administers ■■ The main tool for achieving these objects is the a A$10 billion (approx. US$9.52 billion) fund dedicated CPM. Established by the Clean Energy Act, the CPM to investing in clean energy, however, the CEFC will requires major greenhouse gas emitters to purchase likely be abolished by the new Government in 2014. and surrender an amount of ‘permits’ equivalent to the amount of greenhouse gases that they emit each ■■ ARENA has been tasked with reviving the year. Each permit equates to 1 tonne of CO2-e (carbon Government’s ailing Solar Flagships Program, which dioxide equivalent) emitted. is designed to support the construction of large-scale, grid-connected solar power stations. Following Round ■■ The CPM commenced on 1 July 2012. A fixed price has One of funding offers, the 150MW Moree Solar Farm been set on permits during the first three years of the and 250MW Solar Dawn Project were selected. Both CPM, which has led to the CPM being described as a projects were unable to meet financial close. The Solar ‘carbon tax’ in the media. The price of permits was set Dawn Project subsequently faced a withdrawal of at A$23 (US$21.90) on commencement of the CPM, funding from a newly-elected conservative Queensland rising to A$24.15 (approx. US$23) per tonne on 1 July Government and was also rejected for funding by 2013. In the fourth year of the scheme, commencing on ARENA, effectively ending the project. 1 July 2015, the CPM (if it remains law) will become a full ‘cap and trade’ scheme with the price of permits ■■ In New South Wales however, two large-scale solar fluctuating according to market forces. PV plants with a cumulative capacity of 155MW at Nyngan and Broken Hill reached financial close ■■ A number of changes have been announced to the following a A$166.7 million (approx. US$158 million) design of the CPM since commencement, including commitment from ARENA and A$64.9 million linkages to the EU emissions trading scheme in 2015 (approx. US$62 million) contribution from the and the scrapping of the proposed ‘floor’ to be set on New South Wales Government. the price of permits from this time.

12 | Renewable Energy in the Asia Pacific ■■ In 2011, the Australian Capital Territory Government to pursue a A$150 million (approx. US$143 million) introduced a feed-in tariff scheme for up to 40MW joint venture solar plant with US-based Suntech Power of large-scale solar generation capacity. In September awaiting a more settled regulatory environment. 2012, Spanish group Fotowatio Renewable Ventures ■■ Verve Energy opened Australia’s first large-scale solar was awarded the first 20MW contract which, if PV project in October 2012. The Greenough River solar completed, will become the largest solar facility in farm near Geraldton, Western Australia has a 10MW Australia and the first to be connected to the NEM. capacity. Local banks, ANZ and NAB, have provided project finance for the facility. FOREIGN INVESTMENT/OWNERSHIP

MAJOR PROJECTS/COMPANIES ■■ Foreign direct investment in Australia amounted to A$507 billion (approx. US$482 billion) in 2011. ■■ Hydro Tasmania is regarded as the largest renewable energy generator in Australia. The company has ■■ The Federal Government reviews foreign investment proposed to build a 200MW wind farm on King proposals against the national interest case-by-case Island (located between Tasmania and the Australian through the Foreign Investment Review Board. mainland), which could provide up to 25% of the ■■ The Foreign Acquisitions and Takeovers Act 1975 (Cth) installed generation capacity intended to be achieved provides the legislative framework for the screening by the RET. Hydro Tasmania put the A$2 billion regime. (approx. US$1.9 billion) project to a vote of the island’s residents in mid-2013. The project received a 58% ■■ All foreign governments and their related entities approval rating, so Hydro Tasmania will likely now should notify the Australian Government and obtain proceed with a feasibility study. prior approval before making a direct investment in Australia, regardless of the value of the investment. ■■ OneWind Australia (a joint consortium of Denham Capital, Enersis Australia, National Power and Kato ■■ Foreign persons should notify the Australian Capital), have recently amassed a 1GW portfolio of Government before acquiring an interest of 15% or more wind farm projects, including Glen Innes (100MW), in an Australian business or corporation that is valued Lincoln Gap (250MW) and Cattle Hill (240MW). above A$244 million (approx. US$232 million). It is The three projects have an estimated cost of also necessary for persons to notify the Government if A$800 million (approx. US$762 million) with they wish to acquire an interest in an offshore company financial close anticipated for 2013 or 2014. whose Australian subsidiaries or gross assets are valued above A$244 million. ■■ Some other notable established wind projects in Australia include Crookwell 2 in New South Wales RELEVANT INTERNATIONAL TREATIES (92MW) and the Waterloo Wind Farm in South

Australia (111MW). ■■ Australia ratified the Kyoto Protocol in late 2007. Under the United Nations Framework Convention on ■■ The Snowy Mountain Hydropower Scheme, which was completed in 1974, is the largest engineering project Climate Change (UNFCCC) and the Kyoto Protocol, ever undertaken in Australia. It provides up to 10% of Australia had one of the more modest emissions all electricity in New South Wales. The scheme consists reduction targets at 108% of 1990 levels by 2008. of 16 major dams, seven power stations, a pumping This target controversially included the “Australia station and 225km of tunnels, pipelines and aqueducts. clause”, which set baseline land use, land use change and forestry emissions at 1990 levels. In 1990, ■■ Infigen Energy has decided to put on hold a Australia’s emissions increased by roughly 30% due A$180 million (approx. US$171 million) expansion to land clearing. As a result, subsequent reduced land of its Capital wind farm near Canberra and also not

www.dlapiper.com | 13 clearing ensured Australia complied with its emissions REFERENCES targets despite fossil-fuel energy consumption ■■ Department of Resources, Energy and Tourism, increasing significantly. Energy White Paper 2012, accessed at: http://www.ret.

■■ Australia may well adopt a different negotiating gov.au/energy/facts/white_paper/Pages/energy_white_ stance at the next UNFCCC Conference of the Parties paper.aspx (COP 19) in Warsaw in November 2013, by focusing ■■ Clean Energy Regulator, About the Renewable Energy on Australia’s small (in absolute terms) contribution Target, accessed at: http://ret.cleanenergyregulator.gov. to global greenhouse gas emissions. au/About-the-Schemes/about-schemes

■■ Clean Energy Regulator, Renewable Energy Target: RELEVANT WEBSITES 2012 Administrative Report, accessed at: http://ret. ■■ Clean Energy Regulator – http://ret. cleanenergyregulator.gov.au/Latest-Updates/2013/ cleanenergyregulator. gov.au/Home April/2012-administrative-report-released

■ ■ Clean Energy Map – http://www.cleanenergymap. ■■ Reegle, Country Energy Profile: Australia, accessed gov.au/#greening-australia-qld/?&_ at: http://www.reegle.info/countries/australia-energy- suid=1369715216065024367640 04757191 profile/AU

■ ■ Australian Renewable Energy Agency – ■■ Bureau of Resources and Energy Economics, Clean http://www.arena.gov.au/ Energy in Australia 2013, accessed at: http://www.bree. gov.au/documents/publications/energy-in-aust/BREE- ■■ Clean Energy Finance Corporation – http:// www.cefcexpertreview.gov.au/content/Content. EnergyInAustralia-2013.pdf

aspx?doc=home.htm ■■ Sarah Dingle, An ill wind, accessed at: http:// www.abc.net.au/radionational/programs/ ■■ Department of the Environment – http:// www.environment.gov.au/ backgroundbriefing/2013-05-26/4705822

■■ Clean Energy Council, Clean Energy Australia Report ■■ Clean Energy legislative package – http://www. climatechange.gov.au/government/clean-energy-future/ 2012, accessed at: http://www.cleanenergycouncil.org. legislationaspx au/resourcecentre/reports/cleanenergyaustralia.html

14 | Renewable Energy in the Asia Pacific CHINA

KAZAKHSTAN

MONGOLIA

UZBEKISTAN

N. KOREA TURKMENISTAN

S. KOREA JAPAN CHINA

AFGHANISTAN IRAN

PAKISTAN NEPAL BHUTAN

INDIA BANGLADESH

MYANMAR VIETNAM LAOS

THAILAND

Overview CAMBODIA PHILIPPINES

Jurisdiction Language SRI LANKA

MALAYSIA BRUNEI Civil law Mandarin andMAL manyAYSIA other languages and regional dialects INDONESIA

PAPUA NEW GUINEA Business Environment EAST TIMOR

■■ Ease of Doing Business Report 2013: 91 out of 185 (no change)

■■ Global Competitiveness Index 2013: 29 out of 144 (down 3 rankings)

■■ Index of Economic Freedom 2013: 136 out of 177 (up 2 rankings)

■■ Corruption Perceptions Index 2012: 80 out of 176 (down 5 rankings)

Population Income GNI Per Capita (PPP TERMS)

1.34 billion Upper middle $8,390

Profile Since 1949, the world’s most populous country has been an unprecedented rise in living standards, a number of governed by the Communist Party of China (CCP). environmental, income disparity, geopolitical and energy China has experienced rapid economic growth since security challenges have arisen. To address these issues, Deng Xiaoping and Hu Yaobang’s post-Mao economic the CCP’s 12th Five Year Plan (2011-2015) has vowed reforms (gaige kaifang) that commenced in the late to stimulate domestic demand and invest significantly 1970s. As is widely known, China is now predicted to in renewable energy, while the new Chinese leadership, become the world’s biggest economy by the end of this headed by Xi Jinping and Li Keqiang, have sought to decade. While China’s economic liberalisation has seen stamp out corruption and promote sustainable development under Xi’s mantra of “the Chinese dream”.

www.dlapiper.com | 15 ELECTRICITY INDUSTRY OVERVIEW Reforms

■■ China is the world’s largest energy producer and now ■■ At the 2013 National People’s Congress, State also the largest energy consumer of any nation. Councillor Ma Kai announced the Government’s intention to merge the NEA and SERC. ■■ While data is difficult to verify in a country as expansive as China, it was estimated that in ■■ China’s power sector has already undergone significant 2011, China’s electricity capacity was 1,055GW reforms. In 2002, the CCP launched a series of rules (predominantly fossil fuel-based), while electricity and regulations levying pollutant discharge fees and generation was approximately 4,700TWh. setting emission standards of air pollution for thermal power plants. Additionally, the State Power Corporation ■■ Some experts believe China’s generating capacity will was divided into 11 new corporations, resulting in some increase by 250% from present levels by 2020. competition in the energy generation sector, however ■■ Surprisingly, in 2012, demand for electricity fell by state-owned enterprises continue to dominate the sector. nearly 50%, however this is expected to be an anomaly as China’s mass urbanisation and industrialisation Generation, distribution and transmission continues. ■■ There are five state-owned power generation

■■ China is the largest producer and consumer of coal companies: China Guodian Corporation, China in the world. Unlike Australia for instance, much Huaneng Group, China Datang Corporation, Huadian of China’s coal is consumed domestically, which Corporation and China Power Investment Corporation. contributes significantly to air pollution problems. ■■ More than 90% of the total installed generating China’s energy market also relies heavily on domestic capacities are state-owned. and imported oil as well as natural gas. ■■ 99% of the assets in the distribution and transmission ■■ In 2006, there were 11.5 million households without sectors are owned by the Central Government. electricity. Through the “Electricity for Every Household” program, around 520,000 additional homes ■■ More than 80% of electricity is supplied by the State have since been provided with electricity. Grid Corporation of China (SGCC) and the China Southern Power Grid (CSPG). Regulators ■■ Since the 2002 reforms, the SGCC and CSPG operate

■■ China’s energy sector is overseen by a vast bureaucracy the grids. across a number of organisations and levels of ■■ Currently, China has six regional power grids. government. The National Development and Reform The 12th Five Year Plan has flagged the possibility of Commission (NDRC), the Commission of Economy a unified and smart grid system to operate nationwide and the Office of the National Energy Leadership by 2020. Group implement central government policy. A number of other bodies have been established in the past few Electricity laws years, such as the National Energy Agency (NEA) and the National Energy Commission. ■■ The Electric Power Law 1996 (EPL) applies to the construction, production, supply and utilisation of ■■ The State Electricity Regulatory Commission (SERC) electric power. is the main regulatory body in the energy sector. It undertakes a number of functions in relation to market ■■ The EPL aims to:

inspection, price inspection, security inspection, ■■ protect and develop the electricity industry; customer service inspection and permits for operation. ■■ protect the interests of investors and users/ SERC’s powers are subject to the NDRC and the consumers; National Energy Administrator.

■■ ensure safe and reliable operation of electricity; and

■■ facilitate healthy development of the industry.

16 | Renewable Energy in the Asia Pacific ■■ The EPL mostly uses generic language, such as the has voluntarily committed to reducing its carbon need to: intensity per unit of GDP by 40-45% by 2020 compared to 2005 levels, however its emissions are not expected ■■ incorporate electric power development into the to peak until 2025 or 2030. national and social development;

■■ The renewable energy capacity of China is increasing ■■ promote safe production of electricity; faster than its coal capacity. However, coal still ■■ promote the “hook-up” between power-producing accounts for 70% of China’s energy consumption enterprises and electric networks (reserving priority and the overall share of electricity generated from in utilisation to the investor); renewable sources has increased only slightly.

■ ■ require contracts between suppliers and users of ■■ China’s 12th Five Year Plan aims for non-fossil fuel electricity; energy production to reach 11.4% of total energy production by 2015. The CCP envisages that 15% of ■■ require unified pricing of electricity; and China’s electricity needs will come from renewable ■■ adopt preferential policies for rural electrification. sources by 2020.

■■ The Energy Conservation Law 1998 has a broad ambit to promote energy efficiency and has led to over 164 Hydropower

“energy savings standards” across China. ■■ China has the largest total installed hydropower capacity of any country at 213GW, with an estimated ■■ Other important legislative instruments include the: potential of 500GW. ■■ Electricity Regulation 2005; ■■ Rural hydropower capacity is expected to reach 74GW ■■ Electricity Pricing Reform 2005; and by 2015.

■■ Electricity Supply Regulation 1996. ■■ The Three Gorges Dam, located on the famous Yangtze River, includes 32 separate 700MW generators. It is RENEWABLES INDUSTRY OVERVIEW regarded as the largest electricity producing facility in the world. ■■ China is the global leader in renewable energy in almost every sense: from total capacity, to current and ■■ Mega-dam constructions have caused significant social future expenditure, to energy and emission targets and unrest with residents opposing forced evictions and renewable technology production. with some complaints of insufficient compensation packages. Geologists have expressed concern over ■■ China has a total capacity of 152GW of grid-connected building mega-dams in earthquake prone areas, while renewable energy. environmentalists have continually lamented the ■■ The push for renewable energy is underscored by impact of dams on river ecosystems. air quality concerns, water and food contamination ■■ The CCP has not publically backed any other large concerns as well as geopolitical concerns about supply hydropower projects since the Three Gorges Dam, routes through the narrow Malacca Strait (as well as however it appears that mega-dams are being the Lombok and Makassar Straits). As a result, it is constructed to reach China’s carbon reduction targets. estimated that over the next 15 years, China will spend Recently, western media have been given access to the US$1.54 trillion on clean energy projects. Indeed, in dams planned on the Jinsha River (see below). 2012 China increased spending on renewable energy by more than 20% to US$65.1 billion, which was ■■ ‘Dam diplomacy’ has emerged as a significant and approximately one-quarter of total global renewable complex geopolitical issue for China and its relations energy expenditure for 2012. with downstream neighbours. The damming of the upper reaches of the Mekong River has unsurprisingly ■■ China recently overtook the United States as the largest proved unpopular with South East Asian countries in greenhouse gas emitter in the world and now accounts the past. However, there is a growing number of dams for about one-fifth of global carbon emissions. China within countries such as Laos, that have involved

www.dlapiper.com | 17 Chinese financiers and developers. The United States ■■ China is anticipating growth to 60MW of installed has weighed into the issue and supported countries of the geothermal generating capacity by 2015. lower Mekong in their claims for increased water flows. ■■ Most of China’s known high-temperature resources Wind energy are located in Yunnan and Tibet, however geothermal exploration has been limited mostly to these provinces. ■■ Between 2005 and 2012, China increased its wind energy capacity almost 50-fold. Current wind capacity Biogas/biomass energy is 63GW (the largest of any nation) and is expected to rise to 100GW by 2015. ■■ Biogas digesters are seen as a solution to the dumping of animal waste in waterways. There have been more than ■■ It is estimated that over the past few years, an average 1,600 large-scale digesters and more than 30 million of 36 wind turbines per day have been erected in household biogas digesters constructed in China. China. China experienced a 36% increase in wind power generation in 2012 alone. ■■ China’s estimated installed capacity of biomass was 4GW in 2010 and is expected to reach 30GW by 2030. ■■ China’s windiest areas, which include Inner Mongolia, Xinjiang, Gansu and Tibet, are located far CURRENT ISSUES IN THE RENEWABLES from population centres and thus require extensive INDUSTRY transmission infrastructure. ■■ As was emphasised by China’s former Premier Wen Solar energy Jiabao, China must strike a balance between economic development and environmental considerations. It is ■■ China is now targeting 35GW of installed solar power capacity by 2015, with current capacity below 10GW clear that the new Politburo have also sought more (the 2015 solar target has been increased four times in sustainable development through climate change the past two years). mitigation and immense clean energy investment. In an unusually blunt assessment, new Premier Li Keqiang ■■ The Middle Kingdom enjoyed a dramatic 75% increase acknowledged the social impetus for climate change in new solar capacity in 2012. action during a press conference at the 2013 Nation’s

■■ China accounted for approximately 25% of global solar People’s Congress. He remarked: “we shouldn’t pursue investment in 2012 spending US$35.1 billion. economic growth at the expense of the environment. Such growth won’t satisfy the people”. ■■ Low interest rates and extended credit from the Chinese Development Bank, as well as other government ■■ Accusations from the United States of anti­competitive subsidies for land, research and development, have subsidies to support solar sector growth in China underpinned the success of the solar industry. led Washington to file a case with the World Trade Organisation in 2011/12. China reportedly ■■ China is the world’s largest manufacturer of solar panels provided US$30 billion in credit to its biggest solar and has 65% of the world’s operational solar heaters. manufacturers (about 20 times the United States

■■ Seven of the top 10 global solar panel makers are investment). Subsequently, the US has imposed tariffs Chinese, contributing to an 80% drop in the price of between 31% and 250% on Chinese PV cells. Recent solar PV cells over the last five years. media reports suggest that the US may remove these tariffs and has also acted as a mediator between Geothermal energy Europe and China with the EU Commission currently considering anti-dumping taxes as high as 67.9% on ■■ As at 2010, China had 24.2MW of installed geothermal Chinese PV cells. generation capacity.

■■ Much of China’s potential renewables capacity has not been met to date due to the challenges of connecting renewable sources with grids. This problem has been

18 | Renewable Energy in the Asia Pacific exacerbated as there is now an excess of solar PV cells ■■ The NDRC has also introduced a feed-in tariff for and wind turbines. In response to this, the NDRC has biomass, wind, solar and hydropower, with the most increased energy surcharges and a subsidy designed to generous tariffs for solar energy generators. encourage smaller-scale distributed solar power plants. ■■ There are a number of general incentives offered under ■■ The CCP will introduce (or has already introduced) the REL, such as preferential loans, tax benefits and regional and city based emissions trading schemes in funding from the Renewable Energy Development Beijing, Tianjin, Shanghai, Chongqing and Shenzhen, Fund for renewable projects. as well as province-wide schemes in Hubei and Guangdong. Shanghai and Shenzhen commenced MAJOR PROJECTS/COMPANIES their respective schemes mid-2013. These pilot schemes, which cover approximately one-fifth of China’s ■■ The Xiluodu and Xiangjiaba hydropower stations on population, will be used to establish a nationwide trading the Jinsha River are currently under construction. scheme after 2015. Once completed, the dams will have a combined capacity of nearly 20GW. These dams are the largest ■■ The energy sector is currently facing a scandal of its hydropower facilities to be built since the Three Gorges own involving Liu Tienan. In March 2013, Liu was Dam (22GW) and have created thousands of jobs. removed from his position as Director of the NEA, but Opponents of the dams have lamented the relocation has continued on in his role as Deputy Director of the of hundreds of thousands of people and indeed Jinsha far-reaching NDRC. Liu is alleged to have embezzled River damming projects have become a sensitive issue, US$200 million and is currently awaiting formal charges. particularly in Yunnan and Sichuan where the dams are located. There are reportedly “dozens” of other RENEWABLES LAWS proposed dams on the Jinsha River which has led environmentalists to warn of a potential “dead river ■■ The Renewable Energy Law 2006 (REL) includes system”. Besides environmental and geological impacts provisions regarding price regulation, differentiated of mega-dams, renewable energy in China receives pricing, special funds and tax relief. Importantly, widespread public support, particularly because it state-owned grid operators are required to purchase alleviates air pollution. all grid-connected activity generated from approved

renewable generators in accordance with the REL. ■■ China Investment Corporation and China Energy For wind, the price is based on bid prices from Conservation Investment Corporation are two notable government tenders, while for biomass and solar, prices state-owned enterprises investing heavily in renewable are calculated on cost price with a “reasonable profit”. energy in China. In turn, the grid enterprise can cross-subsidise by ■■ Currently, there are six 10GW wind farms under charging customers a higher price. construction in Gansu, Inner Mongolia, Hebei, Jilin ■■ The National Climate Change Program, launched in and Xinjiang. 2007, sets out a number of greenhouse gas mitigation, ■■ The largest rooftop solar power station in the world is educational and institutional mechanisms to combat located in Weihai City in China’s Shandong province. climate change in China. It was the country’s first major climate change policy initiative. ■■ Himin Solar Energy Group, one of the world’s biggest producers of solar water heaters is constructing “Solar Valley” in Dezhou, which is China’s clean-tech GOVERNMENT INCENTIVE PROGRAMS version of Silicon Valley. Himin Solar is headed by ■■ The Golden Sun program is targeted at solar energy “the Sun King” – Huang Ming. producers. The program subsidises 50% of grid- ■■ Beijing Jingyuntong Technology Co Ltd raised connected solar investments and 70% of off-grid solar RMB2.5 billion (US$394 million) via an Initial Public PV power investments. Offering on the Shanghai Stock Exchange, for the ■■ For wind energy producers, there is an immediate purpose of a silicon industrial park in Beijing. value-added tax rebate of 50% applied to the sale of self-manufactured electric wind power.

www.dlapiper.com | 19 ■■ Suntech Power Holdings, which was valued at ■■ China’s Three Gorges Dam – http://www.mtholyoke. US$9 billion in 2007, is believed to be the largest solar edu/~vanti20m/classweb/website/home.html energy company in the world. However, like other ■■ China’s 12th Five Year Plan (full text) – http://cbi.typepad. solar energy companies, its profits have fallen in recent com/china_direct/2011/05/chinas-twelfth-five- new-plan- years due to the oversupply of solar panels on the global the-full-english-version.html market.

REFERENCES FOREIGN INVESTMENT/OWNERSHIP ■■ China Briefing, An Overview of China’s Renewable ■■ The Catalogue for Guidance of Foreign Investment, Energy Market, accessed at: http://www.china-briefing. revised for a fifth time by the NDRC in 2011, requires com/news/2011/06/16/an-overview-of-chinas- renewable- foreign investment be made in a manner that is energy-market.html consistent with Chinese policy and in a way that will promote the development of China. Importantly, ■■ Reegle, Energy Profile China, accessed at: http://www. alternative energy and energy efficient technology reegle.info/countries/china-energy-profile/CN#energy_ investment are in the “encouraged” category. This is framework in-line with China’s emphasis on renewables in the ■■ Lester Ross, Robert Woll and Kenneth Zhou, (2012), 12th Five Year Plan. However, there are still barriers for foreign investment, such as the need to create joint China Releases New Foreign Investment Catalogue, ventures with Chinese companies. accessed at: http://www.mondaq.com/x/161086/ International+Trade/China+Releases+New+Foreign+In vestment+Catalogue+2011+Edition RELEVANT INTERNATIONAL TREATIES ■■ Australian Climate Commission, The Critical Decade: ■■ China ratified the United Nations Framework Global Action Building on Climate Change, accessed at: Convention on Climate Change (UNFCCC) in 1993 http://climatecommission.gov.au/report/global-action- and ratified the Kyoto Protocol in 2002. building/ ■■ In a 2013 report, the independent, Australia-based Climate ■■ Geoff Raby, There’s a catch to Xi’s tiger trap, Commission, surmised that both China and the US were on track to meet their commitments to tackle climate accessed at: http://www.businessspectator.com. change. This came in the wake of an “historic” agreement au/article/2013/5/21/china/theres-catch-xis-tiger- for ministerial-level cooperation on climate change in trap?utm_source=Sinocism+Newsletter&utm_ April between the world’s two largest economies who campaign=3f26083cda-Sinocism05_21_13&utm_medium together account for over one-third of total emissions. =email&utm_term=0_171f237867-3f26083cda-29580897

■ ■■ At the 2012 Doha climate talks, UNFCCC Executive ■ The Telegraph (UK), China rushes to build new Secretary, Christiana Figueres, tentatively noted generation of mega-dams as thirst for power grows, China’s current leadership in tackling climate change. accessed at: http://www.telegraph.co.uk/news/worldnews/ asia/china/9541869/China-rushes-to-build-a-new- RELEVANT WEBSITES generation-of-mega-dams-as-thirst-for-power-grows.html

■■ Huw Pohlner, Big money, big dams: large-scale ■■ National Development and Reform Commission – Chinese investment in Laos, accessed at: http://www. http://en.ndrc.gov.cn/ eastasiaforum.org/2013/05/25/big-money-big-dams-large- ■■ State Electricity Regulatory Commission – scale-chinese-investment-in-laos/ http://www.serc.gov.cn/english/index.htm

20 | Renewable Energy in the Asia Pacific KAZAKHSTAN

MONGOLIA

UZBEKISTAN

N. KOREA TURKMENISTAN

S. KOREA JAPAN EAST TIMCHINAOR AFGHANISTAN IRAN

PAKISTAN NEPAL BHUTAN

INDIA BANGLADESH

MYANMAR VIETNAM LAOS

THAILAND

CAMBODIA PHILIPPINES

SRI LANKA

MALAYSIA BRUNEI MALAYSIA

INDONESIA

PAPUA NEW GUINEA EAST TIMOR

Overview

Jurisdiction Language

Civil law Tetum, Portuguese, Bahasa Indonesia, English and various local languages

Business Environment

■■ Ease of Doing Business Report 2013: 169 out of 185 (no change)

■■ Global Competitiveness Index 2013: 136 out of 144 (down 5 rankings)

■■ Index of Economic Freedom 2013: 166 out of 177 (up 3 rankings)

■■ Corruption Perceptions Index 2012: 113 out of 176 (up 30 rankings)

Population Income GNI Per Capita (PPP TERMS)

1.2 million Lower middle $5,200

PROFILE East Timor (officially known as the Democratic Republic positive steps towards development. In 2012, both the of Timor-Leste) was a Portuguese colony for nearly UN and International Stabilisation Force withdrew 500 years. Following a period of Indonesian occupation, from the country following successful presidential and East Timor emerged as the first newly created sovereign parliamentary elections, which saw Taur Matan Rauk state of the 21st century. Despite being one of the become president and a Xanana Gusmão-led coalition poorest countries in the world, East Timor has built a take office. The current government has set a target of strong foundation for ongoing stability and is making East Timor becoming an upper middle income country by 2030.

www.dlapiper.com | 21 ELECTRICITY INDUSTRY OVERVIEW ■■ UNTAET Directive No. 2002/07 sets a connection fee of US$10 to US$100 depending on the type of premises ■■ East Timor has approximately 80MW of installed power is supplied to. It also sets a tariff of US$0.117 for electricity capacity, of which 19MW is in the capital, Dili. each kWh of electricity supplied. ■■ Dili has an electrification rate of 85%, yet rural ■■ The Basic Law is the main legal regime for the energy electrification rates range from between 5% and 18%, sector. It is a more comprehensive regime than the with estimates of total nation-wide electrification at just UNTAET Directives in that it creates a national 22% (one of the lowest electrification rates of any country electricity system that goes beyond consumer-focussed in the world). Only Dili and Baucau have a constant regulations. electricity supply, though power outages are common.

■■ Perhaps the most important aspect of the Basic Law ■■ The majority of East Timor’s power supply is based on is its provision for the establishment of a Universal imported oil for diesel power generation, while fuel wood Service Operator (USO) for the generation, distribution supplies the majority of energy used by East Timorese. and transmission of electricity. The Basic Law is not ■■ Nearly all of the electricity grid was destroyed during prescriptive as to what type of utility company the USO the Indonesian withdrawal in 1999. will be. When established, the USO will have public utility status bringing with it various public and private ■■ The East Timor Government has commissioned a new 150kV, 715km long transmission line. The line will rights, responsibilities and duties.

circumvent the country linking the Hera Generating ■■ The Basic Law provides that if a private body corporate Station, the Betano Generating Station, nine substations is appointed as the USO, it must be through a concession and the Dili control centre. This infrastructure is contract. Concession contracts must be announced and essential to achieve the Government’s aim of providing open to an international tendering process. 100% of households with electricity by 2015 and is the ■■ Other key points of the Basic Law include the: largest construction project in the country’s history.

■■ appointment of a Regulatory Authority (however ■■ In its five year legislative agenda (2012 – 2017), the government ministries and the State Secretariat Gusmão Government committed to the continued for Energy Policy (SSEP) currently act as de facto upgrade and expansion of the national grid. An additional regulators); 10 substations have also been proposed to deal with an

expected increase of 210MW in generating capacity. ■■ establishment of binding producers after a tendering process by the Regulatory Authority; Electricity laws ■■ establishment of non-binding producers who may ■■ There have been a number of attempts to commence obtain either domestic or commercial licences; and electricity regulation by the United Nations Transitional ■■ establishment of tariff regulations governing the Administration in Timor-Leste (UNTAET) and now “criteria and methods for formulating and fixing the East Timorese Government. These include: tariffs and rates for electricity”. ■■ UNTAET Directive No. 2001/10 on Fees and Charges for Electricity and Related Services; Distribution

■■ UNTAET Directive No. 2002/07 on Amendment on ■■ The state-owned Electricidade de Timor-Leste (EDTL) the Schedule of Fees and Charges for Electricity and has a monopoly on the supply and distribution of Related Services; and electricity to Dili and 11 district capitals. EDTL is largely funded by donor countries including Australia, ■■ Government Decree Law No. 13/2003 establishing Japan, Norway and Portugal. the Bases for the National Electricity System (the Basic Law).

22 | Renewable Energy in the Asia Pacific International assistance ■■ NGOs have been actively involved in East Timor. For instance, the Alternative Technology Association ■■ The World Bank has funded two projects aimed at has (since 2003) sent volunteers to install solar improving electricity supply, including financing the and wind installations in schools, hospitals, offices repair of the Comoro power station and work on Dili’s and other community buildings. This not-for-profit power distribution infrastructure. organisation has a strong focus on training Timorese ■■ The Asian Development Bank is also actively involved people to install and manage their own solar power and in financing projects in the country. lighting, as well as encouraging capacity building.

■■ Renewable energy feasibility research has been RENEWABLES INDUSTRY OVERVIEW undertaken by government organisations (for example,

■■ Despite a lack of regulation, the East Timorese the SSEP), as well as international development Government aims to have at least half of its energy groups like the Norwegian Agency for Development needs met from renewable energy sources by 2020. Cooperation and the Netherlands Development It is estimated that the country will need an additional Organisation. 50MW to 100MW of renewable energy generation capacity to meet this target. Hydropower

■■ In 2009, the Government commenced a national ■■ In its five year legislative agenda, the Government identified renewable energy and rural electrification program to install hydropower plants.

as its two key energy priorities. The Government ■■ HydroTimor oversees the development of hydropower has earmarked remote areas like Atauro and Oecussi in the country. Ambeno to take precedence in solar and wind ■■ East Timor has a total potential of between 80MW and installations. 252MW of hydro capacity, with the 27MW Ira Lalaro ■■ In August 2012, the Prime Minister announced his hydropower project deemed to be the most feasible new cabinet. Januário Pereira is now the Secretary project. of State for Electricity (which includes renewable ■■ The steep topography of East Timor prevents the energy) whilst policy in the energy sector generally construction of artificial reservoirs for hydropower will be within the remit of Alfredo Pires, who takes electricity generation. up the newly created position of Minister of Petroleum

and Natural Resources. The Ministry of Finance also ■■ Micro and mini hydropower projects may become plays an active role in many large renewable energy an interim power source for villages unlikely to be developments, well led by Minister Emília Pires. connected to the national grid within the next 10 to 15 years. ■■ In a Council of Ministers meeting on 9 May 2012, the Council was presented with a Renewable Energy Wind energy Master Plan for the Development of Electricity in East Timor. The report concluded that the country has vast ■■ Studies have shown that there is great potential for potential for renewable energy production and that by wind power generation (approximately 72MW) in 2020 it is expected that at least 50% of national energy East Timor given the high coastal wind speeds and needs will be provided by renewable energy. Analysts favourable seasonal conditions. have suggested this will cost US$600 million. Solar energy ■■ A report produced by the Asian Development Bank regards hydropower and wind as the most promising ■■ East Timor has high rates of solar radiation and is renewable energy sources for East Timor. However, accordingly well-suited to solar PV installations.

cheap stand-alone solar PV systems are seen as a ■■ It is estimated that between 10,000 and 50,000 solar PV solution to rural electrification for houses that cannot systems will be needed for households that will not be be connected to the grid. connected to the national distribution network or micro grids in the next 15 years.

www.dlapiper.com | 23 ■■ Capital subsidies will be needed to reduce start-up ■■ customs import duty exemption to the value of costs, however operation and maintenance costs are low. 100% in relation to all capital goods and equipment used in the construction/management of the project Biogas/Biomass energy for a period of up to 10 years depending on the location of the project; and ■■ The majority of energy in rural and remote areas is

sourced from biomass fuels. ■■ the possibility of negotiating a special investment agreement, which defines a special legal regime ■■ 78MW of biomass, biogas and waste-to-energy projects are currently being developed by the Government. for a particular project because given its scale or corresponding economic, social, environmental or technological impact, is of great interest to CURRENT ISSUES IN THE RENEWABLES East Timor. INDUSTRY

■■ Infrastructure shortages are a major hindrance to MAJOR PROJECTS/COMPANIES development across all sectors in East Timor, including renewable energy. ■■ The Government has committed to complete construction on the Lariguto wind farm as well as the Bobonaro wind ■■ East Timor will require financial support either from farm and to connect them to the national grid. the Asian Development Bank, a foreign government or a NGO to construct a viable renewables industry. ■■ The Government has also vowed to establish a solar An alternative would be for the Government to consider centre in Hera and conduct feasibility studies on guaranteed feed-in tariff rates, as has occurred in other thermoelectric power and biomass fuel options in Asia Pacific jurisdictions. Manatuto, Viqueque and Lautem.

■■ The Gariuai mini hydropower station which opened ■■ The current practice of using wood fuels for cooking and heating has led to widespread deforestation. in 2008 was the first hydropower facility with an installed capacity of 0.3MW. The plant, which is located in Baucau, is projected to produce 1.5GWh RENEWABLES LAWS annually of electricity.

■■ There is no renewable energy governance as such in ■■ The Ira Lalaro hydropower project has the potential to East Timor, despite a Draft Base Law for Renewable meet a significant amount of East Timor’s electricity Energy being proposed in 2010. Under the East needs. It is considered the most cost effective Timorese Constitution a “draft law” indicates that hydropower project, in part due to the Ira Lalaro lake the National Parliament has granted legislative which would provide natural storage for the plant. authorisation to the Government. However, draft laws terminate when a legislative term ends, which occurred ■■ Other hydropower projects are run-of-river type plants recently. Whether the Draft Base Law for Renewable at Gleno, Belulic and Laclo. Energy will be reissued under the new government ■■ A 10MW to 15MW wind power project was identified remains to be seen. in Foho Bagarkoholau, 10km south of Dili.

GOVERNMENT INCENTIVE PROGRAMS FOREIGN INVESTMENT/OWNERSHIP

■■ The Private Investment Law No. 14/2011 offers ■■ The Private Investment Law No. 14/2011 establishes various incentives for a company involved in foreign a legal framework to attract and promote foreign investment, including: investment. Article 8 of the law establishes a presumption

■■ income and sales tax exemption to the value of that foreign investment is permitted in any sector 100% for up to 10 years depending on the location unless the investment in the relevant sector is of the project; specifically prohibited or restricted from foreign ownership or operation by the State. Article 10 sets a

24 | Renewable Energy in the Asia Pacific minimum foreign investment amount for access to the ■■ Timor-Leste Strategic Development Plan 2011 – incentives and benefits established under the law at 2030 – http://www.tls.searo.who.int/LinkFiles/ US$1.5 million (50% of such investment must be in cash). Home_NATIONAL_STRATEGIC_DEVELOPMENT_ PLAN_2011-2030.pdf ■■ In 2011, East Timor’s Parliament established the

National Investment Agency to further streamline and ■■ Program of the Fifth Constitutional Government (2012 encourage foreign investment. – 2017) – http://timor-leste.gov.tl/?cat= 39&lang=en#toc 335313446 RELEVANT INTERNATIONAL TREATIES REFERENCES ■■ East Timor ratified the United Nations Framework

Convention on Climate Change in 2006 and the Kyoto ■■ East Timorese Government, Power Sector Development Protocol in 2008. The country is a non-annex one party Plan for Timor-Leste, accessed at: http://www.adb.org/ so it does not have any binding emissions target. publications/power-sector-development-plan-timor-leste

■■ Despite declaring its intentions to join the Association ■■ East Timorese Government, Timor-Leste Strategic of South East Asian Nations (ASEAN) and despite Development Plan 2011 – 2030, accessed at: http:// support for its bid from Indonesia, East Timor has thus www.tls.searo.who.int/LinkFiles/Home_NATIONAL_ far failed in its bid to join the ASEAN community. STRATEGIC_DEVEL0PMENT_PLAN_2011-2030. pdf

■■ Reegle, Energy Profile East Timor, accessed at: http:// RELEVANT WEBSITES www.reegle.info/countries/east-timor-energy-profile/TL

■ ■ East Timor Government website – http://timorleste.gov. ■■ Avelino Coelho, Renewable Energy in Timor-Leste, tl/?lang=en accessed at: http://prezi.com/_2dnr8q-d34b/renewable- energy-in-timor-leste/

www.dlapiper.com | 25 india KAZAKHSTAN

MONGOLIA

UZBEKISTAN

N. KOREA TURKMENISTAN

S. KOREA JAPAN CHINA

AFGHANISTAN IRAN

PAKISTAN NEPAL BHUTAN

INDIA BANGLADESH

MYANMAR VIETNAM LAOS

THAILAND

CAMBODIA PHILIPPINES

SRI LANKA

MALAYSIA BRUNEI MALAYSIA

INDONESIA Overview

PAPUA NEW Jurisdiction Language GUINEA EAST TIMOR Common law Hindi, English and regional languages

Business Environment

AUSTRALIA ■■ Ease of Doing Business Report 2013: 132 out of 185 (no change)

■■ Global Competitiveness Index 2013: 59 out of 144 (down 3 rankings)

■■ Index of Economic Freedom 2013: 119 out of 177 (up 4 rankings)

■■ Corruption Perceptions Index 2012: 94 out of 176 (up 1 ranking)

Population Income GNI Per Capita (PPP TERMS)

1.24 billion Lower middle $3,620

PROFILE ELECTRICITY INDUSTRY OVERVIEW Led by Mohandas Gandhi and Jawaharlal Nehru, India ■■ As at 30 April 2013, India’s total installed electricity gained its independence in 1947 after a long period of generation capacity was just over 223.6GW, of which: British rule. India is now the largest democracy in the world and regarded as a key emerging market given its ■■ coal (58.4%), oil (0.5%) and gas (9.0%) accounted for enormous, youthful population and continued economic 67.9%;

growth. Nonetheless, the Indian Government continues ■■ hydropower accounted for 17.7%; to face issues of widespread poverty, overpopulation, environmental degradation, corruption, energy shortages ■■ nuclear accounted for 2.1%; and and continued tensions with neighbouring Pakistan.

26 | Renewable Energy in the Asia Pacific ■■ renewable energy (including small hydropower ■■ Entities are generally not required to have a licence to projects) accounted for 12.3%. generate electricity except in relation to nuclear projects and certain hydropower projects. The private sector is ■■ This reflects that as of April 2013, approximately able to commission coal, gas or oil, hydropower, wind, 70% of the installed generation capacity is based on solar and other renewable energy-based projects of any conventional sources of energy and 30% is based size. However, only central government owned and on non-conventional sources of energy. controlled entities are permitted to build and operate ■■ In the 12th Plan (2012 – 2017), India has a capacity nuclear energy stations. Currently, only the NPC addition target of 72.34GW, 10.9GW, 5.3GW for the generates electricity using nuclear energy. thermal, hydropower and nuclear sectors respectively. Distribution and transmission ■■ The Indian National Electricity Policy 2005 (NEP),

established under the Electricity Act 2003 (the ■■ The distribution and transmission system in India is a Electricity Act), is the overarching policy for the unique three-tier operation consisting of distribution development of India’s energy sector. The NEP outlines networks, state grids and regional grids. In order to the importance of meeting electricity demands, facilitate the transmission of power among neighbouring securing supply, mitigating climate change, promoting states, the state grids are interconnected to form regional renewable energy sources and protecting the interests of grids. These regional grids are divided according to five consumers and stakeholders. geographical areas: western, northern, eastern, north- eastern and southern. ■■ India is already the world’s fourth highest energy

consumer behind China, the US and Russia. However, ■■ Much like in China, the regional grids are being electrification rates remain low, with about one-quarter gradually integrated to form a national grid to enable of the population (roughly 400 million people) not inter-regional transmission of power. having access to electricity. ■■ A non-discriminatory open access obligation is

■■ With a rapidly expanding economy and an ever- imposed on the distribution and transmission entities to increasing demand for electricity, India is facing encourage competition among generators, distributors significant energy security issues. Energy demand is and traders in electricity from regions that have surplus expected to rise by 16GW each year until 2020. electricity to regions with an electricity deficit.

■■ Electricity prices are regarded by some analysts ■■ The Power Grid Corporation of India Limited operates as unsustainably low. This has resulted in the poor the 100,000km long inter-state transmission lines. financial positions of the state-owned distribution ■■ Each state-owned transmission entity has a monopoly companies. over the intra-state electricity transmission system.

■■ Theft of electricity is also prevalent, which reduces ■■ Engaging in transmission of electricity requires a licence incentives for investment in the energy sector. from the Central Electricity Regulatory Commission (CERC) for inter-state transmission activity and the Generation relevant State Electricity Regulatory Commissions ■■ Just 31% of total installed electricity capacity is (SERCs) for intra-state transmission activity. However, provided by the private sector in India, with central no licence is required for transmission of electricity in and state government entities dominating generating rural areas notified by the state government entities. capacity. ■■ Transmission licensees are prohibited from engaging in ■■ The Central Government entities include the the trading and distribution of electricity. National Thermal Power Corporation, the National ■■ Distribution of electricity in India is controlled by the Hydroelectric Power Corporation Limited and the states. Public and private entities intending to engage Nuclear Power Corporation of India Limited (NPC). in distribution of electricity are required to obtain a Each state also has at least one generation company. licence from the relevant SERC.

www.dlapiper.com | 27 Regulatory bodies ■■ The SERCs have responsibilities similar to the CERC, that is, they have the authority to make regulations, act ■■ The Ministry of Power has a number of regulatory as the regulator and also fulfil quasi-judicial functions functions, including: concerning intra-state matters. The SERCs are also ■■ administering the Electricity Act; responsible for:

■ ■ monitoring and updating the NEP; ■■ granting the electricity transmission, distribution and trading licences in respect of their intra-state ■■ setting the rural electrification policy and tariff policy in consultation with the state governments operations;

and the Central Electricity Authority (CEA); and ■■ stipulating the general and special conditions of the licence; ■■ overseeing the Central Government entities in the

electricity sector. ■■ revoking licences or selling licences through bidding;

■ ■ The CEA performs several functions, including: ■■ regulating the tariff of generating stations owned by a state government entity or by generating companies ■■ advising the Central Government entities on matters relating to the NEP; involved in generating electricity within a state;

■■ regulating the intra-state transmission and supply of ■■ specifying the technical standards and safety requirements for construction, operation and electricity; and

maintenance of electrical plants and electric lines ■■ promoting co-generation and generation of through regulations; and electricity from renewable energy sources by providing suitable grid connectivity measures and ■■ promoting research in relation to matters affecting the generation, transmission, distribution and regulating the sale of such electricity. In this respect, trading of electricity. the SERCs are required to specify the renewable energy purchase obligation (RPO) for distribution ■■ The CERC has a number of responsibilities, including: licensees (both private and state-owned), open

■■ making regulations in accordance with the grid access consumers and captive power plants. standards specified by CEA (including the Grid Code); Electricity laws ■■ enforcing standards of quality, continuity and reliability of service by licensees; ■■ The Electricity Act and the Energy Conservation Act 2001, as well as the rules and regulations made ■■ regulating the tariffs of central government entities under those acts, primarily govern the legislative and private entities engaged in sale of electricity in framework of the electricity sector in India. more than one state; ■■ The Atomic Energy Act 1962 (AE Act) regulates the ■■ regulating the tariffs for inter-state transmission of generation of electricity from nuclear energy, among electricity; other matters. To the extent of any inconsistency

■■ acting as a licensing authority for granting between the Electricity Act and the AE Act, the electricity transmission and trading licences provisions of the AE Act prevail. regarding inter-state operations; and ■■ The Electricity Act consolidates the laws relating to

■■ adjudicating disputes involving generating entities the generation, transmission, distribution, trading and and transmission licensees in respect of the use of electricity. The Electricity Act has a number of aforementioned matters and referring any such important features, namely it: dispute for arbitration. ■■ recognises and regulates generation, transmission, distribution and trading of electricity as separate activities;

28 | Renewable Energy in the Asia Pacific ■■ removes the requirement for a generation licence ■■ As at 31 March 2013, the installed capacity from for entities engaged in the generation of electricity renewable energy sources (including small hydropower (except for certain hydropower projects), provided projects) was approximately 29GW. Of this amount: that such entities comply with the technical ■■ wind power accounted for 65%; standards regarding grid connectivity; ■■ biomass and bagasse accounted for 14%; ■■ permits captive generation of electricity; ■■ small hydropower projects accounted for 13%; ■■ provides for private participation in the generation, transmission, distribution and trading of electricity; ■■ solar and balance through urban/industrial waste accounted for 5%; and ■■ requires the SERCs to set out a minimum percentage of electricity to be purchased from ■■ other sources of renewable energy accounted for the renewable sources by formulating regulations; remaining 3%.

■■ mandates control of the electricity supply through Hydropower load despatch centres at inter-state and intra-state levels by the Central and State Government entities; ■■ The overall installed hydropower capacity as at 31 April 2013 was approximately 39.5GW. ■■ mandates a non-discriminatory open access regime for the transmission and distribution of electricity; ■■ Hydropower projects up to a capacity of 25MW are classified as small hydropower projects (SHP). MNRE ■■ establishes the Appellate Tribunal for Electricity; and is vested with the responsibility of developing SHP

■■ makes provision for penal sanctions for the theft of projects and has earmarked 5,718 sites for these projects. electricity. The estimated potential for SHP projects is over 15GW.

Wind energy RENEWABLES INDUSTRY OVERVIEW ■■ Despite lower than average wind speeds by ■■ The Ministry of New and Renewable Energy (MNRE) international standards, wind power has been the most promotes renewable technologies and renewable energy successful renewable energy source in India. use in India. ■■ Installed wind capacity grew 10% from 2011/12 to ■■ The MNRE has estimated that the country has potential 2012/13. for 90GW of power generation from renewable sources. A total of 87GW of renewable power capacity is expected ■■ The Centre for Wind Energy Technology estimated a to be reached by 2022. However, in 2012, 22 out of India’s technically feasible wind energy potential of 49GW. 29 states failed to meet their respective RPOs. ■■ The MNRE has removed the regulatory requirement

■■ During the 12th Plan (2012/13 to 2016/17), the MNRE that allowed wind installations at sites with a minimum intends to oversee the installation of 29.8GW of grid- wind power density of 200W/m2 at a hub height of 50m. interactive renewable power comprising 15GW from This change is expected to give impetus to small wind wind power, 2.1GW from small hydropower projects, power projects. 10GW from solar power and 2.7GW from biomass/ ■■ Nearly 85% of India’s wind power is generated by just biogas sources. five of India’s states.

■■ In its 11th Plan (2007/08 to 2011/12), India exceeded its ■■ In May 2013, the MNRE released a draft national original goal of adding 3.5GW of renewables capacity. offshore wind policy which stated that offshore wind The Government revised its goal at the time to 14GW energy is now cost-competitive with fossil fuel- by 2012, backed largely by an increase in wind energy generated energy. capacity.

www.dlapiper.com | 29 Solar energy ■■ The vast amounts of land needed for viable renewables projects has emerged as a significant issue for ■■ According to the MNRE, as at March 2013, solar PV renewable energy projects given the high competition power had a total installed capacity of approximately for land in India. 1.6GW.

■■ Analysts point to general problems with India’s ■■ High solar radiation levels, particularly in the western electricity industry, such as fuel shortages and ailing half of India, make solar energy an attractive option. distribution companies, as disincentives for renewable The Jawaharlal Nehru National Solar Mission 2009 energy developers. (JNNSM) aims to increase solar deployment to 20GW

by 2022. The plan under JNNSM involves three phases ■■ In May 2013, the MNRE revealed that seven solar targeting solar power development as follows: projects with a capacity totalling 470MW, have been delayed due to a lack of water, financing difficulties and ■■ the phase throughout 2012/13 will have a target of equipment shortages. up to 1.1GW;

■■ the phase from 2013 to 2017 will have a target of up RENEWABLES LAWS to 10GW; and ■■ There is no national, unified framework for renewable ■■ the phase from 2017 to 2022 will have a target of up energy. Promotion of renewable energy is included in to 20GW. the general Electricity Act, however there is no national “renewable energy act” as such. Geothermal energy

■■ The Energy Conservation Act 2001 gives state ■■ Geothermal power use is limited in India and solely governments and the Central Government powers to limited to private, direct use. The Geological Survey pursue energy efficient practices. of India suggests that roughly 10GW of geothermal

energy is possible in India. ■■ The National Action Plan on Climate Change (2008) seeks to promote sustainable growth for India to ensure Biomass energy the protection of poor and vulnerable sections of Indian society whilst also achieving national growth objectives. ■■ Fuelled by its agriculture base, India has great potential in biomass energy, however generation of biomass The plan sets out a number of ways to promote energy energy is also limited. efficiency in the commercial and residential markets.

■■ The MNRE estimates that India has the capacity for government incentive programs approximately 18GW of biomass power generation

from agricultural residues, 5GW from raising dedicated ■■ The Government has set out a number of tax incentives plantations on about 2 million hectares of forest and for renewable energy investors, including concessions on non-forest degraded lands and an additional 5GW from customs duties for imports of renewable energy equipment bagasse produced by about 550 sugar mills. and a 10 year tax holiday for renewables companies.

■■ There are also generation-based incentives for wind and CURRENT ISSUES IN THE RENEWABLES solar producers. INDUSTRY ■■ State governments provide support by way of energy ■■ The unprecedented black-outs of July 2012 that left buy-back schemes, power wheeling and banking facilities, approximately 640 million people without power, sales tax concession benefits, electricity duty exemptions initially raised concerns that the Government will and capital subsidies. seek a quick fix to energy shortages by pushing fossil ■■ Various state governments offer preferential tariffs for wind fuels and nuclear energy rather than to continue power producers or small hydropower projects. Almost all substantial renewable energy investments. However, in state governments have announced a RPO on buyers April 2013, India’s Prime Minister Manmohan Singh of electricity (including Himachal Pradesh, Rajasthan, affirmed India’s prior commitment to more than double Tamil Nadu, Karnataka Maharashtra and Gujarat). renewable energy capacity to 55GW by 2017.

30 | Renewable Energy in the Asia Pacific ■■ The Indian Renewable Energy Development Agency ■■ According to the Department of Industrial Policy and provides loans for renewable energy projects. Promotion, foreign direct investment inflows from non- conventional energy sources during 2012/13 were worth ■■ The accelerated depreciation incentive for wind power US$414 million. projects was withdrawn in 2012. Despite government reassurances that various incentives will be reintroduced, no such policies have been forthcoming. relevant international treaties

■■ India is party to the United Nations Framework MAJOR PROJECTS/COMPANIES Convention on Climate Change, which it signed in 1992 and ratified in 1993. India later ratified the Kyoto Protocol ■■ In May 2013, Spanish manufacturer Gamesa was awarded in 2002. As a developing nation, India has no binding a contract to deliver and install 130MW for China targets, but it has supported a number of initiatives Light & Power India and 100MW for Greenko Wind through its National Action Plan on Climate Change. Power in wind turbines. The turbines will be installed in

the states of Karnataka and Andhra Pradesh. ■■ India has added over 2,000 renewable energy projects classified as clean development mechanisms under the ■■ Godawari Power’s 50MW solar thermal plant is expected Kyoto Protocol. to be operational mid-2013.

■■ While per capita greenhouse gas emissions are low, India ■■ AllGreen is investing in 10 biomass gasification plants in is already the third biggest emitter in total, accounting India. for about 5% of global emissions. Its anticipated rise in 2 ■■ A 35,000 km section of the Thar Desert in Rajasthan greenhouse gas emissions make it a key third party (after has been set aside for solar projects. The Thar Desert is the US and China) for binding climate change targets. seen as an ideal location for solar plants as it has a solar intensity level of approximately 6kW/m2 per day and sun relevant websites availability of over 345 days annually. ■■ Ministry of New and Renewable Energy – www.mnre. ■■ The Subansiri 2GW hydropower plant is the largest in gov.in India. ■■ National Action Plan on Climate Change – http://pmindia. nic.in/climate_change.php FOREIGN INVESTMENT/OWNERSHIP

■■ India Climate Portal – http://www.indiaclimateportal.org/ ■■ A non-resident entity (including investment by a citizen

or entity of Pakistan, with Indian Government approval) ■■ India Energy Portal – http://www.indiaenergyportal.org/ can invest in India. index.php

■■ There are two routes for investment in India: ■■ National Thermal Power Corporation – www.ntpc.co.in

■■ the “automatic route” where up to 100% foreign ■■ National Hydroelectric Power Corporation – ownership is permissible in certain sectors; or www.nhpcindia.com

■■ the “government route” which requires prior ■■ Nuclear Power Corporation of India Limited – government approval for sectors not mentioned in the www.npcil.nic.in “automatic route” or for investments in certain sectors ■■ Ministry of Power – www.powermin.nic.in beyond the permissible limits. ■■ Overseas Indian Facilitation Centre – www.oifc.in/ ■■ Joint ventures with local companies are a common way to Sectors/Energy-%26 -Environment\ enter the Indian market. ■■ Central Electricity Authority – ■■ Investment in both electricity infrastructure and renewable http://www.cea.nic.in/welcome.htm energy is actively encouraged by the Indian Government under the “automatic route”. The Government also promotes renewable energy-based power generation projects on a build, own and operate basis.

www.dlapiper.com | 31 REFERENCES ■■ Chaturvedi, Saurabh, India’s wind power target is up in the air, accessed at: http://stream.wsj.com/story/latest- ■■ Reegle, Energy Profile India accessed at: http:// headlines/SS-2-63399/SS-2-238677/ www.reegle.info/countries/india-energy-profile/IN

■■ Electrical Monitor, FDI in India soars in 2012, accessed ■■ Reserve Bank of India, Foreign Investments in India at: http://www.electricalmonitor.com/Article Details. accessed at: http://www.rbi.org.in/scripts/FAQView. aspx?aid=1630&sid=61 aspx?Id=26

■■ World Bank, Energy Facts, accessed at: http://web. ■■ Premila Nazareth Satyanand, Foreign Direct Investment worldbank.org/WBSITE/EXTERNAL/TOPICS/EXTENE in India’s Power Sector, Journal of Infrastructure RGY2/0,,contentMDK:22855502~pagePK:210058~piPK:2 Development, June 2011 (3) pp65 -89 10062~theSitePK:4114200,00.html

32 | Renewable Energy in the Asia Pacific KAZAKHSTAN

MONGOLIA

UZBEKISTAN

N. KOREA TURKMENISTAN

Indonesia S. KOREA JAPAN CHINA

AFGHANISTAN IRAN

PAKISTAN NEPAL BHUTAN

INDIA BANGLADESH

MYANMAR VIETNAM LAOS

THAILAND

CAMBODIA PHILIPPINES

SRI LANKA

MALAYSIA BRUNEI MALAYSIA

INDONESIA

PAPUA NEW GUINEA EAST TIMOR

Overview

Jurisdiction Language

Civil law Indonesian (Bahasa Indonesia)

Business Environment

■■ Ease of Doing Business Report 2013: 128 out of 185 (up 2 rankings)

■■ Global Competitiveness Index 2013: 50 out of 144 (down 4 rankings)

■■ Index of Economic Freedom 2013: 108 out of 177 (up 7 rankings)

■■ Corruption Perceptions Index 2012: 118 out of 176 (down 18 rankings)

Population Income GNI Per Capita (PPP TERMS)

242.3 million Lower middle $4,500

Profile Indonesia is an archipelagic nation located in South East Japanese occupation ended in 1945. After a long period of Asia. It is the fourth most populous country in the world political instability, Indonesia held legislative elections in and is home to the world’s largest Muslim population. 1999 and is now regarded as the third-largest democracy Its 13,466 islands foster a diverse range of cultures, in the world. Important issues within Indonesia languages and ethnicities, which inspired the country’s include combating poverty and domestic terrorism, motto of “unity in diversity”. Indonesia was once a the implementation of reforms and the promotion of Dutch colony and declared its independence shortly after transparency in its governmental institutions.

www.dlapiper.com | 33 ELECTRICITY INDUSTRY OVERVIEW ■■ Two wholly owned subsidiaries of PLN, Pembangkit Jawa-Bali and Indonesian Power, are now the primary ■■ Total installed electricity capacity in 2011 was 28.6GW. generators of electricity. Overall, PLN effectively Of this amount: controls 86% of generation assets. Independent Power ■■ coal accounted for 44%; Producers (IPPs) and various electricity cooperatives also generate electricity, however PLN is the sole buyer ■■ oil accounted for 23%; of electricity and retains the right of first refusal. ■■ natural gas accounted for 21%; Distribution and transmission ■■ hydropower accounted for 7%; and

■■ The low rate of electrification in Indonesia is largely ■■ geothermal accounted for 5%. due to distribution and transmission infrastructure ■■ Despite an abundance of indigenous fossil fuel reserves shortages. Experts have warned that unless Indonesia’s and renewables capacity, Indonesia is not self-sufficient electricity infrastructure is updated, then the country in energy supply. could face an energy crisis within a decade.

■■ It is estimated that just 65% of the population has ■■ Five distribution entities now act semi-autonomously access to electricity or modern forms of energy, with from PLN to distribute electricity to the east, west, electrification rates lower in remote and rural areas. central Java, Bali and Jakarta regions. Despite significant growth in electricity infrastructure in the last decade, per capita capacity remains low. ■■ The Indonesian interconnected system encompasses Java, Bali and Madura. The islands of Java and ■■ An additional 54GW of electricity capacity will Sumatra are connected by a 39km submarine cable. need to be developed by 2020 to meet continued growth in demand. Accordingly, the Government has sought to ■■ Despite the increased privatisation of the electricity diversify the country’s energy supplies with an increased sector, PLN controls all transmission infrastructure. renewable energy contribution while also attempting to Electricity laws foster competition in the electricity market.

■■ Electricity Law No. 15/1985 allowed limited private Government participation in the generation phase through IPPs who sold electricity to PLN. However, PLN was granted ■■ The Ministry of Energy and Mineral Resources (MEMR) is the overarching government body for the exclusive powers over the transmission, distribution energy sector. The MEMR oversees the electricity and ultimate sale of electricity. The impact of the Asian master plan, which lays out the future goals and targets financial crisis, however, significantly limited the IPPs for the sector. operation. This law has been revoked and replaced by Electricity Law No. 30/2009. ■■ The Directorate General of Electricity and Energy Utilisation, which is under the Department of Energy ■■ Electricity Law No. 20/2002 sought to further privatise and Mineral Resources (DEMR), is the chief regulator the industry by allowing market-driven tariffs and of the energy sector. independent regulation whilst also amending Law No. 15/1985. However, Law No. 20/2002 was ruled Generation as unconstitutional by the Constitutional Court. In its decision, the Court considered that electricity is an ■■ The state-owned electricity company, Perusahaan industry sector that the Indonesian Government must Listrik Negara (PLN), owns most of the generation control because it is “important to the state and affects assets, transmission and distribution infrastructure. the lives of most people”. As a result, Law No. 15/1985

■■ In 1994, PLN’s status was changed from a general was reinstated. company to a corporation. It also became the only ■■ Electricity Law No. 30/2009 is now the key piece of “authorised agency of electricity business” (PKUK) legislation regulating the electricity sector. Under Law permitted to provide electricity to the public. However, No. 30/2009, the Government (Central or Regional) in 2009 PLN’s role was further reformed when it has the authority to issue licenses that are needed by was restructured to become a state-owned enterprise entities to conduct activities in the electricity sector. (BUMN).

34 | Renewable Energy in the Asia Pacific Under Law No. 30/2009, PLN is treated as a BUMN Hydropower and no longer has a monopoly power in the electricity ■■ Indonesia has a significant hydropower potential of sector. Law No. 30/2009 also provides for competition approximately 75GW, of which about half lies in in the supply and distribution of electricity to end isolated Papua. customers and establishes the basic framework for private entities to participate in the electric power ■■ The current total installed capacity for hydropower is business. Unlike Law No. 20/2002, which was intended estimated by MEMR to be 4.3GW. to privatise the industry by allowing market-driven tariffs and independent regulation, Law No. 30/2009 Wind energy

still gives authority to the Government to control the ■■ Wind speeds averaging between 3m/s and 6m/s have energy sector. encouraged government investment in small and medium sized wind projects, however large-scale wind ■■ Energy Law No. 30/2007 established the National Energy Council. farms are not feasible with such wind speeds.

■■ Much like in Mongolia and China, Indonesia’s most RENEWABLES INDUSTRY OVERVIEW productive wind sites are located far from population centres, thus requiring extensive transmission ■■ Renewable energy currently plays a minor role in infrastructure. Indonesia’s energy supply, however the Government is seeking an increase in renewable generation to 17% of ■■ Indonesia is seeking a total installed wind capacity of total energy consumption by 2025. 970MW by 2025.

■■ Current estimates place total renewable energy Solar energy capacity at 2.9GW (on-grid) and 3.2GW (off-grid). Given a total renewable energy potential within the ■■ The installed capacity of solar energy in Indonesia is country of 163.3GW, this amounts to an undeveloped just 12MW.

renewables potential of 96%. ■■ In 2009, 77,433 50W solar PV home systems were distributed to Indonesian households. ■■ The Government is aiming for 10.1GW of new capacity comprising of 3.9GW of geothermal and 1.2GW of Geothermal energy hydropower by 2014.

■■ Geothermal energy is Indonesia’s most feasible renewable ■■ Indonesia has introduced a Climate Change Trust energy source given that it accounts for roughly 40% Fund to ensure that climate change is integrated into of known geothermal capacity worldwide. Indonesia is development planning. The Government is seeking currently the third largest geothermal generator. to become a regional leader on climate change

mitigation and in 2009 voluntarily committed to reduce ■■ Climate change activists like Al Gore have proclaimed greenhouse gas emissions by 26% by 2020. that Indonesia can become the global geothermal superpower, while other analysts have called on ■■ The US$400 million Clean Technology Fund was the country to replicate its success in thermal coal created to promote renewable energy, improve production in the geothermal field. electrification rates and enhance energy efficiency

within Indonesia. The fund’s predominant focus is ■■ Indonesia’s total geothermal potential is reportedly on developing Indonesia’s large-scaled geothermal 28.1GW, with current capacity at 1.2GW – a figure projects. considered quite low given the country’s potential.

■■ The Directorate General of Renewable Energy and ■■ A target of 5GW production by 2014 has been Energy Conservation, which sits under the MEMR, is announced by the Government. the chief regulator in the renewable energy area. ■■ There is a separate legal regime for geothermal energy production in Indonesia compared to other forms of electricity. It is regulated by Geothermal Law No. 27/2003. A geothermal business requires a

www.dlapiper.com | 35 geothermal business licence, as well as the standard ■■ There is a large backlog of pipeline projects, electricity supply business licence to generate particularly for geothermal projects. For instance, the electricity. World Bank has estimated that there are 580MW of geothermal projects in the pipeline and just 5MW of ■■ In April 2012, Indonesia signed an extensive total capacity that have reached financial close. geothermal cooperation agreement with New Zealand.

■■ The cost of electricity, like in Australia, is a Biomass energy politically sensitive issue. In 2011, the Government gave US$8 billion in subsidies to PLN to offset the ■■ The installed capacity of biomass in 2010 was 5.7GW, while biomass potential is approximately 50GW. renewable energy feed-in tariff scheme (see below). An ensuing proposal to raise the cost of electricity by ■■ Indonesia is a leading exporter of palm oil. 20% was met with mass strikes and demonstrations,

■■ Like East Timor, remote villages in Indonesia rely ultimately defeating the proposal. It is estimated heavily on traditional biomass sources for energy. that only an 80% increase in electricity prices would cover production costs, which brings into question Ocean energy the financial viability of Indonesia’s state-dominated electricity system. ■■ With 54,716km of coastline, Indonesia has vast potential for ocean current, wave and tidal energy. However, at present the country has no installed ocean RENEWABLES LAWS energy capacity and just one demonstration project has ■■ The Green Energy Policy 2004 resulted from MEMR been developed. Decision No. 2/2004 which aims to reduce the

■■ The estimated potential of ocean energy in Indonesia is country’s reliance on oil. between 10MW and 35MW per kilometre of coastline. ■■ Geothermal Law No. 27/2003 gives power to the regional governments to develop geothermal energy CURRENT ISSUES IN THE RENEWABLES and establishes a separate regime for geothermal INDUSTRY licensing.

■■ Around 80% of Indonesia’s geothermal resources lie ■■ Governmental Regulation No. 70/2009 on Energy in conservation forests, which are protected under Conservation forms the National Energy Conservation Indonesian law. The Government has proposed to Plan, promotes energy efficiency and offers incentives allow drilling in these conservation forests on the for the importation of energy-saving devices. condition that the processing plant is located outside ■■ Presidential Regulation No. 5/2006 on National Energy the conservation forest area. Still, developments within Policy sets out the definition of renewable energy and these areas require presidential approval and in May the target for renewable energy production. 2011 the Indonesian Government committed to a two- year moratorium on forestry development as part of a US$1 billion forestry agreement with Norway. It will GOVERNMENT INCENTIVE PROGRAMS

thus be difficult for Indonesia to balance its voluntary ■■ Indonesia currently offers tax concessions for emission reduction targets which rely on reducing renewable energy projects, particularly geothermal deforestation whilst also reaching its geothermal energy projects. Incentives for geothermal projects potential that is crucial for the country to avoid an include an investment credit of 20% of the qualifying energy crisis. capital investment, an extended tax loss carry forward period for up to 10 years, accelerated depreciation rates ■■ Commentators suggest that the Directorate General of Electricity and Energy Utilisation, which regulates the and a maximum dividend withholding tax of 10%.

electricity industry, has no clearly defined role or free ■■ The Ministry of Finance’s Regulation No. 21/PMK. autonomy to balance the various interests in the energy 011/2010 provides similar tax and also custom sector. Additionally, the absence of an independent incentives for other renewable energy technologies. regulator, as well as infrastructure shortages, had led to cautiousness from foreign investors.

36 | Renewable Energy in the Asia Pacific ■■ Importantly, since 2002, the MEMR has also partnerships or cooperatives. Geothermal facility established a feed-in tariff scheme for renewable services may have foreign ownership of up to 90%. energy. However, international developers have not Clearly though, there are limits on foreign ownership been as attracted by the feed-in tariff given the fixed for larger renewables projects. end-user energy prices, which are regarded by many as ■■ Industry analysts have recognised an increase in unsustainably low. foreign investment as crucial to growing renewable energy development in Indonesia. MAJOR PROJECTS/COMPANIES

■■ Ulumbu Geothermal Power Plant, which supplies RELEVANT INTERNATIONAL TREATIES electricity to neighbouring districts, has a capacity ■■ Indonesia is a signatory to the United Nations of 5MW. Framework Convention on Climate Change, however

■■ There are a number of other geothermal plants that it has no emission reduction targets. Like other have recently become operational, including a 20MW non-annex one countries, Indonesia has voluntarily plant in Lahedong. committed to reducing emissions.

■■ Cisokan hydropower plant has a capacity of 1GW. ■■ It is a member of the Association of South East Asian The project is substantially funded by the World Bank. Nations (ASEAN), which promotes sustainable energy through the ASEAN Centre for Energy. ■■ As part of Indonesia’s Power Transmission Development Phase II, PLN is undertaking extensive repairs to the transmission infrastructure on grids in RELEVANT WEBSITES Java-Bali, Sulawesi and Kalimantan. This is being ■■ Perusahaan Listrik Negara – www.pln.co.id funded by the World Bank. ■■ Pembangkit Jawa-Bali – www.ptpjb.com ■■ The Itochu Corporation of Japan has been one of the largest sponsors of renewable energy projects in ■■ Indonesia Power – www.indonesiapower.co.id

Indonesia. ■■ Ministry of Energy and Mineral Resources – www.esdm.go.id FOREIGN INVESTMENT/OWNERSHIP ■■ Directorate General of Electricity and Energy

■■ Investment Law No. 25/2007 requires foreign investors Utilisation – www.esdm.go.id/directorate-general-of- in the electricity sector to obtain a foreign investment electricity-and-energy-utilization license from the Capital Investment Coordinating Board (BKPM). In order to obtain the foreign REFERENCES investment license, an Indonesian company must be ■ established under the Investment Law. The Indonesian ■ Reegle, Energy Profile Indonesia, accessed at: company can then apply to MEMR for a licence to http:// www.reegle.info/countries/indonesia-energy- engage in the energy sector. profile/ID

■■ PricewaterhouseCoopers, Electricity in Indonesia – ■■ BKPM provides a one-stop integrated service to handle the investment application process. Investment And Taxation Guide, accessed at: http:// www.pwc.com/id/en/publications/assets/ ■■ Like the Philippines, Indonesia has a “negative list” Indonesian- Electricity-Guide_2011.pdf for foreign investment. It is set out in Presidential ■ Regulation No. 77/2007 (Perpres), as amended by ■ Jeremy Wilcox, Indonesia’s Energy Transit: Struggle to Perpres 36/2010. Generally, this list limits foreign Realize Renewable Potential, accessed at: http://www. ownership in the production, transmission and renewableenergyworld.com/rea/news/article/2012/09/ distribution of electricity up to 95%. However, since indonesias-energy-transit?page=2 Perpres No. 36/2010, foreign ownership is allowed for small-scale power plants of 1MW to 10MW through

www.dlapiper.com | 37 Japan

KAZAKHSTAN

MONGOLIA

UZBEKISTAN

N. KOREA TURKMENISTAN

S. KOREA JAPAN CHINA

AFGHANISTAN IRAN

PAKISTAN NEPAL BHUTAN

INDIA BANGLADESH

MYANMAR VIETNAM LAOS

THAILAND

Overview CAMBODIA PHILIPPINES

Jurisdiction Language SRI LANKA

Civil law MALAYSIA JapaneseBRUNEI MALAYSIA

INDONESIA

Business Environment PAPUA NEW GUINEA EAST ■■ Ease of Doing Business Report 2013: 24 out of 185 (down 4 rankings)TIMOR

■■ Global Competitiveness Index 2013: 10 out of 144 (down 1 ranking)

■■ Index of Economic Freedom 2013: 24 out of 177 (down 2 rankings)

■■ Corruption Perceptions Index 2012: 17 out of 176 (down 3 rankings)

Population Income GNI Per Capita (PPP TERMS)

127.8 million High $34,670

Profile Following the Second World War, a western currently the third largest economy in the world behind parliamentary system of governance was introduced in the US and China. The disasters of 2011 triggered by Japan. Throughout the second half of the 20th century Japan’s largest-ever earthquake, tested the country’s Japan experienced tremendous economic growth which institutions whilst thrusting energy issues into the saw the country emerge as the leading economy of Asia. national and global spotlight. Sporadic territorial disputes Despite an economic slowdown in the 1990s, Japan is with China and Russia have led political leaders to question the country’s pacifist constitution.

38 | Renewable Energy in the Asia Pacific Electricity industry overview ■■ The General Electric Utilities are full-service electric power companies providing users (customers) ■ ■ Total installed capacity in 2012 was 225GW, making with electric power generation, transmission, and Japan the third largest generator of electricity in the world. distribution. Japan has 10 power companies in this

■■ Japan is just 16% energy self-sufficient, but it has a category, namely, Hokkaido Electric Power Company, 100% electrification rate. Tohoku Electric Power Company, TEPCO, Chubu Electric Power Company, Hokuriku Electric Power ■■ Prior to the Fukushima nuclear disaster in March 2011, Company, Kansai Electric Power Company, Chugoku Japan relied on nuclear power for roughly 30% of its Electric Power Company, Shikoku Electric Power energy needs, with 60% coming from conventional Company, Kyushu Electric Power Company and sources such as coal, oil and natural gas. Okinawa Electric Power Company. ■■ Japan is aiming to reduce electricity demand by at least ■■ In the past, the electric power business in Japan was 10% by 2030. dominated by the General Electric Utilities, which had ■■ Japan has the second highest electricity rates in monopoly control in their respective service areas. Asia, after the Philippines. In 2011, the retail rate of After a revised Electric Utilities Industry Law came electricity was US$0.179 per kWh. into effect in 1995 (along with two later revisions), the situation has changed significantly, starting with ■■ Currently, all of Japan’s operating nuclear reactors have been permanently shut down or are temporarily the liberalisation of power generation and partial closed for inspection. This is in spite of the election liberalisation of retail sales.

of the largely pro-nuclear, Shinzo Abe-led Liberal ■■ Wholesale Electric Utilities are businesses having Democratic Party (LDP) in 2012. supply capacity of 2GW or above and supplying electricity to General Electric Utilities. Examples are Electricity laws J-Power and the Japan Atomic Power Company.

■ ■ The Basic Act on Energy Policy was passed by the ■■ Wholesale Suppliers (including IPPs) are businesses Japanese Diet in June 2002. The Act focuses on energy other than Wholesale Electric Utilities supplying security, adaptability to the environment and promotes electricity to General Electric Utilities, contracting the use of market mechanisms. with them for supply of 1MW or more for at least

■■ The Electricity Utilities Industry Law (which was 10 years, or for 100MW or more for at least five years.

amended significantly in 1995) sets out the procedures ■■ PPSs are businesses supplying electricity to customers for an electricity utility to obtain a licence from the contracted for 0.05MW or more, using the power line Minister of Economy, Trade and Industry. networks of General Electric Utilities. PPSs are new entrants in the liberalised retail electricity sector. Generation, transmission and distribution ■■ Specified Electric Utilities are businesses supplying ■■ The electricity market is dominated by regional electricity to certain defined areas using their own monopolies, with 85% of the country’s total installed power generation and distribution facilities, such as generating capacity produced by 10 privately owned power lines. companies. ■■ West Japan and East Japan have electricity running at ■■ The electricity producers are strictly regulated by the different frequencies. In West Japan it runs at 60Hz Ministry of Economy, Trade and Industry (METI). and in East Japan it runs at 50Hz. There are very few

■■ Companies engaged in the electric power business in conversion stations, resulting in difficulty transmitting Japan are classified either as General Electric Utilities, power from one region to another. Wholesale Electric Utilities, Independent Power Producers (IPPs), Power Producers and Suppliers (PPSs), or Specified Electric Utilities.

www.dlapiper.com | 39 RENEWABLES INDUSTRY OVERVIEW Solar energy

■■ Japan currently sources approximately 9% of its energy ■■ Japan is expected to become the world’s largest solar from renewable sources, with hydropower the largest market by year’s end with solar installation projects source of renewable energy. going beyond expectations to produce an anticipated 6.9GW to 9.4GW of energy in 2013. ■■ In 2010, a target of 20% renewable energy contribution was announced, however this target is not a central ■■ Japan is the third largest producer of PV panels. It is driver of renewable energy investment like in other regarded as a global pioneer in the residential solar jurisdictions. market.

■■ There was a significant push to develop renewable Geothermal energy energy in Japan in order to boost energy self- sufficiency and to move away from nuclear power in ■■ Japan’s geothermal capacity is 2.47GW, however the the wake of the 2011 disasters. resource is largely undeveloped.

■■ Although there was initial uncertainty in the Biomass energy renewables industry following the election of the pro-nuclear LDP in 2012, Japan has re-emerged as ■■ By July 2009, 218 towns were established as biomass one of the most promising renewables markets in the towns as part of the Biomass Nippon Strategy. Asia Pacific, particularly for solar energy. Biofuels energy ■■ Japan does not have a national emissions trading ■■ The Japanese Government predicts that Japan has the scheme, but does have regional schemes in Tokyo capacity to produce 6Gl per year of biofuels by 2030. and Saitama. Under the Cool Earth 50 initiative

launched in 2007, the Government has committed to ■■ Use of abandoned arable land (386,000ha) could reduce emissions by 50% on current levels by 2050. produce resource crops equivalent to 6.2Gl of oil. Later policies, like the Fukuda Vision, set even more ambitious carbon reduction targets. CURRENT ISSUES IN THE RENEWABLES

■■ Perhaps the most notable feature of Japan’s renewables INDUSTRY industry is its feed-in tariff regime (see below). ■■ The political instability of successive Japanese Governments is seen by some commentators as a Hydropower deterrent to renewables investment. Indeed, the industry ■■ 65% of Japan’s 34GW of hydropower reserves have is in minor state of regulatory flux with the new LDP already been tapped into. Government yet to make significant announcements on the country’s energy future. Nonetheless, this has ■■ It is easily the largest source of renewable energy in not deterred domestic and international developers Japan at present. investing in major projects in recent months.

Wind energy ■■ Nuclear energy remains unpopular with the Japanese public, with support for renewable energy options ■■ The topographical features of Japan present challenges in wind development. Hokkaido and Tohoku are two of continuing despite the likelihood of electricity price the regions where large-scale wind farms continue to be rises if renewable energy options were developed more constructed. Within these two prefectures, the Japanese aggressively.

Government has committed to the construction of ■■ Regional utilities have retained the right of refusal for a high voltage transmission network to help wind renewable energy generators. This has been a particular producers gain grid access. problem for wind producers with utilities often refusing to accept wind power on the grounds that it might ■■ In 2010, the total installed wind capacity was 2.3GW. destabilise the grid. Recently, Softbank Corp’s plans for ■■ Offshore wind is emerging as one of the most three solar farms in Hokkaido were also turned down promising renewables sources in the country.

40 | Renewable Energy in the Asia Pacific by a regional grid provider. Hokkaido Electric Power ■■ shortens the amount of time required to assess the Co emphasised that there was a limit to how many environmental impact of building and running wind large solar farms that could be incorporated into the farms; grid. ■■ deregulates the process of setting up small

■■ Complex environmental impact assessments and hydropower plants; zoning restrictions are also seen as significant barriers ■■ exempts solar power stations from regulations under to guaranteeing power markets for investors. the Factory Location Act;

■■ allows for geothermal power development in RENEWABLES LAWS national parks for firms that drill wells outside the ■■ The 2003 Renewable Portfolio Standard targeted parks; and solar power, wind power generation, biomass energy, ■■ gives power generation companies control over the hydropower and geothermal power: substance of Power Purchase Agreements. Electric ■■ the law requires electricity utilities to meet certain utilities cannot refuse requests by power generation annual renewable energy targets set by the Minister, companies to enter into agreements to supply power determined as a percentage of electricity sales; and from renewable energy sources unless there is a risk of unjust harm to the interests of the electric utility. ■■ an electricity utility may choose to meet its

obligation in the following ways: (i) by generation ■■ In order to receive the benefit of the feed-in tariff, a of electricity itself; (ii) by purchasing the supplier must first obtain accreditation from METI electricity generated from renewable resources for the facility generating renewable electricity. While from another party; or (iii) by purchasing tradable there are particular requirements for each kind of “Renewable Energy Certificates” from another renewable resource, the following criteria apply to all: party. Such Renewable Energy Certificates are ■■ the facility must have a system in place that enables granted to utilities that generate electricity from it to maintain its expected capacity during the renewable sources. anticipated term of the agreement with the electric utility operator that will purchase the electricity; GOVERNMENT INCENTIVE PROGRAMS ■■ the facility must have a proper mechanism to ■■ The 2011 Tax Reforms introduced tax exemptions accurately measure the amount of the renewable between 30 June 2011 and 31 March 2014 for the electricity supplied; acquisition of machinery and equipment to promote environmental protection. ■■ the functions and operations of the facility must be specifically identified and reported to METI; and Japan’s feed in tariff regime ■■ the installation and operating costs of the facility

■■ The Act on Purchase of Renewable Energy Sourced must be recorded accurately and filed with METI. Electricity by Electric Utilities, which became effective ■■ After a supplier has received accreditation, it may then on 1 July 2012, establishes a feed-in tariff regime for apply to enter into an agreement with an electric utility renewable energy. The tariffs are the Government’s operator. The terms of the agreement are determined chief incentive for renewables investment. The law: by METI.

■■ introduces a feed-in tariff regime for renewable ■■ Despite a 10% drop in solar rates, the 2013 revision of energy whereby energy operators are generally feed-in tariff rates by METI still provide some of the obligated to purchase set amounts of solar, wind, most generous feed-in tariff rates in the world. geothermal, hydropower and biomass energy at set rates; ■■ In 2012, the tariffs resulted in US$16.3 billion of renewable energy investment, which was an increase of 75% on the year prior.

www.dlapiper.com | 41 Structure of FIT Regime

Sell Renewable Electricity Provide Electricity Renewable Electric utility Electricity operators Suppliers Consumers Purchase Renewable Solar Electricity at term and Pay electricity price decided by METI Pay charge collected and surcharge Hydroelectric Distribute surcharge Compensation

Wind Cost-sharing Coordination Body Biomass Set Set purchase price and surcharge Geothermal procurement term (yearly) (yearly)

METI Accredit Facilities Advise on purchase Suppliers who price and term generate power Procurement Price at home Calculation Committee

MAJOR PROJECTS/COMPANIES ■■ mass distribution of solar PV panels to offices and ■■ The Fukushima prefecture is now set to become a residential buildings; and renewable energy hub. Aided by generous national government subsidies, construction is about to ■■ instigating ‘smart city’ plans.

commence on a number of projects that are a part of the ■■ In addition to ‘smart city’ plans in Chiba and prefecture’s goal to become 100% energy self-sufficient Fukushima, companies including Fujitsu, PanaHome by 2040. The projects include: Corp and Daiwa House are investing JPY50 billion (approx. US$528 million) for the construction of ■■ the world’s largest offshore wind farm to be built by a joint venture (including Toshiba, Hitaci, Zosen high-tech urban communities.

Corp and JFE Steel) off the Fukushima coast and ■■ In May 2013, Goldman Sachs announced plans to invest comprising of up to 143 floating turbines; as much as JPY50 billion (approx. US$487 million) in renewable energy projects over the next five years. ■■ a proposal to build Japan’s largest solar park; The firm also formed the Japan Renewable Energy ■■ construction of a biomass energy experiment Company to develop projects across a range of facility; renewables sources.

42 | Renewable Energy in the Asia Pacific ■■ Tokyo’s metropolitan government awarded Sparx FOREIGN INVESTMENT/OWNERSHIP a contract to establish a renewable energy fund ■■ Japan External Trade Organisation (Jetro) is a body for the region. METI have also announced plans that encourages foreign direct investment in Japan. for a nationwide renewable energy fund, while in November 2012 Mizuho Corp Bank launched a ■■ Jetro assists foreign investors through tours of regions JPY5 billion (approx. US$53 million) solar energy fund. and introductions to Japanese business persons.

■ ■■ In February 2013, Hitachi announced an investment ■ There are no restrictions on foreign investment for of JPY1 billion (approx. US$10.5 million) in an 8MW participation in the feed-in tariff regime. In fact, solar plant in Kumamoto prefecture, which is scheduled foreign investment is welcomed by the Government to to be operational by the end of 2013. help increase the country’s renewable electricity base.

■ ■■ SB Energy Corp will be constructing and managing ■ There are four ways in which corporations can Japan’s largest solar project, a 200MW project in establish a business presence in Japan: Tomakomai, Hokkaido. ■■ representative office (cannot engage in business

■■ A 13MW plant at Kawasaki is currently the largest operations, can only carry out supplementary and installed solar PV plant in Japan. Tokyo Electric Power preparatory tasks); Co along with Kawasaki City plan to build more solar ■■ branch office; plants in the region. ■■ subsidiary company; and ■■ Other major solar players include Zen-Noh (plans for 200MW of capacity by 2015) and Toshiba (plans ■■ limited liability partnership.

for 100MW of solar along the Fukushima coast). ■■ To lawfully operate, at least one director or Kyocera, IHI Corp, Mitsui Fudosan, Maeda Corp, Solar representative of the foreign company must be Frontier, Orix Corp, West Holdings Corp, Mitsui & Co present in Japan. and Tokyo Marine Asset Management Co have also announced solar project plans. RELEVANT INTERNATIONAL TREATIES

■■ Mitsui Ocean Development & Engineering Company ■■ Japan is a signatory to the United Nations Framework is constructing the world’s first hybrid wind-current Convention on Climate Change and the Kyoto Protocol. generation facility in 2013. Citing the United States’ and China’s reluctance to enter ■■ SB Energy is planning a 111MW wind project (among into binding emissions targets, Japan did not agree to a other larger proposals), while Marubeni Corp and Wind renewal of the Kyoto Protocol. Power Energy have announced a 250MW wind farm north of Tokyo. RELEVANT WEBSITES

■■ Daiwa House Industry Co completed a wind farm on ■■ Ministry of Economy, Trade and Industry – www.meti. the Sadamisaki Peninsula in 2007. It operates nine go.jp/english/ generators and provides enough energy for 6,500 homes. ■■ Jetro – www.jetro.go.jp/ ■■ Eurus Energy Holdings Corp has numerous wind farm projects in Japan. It developed Japan’s first major wind ■■ Japan Photovoltaic Energy Association – www.jpea. farm in Tomamae-cho, Hokkaido in 1999. gr.jp/08eng.html

■ ■■ J-Power operates 16GW of hydropower and thermal ■ Japan Wind Power Association – jwpa.jp/index_e.html

power plants. ■■ Agency for Natural Resources and Energy – www.meti.

■■ A 2.35GW Kannagawa hydropower plant is due online go.jp/english/aboutmeti/data/aOrganizatione/keizai/ in 2017. sigenenerugi/01. htm

www.dlapiper.com | 43 REFERENCES ■■ Deloitte, International Tax Japan Highlights 2012, accessed at: http://www.deloitte.com/assets/Dcom- ■■ U.S. Energy Information Administration, Country Global/Local%20Assets/Documents/Tax/Taxation%20 Analysis Brief, accessed at: http://205.254.135.7/ and%20Investment%20Guides/2012/dttl_tax_ countries/cab.cfm?fips=JA highlight_2012_Japan.pdf ■■ World Nuclear Association, Nuclear Power in Japan, ■■ Ministry of Economy, Trade and Industry, Statistics accessed at: http://www.world-nuclear.org/info/inf79. of METI, accessed at: http://www.meti.go.jp/english/ html statistics/ ■■ The Renewable Energy & Energy Efficiency ■■ Felicia Jackson, Japanese renewables: revolution Partnership, Policy DB Details: Japan (2012), deferred?, accessed at: http://www.environmental- accessed at: http://www.reeep.org/index.php?id= finance.com/features/view/864 9353&special=vi ewitem&cid=150

■■ Reegle, Country Energy Profile: Japan, accessed at: ■■ Japan External Trade Organization, accessed at: http:// http://www.reegle.info/countries/japan-energy-profile/ www.jetro.go.jp/ JP

44 | Renewable Energy in the Asia Pacific KAZAKHSTAN

MONGOLIA

UZBEKISTAN

N. KOREA TURKMENISTAN MALAYSIA S. KOREA JAPAN CHINA

AFGHANISTAN IRAN

PAKISTAN NEPAL BHUTAN

INDIA BANGLADESH

MYANMAR VIETNAM LAOS

THAILAND

CAMBODIA PHILIPPINES

SRI LANKA

MALAYSIA BRUNEI MALAYSIA

INDONESIA

PAPUA NEW GUINEA EAST TIMOR

Overview

Jurisdiction Language

Common law, Islamic law and customary Bahasa Malaysia (official), English, law Chinese dialects, Tamil, Telugu, Malayalam, Panjabi and Thai

Business Environment

■■ Ease of Doing Business Report 2013: 12 out of 185 (up 2 rankings)

■■ Global Competitiveness Index 2013: 25 out of 144 (down 4 rankings)

■■ Index of Economic Freedom 2013: 56 out of 177 (down 3 rankings)

■■ Corruption Perceptions Index 2012: 54 out of 176 (up 6 rankings)

Population Income GNI Per Capita (PPP TERMS)

29.7 million Upper middle $15,650

Profile Malaysia federated in 1963. The early years of the policies of successive governments have ensured that country were marred by a number of internal conflicts, manufacturing, services and tourism are Malaysia’s territorial claims from neighbouring countries and dominant industry sectors. The May 2013 federal election Singapore’s secession from the federation in 1965. captured the region’s attention with the incumbent Presently, Malaysia comprises 13 states and three federal National Front led by Najib Razak narrowly defeating territories. Former Prime Minister Tun Dr. Mahathir Anwar Ibrahim’s People’s Alliance. The National Front bin Mohammad (1981-2003) is largely credited with has ruled Malaysia since the country broke from British transforming Malaysia’s economy. The pro-business rule, yet this election was the strongest challenge the party has faced to retain government.

www.dlapiper.com | 45 ELECTRICITY INDUSTRY OVERVIEW ■■ Sabah Electricity Sdn Bhd (SESB) (formerly known as Sabah Electricity Board) for Sabah. ■■ In 2009, Malaysia’s total installed electricity capacity

was 27GW (not including private generation). Of this ■■ TNB is a private company that is wholly owned by the amount, gas and coal-sourced electricity contributed Malaysian Government, SESCO was fully privatised in over 90% of capacity. 2005, whilst SESB is owned by both TNB (80%) and the State Government of Sabah (20%). ■■ Malaysia has nearly achieved 100% electrification,

which is a significant increase on 1990 levels when ■■ The three main utility companies are now only 80% of Malaysia had electricity coverage. complemented by Independent Power Producers (IPPs) and to a lesser extent, by dedicated power producers Government and co-generators.

■ ■ Key government bodies in the energy sector are the: ■■ In 1993, licences were issued to IPPs to build, operate and own power plants. Currently, there are 27 IPPs, ■■ Energy Section of the Economic Planning Unit of the Prime Minister’s Department; which contribute approximately 43% of the total installed electricity generation capacity in Malaysia. ■■ Ministry of Energy, Green Technology and Water (keTTHA) which facilitates and regulates the RENEWABLES INDUSTRY OVERVIEW energy sector; and

■■ Malaysia has abundant domestic energy resources ■■ Energy Commission which was established under including oil, gas, hydropower and coal. However, the Energy Commission Act 2001 to also regulate domestic fossil fuel resources are depleting, which the energy sector with a particular focus on the has reinforced the need to source renewable energy electricity supply and piped gas supply industries in alternatives. Peninsula Malaysia and Sabah.

■■ Malaysia has targeted 985MW, or about 6% of its Electricity laws electricity generation, to be from renewable sources by 2015. The Government is anticipating strong progressive ■■ The Government has jurisdiction over electricity, gas, gas works and other works for the production and growth in renewables capacity through to 2050.

distribution of power and energy. ■■ As of September 2012 though, only 74MW of renewables capacity was connected to the utility grid. More than ■■ The Electricity Supply Act 1990 regulates a number of aspects of the electricity supply industry, including the: 430MW of renewables sourced electricity is off grid, mostly from private palm oil millers and through solar ■■ supply of electricity at reasonable prices; hybrid systems.

■■ licensing, registration and control of any electrical ■■ The Sustainable Energy Development Authority (SEDA) installation, plant and equipment with respect to is the statutory body formed under the Sustainable matters relating to the safety of persons; and Energy Development Authority Act 2011. The key role of

■■ efficient use of electricity. SEDA is to administer and manage the implementation of the feed-in tariff. Generation, distribution and transmission ■■ The percentage distribution (in total capacity terms)

■■ Despite some privatisation, Malaysia’s electricity industry of approved projects entitled to the feed-in tariff was is mostly vertically integrated and monopolistic. The three dominated by solar PV (43%), small hydro (26%), main utility companies that are responsible for generation, biomass (26%) and biogas (5%). transmission and distribution of electricity are: Renewable energy policies ■■ Tenaga National Berhad (TNB) for Peninsula Malaysia; ■■ The National Renewable Energy Policy was approved by cabinet in April 2010. The policy aims to “enhance ■■ Syarikat SESCO Berhad (SESCO) (formerly known the utilisation of indigenous renewable energy resources as Sarawak Electricity Supply Corporation) for to contribute towards national electricity supply security Sarawak; and and sustainable socio-economic development”.

46 | Renewable Energy in the Asia Pacific ■■ The policy includes a five-stage plan to enhance Geothermal energy renewable energy capacities, namely to: ■■ The Tawau geothermal field is estimated to have

■■ introduce a legal and regulatory framework; potential for 67MW, with temperatures between 220 and 236 degrees Celsius. RM1.5 million (approximately ■■ provide a conducive business environment for US$473,000) has been allocated for research into the renewable energy; site, and plans for its development have been included ■■ intensify human capital development; in the 10th Malaysian Plan (2011 – 2015).

■■ enhance renewable energy research and Biomass energy development; and ■■ Malaysia is the largest palm oil producer in the world ■■ create public awareness and renewable energy and has abundant sources of palm oil biomass. policy advocacy programs. ■■ It has been estimated that technical biomass potential in ■■ Malaysia is arguably still at stage two following the Malaysia could be 29GW. Along with biogas sources, introduction of renewable energy legislation in 2011 biomass could generate up to 20% of Malaysia’s total (see below). electricity needs. Currently, the country produces ■■ In 2001, the Government introduced the Five Fuels around 18 million tonnes of palm oil annually. Policy, which was part of the 8th Malaysia Plan (2001 – 2005). It added renewable energy to the CURRENT ISSUES IN THE RENEWABLES traditional “four fuels policy” (which consisted of coal, INDUSTRY hydropower, natural gas and oil). ■■ Palm oil is a contentious, yet potentially vast renewable Hydropower energy source for Malaysia. Large and often forested areas need to be cleared for plantations, which ■■ Hydropower is the dominant renewable energy impacts on Malaysia’s carbon reduction platform and generator in Malaysia. conservation efforts. Palm oil plantations already cover ■■ Most suitable hydropower sites in Peninsular Malaysia approximately 15% of the country (4.7 million ha). have been developed. States like Pahang, Kelantan and ■■ Most renewables projects in Malaysia have been on a Perak have been earmarked for potential development. small scale to meet short or medium term goals. Some Wind energy commentators suggest there is a need for larger projects to satisfy increasing electricity demands and renewable ■■ Onshore wind sites are limited, however they have energy targets, yet approvals for such large projects exhibited potential for small and medium scale have not been forthcoming from the Government. projects, with average wind speeds of 4.1m/s recorded in the eastern Peninsula region of Malaysia. ■■ In recent months there has been confusion about the 1% charge on electricity bills that contributes to the ■■ Overall, the wind industry is underdeveloped with an Renewable Energy Fund (REF). TNB has, by press estimated capacity of 0.15MW at present. statement, clarified that the 1% charge is not new and Solar energy not a scheme to collect money from unwary customers as alleged. The 1% charge is imposed following the ■■ It is estimated that just 1.5MW of grid-connected PV launch of the Feed-in-Tariff system. This system is a systems are installed in Malaysia, however stand-alone funding mechanism under the Renewable Energy Act PV systems are prevalent, particularly in rural areas. 2011 and Sustainable Energy Development Authority ■■ SEDA is encouraging “the massive involvement of Act 2011 designed to encourage the development of the public in solar systems”. In 2012, it allocated solar renewable energy via cost-sharing among electricity rooftop systems for 2,000 households and in 2013 it consumers in Peninsular Malaysia. plans to allocate a further 10,000 solar systems.

■■ Solar energy is far more feasible in Malaysia than wind or geothermal energy for instance, as is evidenced by recent feed-in tariff grants.

www.dlapiper.com | 47 RENEWABLES LAWS ■■ Renewable Energy (Technical and Operational Requirements) Rules 2011; Renewable Energy Act 2011 ■■ Renewable Energy (Recovery of Moneys by ■■ This Act is Malaysia’s main regulatory instrument in Distribution Licensee) Rules 2011; and prioritising renewable energy over fossil fuels. It provides ■■ Renewable Energy (Administrative Fees) for the establishment and implementation of the feed-in Order 2011. tariff to support the generation of renewable energy.

■■ Part II of the Act establishes the feed-in tariff. Under Sustainable Energy Development Authority Act 2011 section 4 of the Act, generally only persons who produce ■■ The Sustainable Energy Development Authority renewable energy from a renewable energy installation Act 2011 gives SEDA the power to do all things having an installed capacity of not more than 30MW necessary or expedient for or in connection with the (or such higher installed capacity as may be approved performance of its functions under the sustainable by the Minister), and who meet such other criteria as energy laws. SEDA’s functions include promoting may be prescribed by SEDA, are eligible for the tariff. the national policy objectives for renewable energy, ■■ Part III of the Act deals with the connection, purchase promoting investment in the sector and advising the and distribution framework for renewable energy, Government on sustainable energy. including:

■■ renewable energy power purchase agreements GOVERNMENT INCENTIVE PROGRAMS (PPAs); ■■ The feed-in tariff is Malaysia’s main mechanism

■■ the procedure for making an application for incentivising the generation of renewable energy up to connection to a supply line when a PPA has been 30MW in size. Special approval from the Minister will concluded; and need to be obtained for renewable energy installations with an installed capacity of more than 30MW in ■■ the requirement for a distribution licensee to purchase size. This mechanism allows electricity produced and distribute electricity generated by renewable from indigenous renewable resources to be sold to energy installation connected to a supply line. power utilities at a fixed premium price for a specific Licensees who distribute renewable-sourced electricity duration. The feed-in tariff system is not financed by are given priority over fossil fuel-sourced electricity. the Government. It is financed by electricity consumers ■■ Part IV of the Act addresses the feed-in tariff, as well themselves, who contribute 1% of their total electricity as outlining the amount a distribution licensee may bill towards the renewable energy fund. However, recover from the renewable energy fund. domestic customers who consume 300 units of electricity or less each month do not have their tariffs ■■ There is significant subsidiary legislation under the raised to contribute to the fund. Renewable Energy Act, including:

■■ Currently, biogas, biomass, solar PV and small ■■ Renewable Energy (Criteria for Renewable hydropower projects are eligible for the tariff. Resources) Regulations 2011;

■■ Tax incentives are open to companies providing ■■ Renewable Energy (Allocation form Electricity energy conservation services. Under a 2011 Budget Tariffs) Order 2011; announcement, the following tax incentives will be ■■ Renewable Energy (Feed-in Approval and Feed-in extended for applications received until 31 December Tariff Rate) Rules 2011; 2015. These include:

■ ■ Renewable Energy (Renewable Energy Power ■■ a pioneer status, which grants an income tax Purchase Agreement) Rules 2011; exemption of 100% of statutory income for a period of 10 years;

48 | Renewable Energy in the Asia Pacific ■■ an investment tax allowance of 100% on the FOREIGN INVESTMENT/OWNERSHIP qualifying capital expenditure incurred within a ■■ In 2009, Malaysia relaxed its foreign investment laws period of five years; significantly. Among the changes, the Government

■■ exemption on import duty and sales tax on imported has removed the requirement for 30% ethnic machinery, equipment, materials, spare parts and ownership of Malaysian companies. As a result of consumables used directly in the generation process these reforms, Malaysia has become a more attractive and that are not produced locally; and foreign investment destination. The ethnic ownership restriction still applies in strategic sectors such as ■■ full exemption on sales tax for locally purchased the telecommunications, ports, energy (not including machinery, equipment, materials, spare parts and renewable energy) and transport sectors. consumables. The exemption is for a period of one year, commencing from the date of application. RELEVANT INTERNATIONAL TREATIES ■■ The Government has also earmarked RM1.5 billion (approximately US$473 million) in a Green Technology ■■ Malaysia became a signatory to the United Nations Financing Scheme (GTFS). The scheme is intended to Framework Convention on Climate Change in 1993 and benefit producers as well as users of green technology. it ratified the Kyoto Protocol in 2002. As a developing It is a soft loan supported by the Government and nation, Malaysia has no binding emission reduction the nature of it is similar to a normal loan, where the targets under the Kyoto Protocol, however, as at 2009, it borrower is required to pay an instalment to the bank had registered 67 clean development mechanism projects. throughout the tenure period. ■■ During the Copenhagen talks of 2009, Malaysia’s Prime Minister pledged that his country would adopt a MAJOR PROJECTS/COMPANIES voluntary greenhouse gas emissions reduction target of up to 40% of 2005 levels by 2020. ■■ Yingli Green Energy Holding Company Limited announced in May 2013 that it will supply over 10MW of solar panels for Malaysian PV projects. RELEVANT WEBSITES

■ ■■ Kulim Hi-Tech Park is the first high technology ■ Renewable Energy Capacity Map – http://seda.gov.my/ industrial park in Malaysia. The park’s primary aim go-home.php?omaneg=000101000 00001010101000100 is to help Malaysia achieve its “Vision 2020” for the 001000000000000000000000&s=140 country to be fully industrialised. ■■ More information on feed-in tariffs, including rates –

■■ EQ Solar is investing US$500 million to manufacture http://www.seda.gov.my/ solar modules, cells and wafers in Senai Hi-Tech Park. ■■ Energy Unit of the Economic Planning Unit of the

■■ Berjaya Solar Sdn Bhd is investing US$61 million Prime Minister’s office – www.epu.gov.my in a 100MW plant at Bukit Tagar, as a precursor to a ■■ Ministry of Energy, Green Technology and Water – proposed 50MW solar PV plant. www.kettha.gov.my

■■ The Hulu Terengganu (250MW) and Ulu Jelai (372MW) ■■ The Energy Commission – www.st.gov.my hydropower projects are among other notable planned projects. ■■ Sustainable Energy Development Authority of Malaysia – http://seda.gov.my/ ■■ Bosch has invested US$736 million for a new solar energy manufacturing site in Penang. ■■ Tenaga National Berhad – http://www.tnb.com.my/

■■ Petroliam Nasional Berhad (PETRONOS) – state- ■■ Bakun Hydropower Project will add 2.4GW to Malaysia’s hydropower capacity. owned oil and gas corporation – http://www.petronas. com.my/Pages/default.aspx

www.dlapiper.com | 49 ■■ National Renewable Energy Policy and Action Plan – ■■ Department of Statistics, Malaysia, A Brief http://www.seda.gov.my/go-home.php?omaneg=00010 Presentation on the Malaysia Electricity Supply 10000000101010100010000100000000000000000000 Industry, accessed at: http://www.iea.org/work/2008/ 0&s=31 bangkok/malaysia.pdf

■■ Suruhanjaya Tenaga Guidelines in Applying REFERENCES Energy Efficiency Standards, accessed at: http:// www.st.gov.my/v4/index.php?option=com_ ■■ Tildy Bayar, Malaysia Explores its Renewables Options, accessed at: http://www. renewableener content&view=article&id=4 080&Itemid=1753& gyworld.com/rea/news/article/2011/09/malaysia- lang=en

explores-its-renewables-options ■■ Wei-nee Chen, Renewable Energy Status in Malaysia, accessed at: http://www.mida.gov.my/env3/uploads/ ■■ Reegle, Energy Profile Malaysia, accessed at: http:// www.reegle.info/countries/malaysia-energy-profile/MY events/Sabah04122012/SEDA.pdf

50 | Renewable Energy in the Asia Pacific MONGOLIA

KAZAKHSTAN

MONGOLIA

UZBEKISTAN

N. KOREA TURKMENISTAN

S. KOREA JAPAN CHINA

AFGHANISTAN IRAN

PAKISTAN NEPAL BHUTAN

INDIA BANGLADESH

MYANMAR VIETNAM LAOS

Overview THAILAND

PHILIPPINES Jurisdiction Language CAMBODIA

Civil law SRI LANKAMongolian

MALAYSIA BRUNEI MALAYSIA Business Environment INDONESIA

■■ Ease of Doing Business Report 2013: 76 out of 185 (up 12 rankings) PAPUA NEW GUINEA ■■ Global Competitiveness Index 2013: 93 out of 144 (up 3 rankings) EAST TIMOR

■■ Index of Economic Freedom 2013: 75 out of 177 (up 6 rankings)

■■ Corruption Perceptions Index 2012: 94 out of 176 (up 26 rankings)

Population Income GNI Per Capita (PPP TERMS)

2.8 million Lower middle $4,290

Profile Mongolia is the second largest landlocked and the a democratic republic in 1990, however more ethnic most sparsely populated country in the world. Perhaps Mongols live in present-day Inner Mongolia, which is a Mongolia’s most famous historical figure is Genghis Khan neighbouring province of China. The capital, Ulan Bator, who founded the Mongol Empire in 1206. Mongolia was is currently home to about 45% of the population, while later invaded and occupied by the Chinese during the approximately 30% of Mongols are still nomadic or Qing Dynasty, and did not gain international recognition semi-nomadic. Continued improvements in the country’s as a sovereign state until 1945. Unsurprisingly, both business environment (see above) have resulted in the Chinese and Soviet Union heavily influenced the increased foreign investment and an increased presence of country’s culture, economy and institutions. Following foreign companies in the country. the collapse of the Soviet Union, Mongolia became

www.dlapiper.com | 51 ELECTRICITY INDUSTRY OVERVIEW generation capacity. In the same year, renewables contributed 4.52% and were comprised largely of ■■ Much of the foreign interest in Mongolia centres around hydropower-sourced electricity. its current mining boom which has seen large fossil fuel

and metal-based mines open. The boom has caused an ■■ The national transmission and distribution grid, as annual growth rate in electricity demand above 8%. well as seven power plants, make up the electricity supply system. ■■ The energy sector is struggling to meet the growing need

for electricity. The Government has commissioned large ■■ Mongolia deregulated and privatised the power coal mines and hydropower projects in an attempt to sector in 2001 upon the passing of the Energy Law of meet present and future demand. Mongolia. The law sought to vertically separate the sector by separating the generation, transmission and ■■ Mongolia has seven coal-fired power plants, two distribution companies. Despite this separation, all hydropower plants and some small diesel and energy enterprises remain government-owned. renewable energy generators. The seven coal-fired

power plants have an installed capacity of 856MW, ■■ In 2002, a single buyer market model was introduced. however due to the age and condition of these plants, This model stipulates that the five power-generating actual available capacity is closer to 615MW. companies sell electricity at a regulated tariff to the Central Regional Distribution Company, which is the ■■ Mongolia has seasonal variations in electricity demand, sole buyer of electricity and which then on-sells to with winter requiring additional energy to be imported 10 distribution companies. from Russia for heating.

■■ In addition to the single-buyer market model, a spot ■■ The financial viability of Mongolia’s electricity market has been operating since 2006 and an auction providers is being threatened by the increasing price market since 2007. of Russian electricity, inefficient infrastructure and the low cost of electricity for consumers. RENEWABLES INDUSTRY OVERVIEW ■■ The World Bank and USAid estimate that the price of electricity will need to increase by at least 60% for the ■■ Mongolia is teeming with renewable energy resources, energy industry to cover the costs of providing electricity. however the main barrier the industry faces is how to develop viable renewable energy projects across a ■■ The electrification rate in 2008 was 87.5%, however sparse country that presently has out-dated, Soviet-era vast discrepancies in access to electricity exist between infrastructure. urban and rural or nomadic people. ■■ A recent study by the US National Renewable Energy ■■ There are three separate electricity systems in Laboratory and the Mongolian National Renewable Mongolia: Energy Centre, estimated that Mongolia has potential ■■ the Central Energy System, which serves Ulan to generate 2,600GW of wind, solar, geothermal and Bator and surrounding areas, represents the vast hydropower-based energy. This figure represents majority of all Mongolian electricity supply and approximately 25% of total global electricity demand is comprised of five coal powered plants and an and encapsulates the vast potential of Mongolia for interconnection with Russia; renewables development.

■■ the Eastern Energy System, which has one ■■ Mongolian President Tsakhiagiin Elbegdorj has been combined heat and power plant; and lauded internationally for his eco-friendly policies and for his promotion of renewable energy. At the ■■ the Western Energy System, which relies on the Northeast Asia Renewable Energy Cooperation Forum importation of electricity from Russia. in November 2012, the President outlined Mongolia’s Generation, distribution and transmission long term goal of exporting renewable energy to China and Russia. He was re-elected for a second presidential ■■ Electricity generation in Mongolia is dominated by term in June 2013. coal-fired combined heat and power plants. In 2009, these sources accounted for over 95% of total

52 | Renewable Energy in the Asia Pacific ■■ Government rhetoric on renewable energy has been conditions of sustainable social development through strong with authorities claiming that Mongolia can increasing the share of renewable energy in the become “the Saudi Arabia of the East, not for coal but electricity supply of Mongolia”. for renewable energy”. ■■ The program is currently in its second phase

■■ Mongolia’s National Renewable Energy Plan (see (2010 to 2020). below) stipulates a goal of 20 – 25% electricity ■■ Phase one of the project (2005 to 2010) saw the generation to come from renewable sources by 2020. construction of 12MW and 11MW hydropower plants

■■ The European Bank for Reconstruction and in Durgun and Taishir. Additionally, 12 renewable Development (EBRD) and the Energy Regulatory energy systems for Soum centres (districts) with a Authority (ERA) of Mongolia developed a Renewable capacity of 60-150kW were constructed. Energy Regulatory Development Road Map. The ■■ The long-term goal of the program is to have total roadmap seeks to establish stronger regulation of the installed capacity generated from renewable sources to renewables industry to encourage private investment. be 20-25% by 2020. The target of 3-5% of renewables-

■■ To coincide with Mongolia hosting the UN’s World sourced capacity was achieved for phase one. Environment Day in June 2013, the UK is sending a ■■ The program is administered by the NREC. renewable energy trade mission to further promote the use of British technology. Hydropower

Government ■■ Mongolia’s 3,800 streams and rivers, which are located primarily in the northern and western areas of the ■■ The Mongolian Government plays an active part in the country, have the potential for the generation of up to renewables industry through a number of ministries 6.4GW of hydropower. and authorities, including the: ■■ Currently, Mongolia has approximately 12MW of ■■ Ministry for Mineral Resources and Energy, which hydropower capacity, with an additional 12MW under formulates energy policies and also approves construction. foreign investment;

■■ Energy Authority, which conducts broader research Wind energy and technical monitoring of the energy sector. ■■ About 10% of Mongolia’s total territory has been One of the divisions within the Authority is the deemed as suitable for wind projects, which amounts to Renewable Energy Division; a vast potential of 160GW of wind power. However the

■■ Energy Regulatory Authority, which sets energy highest winds are located in the south of the country, prices, issues licenses and tariffs and also regulates far from major population centres. the sector; ■■ The Salkhit wind farm, currently under construction,

■■ Unfair Competition Regulating Authority, which is the largest renewable energy project in the country addresses anti-competitive behaviour; (see below).

■ ■■ National Committee, which is charged with ■ Mongolia has two operational wind farms at present. reducing the high pollution levels in Ulan Bator; They are the 3MW wind farm at Naran and the 5MW wind farm at Tsagaanchuluut. ■■ National Renewable Energy Centre (NREC); and

■■ Ministry of Nature and Environment. Solar energy

■■ “The land of the blue sky” has, in an average year, 2005 National Renewable Energy Program 270 to 300 ‘sunny’ days. Accordingly, solar potential in

■■ The objective of this program is to “enhance ecological the country is quite high, estimated to be 11GW. balance, to improve economic efficiency, to reduce poverty and unemployment and to create favourable

www.dlapiper.com | 53 ■■ There are three solar PV installations in operation: ■■ Despite its vast potential, the Government may choose to reduce renewables investment given the urgency of ■■ the Naran Plant (5kW); power shortfalls and the affordability of coal-generated ■■ the Noyon plant (200kW); and electricity.

■ ■ the Tsagaanchuluut plant (1kW). ■■ Operators have experienced some problems with renewable energy infrastructure. For instance, screw ■■ One of Mongolia’s most successful renewable energy initiatives has been the Solar Gers Project. Under the connections on large wind turbines have failed, causing project, 100,146 herder families have been provided them to blow over while poor quality wind turbines with portable solar energy systems since 1999. The have led to delays in energy production. project is jointly funded by the World Bank and Dutch Government and provides a 50% subsidy on the cost of RENEWABLES LAWS solar systems. ■■ The Energy Law of Mongolia 2001 regulates matters

■■ The Gobi Desert has been earmarked as a possible of energy generation, transmission, distribution and location for a large solar PV or concentrated solar plant. dispatching, opens the industry to private sector investment and coordinates supply activities, as well as Geothermal energy infrastructure matters.

■ ■ 40 possible geothermal sites have been identified, with ■■ The Program on Integrated Power Energy System of projects at Tsenkher, Khujirt and Shargaljuut in the Mongolia 2002 sets the long-term strategic plan to form Khangai region deemed the most feasible. the integrated power system. It is to be implemented over three stages between 2007 and 2040. ■■ There is potential for 45MW to 900MW of geothermal

power in Mongolia, however Mongolia has not yet ■■ The Renewable Energy Law 2007 establishes a feed-in generated power from geothermal resources. tariff range for renewable energy, which varies among different types of renewables. The law also introduced ■■ The Shivert area has measured surface temperatures of 55 degrees Celsius. the first long-term Power Purchase Agreement between the Central Energy System Transmission Network, a Biomass energy state-owned stock company, and Newcom Holdings.

■■ The biomass potential of the country has not been extensively researched, however production from GOVERNMENT INCENTIVE PROGRAMS

animal manures, particularly in rural areas, is deemed ■■ The Government offers a variety of incentives for to have potential. renewable investments, particularly from the feed-in tariff rates. The most generous tariffs are provided in solar ■■ There are currently no biofuels or biomass facilities in Mongolia. energy, with tariffs also for wind and hydropower energy.

CURRENT ISSUES IN THE RENEWABLES MAJOR PROJECTS/COMPANIES

INDUSTRY ■■ The EBRD invested US$47 million to help Mongolia build its first wind energy project. The 50MW Salkhit ■■ There are several challenges in establishing a viable renewables industry in Mongolia, such as the: wind farm is also Mongolia’s first-ever private energy enterprise. The project is being constructed 70km ■■ high degree of subsidisation of electricity prices; south of the capital by the Newcom Group. Once fully

■■ small market; operational, it is expected to provide about 5% of the country’s electricity needs. The 10th wind turbine was ■ ■ lack and inadequacy of infrastructure; and installed in November 2012, while earlier in 2013 the

■■ distance between population centres and renewable project was named the ‘Project Finance Asia Pacific sources. Renewable Deal of the Year 2012’ by the Project Finance Magazine.

54 | Renewable Energy in the Asia Pacific ■■ The Newcom Group is regarded as Mongolia’s leading RELEVANT WEBSITES renewable energy company. ■■ National Renewable Energy Centre – http://www.

■■ Softbank Corp and the Newcom Group are working to renenergy.com/start1. html develop a 300MW wind farm in the Gobi Desert. ■■ Newcom Group – http://www.newcom.mn/en/

■■ The 100MW Orkhon hydropower plant in the Central company/26 Region has been identified as a priority project by the ■■ Asian and Pacific Centre for Transfer of Technology of NREC. However, the project is only at the feasibility the United Nations – Economic and Social Commission stage. for Asia and the Pacific report: Mongolia’s Renewable Energy – http://recap.apctt.org/Countries/PDF/ FOREIGN INVESTMENT/OWNERSHIP Mongolia_CountryReport.pdf

■ ■ The Mongolian Government has set up the Foreign ■■ Pictorial tour of Mongolia’s Solar Gers Project – http:// Investment and Foreign Trade Agency to help bolster www.worldbank.org/en/news/video/2012/09/20/ international interest and investment in Mongolia. mongolia-providing-portable-solar-power-to-100000- herder-families ■■ In June 2012, the Government moved to regulate foreign investment. The new law classifies foreign investment into two categories: REFERENCES

■■ foreign investment in strategic sectors; and ■■ Reegle, Energy Profile Mongolia, accessed at: http:// www.reegle.info/countries/mongolia-energy-profile/ ■■ foreign investment by state-owned entities. MN ■■ Foreign investment restrictions were marginally relaxed in ■■ Energici, Mongolia – Renewable Energy Profile, April 2013 with Mongolia’s Parliament easing restrictions accessed at: http://www.energici.com/energy-profiles/ on private foreign companies investing in ‘strategic by-country/asia-m-z/mongolia sectors’ (mining, media and banking). The amendments remove the need for Parliament to review investments ■■ European Bank of Reconstruction and Development, from non-state owned companies, however state- Mongolia, accessed at: http://ws2-23.myload spring. owned companies or companies with government equity com/sites/renew/countries/Mongolia/profile.aspx investing in over 49% of a company operating within a ■■ Michael Kohn, Mongolia’s Parliament Approves ‘strategic sector’ still require parliamentary approval. Changes to Foreign Investment Law, accessed at: http:// Any investment in a ‘strategic sector’, whether by a www.bloomberg.com/news/2013-04-19/mongolia-s- private or public company, must obtain government, parliament-approves-changes-to-foreign-investment- prime ministerial and/or cabinet approval. Effectively law.html therefore, the amendments merely transfer some foreign investment approvals from Parliament to the Government. The amendments were introduced after a 17% drop in foreign direct investment in Mongolia in 2012.

RELEVANT INTERNATIONAL TREATIES

■■ Mongolia ratified the United Nations Framework Convention on Climate Change in 1993 and the Kyoto Protocol in 1999. However as a non-annex one country, it does not have any binding emissions targets.

www.dlapiper.com | 55 KAZAKHSTAN MYANMAR MONGOLIA

UZBEKISTAN

N. KOREA TURKMENISTAN

S. KOREA JAPAN CHINA

AFGHANISTAN IRAN

PAKISTAN NEPAL BHUTAN

INDIA BANGLADESH

MYANMAR VIETNAM LAOS

THAILAND

CAMBODIA PHILIPPINES

SRI LANKA

MALAYSIA BRUNEI MALAYSIA

INDONESIA

Overview PAPUA NEW GUINEA EAST TIMOR Jurisdiction Language

Common law and customary law Burmese

Business Environment

■■ Ease of Doing Business Report 2013: not listed out of 185

■■ Global Competitiveness Index 2013: not listed out of 144

■■ Index of Economic Freedom 2013: 172 out of 177 (up 1 ranking)

■■ Corruption Perceptions Index 2012: 172 out of 176 (up 8 rankings)

Population Income GNI Per Capita (PPP TERMS)

48.3 million Low <$1,025 (est.)

Profile Myanmar (or Burma) attained independence in 1948. This Despite another brutal crackdown of pro-democracy was the start of a long period of military rule, civil unrest, activists in 2007 and a cyclone which killed 138,000 ethnic-based conflict and isolation from the outside world. people in 2008, parliamentary elections were held in 2010. Multiparty legislative elections were held in 1990 which The ruling Union Solidarity and Development Party won resulted in Aung San Suu Kyi’s National League for 75% of the seats in a controversial election whilst the Democracy winning in a landslide victory, however the new parliament appointed Thein Sein as president. Since ruling military junta did not hand over power and Aung then though, political and social reforms have abounded. San Suu Kyi subsequently faced years of house arrest. Aung San Suu Kyi is now the leader of the opposition, the

56 | Renewable Energy in the Asia Pacific Government has signed peace deals with ethnic rebels, ■■ Myanmar has not received extensive development foreign investment laws have been released as President assistance from organisations like the Asian Sein has toured global capitals promoting the country, Development Bank, because of economic sanctions. political prisoners have been released and the country has gradually eased civil rights restrictions. Despite the Electricity laws relaxing of some economic sanctions as a result of these ■■ The Electricity Act 1984, sets out the requirements for reforms, the country remains one of the least developed the electricity authority, the duties and responsibilities nations in the world. In 2014, Myanmar will chair the of electricity inspectors and also sets out punishments/ Association of South East Asian Nations. fines for various offences.

■■ Other important electricity regulation includes the: ELECTRICITY INDUSTRY OVERVIEW ■■ Electricity Act 1948 (amended in 1967); ■■ Total installed electricity capacity is estimated to be 3.3GW, consisting of: ■■ Electricity Rules 1985; and

■ ■■ 2,520MW of hydropower (76%); ■ National Environment Policy 1994.

■■ 715MW of gas (21%); and Government

■■ 120MW of coal (3%). ■■ The Ministry of Electric Power (MOEP) formerly

■■ Myanmar’s per capita electricity consumption divided the electricity sector into the gas and hydro is amongst the lowest in the region, while the power sector (controlled by the MOEP (1)) and the electrification rate is just 26% (although it has risen power distribution sector (controlled by the MOEP (2)). from 11% in 1988 and 16% in 2006). However in September 2012, the MOEP was merged into one ministry. ■■ Energy demand has increased consistently since 1990. Peak demand was 322MW in 1990 and 1.53GW in ■■ Under the MOEP exists a number of departments with 2011. This accounts for an annual increase of 6.9%. varying roles, including the: The economy is expected to grow by 6% in 2013, ■■ Department of Hydropower Planning, which is resulting in a further increase in energy demand. responsible for hydropower and thermal power

■■ Rolling blackouts are introduced to cover the excess project planning; in demand, particularly in the dry season when ■■ Department of Electric Power, which oversees gas hydropower facilities are less productive. turbines, wind and other projects;

■■ Myanmar’s National Energy Policy has a number of ■■ Department of Hydropower Implementation, which aims, including: (as its name suggests) governs the implementation

■■ to maintain current energy dependence; of hydropower and thermal power projects;

■ ■■ the promotion of renewable energy; ■ Myanmar Electric Power Enterprise, which administers transmission lines, sub-stations, ■■ the promotion of energy efficiency and gas turbines, wind farms and small hydropower conservation; and generation;

■■ the use of alternative fuels in households. ■■ Hydropower Generation Enterprise, which is

■■ Myanmar Agenda 21 is a national development responsible for hydropower stations and coal-fired document that seeks to facilitate the integration thermal plant generation; of environmental and sustainable development ■■ Electric Supply Enterprise, which is responsible for considerations. The 2009 National Sustainable electricity distribution outside of the capital; and Development Strategy also envisages a similar focus.

www.dlapiper.com | 57 ■■ Yangon City Electricity Supply Board, which ■■ The National Environmental Conservation Committee is responsible for electricity distribution within is responsible for national climate change policy, Yangon (Rangoon). however the country does not have a climate change strategy at present. Generation, distribution and transmission Hydropower ■■ All power generation companies are state-owned.

■■ Myanmar has a hydropower potential of over 100GW ■■ Distribution and transmission infrastructure is limited, from its four main river basins: Ayeyarwaddy, particularly outside of the capital. In an effort to Chindwin, Thanlwin and Sittaun. address such shortages, Myanmar joined the Greater

Mekong Sub-region Economic Cooperation to aid ■■ Over 200 sites have been recognised as suitable for in regional power interconnections and power trade hydropower development throughout the country, 92 of arrangements, as well as to facilitate the exchange of them for large hydropower projects. information on renewable energy. ■■ Approximately 1.5GW to 2.65GW of hydropower has

■■ The inadequacy of transmission infrastructure was been developed. Amongst this capacity, there are 11 seen in 2011 with technical and non-technical losses at existing small hydropower facilities and 14 facilities 27% and as high as 30% in 2003. are currently under construction.

■■ The transmission infrastructure consists of an ■■ Hydropower will be the main contributor to any interconnected overhead grid of 230kV, 132kV and increase in renewable energy capacity in Myanmar 66kV. There are plans to introduce a 500kV line to and it is the only renewables source currently being connect the north and the south of the country. The commercially exploited. existing three lines are 9,886km long. ■■ The majority of hydropower potential is located on

■■ In early June 2013, the Japanese Prime Minister visited the eastern side of the country in Kayin State (17GW Myanmar and announced extensive Japanese support potential), Shan State (7GW potential) and Kayah State for developing Myanmar’s electricity infrastructure. (3.9GW potential).

■■ Hydropower facilities within the country range from RENEWABLES INDUSTRY OVERVIEW village-scale projects made from wood to modern turbine systems. ■■ According to government statistics, renewable energy use (and energy used from fossil fuels), Wind energy has increased across all types of renewable energy

since the year 2000. ■■ Myanmar has vast potential for wind energy, however the industry is currently underdeveloped. ■■ Total installed renewables capacity is now 150MW.

■■ There are some small wind farms in operation in the ■■ The Ministry of Energy is targeting an additional country, including a 1.2kW wind turbine in Kyauske 500MW of renewable energy by 2015. This represents Township in Mandalay, a 1.2kW facility at the 15% of current installed capacity. Government Technical High School in Ayeyarwaddy ■■ In 2005, Myanmar signed a memorandum of Region and a 3kW wind turbine run by the Ministry of understanding with Thailand to cooperate on renewable Science and Technology. energy matters. Solar energy ■■ The Government has stated that it needs international

assistance to develop solar energy, wind energy, tidal ■■ As with other South East Asian nations, Myanmar has energy and geothermal energy due to high capital costs high solar radiation levels. However, like the country’s and a lack of technological knowledge in the country. wind industry, the solar industry is also at a research and development phase. ■■ The Ministries of Science, Technology and Agriculture together have a regulatory purview which covers renewable energy.

58 | Renewable Energy in the Asia Pacific ■■ Stand-alone PV systems are being used for rural CURRENT ISSUES IN THE RENEWABLES electrification for areas that cannot be connected to the INDUSTRY national grid, with notable initiatives in schools and ■■ Myanmar’s renewables industry is underdeveloped, and universities. faces a number of issues in developing viable projects, including the: Geothermal energy ■■ lack of a renewables regulatory regime; ■■ 93 geothermal locations have been identified throughout Myanmar. ■■ subsidised cost of electricity that discourages power investments; ■■ The country is considered to have commercially viable geothermal sites. ■■ lack of transparency in dealings with government;

■■ The Electric Power Development Company of Japan ■■ lack of human resource capacity; has been involved in helping government ministries ■■ lack of adequate transmission and distribution and state-owned enterprises in testing various sites. infrastructure;

■■ Hot springs are found in Kachin State, Shan State, ■■ competition from cheaper gas alternatives Taninthayi Region and other areas. (Myanmar has the 10th largest gas reserves of any country); and Biomass/biogas energy ■■ need for greater inter-governmental cooperation in ■■ Approximately two-thirds of primary energy is the electricity market generally. supplied from biomass sources in Myanmar. This includes fuel wood, charcoal, agriculture residue and ■■ About half the country’s land area is covered in animal waste. This is a strong indicator that Myanmar forests, however significant deforestation has occurred. is an agriculture-based economy. The Asian Development Bank estimates that the average rural household uses 2.5 cubic tonnes of fuel ■■ Installed capacity of biomass in 2008 was 18MW. wood per year. The National Forestry Master Plan ■■ Biogas generators have been used to supplement fuel introduced by the Forestry Ministry, forecasts uses of wood scarcity. fuel wood to decrease because of greater reliance on energy efficient stoves and alternative energy sources, ■■ Rice husk gasification technology is currently being researched by the Government. Some mid to large- including hydropower and natural gas.

scale rice mills use husks as fuel to generate steam for ■■ Myanmar could use its vast forest covering to establish steam engines. carbon offset agreements with a developed economy (much like Indonesia’s agreement with Norway for ■■ The country is also seeking to grow dedicated energy crops. instance).

■■ The Ministries of Forestry and Agriculture deal RENEWABLES LAWS specifically with biomass energy matters. ■■ There is no renewable energy law in Myanmar at Ocean energy present. Regulatory guidance can be found in national energy policies and through electricity laws. ■■ Myanmar has a vast coastline that is 2,832km long.

■■ There is potential for tidal and ocean current energy GOVERNMENT INCENTIVE PROGRAMS given the strong currents and tides along the coast. ■■ There are no specific renewable energy incentives ■■ The first tidal power plant was commissioned in 2007 at present, however the Government has recently in Kambalar village. It has a 3kW turbine and provides announced a new foreign investment law (see below) electricity to 220 village households. which offers foreign investment incentives generally.

www.dlapiper.com | 59 For instance, there is a general five year tax holiday for FOREIGN INVESTMENT/OWNERSHIP all foreign investors. Other tax exemptions are more ■■ The local currency, the Kyat, was floated in April 2012 tailored and include: which broadly encouraged foreign investment.

■■ exemption from a tax on profits if the profits are ■■ The Myanmar Foreign Investment Law 2012 (FIL) maintained in a reserve fund and reinvested therein which was passed by the Myanmar National Assembly within one year; on 2 November 2012 and approved by President Thein

■■ if goods are exported, relief for income tax of up to Sein the next day, is a crucial part of the Myanmar 50% of the profits accrued is available; Government’s push to attract foreign investment and reform the country’s once-isolated industry. ■■ deductions for expenses in respect of research and development relating to the enterprise; ■■ The FIL prohibits and restricts investment in only a small number of industries while also offering ■■ the right to carry forward and offset a loss for up significant incentives to investors. Indeed, the to three consecutive years from the year the loss is objectives and “fundamental principles” of the FIL sustained; and recognise the need to create jobs, develop basic ■■ exemptions or relief from customs duties for the infrastructure and for Myanmar to be brought into line importation of machinery, equipment, instruments, with international standards. machinery components, spare parts and materials that are required for the enterprise. Myanmar Investment Commission

■■ The new law also assures that the Government will ■■ The Myanmar Investment Commission (MIC) is not nationalise an investor’s enterprise during the created under the FIL. The MIC’s chief duty is to contract period, nor terminate permits without a proper scrutinise investment proposals and to accept proposals reason and that the investor’s foreign currency shall be that are in the State’s interests. It is comprised of repatriated in the same foreign currency. members from various Ministries, government departments and organisations as well as other MAJOR PROJECTS/COMPANIES non-government persons.

■■ The HOPIN hydropower station is one of the largest Restricted and prohibited activities hydropower facilities in Myanmar. Its two generators ■■ The FIL has both general and specific restrictions/ produce 630kW each. prohibitions. ■■ There are a number of planned micro-hydropower ■■ The general restrictions/prohibitions relate to plants, including the 1.2MW Mepan Chaung project, preserving cultures and customs of ethnic nationalities, the 6MW Nam Mae Sai project and the 1.2MW Kang activities detrimental to public health, natural Hkawng in Eastern Shan State, as well as the 6MW resources, the environment and biodiversity, as well as Tumpang Hka Chaung in Kachlin State. the importation of toxic waste products or the use of ■■ The first medium-scale hydropower plant was Baluchaung hazardous chemicals. 2 in central-east Myanmar. It was commissioned in 1960 ■■ The specific restrictions/prohibitions relate to industries with an installed capacity of 84MW. that “can be operated by [Myanmar] citizens” such as ■■ In 2005, the 280MW Paunglaung hydropower plant was agricultural activities, livestock activities and fishery commissioned just east of Yangon. This was followed activities. There are also restrictions on manufacturing by eight more plants, totalling nearly 2GW, with two and service activities, subject to regulations underneath large-scale hydropower plants (Shewli-1, 600MW and the FIL. As regulations have yet to be passed, there is Yeywas, 790MW) commissioned in 2008 and 2010 no guidance as to whether an industry is “restricted” or respectively. “prohibited”.

■ ■ Thailand’s Green Earth Power company is currently ■■ Nonetheless, the MIC may permit investments in seeking partners for a joint development of a 210MW restricted or prohibited sectors with approval from the solar plant in Myanmar. The company also has plans Union Government Board. It is also important to note for a 300MW solar project in the country.

60 | Renewable Energy in the Asia Pacific that the State-Owned Economic Enterprises Law gives Duties of investors the government the sole right to carry out economic ■■ There are numerous duties for investors to comply enterprises in a number of sectors. with, ranging from the obvious, such as abiding by existing laws and issued permits, through to specific How to invest duties relating to notification of the discovery of natural ■■ There are now three ways to invest in Myanmar resources or antiques. There is an important duty in according to the FIL: relation to transferring of shares, which states that if the investor transfers shares in a foreign company, then the ■■ a 100% foreign capital investment for activities permitted by the MIC; investor should seek approval from MIC. An investor is also required to open a foreign currency account. ■■ a joint venture between foreigners and citizens/ government departments, whereby the ratio of Hiring local staff requirements foreign and local capital can be decided by the ■■ When hiring local experts and technicians, at least parties, unless the investment is a restricted 25% of employees should be “local staff” for the activity; and first two years of the enterprise, increasing to at least ■■ through an “agreed contract”. 50% within the next two years and at least 75% in the third two year period. MIC may amend this however. ■■ There are no minimum capital requirements under the FIL, except for a joint venture in a restricted There are also duties as to training of local staff and sector. Insurance must be obtained from an insurance importantly, the provision of the same benefits to local company permitted within the country. staff vis-à-vis foreign staff, specifically in regards to salary levels. Foreign workers must obtain work Permits process permits and resident permits issued by the State.

■■ There is broadly a three-step process to invest in Rights of investors Myanmar under the FIL: ■■ The rights of an investor include the right to sell ■■ an investor must submit a proposal to the MIC. basic equipment with the MIC’s approval, to expand The initial decision will be either to accept or reject activities with MIC’s approval as well as various rights a proposal for further scrutiny which is given within to present applications and requests to MIC. 15 days of an application; ■■ For foreign capital and currency, MIC will register ■■ if the proposal is accepted for scrutiny, the MIC foreign capital in the name of an investor in an has 90 days in which to approve or not approve the accepted foreign currency, while an investor has the proposal; and right to transfer foreign currency.

■■ if a permit is granted by the MIC, the investor must establish an enterprise with the relevant government Penalties and disputes

department or organisation. ■■ In the event of a breach of any law or permit conditions, the MIC may issue a number of administrative Land leases and land usage permits penalties, ranging from a warning through to

■■ MIC may allow an investor up to 50 years to lease or revocations of permits and black listing. The FIL use land. Ten year extensions may be permitted after mentions that an investor may be criminally prosecuted the expiry of the term of the initial lease. Longer leases for more serious breaches (for example, because of and land usage permits may be granted for investments deliberate misrepresentations).

in remote or undeveloped areas. Under the law, foreign ■■ Contractual provisions between parties related to investors are not allowed to own land. dispute resolution takes precedence over state law relating to conflict resolution.

www.dlapiper.com | 61 RELEVANT INTERNATIONAL TREATIES REFERENCES

■■ Myanmar ratified the United Nations Framework ■■ Reegle, Energy Profile: Myanmar, accessed at: http:// Convention on Climate Change in 1994 and also www.reegle.info/countries/myanmar-energy-profile/ ascended to the Kyoto Protocol in 2003. The country’s MM carbon footprint however, is extremely low. ■■ U Win Khaing, Myanmar’s Future Potentials in Low Carbon Energy, accessed at: http://www.iges.or.jp/ RELEVANT WEBSITES en/cdm/pdf/regional/20121113/Discussant_Low%20 Carbon%20Energy%20Potentials_U%20Win%20 ■■ Ministry of Electric Power – http://www.modins.net/ myanmarinfo/ministry/electric.htm Khaing.pdf

■■ Asian Development Bank, Myanmar: Energy Sector ■■ Ministry of Energy – www.energy.gov.mml Initial Assessment, accessed at: http://www.adb. org/ ■■ Myanmar and the Asian Development Bank – http:// documents/myanmar-energy-sector-initial-assessment www.adb.org/countries/myanmar/main

62 | Renewable Energy in the Asia Pacific KAZAKHSTAN

MONGOLIA

UZBEKISTAN

N. KOREA TURKMENISTAN

S. KOREA JAPAN CHINA

AFGHANISTAN IRAN

PAKISTAN NEPAL BHUTAN

INDIA BANGLADESH

MYANMAR VIETNAM LAOS

THAILAND

CAMBODIA PHILIPPINES

SRI LANKA

MALAYSIA BRUNEI NEWMALAYSIA ZEALAND INDONESIA

PAPUA NEW GUINEA EAST TIMOR

AUSTRALIA

NEW ZEALAND

Overview

Jurisdiction Language

Common law English, Maori and Sign Language

Business Environment

■■ Ease of Doing Business Report 2013: 3 out of 185 (no change)

■■ Global Competitiveness Index 2013: 23 out of 144 (up 2 rankings)

■■ Index of Economic Freedom 2013: 4 out of 177 (no change)

■■ Corruption Perceptions Index 2012: 1 out of 176 (no change)

Population Income GNI Per Capita (PPP TERMS)

4.4 million High $29,420

Profile New Zealand was colonised by the British in the which contributed significantly to the high standard of 19th century. In 1840, the Maori Indigenous chiefs agreed living New Zealanders enjoy today. The 1980s also saw to the Treaty of Waitangi, which ceded sovereignty to a shift in foreign policy with the Government effectively the British Crown whilst also retaining territorial rights leaving an Australia/New Zealand/US defence alliance for the Indigenous population. Sixty-seven years later, in and has ever-since taken a more independent foreign 1907, New Zealand became an independent dominion, policy from regional and global allies. The tourism and however the country fought for the British empire in agriculture industries are two of the key sectors in the both world wars. In the 1980s, government policies economy today. transformed the economy into an open and free market,

www.dlapiper.com | 63 ELECTRICITY INDUSTRY OVERVIEW ■■ As at April 2012, there were 29 local and regional distribution entities. ■■ In 2011, 43,138GWh of electricity was generated in

New Zealand. Unlike most Asia Pacific countries, ■■ All five of the generators of electricity are also retail New Zealand does not rely heavily on fossil fuels companies who sell electricity through an energy-only to meet electricity requirements. In 2011, electricity market exchange. generation comprised of: Energy strategies ■■ 57.6% from hydropower; ■■ In 2011, the Government released a revised New Zealand ■■ 18.4% from gas; Energy Strategy 2011 – 2021 (NZES). The report ■■ 13.4% from geothermal; recognises that New Zealand’s “significant and diverse energy potential is a source of competitive advantage ■■ 4.7% from coal; for the country, particularly in a world where ■■ 4.5% from wind; environmental constraints will continue to increase”.

■ ■ 1.3% from bioenergy; and ■■ The NZES identifies four policy priorities, being:

■ ■ 0.1% from other thermal sources. ■■ diverse resource development;

■ ■ Electricity demand is expected to grow at ■■ environmental responsibility; 1% per annum until 2030. ■■ efficient use of energy; and ■■ Like many sectors in the economy, the energy sector ■■ secure and affordable energy. underwent major reforms during the 1980s and 1990s.

The reforms deregulated the market and limited the ■■ The NZES also set two important targets, being the reach of state monopolies. Presently however, and 90% target for renewables-sourced electricity by despite further recent reforms, only the generation 2025 and to also achieve a 50% reduction in carbon and retail stages of the energy sector are open to emissions from 1990 levels by 2050. competition. ■■ The New Zealand Energy Efficiency and Conservation Strategy 2011 – 2016 (NZEECS) was released Generation, distribution and transmission concurrently with the NZES and includes interim ■■ Three state-owned enterprises (Genesis Energy, targets for energy efficiency and renewable energy. Meridian Energy and Mighty River Power), as well as two public companies (Contact Energy and TrustPower), Government generate 92% of New Zealand’s electricity. ■■ The Electricity Authority (EA) was established in 2010 ■■ In 2011, Mighty River Power produced 17% of New to replace the Electricity Commission. The EA is an Zealand’s electricity, Genesis Power produced 15%, independent Crown authority powered with promoting Meridian Energy produced 32%, Contact Energy competition and supply in the electricity industry under generated 22%, TrustPower generated 6% while other the Electricity Industry Act 2010. independents and on-site generators produced 8% of ■■ The Ministry of Business, Innovation and Employment New Zealand’s total electricity. advises the Government on energy efficiency and ■■ New Zealand’s grid system is near capacity and has renewable energy matters (the Ministry assumed resulted in transmission and distribution losses that are the role of the now-abolished Ministry of Economic quite high for a developed nation. Development).

■■ The national grid is wholly owned and operated by a ■■ The Minister of Energy and Resources is responsible state-owned company, Transpower. The grid is nearly for the NZEECS. 12,000km long with an inter-island system connecting ■■ The National Energy Research Institute conducts the north and south islands via a 40km undersea cable energy research within New Zealand. in the Cook Strait.

64 | Renewable Energy in the Asia Pacific Electricity laws Hydropower

■■ The Electricity Act 1992 sets out the overall regulatory ■■ Most of the country’s hydropower capacity and framework for the electricity industry. potential is located in the South Island.

■■ The Electricity Industry Participation Code 2010 ■■ New Zealand’s two largest river systems, the Waikato govern the operation of the electricity market. in the North Island and the Clutha in the South Island, hold many of the country’s largest hydropower stations. ■■ The Electricity Industry Act 2010 was a result of a

ministerial review of the electricity sector. The Act has ■■ Many of the country’s most lucrative hydropower sought to improve competition within the electricity sites have already been developed. Proposals for the market, enhance security of supply (particularly during development of further sites have been met with stiff hydropower generation shortages) and it also abolished environmental opposition. the Electricity Commission and replaced it with the EA. ■■ Due to New Zealand’s reliance on hydropower, drier months have resulted in electricity shortages in the RENEWABLES INDUSTRY OVERVIEW past.

■ ■ New Zealand has the second highest renewable ■■ New Zealand has a long history of hydropower energy contributions of any OECD country. In 2011, facilities. The Waipori scheme (commissioned in 1903) New Zealand generated about 77% of its electricity and the Coleridge plant (commissioned in 1914), were needs from renewable energy. There is no doubt that the earliest hydropower stations in the country. By New Zealand is a global leader in renewable energy the 1950s, New Zealand had over 1GW of installed generation, particularly for geothermal energy. hydropower and in 1965 a high voltage transmission line from Benmore in the South Island to Haywards in ■■ In the NZES, the Government set a renewable energy target of 90% by 2025. This is significantly higher the North Island was constructed. This line resulted in than any other country in the region and reflects the more hydropower stations in the South Island (such as advanced state of renewable energy in the country. the 540MW Benmore station, the 700MW Manapouri station and the 432MW Clyde dam) and hydropower ■■ The Energy Efficiency and Conservation Authority generation reached 5GW by the 1990s. New Zealand’s (EECA) is the chief government body for the hydropower capacity has remained steady since then. promotion of renewable energy. It reports to the Minister of Energy and Resources. The Ministry Wind energy for the Environment also plays an active role in the ■■ Wind-sourced electricity accounts for nearly 5% renewable energy industry, particularly insofar as it of New Zealand’s total electricity needs (roughly effects New Zealand’s climate change program. 614MW). ■■ New Zealand has had an emission trading scheme ■■ Natural conditions throughout New Zealand are highly (ETS) since 2008, however its success to date has been conducive to developing wind projects, both onshore limited due to subsequent amendments lessening the in mountainous areas and along the coast, as well as impact of the ETS and the slow international pickup offshore. with such schemes.

■■ In a recent review published by the EECA, 13 areas ■■ Historically, geothermal energy and hydropower have were earmarked for wind development. contributed the largest proportion of New Zealand’s

renewable energy growth. Future growth is expected to ■■ There are both national and local standards for come from wind energy, given the country’s attractive maximum noise levels that can be emitted from wind wind speeds, and also from further geothermal turbines. projects. New Zealand’s hydropower potential has largely been fulfilled.

www.dlapiper.com | 65 ■■ Wind power capacity increased 19% from 2010 to 2011. ■■ There has been some community concern about The average annual increase in wind capacity has been the visual impact of wind turbines on mountainous 30% over the last decade. landscapes, however some tourism operators advertise sites like the Tararua wind turbines as a tourist ■■ The first large-scale wind turbine was not built until attraction. 1993 (see below). Accordingly, the wind industry is

less developed than the hydropower or geothermal ■■ In the NZEECS, the Government committed to industries, however estimated potential from wind removing unnecessary barriers to investment in sources in New Zealand is nearly 15GW. large-scale renewable electricity generation and also to fostering new sources of renewable energy, including Solar energy ocean energy.

■ ■ Solar hot water heaters are widely used throughout ■■ The price of carbon in New Zealand’s emissions the country. trading scheme has plummeted in 2013, much like in the European market. ■■ Solar thermal is regarded as a more viable solar option than solar PV. RENEWABLES LAWS ■■ The solar industry generally is far less developed than

other sources of renewable energy. ■■ The Energy Efficiency and Conservation Act 2000 was the first legislative effort to promote renewable energy Geothermal energy in New Zealand. The Act established the Energy Efficiency and Conservation Authority (EECA) which ■■ All of New Zealand’s geothermal generation is in the North Island, mostly around the Taupo Volcanic Zone. produces regular reports on New Zealand’s energy use and energy targets. The Act largely sets out the ambit ■■ Geothermal-sourced electricity makes up 13.4% of the of the EECA’s reporting requirements. country’s electricity needs. ■■ The National Policy Statement for Renewable ■■ Geothermal capacity is approaching 1GW, which is Electricity Generation 2011 is the main government largely due to two older, large-scale geothermal plants policy paper on coordinating the renewable energy and several more recent, smaller-scale geothermal drive throughout New Zealand. The paper’s main plants (see below). objective is to “recognise the national significance of

■■ Geothermal energy is used for direct heating in some renewable electricity generation activities by providing parts of New Zealand. for the development, operation, maintenance and upgrading of new and existing renewable electricity ■ ■ As a world-leader in geothermal generation and generation activities”. research, New Zealand has signed agreements with other countries who are seeking to boost their own geothermal capacity. GOVERNMENT INCENTIVE PROGRAMS

■■ New Zealand does not have a feed-in tariff scheme for Biomass energy renewable energy generators.

■■ The biomass industry is also well-established in ■■ Local initiatives are in place to encourage renewable New Zealand. energy generation at a residential level with incentives

■■ Wood-processing facilities produce a lot of the for the installation of solar power systems on individual country’s biomass energy. properties.

■■ The Government formed the Green Growth Advisory CURRENT ISSUES IN THE RENEWABLES Group to identify further opportunities for renewable INDUSTRY energy innovation. The Group issued a report in December 2011. ■■ New Zealand will need to invest significantly in grid infrastructure in order to meet its renewable energy ■■ The ETS as well as the electricity market reforms target of 90% renewables-sourced electricity by 2025. are perhaps the greatest government incentives for renewable energy in New Zealand.

66 | Renewable Energy in the Asia Pacific MAJOR PROJECTS/COMPANIES Office (OIO), which coordinates foreign investment in New Zealand. Under the Act, a non-resident only ■■ The two largest wind farms in the Southern requires OIO approval in three circumstances if: Hemisphere are located on the Tararua Ranges in the

North Island. The average wind speed in the ranges ■■ investing more than NZ$100 million is over 10m/s. TrustPower’s Tararua wind farm has (approx. US$79.8 million) to establish a business; 103 turbines, each with a capacity of 660kW, for a total ■■ planning to purchase an equity share of greater than capacity of 161MW. 25% in a New Zealand company worth more than ■■ The Te Apiti wind farm, which was completed in 2004, NZ$10 million (approx. US$7.98 million); or has 55 wind turbines, each with a capacity of 1.65MW. ■■ investing in land or an interest in land that is ■■ In 2011, 36MW of TrustPower’s Mahinerangi wind “sensitive land”. Sensitive land includes land that is farm in Otago and 64MW of Meridian Energy’s Te the foreshore or seabed, the bed of a lake, land on Uku wind farm in Waikato came online. islands (other than the North Island, South Island) and non-urban land that exceeds 5 hectares. ■■ The Wairakei power station, which commenced

operation in 1958, remains the world’s oldest ■■ The OIO coordinates foreign direct investment into geothermal power station still in operation and is also New Zealand. New Zealand’s largest geothermal producer with a capacity of nearly 180MW. The Wairakei power station RELEVANT INTERNATIONAL TREATIES will be gradually replaced by the Te Mihi plant, which has an estimated capacity of 220MW. ■■ New Zealand ratified the United Nations Framework Convention on Climate Change in 1993 and the Kyoto ■■ In addition to Wairakei, Ohaaki was the second Protocol in 2002. pioneering large-scale geothermal facility in New Zealand. It was built in 1989 and has a capacity ■■ The Government did not sign up to a renewal of the of 104MW. Kyoto Protocol, preferring to address greenhouse gas emission levels through the United Nations Framework ■■ Other recent, but smaller geothermal plants, include Convention on Climate Change which does not incur Poihipi Road (55MW), Rotokawa (35MW), Ngawha binding targets. (25MW), Mokai (112MW), Kawerau (100MW), Nga Awu Purua (138MW) and Tauhara (24MW). RELEVANT WEBSITES ■■ New Zealand’s first large-scale wind turbine was built ■ in Wellington (aptly known as the ‘Windy City’) in ■ Ministry of Business, Innovation & Employment – 1993. The facility has a capacity of 225kW. Four years http://www.mbie.govt.nz/

later, Genesis Energy’s Hau Nui wind farm, with a ■■ Electricity Authority – http://www.ea.govt.nz/ capacity of 8.65MW, was commissioned. ■■ New Zealand Energy Strategy 2011 – 2021 – http:// ■■ Meridian Energy commissioned the first wind farm on www.energyfed.org.nz/NZ%20Energy%20 the South Island in 2007. In 2009, the company built a Strategy%202011-21.pdf 143MW West Wind project on the North Island. ■■ New Zealand Energy Efficiency and Conservation ■■ Other notable wind projects include Meridian Energy’s Strategy 2011 – 2016 – http://www.eeca.govt.nz/ 64MW Te Uku project and TrustPower’s 36MW node/13339 Mahinerangi project. ■■ National Policy Statement for Renewable Electricity Generation 2011 – http://www.mfe.govt.nz/rma/central/ FOREIGN INVESTMENT/OWNERSHIP nps/generation.html

■ ■ The Overseas Investment Act 2005 is the main ■■ New Zealand’s emissions trading scheme – http://www. legislative instrument governing foreign investment in climatechange.govt.nz/ New Zealand. It established the Overseas Investment

www.dlapiper.com | 67 REFERENCES ■■ The Treasury, Foreign Investment Policy, accessed at: http://www.treasury.govt.nz/economy/ ■■ Ministry of Business, Innovation and Employment, overview/2010/18.htm New Zealand Energy Data File 2012, accessed at:

http://www.med.govt.nz/sectors-industries/energy/ ■■ Reegle, New Zealand Energy Profile, accessed energy-modelling/publications/energy-data-file/ at: http://www.reegle.info/policy-and-regulatory- new-zealand-energy-data-file-2012 overviews/NZ

68 | Renewable Energy in the Asia Pacific KAZAKHSTAN

MONGOLIA UZBEKISTAN philippines N. KOREA TURKMENISTAN

S. KOREA JAPAN CHINA

AFGHANISTAN IRAN

PAKISTAN NEPAL BHUTAN

INDIA BANGLADESH

MYANMAR VIETNAM LAOS

THAILAND

CAMBODIA PHILIPPINES

SRI LANKA

MALAYSIA BRUNEI MALAYSIA

INDONESIA

PAPUA NEW GUINEA EAST TIMOR

Overview

Jurisdiction Language

Mixed legal system of civil, common, Filipino and English Islamic and customary law

Business Environment

■■ Ease of Doing Business Report 2013: 138 out of 185 (down 2 rankings)

■■ Global Competitiveness Index 2013: 65 out of 144 (up 10 rankings)

■■ Index of Economic Freedom 2013: 97 out of 177 (up 10 rankings)

■■ Corruption Perceptions Index 2012: 105 out of 176 (up 24 rankings)

Population Income GNI Per Capita (PPP TERMS)

94.9 million Lower middle $4,140

Profile The Philippines is an archipelagic nation comprising periods of political stability intermingled with “people 7,107 islands. The country is a former Spanish colony and power” movements to overthrow presidents in 1986 and was also under American rule for a period in the early 2001. The Philippines avoided the economic downturn 20th century, which has contributed to the prevalence of following the global financial crisis in 2008. However, it Spanish and English, an affinity with western culture as has faced increased tensions with China over territorial well as a large Christian following. Following Japanese claims in the South China Sea and a prolonged insurgency occupation during World War II, the Philippines gained from domestic terrorist groups operating in certain parts its independence in 1946. Since then, the country has had of the country.

www.dlapiper.com | 69 Electricity industry overview ■■ A number of bodies distribute electricity throughout the Philippines, including investor-owned utilities ■■ Electricity in the Philippines is said to be the most such as the Manila Electric Company (Meralco), local expensive in Asia, with an average retail rate across the government-owned utilities and consumer-owned country of US$0.23 per kWh. electricity cooperatives. Both the investor-owned ■■ According to the Department of Energy (DOE), utilities and electricity co-operatives operate under a hydropower and geothermal energy each accounted rate-setting regime, whilst the investor-owned utilities for 14% of energy consumption. Nonetheless, coal operate on a performance-based scheme, which is (37%) and natural gas (30%) are the main sources of slightly modified in approach and implementation for electricity generation. electricity co-operatives.

■■ Around three million houses are without electricity ■■ The transmission assets held by NPC were transferred in the Philippines. Dwellings with an electricity by EPIRA to the National Transmission Corporation connection experience frequent power fluctuations. (TransCo). The operation, maintenance and upgrade of the assets, on the other hand, were privatised by ■■ A World Bank report noted that electricity demand rose way of concession contract undertaken by the Power 6.6% in 2012, with conservative projections for annual Sector Assets and Liabilities Management Corporation growth of 4% to 2015. (PSALM).

Electricity laws ■■ PSALM then awarded the 25-year concession contract to the National Grid Corporation of the Philippines ■■ The Electric Power Industry Reform Act of 2001 (NGCP). As concessionaire, NGCP is required to (EPIRA) sought to comprehensively restructure the prepare the Transmission Development Plan and is industry from “a vertically integrated, extensively authorised to collect wheeling charges and other fees, publicly-owned utility business, [to an] industry as approved by the ERC. [which] was envisioned to be broken down into its main components with a deregulated and effectively Reforms privatised generation and supply sectors”. ■■ There have been significant reforms in the industry ■■ While the transmission and distribution sectors following the implementation of EPIRA including: remain regulated, the generation sector has been fully deregulated, with generation prices largely governed by ■■ privatisation of more than 85% of NPC generation market forces and/or settled in commercial terms. assets and IPP capacities in Luzon, and ongoing privatisation of assets and capacities in Visayas and ■■ The Energy Regulatory Commission (ERC) is the Mindanao; body charged with regulating the Philippine electricity ■■ privatisation of the operation and maintenance of sector. the transmission assets;

Generation, distribution and transmission ■■ commercial operation of the Wholesale Electricity Spot Market (WESM) in Luzon and Visayas; and ■■ With the privatisation of generation assets held by the

National Power Corporation (NPC), the generation ■■ unbundling of electricity rates to indicate sector can be considered competitive as more investors generation, transmission, distribution, metering and from the private sector are engaging in the business of ancillary services. producing and selling electricity in the market. Sale of electricity ■■ NPC, in the meantime, continues to generate electricity from its own facilities and from Independent Power ■■ For Luzon and Visayas, electricity is sold at the spot Producers (IPPs) under long term offtake agreements. market price through the WESM or under a bilateral The capacity produced by IPPs is also in the process contract agreement. While physical dispatch of plants of being privatised and assigned to IPP administrators is undertaken by the system operator, the Philippine trading in the market on behalf of the NPC. Electricity Market Corporation – as Market Operator – prepares dispatch instructions based on trading volumes and clearing price per hour in the WESM.

70 | Renewable Energy in the Asia Pacific RENEWABLES INDUSTRY OVERVIEW ■■ Estimated potential from small hydropower is approximately 1.3GW. ■■ As a country rich in natural resources and susceptible to world oil price fluctuations, the Philippines initially Wind adopted the development and use of hydropower and geothermal resources as early as the 1950s. ■■ Estimated wind potential in the country is 70GW; Accordingly, the percentage of renewables contributing however, the wind industry in the Philippines is to electricity supply in the country is higher than presently underdeveloped and many of the best possible regional and global averages. wind sites are located far from population centres.

■ ■■ Current generation capacity from renewable energy is ■ Despite this underdevelopment, the DOE is looking estimated at 5GW. to wind power to meet increasing energy demand. It recently approved three wind projects including ■■ Despite a relatively advanced renewable energy Altenergy’s 67.5MW facility in Pililia, the Energy contribution, the Philippines has significant potential Development Corp’s 87MW facility in Ilocos Norte and for further clean energy development. To this end, the Trans Asia’s wind project in Guimaras. Philippine Congress passed the Renewable Energy Act of 2008 (RE Act, see below). It was not until 2012 Solar however, that feed-in tariff rates were announced, and the first grid-connected projects to use the feed-in tariff ■■ Aid organisations have invested in solar PV systems regime are not expected to be operating until 2014. in the Philippines, predominantly for off-grid rural electrification. ■■ Large-scale projects are expected to come online in the coming years as the DOE has guaranteed current ■■ The solar energy sector is particularly underdeveloped feed-in tariff rates for 20 years. in the Philippines with just 1MW of on-grid capacity despite high solar radiation levels. As such, solar ■■ The Philippine Government’s goals for the renewable projects have been recognised as the priority energy energy sector include: source under the feed-in tariff regime. The first grid-

■■ increasing renewable energy-based capacity by connected projects to gain the benefit of the tariff are 15GW by 2030 (roughly 50% of total installed expected to be solar projects. capacity); Geothermal ■■ becoming the number one geothermal energy producer in the world (currently second); ■■ Geothermal energy is a major source of renewable energy in the Philippines, with total installed capacity ■■ becoming the number one wind energy producer in at about 2GW. South East Asia; ■■ The Philippines is the second largest producer of ■■ doubling hydropower capacity by 2013; and geothermal energy globally.

■■ expanding the contribution of biomass, solar and ocean energy by 131MW. Biomass energy

■■ Fuel wood is a dominant energy source in rural parts of Hydropower the country, however this has led to deforestation.

■■ Hydropower already contributes a significant ■■ Alternative sources, such as bagasse from sugar cane proportion of the Philippines’ total electricity and rice husk are being utilised and further developed consumption. as fuel for power projects.

■■ Currently there are 134 hydropower plants, including ■■ The Philippines has large agriculture, forestry and 21 large hydropower plants in the Philippines. livestock industries, which results in the consumption

■■ The DOE mainly focuses on small-scale hydropower of biomass energy widely throughout the country. projects, partially due to the environmental impact of large hydropower projects in the past.

www.dlapiper.com | 71 CURRENT ISSUES IN THE RENEWABLES ■■ The National Renewable Energy Board (NREB) was INDUSTRY created under the RE Act and its function includes recommending specific actions to facilitate the ■■ In late May 2013, the DOE issued guidelines on the implementation of the National Renewable Energy selection and awarding of certificates for renewable Program. energy projects. The DOE will continue the ‘first come,

first served’ approach. Under the new guidelines, ■■ On-grid renewable energy development under the RE upon a project being declared commercially viable, a Act includes the establishment of the RPS. This is developer must compete with other project proponents complemented by a feed-in tariff to accelerate the in building a renewable energy facility before being development of emerging renewable energy sources. awarded a feed-in tariff. It includes priority connections to the grid for renewable energy; priority purchase and transmission ■■ The Philippines archipelagic geography means that the of, and payment for such electricity by the grid system transmission and distribution of electricity is expensive. operators; and for the NREB to recommend for the Accordingly, many areas are without a grid connection ERC to approve the fixed tariff rate. and rely on diesel-run power plants. Analysts have

called for increased renewable energy in these areas as ■■ Consumers may choose to source their power from a cheaper, long-term alternative to diesel-run plants, renewable sources (known as the “Green Energy however they note the need for further regulatory Option” under the RE Act). standardisation beyond the feed-in tariff regime, and ■■ The RE Act also establishes a Renewable Energy also the 40% foreign ownership limit in the country Trust Fund to enhance the development and greater as impediments to renewable energy electrification in utilisation of renewable energy, to be administered by these more remote areas of the country. the DOE as a special account in government financial ■■ Some environmental groups have criticised the institutions. Government for continuing to commission coal plants, despite advocating renewable energy as the country’s GOVERNMENT INCENTIVE PROGRAMS energy priority. DOE figures show that 23 coal-fired power plants are currently in the pipeline. ■■ There are a number of incentives under Chapter VII of the RE Act for achieving the above renewable energy ■■ The ERC has deferred fixing a feed-in tariff rate for targets, such as: ocean energy. ■■ income tax holiday of seven years;

RENEWABLES LAWS ■■ corporate tax rate of 10%;

■ ■■ The RE Act mandates the DOE to establish a ■ duty-free importation of renewable energy Renewable Energy Market (REM) to be operated machinery, equipment and materials within the first under the WESM, for trading of renewable energy 10 years; certificates to facilitate compliance with the Renewable ■■ 10 year exemption from tariff duties; Portfolio Standard (RPS). ■■ net operating loss carry-over for the next seven ■■ The RPS requires electricity suppliers to source a years following the loss; minimum amount of energy from “eligible renewable sources”. Section 2 of the RE Act provides for ■■ accelerated depreciation;

exploration and development of biomass, solar, wind, ■■ 0% value-added tax rate; hydropower, geothermal and ocean energy sources. ■■ cash incentive for missionary electrification (outside ■■ The RE Act seeks to accelerate the exploration and the three main grids and where connection to development of renewable energy sources, and increase existing network is not feasible); the utilisation of renewable energy. The DOE is the ■ lead agency mandated to implement the RE Act. ■ special realty tax;

■■ tax exemption on carbon credits;

72 | Renewable Energy in the Asia Pacific ■■ tax credit on domestic capital equipment; and ■■ North Wind Power Development Corporation has developed the 33MW Bangui Bay North wind farm in ■■ net-metering for renewable energy to allow Ilocos Norte. It is currently the only commercial wind consumers generating their own power to sell back farm in operation in the country; however the DOE to the grid. has approved three new wind farms for commercial ■■ However, the main incentive for renewable energy operation (see above). developers is the feed-in tariff regime. The rates ■■ A number of mini-hydropower development contracts offered for wind, solar, hydropower and geothermal have been approved recently, including an 8MW energy are relatively high by regional standards and Villasiga MHP in Bugasong, Antique. second only to Japan.

FOREIGN INVESTMENT/OWNERSHIP MAJOR PROJECTS/COMPANIES

■■ In the Philippines 1987 Constitution, foreign ownership ■■ The first hydropower project – the Ambuklao was limited to 40% in a number of sectors, including Hydropower Plant – was commissioned in 1956. (implicitly) the renewable energy sector. This is seen The facility is now owned and operated by the joint as a major limiting factor for foreign investors in the venture company of SN Power of Norway and Aboitiz renewable energy sector in the Philippines. Power of the Philippines.

■■ The Foreign Investments Act of 1991, as amended, ■■ Explorations for the Tiwi and MakBan Geothermal provides for the regular issuance of a “Foreign Power Plant Complex commenced in 1964, with the Investment Negative List” that can be used as a first unit in Tiwi commencing operations in 1976. reference by prospective investors. The steam field is operated by the local company of Chevron Geothermal.

www.dlapiper.com | 73 ■■ The Government’s Investment Priorities Plan ■■ National Geothermal Association of the Philippines, nonetheless recognises renewable energy investment as Tiwi, accessed at: http://www.ngaphil.org/services/tiwi a priority investment area. ■■ Philippine Department of Energy, Philippine Power Statistics, accessed at: http://www.doe.gov.ph/ep/ RELEVANT INTERNATIONAL TREATIES Powerstat.htm

■ ■ The Philippines was one of the first countries to ratify ■■ Board of Investments Philippines, Renewable Energy, the United Nations Framework Convention on Climate accessed at: http://www.boi.gov.ph/pdf/industry Change in 1994. The Philippines also quickly ratified profiles/Renewable%20Energy/Renewable%20 Energy. the Kyoto Protocol, however as a “developing” country, pdf it does not have any binding greenhouse gas reduction ■■ Jaromay Laurente Pamaos, Renewable Energy (RE) targets to meet. and RE Service Contracts, accessed at: http://jlp-law. com/blog/renewable-energy-re-and-re-service- RELEVANT WEBSITES contracts/

■■ Department of Energy – http://www.doe.gov.ph/ ■■ World Resources Institute, Investment Priorities Plan

■■ Energy Regulatory Commission – http://www.erc. (IPP), accessed at: http://projects.wri.org/sd-pams- gov.ph/ database/phillipines/investment-priorities-plan-ipp

■■ Eco-Business, Rules on Philippines renewable energy REFERENCES projects selection approved, accessed at: http://www. eco-business.com/news/rules-philippine-renewable- ■■ Manila Bulletin Publishing Corporation, Philippines energy-projects-selection-approved/ has most expensive electricity in Asia, accessed at: http://www.mb.com.ph/node/305841/philippine ■■ Kara Santos, Ramping up Renewable Energy in the Philippines, accessed at: http://www.power-eng.com/ ■■ Helena Agnes S. Valderrama and Carlos C. Bautista, news/2013/05/30/asia-ramping-up-renewable-energy- Efficiency Analysis of electric cooperatives in the in-the-philippines.html Philippines, accessed at: http://cba.upd.edu.ph/ DP/0901_ valderrama.pdf

74 | Renewable Energy in the Asia Pacific REPUBLIC OF KOREA

KAZAKHSTAN

MONGOLIA

UZBEKISTAN

N. KOREA TURKMENISTAN

S. KOREA JAPAN CHINA

AFGHANISTAN IRAN

PAKISTAN NEPAL BHUTAN

INDIA BANGLADESH

MYANMAR VIETNAM LAOS

THAILAND

CAMBODIA PHILIPPINES Overview

SRI LANKA Jurisdiction Language MALAYSIA BRUNEI MALAYSIA Civil law Korean

INDONESIA

PAPUA NEW Business Environment GUINEA EAST TIMOR ■■ Ease of Doing Business Report 2013: 8 out of 185 (up 1 ranking)

■■ Global Competitiveness Index 2013: 19 out of 144 (up 5 rankings)

■■ Index of Economic Freedom 2013: 34 out of 177 (down 3 rankings)

■■ Corruption Perceptions Index 2012: 45 out of 176 (down 2 rankings)

Population Income GNI Per Capita (PPP TERMS)

49.8 million High $29,920

Profile

Korea’s Joseon Dynasty was overrun by Japan which as the Republic of Korea) held its first free and direct occupied the Korean Peninsula from 1910 to 1945. Korea presidential election under a revised constitutional regained its independence after the Second World War, structure. South Korea is now Asia’s fourth largest however the Korean War (1950 – 1953) resulted in an economy. It has a non-permanent seat on the UN Security armistice which split the communist north from the Council and elected its first female President in democratic south. The division along the 38th parallel December 2012. Peace talks between the two Koreas remains to this day. It was not until 1987, after decades have recently been agreed to following a period of of economic growth, that South Korea (also known bellicose threats from the north.

www.dlapiper.com | 75 ELECTRICITY INDUSTRY OVERVIEW ■■ Electricity is transmitted to the major distribution networks on 765kV and 345kV lines. The major ■■ Korea is the 10th largest energy consuming nation in distribution networks then transmit electricity amongst the world, and despite an abundance of gas and coal themselves over 154/55kV lines. reserves, the country currently relies on energy imports for 97% of its energy needs. RENEWABLES INDUSTRY OVERVIEW ■■ In 2011, Korea generated 79.3GW of electricity. Of this amount: ■■ The Government wishes to expand its renewable energy use to 11% by 2030. ■■ thermal accounted for 64.6%; ■■ Between 1993 and 2012, the Government spent ■■ nuclear accounted for 23.6%; US$2.6 billion on fostering a domestic market for ■■ hydropower accounted for 8.1%; and renewable energy.

■■ others (including renewable energy) accounted ■■ On 15 August 2008, the Government announced the for 3.7%. Low Carbon and Green Growth strategy, which is largely a two-pronged plan to reduce carbon emissions ■■ South Korea has a 100% electrification rate, which is and also promote renewable energy, energy efficiency indicative of its highly developed economy. and environmentally conscious buildings. Other ■■ Household electricity prices in Korea are the cheapest government strategies have since been introduced in the OECD at around US$0.08 per kWh. (see below).

■ ■ The Korea Electricity Commission is the Government ■■ The Seoul Metropolitan Government has been active in regulator in the electricity sector. It was created under promoting renewable energy. Seoul recently announced the Electricity Business Act 2000 as part of Government the introduction of its own feed-in tariff program and is efforts to increase competition in the electricity market. also seeking to halt the expansion of all nuclear power The Commission is ultimately responsible to the plants. Korea’s capital accounts for about 10% of the Ministry of Trade, Industry and Energy. country’s electricity consumption.

Generation, distribution and transmission ■■ Between 2021 and 2030 Korea hopes to complete the nationwide “Smart Grid”. This will include: ■■ The Basic Plan for Restructuring the Electricity Industry 1999 unbundled and privatised Korea Electric ■■ electric car charging/discharging system;

Power Corporation (KEPCO). ■■ advanced smart meter;

■ ■ As a result, five thermal generation companies and ■■ green energy micro-grid; one hydropower and nuclear power corporation were ■■ a high-voltage direct current in collaboration with formed in April 2001. These five thermal generation North Korea and north-east Asia; and companies were to be privatised in stages, however

this was not completed by the Korean Government. ■■ a supply of electricity of diverse quality. Consequently, the Government has retained a 51% ■■ The world’s largest test-bed for a Smart Grid is interest in KEPCO and its five subsidiaries. currently being built on Jeju Island, which was chosen ■■ KEPCO continues to control 100% of the transmission due to its abundant wind and solar energy resources. and distribution in the market and 93% of total power generation. Hydropower

■ ■■ The Ministry of Trade, Industry and Energy (formerly ■ In 2011, 7.8TWh of hydropower was produced, making known as the Ministry of Knowledge Economy) is hydropower the country’s top renewables source. assigned ultimate regulatory responsibility under the ■■ It has been estimated that Korea has small-scale Electricity Business Act 2000. hydropower potential of 1.5GW. Installed capacity represents less than 5% of domestic potential, indicating significant untapped resources.

76 | Renewable Energy in the Asia Pacific Wind energy ■■ from 2020 to 2030, the industry will take the lead on the commercial development of ocean energy. ■■ The south-east of Korea is a good location for offshore

wind farms. Korean conglomerates have begun to ■■ The Government’s goal is to produce 1,540ktoe of invest significantly in offshore wind farms. ocean energy by 2030.

■■ Most wind farm developments however, have been onshore turbines. Present onshore installed capacity is CURRENT ISSUES IN THE RENEWABLES 480MW. INDUSTRY

■ ■■ The Government is aiming for 15.66GW of wind power ■ The South Korean Government has tried to encourage to be generated by 2022. more private firms to ‘take the lead’ by taking advantage of the renewable energy incentives on offer. ■■ In 2011, the Government announced a strategy to However, South Korea’s renewable energy industry attract US$8.2 billion to develop offshore wind farms is expected to lag behind global competitors in 2013. with a capacity of 2.5GW by 2019. One of the main reasons being cited by international developers for such current and predicted stagnation is Solar energy a lack of government support. ■■ The greatest economic potential for solar thermal is in ■■ In recent years, reductions in subsidies for solar power Korea’s southern coastal area. generation equipment have resulted in a decline in ■■ In 2008, 276.3MWp of solar power was connected to small-scale producers. the grid. ■■ The global economic downturn affected Korea during Geothermal energy its rollout of ambitious green policies and its effects are still being felt by the industry today. ■■ Current installed geothermal capacity is 229.3MW.

Biomass energy RENEWABLES LAWS

■■ By 2010, 4,000 residential boilers capable of using Basic Law on Low Carbon Green Energy 2010 biomass pellets had been installed. (the Basic Law)

■ ■ KEPCO and most of its subsidiaries are focusing ■■ The Basic Law establishes a national strategy for low on biomass as a means of achieving the Renewable carbon, green energy, which includes: Portfolio Standard (RPS, see below). ■■ matters concerning the realisation of the green Ocean energy economic system;

■■ green technology and green industry; and ■■ Tidal flows around the Korean coastline are highly

conducive for ocean energy. ■■ policies on energy.

■ ■ Korea has the largest tidal energy station in the world ■■ It also establishes and supports the Green Industries (see below). Investment Company. The Government may provide funds for a public institution to invest in the Green ■■ Korea has a basic three-stage strategic plan for ocean energy development: Industries Investment Company.

■■ Under the Law, the Government must establish and ■■ between 2008 and 2012, the Government’s focus was on funding new technologies; enforce a basic energy plan every five years. Such plans must include measures for the supply and use of ■■ from 2012 to 2020, the strategy is to increase renewable energy. industry involvement and to exploit relevant technologies; and

www.dlapiper.com | 77 Promotion Act on Development, Use, Deployment of ■■ The renewable energy certificates are weighted as New and Renewable Energy 2010 (the Promotion Act) follows: one certificate is for 1kWh of hydraulic, onshore wind, bio-energy, refuse derived fuel firing or ■■ The Promotion Act requires that whenever the tidal energy. Two certificates are for 1kWh of offshore Government or a public organisation constructs, expands wind (over 5km), tidal (not including dams) or fuel or remodels a 1,000m2 building (or larger), new cells. 4kWh of integrated gasification combined cycle renewable facilities must be installed to ensure that a or by-product gas is necessary for one renewable certain percentage of the estimated volume of energy energy certificate. use (computed as at the time of its design) comes from

renewable energy sources. This percentage was 10% ■■ The scheme requires that the 13 largest public and private in 2012 and it will increase by 1% every year until it utilities will be required to purchase or generate renewable reaches 20%. energy at a rate equal to 10% of their share of total energy

2 generation by 2022. In 2013, the quota is 2.5%. ■■ Where 3,000m buildings (or larger) are constructed, expanded or remodelled by the Government or a public organisation, a minimum of 5% of the total MAJOR PROJECTS/COMPANIES construction costs are required to be invested in ■■ A 2.5GW offshore wind farm on the southwest coast renewable energy facilities. of Korea is to commence construction in 2013 and be fully operational by 2019. The project will be one of the GOVERNMENT INCENTIVE PROGRAMS largest offshore projects in the world, although actual generation may only be around 1GW. ■■ There is an existing policy of supplying long-term low

interest loans through the Special Account of Energy ■■ Lake Sihwa tidal power station is the largest of its kind and Resources, with a five year grace period and 10 year in the world. Completed in 2011, it has total output repayment period. capacity of 254MW. The project was partly funded by the Korean Government. ■■ Renewable energy technologies receive a 5% tax credit.

■■ In May 2013, Hyundai announced that it will install the ■■ Import duties on components and equipment for nation’s largest rooftop PV plant at its factory in Asan. renewable energy power plants were halved in 2009. The company is aiming to install 40,000 panels by the ■■ Feed-in tariffs have recently been replaced by the RPS. end of 2013. It is believed that the feed-in tariff rates were too low to ■■ Hyundai Heavy Industry, Samsung Heavy Industry, support wind power development. This policy position is Daewoo Shipbuilding and Marine Engineering and a different approach to most of the Asia Pacific countries STX are some of the big names that have taken an which are using feed-in tariffs instead of a RPS. interest in offshore wind energy.

Renewable Portfolio Standard ■■ CK Solar Korea signed a memorandum of understanding with the Baluchistan provincial ■■ Introduced in 2012, the RPS applies to power providers with more than 500MW of power generating capacity. government in Pakistan to install a 300MW solar Power providers can meet the RPS by installing power plant. The plant is expected to cost nearly US$1 qualifying technologies. For example, by using stationary billion to construct and implement. fuel cells or by buying renewable energy credits. FOREIGN INVESTMENT/OWNERSHIP ■■ A fee of US$0.04 per renewable energy certificate

is charged at the time of issuance and subsequent ■■ The Foreign Investment Promotion Act 1998 grants purchase and sale of renewable energy certificates. foreign-owned companies the same rights as Korean In the case of a sale/purchase sale transaction, both the companies, and applies the same taxes as would apply buyer and the seller are required to pay this fee. to Korean companies and nationals.

■■ The tariff for power generated from renewable sources ■■ Foreign ownership of Korean companies is common will be made up of a system marginal price plus a and the rules governing the formation of companies renewable energy certificate. allows for 100% foreign ownership.

78 | Renewable Energy in the Asia Pacific RELEVANT INTERNATIONAL TREATIES REFERENCES

■■ Korea is a signatory to the United Nations Framework ■■ Reegle, Energy Profile Korea, accessed at: http:// Convention on Climate Change and the Kyoto Protocol, www.reegle.info/countries/korea-energy-profile/KR albeit it is not an annex one party. ■■ Bureau of Resources and Energy Economics, Energy

■■ Korea is incorporating clean development mechanisms in Australia 2012, accessed at: http://www. bree.gov. into its overseas investment and foreign aid. au/documents/publications/energy/energy-in- australia- fact-card.pdf

RELEVANT WEBSITES ■■ Sangim Ham, S. Korea to Change Renewable Subsidy Methods to Boost Efficiency, accessed at: http://www. ■■ Ministry of Trade, Industry and Energy – http://www. motie.go.kr/language/eng/index.jsp bloomberg.com/news/2013-01-22/s-korea-to-change- renewable-subsidy-methods-to-boost-efficiency.html ■■ Presidential Commission on Green Growth – http://eng. me.go.kr/content.do?method=moveContent&menuCode ■■ Jung Hee-Hong, A New Wave of Renewable Energy =pol_pol_edu_gov_growth in Seoul, Korea, accessed at: http://en.sma-sunny. com/2013/05/23/a-new-wave-of-renewable-energy-in- ■■ Korea Smart Grid Institute – http://www.smartgrid. seoul-korea/ or.kr/eng.htm.

www.dlapiper.com | 79 KAZAKHSTAN

MONGOLIA

UZBEKISTAN

N. KOREA TURKMENISTAN

S. KOREA JAPAN CHINA

AFGHANISTAN IRAN

PAKISTAN NEPAL BHUTAN

SININDIA GAPOREBANGLADESH

MYANMAR VIETNAM LAOS

THAILAND

CAMBODIA PHILIPPINES

SRI LANKA

MALAYSIA BRUNEI MALAYSIA SINGAPORE

INDONESIA

PAPUA NEW GUINEA EAST TIMOR Overview

Jurisdiction Language

Common law Mandarin, English, Malay and Tamil

Business Environment AUSTRALIA ■■ Ease of Doing Business Report 2013: 1 out of 185 (no change)

■■ Global Competitiveness Index 2013: 2 out of 144 (no change)

■■ Index of Economic Freedom 2013: 2 out of 177 (no change)

■■ Corruption Perceptions Index 2012: 5 out of 176 (no change)

Population Income GNI Per Capita (PPP TERMS)

5.2 million High $59,380

Profile Singapore was founded as a British port in 1819 by 682km2 of territory, however its strategic location has aided Sir Thomas Raffles and was occupied by the Japanese its export capabilities and has also fostered a multicultural during World War II. Singapore was part of the Malaysian society. The People’s Action Party has continually Federation for just two years when it declared independence dominated the political scene in Singapore. in 1965. Singapore is one of the world’s most prosperous nations in per capita terms and has a highly developed ELECTRICITY INDUSTRY OVERVIEW economy (see above). Geographically, this multi-cultural city-state is confined by its small land area with just ■■ Singapore is heavily dependent on fossil fuels for electricity generation.

80 | Renewable Energy in the Asia Pacific ■■ Four offshore pipelines supplied by Malaysia and ■■ Electricity consumers that fall into the “contestable” Indonesia satisfy Singapore’s natural gas demand and segment (i.e. average monthly consumption over a demonstrate the country’s reliance on imported fossil 12 month period above 10,000kWh) can buy electricity fuels to meet domestic energy needs. directly from electricity retailers (all the generators are also electricity retailers), or buy electricity directly ■■ 99.9% of Singapore is serviced by a single grid. from the NEMS as a market participant. ■■ The inter-agency Energy Policy Group (chaired by ■■ Eventually, all retail consumers in Singapore will the Permanent Secretary of the Ministry of Trade and become contestable when the retail electricity market is Industry) has outlined five principles for Singapore’s fully liberalised. energy sector to:

■■ The Electricity Management System (EMS) enables ■■ promote competition to keep energy affordable; operators to monitor and control generation plants and ■■ diversify energy supplies to guard against supply transmission networks in Singapore. The EMS provides disruptions, price increases and other threats; system operators with information about generation plants, transmission stations as well as equipment and ■■ improve energy efficiency (the Singapore Government has set up the Energy Efficiency transmission lines. Programme Office as part of the “Efficient Generation, distribution and transmission Singapore Plan”);

■■ As a general rule, only generation licensees may ■■ invest in the energy industry and in research and generate electricity in Singapore. If connected to the development; and grid, generating units must be registered with the EMC. ■■ improve on international cooperative measures. ■■ Between 2007 and 2008, Temasek Holdings (which Electricity market is wholly owned by the Ministry of Finance) divested its three wholly owned Singaporean power generation ■■ Since the late 1990s, Singapore has progressively companies, namely PowerSeraya, Senoko Power and liberalised its electricity market. The electricity Tuas Power. generation and retail components were separated in 2001. ■■ Singapore currently has five power generation ■■ The Energy Market Authority (EMA) was formed in companies connected to the grid. The following three 2001 to provide a new legal and regulatory framework entities together supply approximately 87% of the for the electricity industry. Progression to full retail country’s electricity: market liberalisation is currently in progress. ■■ PowerSeraya, which is wholly owned by Malaysia’s ■■ In 2002, the Energy Market Company (EMC) was YTL Power International; established to implement the wholesale market system rules and in 2003 the National Electricity Market of ■■ Senoko Energy, which is owned by a consortium led Singapore (NEMS) opened. All of Singapore’s electricity by Japan’s Marubeni Corporation; and

is bought and sold through the EMC in the NEMS. ■■ Tuas Power, which is wholly owned by China’s Huaneng Power International. ■■ The NEMS acts as a real-time electricity trading pool

where power generation companies compete to sell ■■ The two smaller generators are Keppel Merlimau electricity every half-hour. Cogen and SembCorp Cogen. It is expected that a sixth generator will supply the retail electricity market ■■ Electricity consumers whose average monthly consumption over a 12 month period is below 10,000kWh when GMR Energy commences operating an 800MW fall into the “non-contestable” segment of the Singapore combined cycle plant.

retail electricity market and are supplied with electricity ■■ SP PowerAssets, a subsidiary of Singapore Power by SP Services (a subsidiary of Singapore Power) at a (which is wholly owned by Temasek Holdings), is the regulated tariff, which is revised quarterly. sole owner and provider of electricity transmission and distribution services in Singapore. ■■ The regulated electricity tariff for the period 1 April to 30 June 2013 was S$0.267 (approx. US$0.21) per kWh.

www.dlapiper.com | 81 ■■ SP PowerAssets has appointed SP PowerGrid (being ■■ Government is expected to focus on solar energy, wind a further subsidiary of Singapore Power) to manage energy, electric mobility, smart grids, biomass, fuel the operations of the transmission and distribution cells, energy efficiency and carbon services. networks. ■■ By 2015, the Singapore Government expects the clean energy industry to contribute S$1.7 billion (approx. Electricity laws US$1.3 billion) to national GDP. ■■ The Electricity Act 2001 is the chief legislative tool to “create a competitive market framework for the Solar energy electricity industry, to make provision for the safety, ■■ Solar energy is regarded as the most feasible source of technical and economic regulation of the generation, renewable energy for the city-state of Singapore. transmission, supply and use of electricity”. Broadly the Act: ■■ The National Environment Agency has encouraged renewable energy development through programs like ■■ sets out licensing requirements; the Innovation for Environmental Sustainability Fund.

■■ provides the Minister with the power to issue a The fund allows access to public infrastructure for special administration order (whereby an electricity testing of renewables technologies. For instance, the licensee shall be managed directly or indirectly by fund helped install a 14.5kW grid-connected solar the EMA); system at a school in Singapore.

■■ controls electricity licensees and entities with ■■ The Government has provided initial funding of interests in transmission systems; S$350 million (approx. US$277.6 million) for clean energy programs in Singapore (with an emphasis on solar ■■ establishes the wholesale electricity market; and energy) under the Sustainable Development Blueprint. ■■ stipulates various offences. Biomass energy

RENEWABLES INDUSTRY OVERVIEW ■■ The efficient use of solid waste has the potential for use in large-scale power generation. Wood has been used ■■ The “green focus” of the Government is directed at research and development, environmental technology, for biomass generation, however projects are mostly at green transport, water saving and energy efficiency the demonstration stage.

rather than renewable energy generation. ■■ Singapore’s incineration plants consume 2.5 million tonnes of biomass and waste per year. ■■ Solar PV and biofuels are seen as the best opportunities for Singaporean renewable energy development. Wind energy Hydropower and geothermal generation opportunities

are limited due to Singapore’s confined land mass, ■■ Singapore’s limited land area and low wind speeds of while wave, tidal and ocean thermal energy are limited 2-3m/s do not indicate much potential for wind power. because of Singapore’s busy shipping lanes. ■■ Nevertheless, Cygnus Power is investigating the low-

■■ The Inter-Ministerial Committee on Sustainable wind speed potential of Singapore. Development launched the Sustainable Singapore Blueprint, which sets out strategies for sustainable Geothermal energy

growth. This complements the newly created Energy 2 ■■ Singapore has 130MW/m of heat flow and has three hot Efficient Programme Office to encourage an “energy springs, which are suitable for geothermal generation. efficient Singapore”.

■■ The Ministry of Environment and Water Resources CURRENT ISSUES IN THE RENEWABLES deals with climate change issues like energy efficiency, INDUSTRY whilst the Ministry of Trade and Industry is responsible ■ for drafting and implementing energy market policy. ■ Singapore relies heavily on natural gas imported from Indonesia and Malaysia. Diversification of supply has become an important issue for Singapore’s future energy security.

82 | Renewable Energy in the Asia Pacific ■ ■ Issues with air pollution from domestic industry and ■■ However, at present, there are no renewable energy smoke from neighbouring Indonesia and Malaysia have subsidies, targets or feed-in tariffs to incentivise thrust clean energy issues into the national spotlight. renewable energy generation.

■■ The lack of land area and government reluctance to subsidise energy supplies has meant renewable energy MAJOR PROJECTS/COMPANIES options remain relatively expensive and impractical ■■ The Renewable Energy Corporation, a large solar compared to fossil fuels. materials production company headquartered in Norway, invested €3 billion in Singapore to construct RENEWABLES LAWS a solar manufacturing complex in Tuas. The complex

■■ The Energy Conservation Act 2012 introduced minimum now employs 1,500 people with an annual capacity energy management standards for large energy users of 1.5GW. It was opened by the Singaporean Prime in the industry sector from 1 July 2013. The standards Minister in November 2010 and is the largest only affect companies that consume more than 15GWh investment by the company and the largest renewable of energy annually. The Act is part of Singapore’s plan energy investment in Singapore’s history.

to achieve its target of 35% improvement in energy ■■ In late 2012, Germany’s Bosch Group opened its intensity by 2030 from 2005 levels. S$18.9 million (approx. US$15 million) research and

■■ Key objectives of the Act include the: technology centre in Singapore. The site employs 1,000 people. ■■ appointment of energy managers; ■■ Vestas Wind Systems will reportedly invest up to ■■ reporting of energy use; and S$500 million (approx. US$398 million) over the next

■■ submission of energy efficiency improvement plans decade in Singapore to develop its largest research for large energy users. and development facility outside Denmark. Vestas is regarded as the world’s top wind technology company FOREIGN INVESTMENT/OWNERSHIP and opened its Singapore office in 2007.

■■ An integrated biomass solar power generation plant is ■■ Singapore is a hub for multinational corporations. due to be completed by 2013. The facility will produce ■■ There are few restrictions on foreign investment. 9.9MW of electricity.

■ ■ Those industries that are restricted include media, ■■ A number of Indian renewable energy firms, like broadcasting, legal, property ownership and retail Mytrah Energy Ltd, ReNew Power and the Greenko banking. Group, have considered listing on the Singapore stock exchange to take advantage of the ‘business trust’ GOVERNMENT INCENTIVE PROGRAMS structure offered in Singapore.

■■ The Government has introduced an Investment Tax Allowance scheme, which encourages large companies RELEVANT INTERNATIONAL TREATIES

to invest in energy efficient equipment. ■■ Singapore ratified the United Nations Framework Convention on Climate Change in August 1997 and the ■■ The National Climate Change Strategy also encourages the use of energy efficiency labels for home appliances, Kyoto Protocol in 2007. Once the protocol was ratified, seeks to improve waste management and reduce per the National Climate Change Committee was formed capita water consumption. from the National Energy Efficiency Committee. Singapore, as a non-annex one party to the agreement, ■■ The Government has created clean energy funds like has no binding emissions targets, however it has the Clean Energy Research & Testbedding Programme expressed concerns over the exposure of some of its (S$17 million (approx. US$13.5 million)) and the low-lying islands to sea level rise. Solar Capability Scheme (S$20 million (approx. US$15.9 million)), to create incentives for renewable energy.

www.dlapiper.com | 83 ■■ Singapore is a member of the Association of South REFERENCES East Asian Nations (ASEAN). The ASEAN Vision ■■ Reegle, Country Energy Profile Singapore, accessed 2020, adopted in 1997, calls for cooperation to establish at: http://www.reegle.info/countries/singapore-energy- interconnecting arrangements for electricity and profile/SG natural gas through the ASEAN Power Grid and the Trans-ASEAN Gas Pipeline Projects. ■■ Australian Government: Department of Foreign Affairs and Trade, Singapore country brief, accessed at: http:// www.dfat.gov.au/geo/singapore/singapore_ country_ RELEVANT WEBSITES brief. html ■■ Ministry of Environment and Water Resources – http:// ■■ Energy Market Authority, EMA Annual Report 2010/11, app.mewr.gov.sg accessed at: www.ema.gov.sg/.../annual_reports/EMA_ ■■ Ministry of Trade and Industry – http://www.mti.gov. Annual_Report_2011.pdf sg/Pages/home.aspx ■■ Singapore Economic Development Board, Alternative ■■ Energy Market Authority – http://www.ema.gov.sg/ Energy, accessed at: http://www.edb.gov.sg/content/ edb/en/industries/industries/alternative-energy.html ■■ The Renewable Energy Corporation’s integrated solar production facility – http://www.recgroup.com/ recgroup/operations/REC-in-Singapore/

84 | Renewable Energy in the Asia Pacific KAZAKHSTAN

MONGOLIA UZBEKISTAN Thailand N. KOREA TURKMENISTAN

S. KOREA JAPAN CHINA

AFGHANISTAN IRAN

PAKISTAN NEPAL BHUTAN

INDIA BANGLADESH

MYANMAR VIETNAM LAOS

THAILAND

CAMBODIA PHILIPPINES

SRI LANKA

MALAYSIA BRUNEI MALAYSIA

INDONESIA

PAPUA NEW GUINEA EAST TIMOR

Overview

Jurisdiction Language

Civil law system with common law Thai, English, ethnic and regional influences dialects

Business Environment

■■ Ease of Doing Business Report 2013: 18 out of 185 (down 1 ranking)

■■ Global Competitiveness Index 2013: 38 out of 144 (up 1 ranking)

■■ Index of Economic Freedom 2013: 61 out of 177 (down 1 ranking)

■■ Corruption Perceptions Index 2012: 88 out of 176 (down 8 rankings)

Population Income GNI Per Capita (PPP TERMS)

69.5 million Upper middle $8,360

Profile The Kingdom of Thailand became a constitutional have sporadically paralysed the capital, Bangkok. Despite monarchy in 1932. It was known as Siam until 1939 this political unrest, and major flooding of large areas of and was the only country free from colonial takeover in Thailand in 2011, it remains one of the more advanced South East Asia. Numerous military coups have occurred economies in South East Asia. Thailand’s King Bhumibol throughout the country’s modern history. The most Adulyadej is the longest serving Monarch in the world and recent coup ousted Prime Minister Thaksin Shinawatra is widely revered in Thailand. The current Prime Minister in 2006. Since then, lengthy and violent street protests is Yingluck Shinawatra, the sister of former Prime from supporters and opponents of the Thai Government Minister Thaksin Shinawatra.

www.dlapiper.com | 85 ELECTRICITY INDUSTRY OVERVIEW (PEA) for areas outside Bangkok. MEA and PEA have a monopoly in coordinating retailing activities ■■ Thailand is heavily reliant on energy imports, notably and distribution. oil and gas. In 2011, imported natural gas provided over half of the country’s energy needs, with domestic ■■ The Ministry of Energy (MoE) oversees all other natural gas providing about one-quarter of primary government bodies in the sector, including the: energy supply. ■■ National Energy Policy Council (NEPC), which

■■ Electricity consumption has grown by 3.3% per year is comprised of cabinet members who prepare for the past five years. guidelines for the implementation of the energy program which are then administered by the ■■ A rural electrification program instigated in the 1970s National Energy Policy and Planning Office; has resulted in 98% electrical coverage in households throughout Thailand. ■■ Department of Alternative Energy Development and Efficiency; Generation, distribution and transmission ■■ Department of Energy Business; ■■ The Power Development Plan was introduced in 2007. ■■ Department of Mineral Fuel, which regulates the The plan stopped the practice of developing centrally- business of exploration and exploitation in oil and managed major power plants and sought to enhance gas activities in Thailand; competition in the power generation sector through Independent Power Producers (IPPs), Small Power ■■ Energy Regulatory Commission, which regulates Producers (SPPs) and Very Small Power Producers the activities of operators in the electricity sector (VSPPs). There are over 150 active SPP and VSPPs and enforces the Energy Business Act 2007. It is generating 4.7GW of energy in Thailand. The IPPs, chaired by the Prime Minister; and SPPs and VSPPs sell electricity to the Electricity ■■ Energy Conservation Centre of Thailand, which Generating Authority of Thailand (EGAT). provides technical expertise and services to promote

■■ The plan envisages large hydropower, nuclear energy energy conservation. and fossil fuel sources as the dominant contributors to meet Thailand’s growing electricity demand. Electricity laws

■ ■■ There are a number of energy-related state enterprises ■ The Energy Industry Act 2007 governs and regulates that regulate and control the electricity industry: energy business in Thailand. Among its regulatory purview, the Act seeks to allow more participation in ■■ EGAT, a state-owned company, controls 60% of the energy sector by private enterprises. The broad generation capacity as well as the entire transmission ambit of this Act is contained in section seven, which system (the remainder of generation is supplied provides for the promotion of adequate and secure by IPPs like the Electricity Generating Company energy services, protection of energy consumers, (EGCO) and the Ratchburi Electricity Generating promotion of competition, fairness and efficiency. Holding Public Company Ltd (RATCH)). ■■ Additionally, the Act: ■■ EGAT is the single purchaser of electricity that is generated in Thailand. In 1998, it was privatised ■■ gives a number of powers to the Energy Regulatory when the Government sold most of its shareholdings Commission, such as the capacity to grant licences; in EGCO and sold a power station to RATCH. ■■ sets out the procedure for setting of tariffs by the Further privatisation has been controversial, with Minister of Energy (with the consent of the NEPC); and labour union protests effectively preventing further privatisation in 2004. ■■ has provision for a Power Development Fund to support the electricity sector. ■■ EGAT sells electricity to two retail suppliers, the Metropolitan Electricity Authority (MEA) for ■■ The National Energy Policy Council Act 2008 (as Bangkok and the Provincial Electricity Authority amended) establishes the NEPC and its powers. It also sets forth qualifications of members of the NEPC.

86 | Renewable Energy in the Asia Pacific RENEWABLES INDUSTRY OVERVIEW Hydropower

■■ Thailand is considered to be the leading renewable ■■ Like wind power, hydropower has great potential in energy provider in South East Asia. Thailand, however it has been underutilised to date. There is an estimated capacity of 700MW, with just ■■ The Thai Government was one of the first countries in 56MW installed as of 2008. the region to develop incentives for renewable energy generation. In 1992 for instance, Thailand introduced Wind energy the SPP Program and in 2001 introduced the VSPP Program, which both offered incentives for renewable ■■ Just 7.28MW of a potential 1.6GW of wind power energy power plants. generation has been developed.

■ ■■ Despite the interest of large utilities in maintaining the ■ Central, western and coastal regions of Thailand have status quo in Thailand’s electricity market, the goal of been investigated as possible turbine sites. renewable energy policy is to shift the country from a reliance on large utilities to a decentralised model Solar energy

comprising renewable energy projects. ■■ The north and north-eastern regions of Thailand receive an average of six to eight sunshine hours ■■ By the end of 2011, over 260 renewable energy plants were operational under the SPP and VSPP schemes, per day, making Thailand an attractive destination for with a generating capacity of roughly 1 GW. solar PV projects.

■■ It is estimated that Thailand has the capacity to ■■ Around US$1.5 billion was invested in renewable energy in Thailand in 2011. generate 50GW of solar power.

■■ Thailand has several companies involved in Alternative Energy Development Plan (2012 to 2021) manufacturing solar cells and modules using imported

■■ The MoE’s 10 year Alternative Energy Development wafers, as well as several companies who assemble Plan (2012 to 2021) (AEDP) was approved by the Thai imported cells into modules. Nonetheless, the majority Cabinet on 30 December 2011. The AEDP replaced the of domestic solar projects use imported equipment. Renewable Energy Development Plan (2008 to 2022) (REDP). Geothermal energy

■■ There are currently 64 geothermal resources in ■■ The AEDP establishes more aggressive objectives, with renewable energy consumption targeted at 25% of total Thailand, predominantly in the northern regions of the energy consumption by 2021 (the REDP target was country.

20.3%). This amounts to approximately 9.2GW from ■■ The geothermal industry however, will not contribute alternative energy sources, composed of: significantly to Thailand’s renewable energy target. A geothermal target of just 1MW by 2021 underlies ■■ 1.2GW of wind energy; the reliance on other sources of renewable energy. ■■ 2GW of solar energy; Biomass energy ■■ 1.608GW of hydropower (mini/micro);

■■ There is an estimated capacity above 4.4GW for ■■ 3.63GW of biomass energy; biomass. ■■ 600MW of biogas energy; ■■ Thailand had 1.61GW of installed biomass capacity ■■ 160MW of waste energy; in 2008.

■■ 2MW of tidal energy; and

■■ 1MW of geothermal energy.

www.dlapiper.com | 87 RENEWABLES LAWS Corporate Income Tax Exemption for Sale of Carbon Credit (2009) ■■ The Energy Development and Promotion Act 1992 gives the Department of Energy Development and Promotion ■■ The Board of Investment Promotion (chaired by the broad powers to regulate production, transformation, Prime Minister) and the Revenue Department provide utilisation and conservation of energy sources. a corporate income tax exemption for three consecutive years on the profit derived from the sale of carbon ■■ The Energy Conservation Promotion Act 2007 credits of a Certified Emission Reduction (CER) promotes the efficient use of electricity. project or a Voluntary Emission Reduction (VER) project, as certified by the competent authority prior to, CURRENT ISSUES IN THE RENEWABLES or in 2012. INDUSTRY Power Development Fund ■■ Significant increases in renewable energy production

and investment are limited by resource constraints, ■■ This fund allows the Energy Regulatory Commission a lack of grid connections for renewable generation to promote renewable energy from funds sourced by sites (it is estimated that roughly half of Thailand’s electricity tariffs. renewable energy capacity is connected to the grid), a complex bureaucracy and political instability. The Board of Investment

■■ Energy security is a major issue in Thailand. ■■ The board allows an eight year corporate income tax The country is reliant on natural gas imports from exemption for manufacturing solar cells, generation countries like Myanmar, as well as hydropower imports of alternative source energy, manufacturing of energy from Laos. The cost of energy imports is estimated saving machinery or renewable energy equipment and to represent about 12% of the country’s GDP. This machinery and energy service consulting firms who reliance, coupled with growing electricity demand, provide consulting services on the use or installation of has created a strong impetus for increasing domestic energy-saving machinery and equipment. energy production through renewable energy. ■■ A Board of Investment certificate grants foreign

■■ Interim renewable energy targets under the REDP companies who make a “major investment” under show that solar and biogas production were well ahead the Investment Promotion Act a number of benefits, of their respective targets. Wind, hydropower and including permission to conduct a “restricted business” biomass energy, however, were well below their targets. as defined under the Foreign Business Act, to bring Analysts have accordingly noted the lack of a balanced in foreign skilled workers, permission to own land renewable energy portfolio in Thailand. (not normally allowed for foreigners), exemption on import duties and reduction of corporate income tax at ■■ Media reports suggest that the MoE may revoke the the expiry of any applicable eight-year exemption for licences for 700MW of approved solar projects as corporate income tax. the Ministry believes that only 1GW (of the 3GW of approved solar projects), will actually come online. It is reported that ultimately, the MoE plans to revoke 2GW MAJOR PROJECTS/COMPANIES of solar licences given this prediction. ■■ REC has announced that it will deliver 72MW of solar panels in the construction of six solar farms in Nakhon GOVERNMENT INCENTIVE PROGRAMS Pathom and Suphan Buri provinces. Yanhee EGCO Holdings will own and operate the solar projects. REC has New feed-in tariff scheme 82MW of installed or pipeline capacity as of June 2013.

■ ■ A new feed-in tariff scheme commenced from March ■■ Thailand’s largest solar power project is run by Solar 2009, and introduced an additional tariff the price of Power Co., Ltd. The project involves the construction power sold to the grid. of 6MW of solar facilities at 34 different sites, predominantly in north-eastern Thailand. ■■ The tariff will be in place for seven years; however,

solar and wind tariffs will last for 10 years. ■■ Natural Energy Development Co’s 84MW Lopburi Solar Project was completed in May 2013.

88 | Renewable Energy in the Asia Pacific ■■ Suntech Power Holdings Co. Ltd will supply 9.43MW of RELEVANT INTERNATIONAL TREATIES solar panels and technical support for the second phase ■■ Thailand ratified the United Nations Framework of a 44MW solar power plant just outside Bangkok. Convention on Climate Change in 1995 and the Kyoto

■■ Thai Solar Energy Co. is South East Asia’s only solar Protocol in 2002. Thailand does not have any binding thermal energy producer. The company plans to spend emissions reduction targets as it is a “developing more than US$447 million over the coming years to nation”, however, it has indicated that it will aim to develop projects with a total capacity of 135MW. reduce current levels of “energy intensity” by 25%.

■■ Wind Energy Holding Co. is planning to develop three ■■ Thailand is a member of the Asia Pacific Energy wind power plants north of Bangkok. The proposed Research Centre and also the Association of South East project would generate 270MW of electricity and is Asian Nations, which includes a regional integration of valued at US$550 million. Another US$400 million, power networks. 270MW wind farm is currently being developed.

■■ The Fang District geyser field in Chiang Mai has a RELEVANT WEBSITES 0.3MW binary-cycle geothermal plant in operation. ■■ Ministry of Energy – www.energy.go.th

■■ The Asian Development Bank has contributed funding ■■ Electricity Generating Authority of Thailand – to a number of solar projects in Thailand. Recently it www.egat.co.th announced lending of US$85 million to Solarco for three solar plants with total capacity of 57MW. ■■ The Metropolitan Electricity Authority – www.mea.or.th

FOREIGN INVESTMENT/OWNERSHIP ■■ The Provincial Electricity Authority – www.pea.or.th

■■ The Foreign Business Act of 1999 (Foreign Business Act) has superseded the earlier Alien Business Law REFERENCES

of 1972. The Foreign Business Act divides foreign ■■ Reegle, Energy Profile Indonesia, accessed at: http:// investment into three categories: www.reegle.info/countries/thailand-energy-profile/TH

■ ■ category one businesses, which are absolutely ■■ Jon Fox, Renewable Energy Thailand: Green Policies prohibited from foreign ownership unless a special Take Off, accessed at: http://www.thailawforum.com/ exception is granted; green-policies-take-off.html

■ ■ category two businesses, those businesses which ■■ United Nations, Framework Convention on Climate were foreign-owned prior to the Foreign Business Change, accessed at: http://unfccc.int/files/meetings/ Act. Such businesses were permitted to apply for a durban_nov_2011/statements/application/pdf/111208_ special alien business licence. Foreigners who now cop17_hls_thailand.pdf wish to start a category two business must gain ■■ Climate & Development Knowledge Network, ministerial and cabinet approval; and Pioneering renewable energy options: Thailand takes ■■ category three businesses, which are similar to up the challenge, accessed at: http://cdkn.org/2013/05/ category two businesses, except the granting of inside-story-pioneering-renewable-energy-options- an alien business licence is at the discretion of the thailand-takes-up-the-challenge/ Director General rather than the Minister/Cabinet. ■■ Bangkok Post, More solar licences to be revoked, ■■ An alien business licence will have conditions attached accessed at: http://www.bangkokpost.com/business/ to it, such as a minimum capital input into Thailand. news/351952/more-solar-licences-to-be-revoked

■■ The Foreign Business Act sets out a number of sectors and activities in which foreign capital is limited to less than a 50% stake.

www.dlapiper.com | 89 90 | Renewable Energy in the Asia Pacific KAZAKHSTAN

MONGOLIA UZBEKISTAN VIETNAM N. KOREA TURKMENISTAN

S. KOREA JAPAN CHINA

AFGHANISTAN IRAN

PAKISTAN NEPAL BHUTAN

INDIA BANGLADESH

MYANMAR VIETNAM LAOS

THAILAND

CAMBODIA PHILIPPINES

SRI LANKA

MALAYSIA BRUNEI MALAYSIA

INDONESIA

PAPUA NEW GUINEA EAST TIMOR

Overview

Jurisdiction Language

Civil law Vietnamese

Business Environment

■■ Ease of Doing Business Report 2013: 99 out of 185 (no change)

■■ Global Competitiveness Index 2013: 75 out of 144 (down 10 rankings)

■■ Index of Economic Freedom 2013: 140 out of 177 (down 4 rankings)

■■ Corruption Perceptions Index 2012: 123 out of 176 (down 11 rankings)

Population Income GNI Per Capita (PPP TERMS)

87.8 million Lower middle $3,250

Profile The communist north united Vietnam in the 1970s after Continued economic liberalisation has resulted in decades of war with southern Vietnam and foreign improved living standards, however political freedoms forces. Vietnam has now emerged as one of Asia’s fastest remain limited. In 2007, Vietnam joined the World Trade growing economies due largely to the Doi Moi reforms Organisation which has further encouraged foreign which started the country’s transition from a planned players to explore investment opportunities in the country. economy to a socialist-orientated market economy.

www.dlapiper.com | 91 ELECTRICITY INDUSTRY OVERVIEW hydropower and nuclear). It has successfully privatised more than 40 subsidiaries to date. Key distribution ■■ Total installed electricity capacity in 2010 was 18.2GW companies are also currently being privatised. Of this amount:

■■ Two notable power stations that are operating in ■■ hydropower accounted for 42%; Vietnam are the Phu My 2.2 and Phu My 3 gas-fired ■■ natural gas accounted for 34%; power plants commissioned in May 2000. Together these power plants can meet up to 40% of Vietnam’s ■■ coal accounted for 21%; and energy needs. ■■ oil products accounted for 3%. ■■ The Vietnamese Government has stated that it is ■■ Electricity demand is expected to increase by 16% per focused on updating the electricity grid so that all year until 2012 and by 14% per year from 2012 to 2015. rural households will have electricity by 2020. This growth in demand will likely outstrip Vietnam’s generation capacity. Annual consumption per person ■■ Much like China and India, the Vietnamese is expected to nearly double from 996kW per person to Government is seeking to join the various regional grids 1,835kW per person by 2015. into a national grid. Importantly, France has committed US$101 million for a high voltage, 434km long power ■■ It was not until June 2005 that the national power line to connect hydropower stations in the centre of grid reached all of Vietnam’s provinces. Around Vietnam to demand centres in the south of the country. 75% of Vietnam’s population lives in rural areas, yet the Government has achieved a country-wide ■■ EVN is currently developing a third 500kV North- electrification rate of 96%. South Power cable, as the first two lines are overloaded.

■■ Independent Power Producers (IPPs) and Build ■■ Vietnam experiences frequent power shortages and blackouts. Estimated capacity shortfall during peak Operate Transfer (BOT) entities supplement the demand times is between 1.5GW and 2GW. provision of electricity in Vietnam.

■■ Vietnam imports small amounts of electricity from Government bodies China through 110kV and 220kV lines. The importation ■■ The Ministry of Industry and Trade (MoIT) monitors of electricity from China is expected to increase in the activities related to the energy sector in accordance coming years. with Decree 189/2007/ND-CP issued by the Prime ■■ Vietnam supplies electricity to Laos and Cambodia by Minister on 27 December 2007. It is responsible for the a medium voltage line. Recently, Laos and Vietnam management of all types of energy industries, including signed an accord under which Vietnam will import renewables. It proposes laws, policies, development 2GW of electricity from Laos. A similar agreement has strategies and plans and submits them to the Prime been reached between Vietnam and Cambodia. Minister for approval. The MoIT is responsible for managing the state’s stake in EVN. ■■ In 2011 the price of electricity was US$0.05 to

US$0.06 per kWh, which resulted in a US$166.4 million ■■ The Ministry of Finance coordinates taxes and tariffs loss for the state power company. In July 2012 prices in all industry sectors, including energy. were raised to US$0.065 per kWh. ■■ The Ministry of Natural Resources and Environment Generation, distribution and transmission aids in the research and development of energy and environmental protection policies. ■■ The state power company is Vietnam Electricity (EVN). Founded in 1995, EVN is responsible for the ■■ The Centre for Renewable Energy and Clean generation, transmission and distribution of power. Development Mechanisms was founded in 2007. In 2007, EVN controlled over 72% of Vietnam’s total It operates under the Institute of Energy, which was power generation. EVN is in the process of privatising established pursuant to a decision of the Ministry its subsidiaries (except for those operating in of Energy (which has since been merged with other governmental bodies to form the current MoIT).

92 | Renewable Energy in the Asia Pacific Electricity laws ■■ The total capacity of wind power is expected to increase from its current insignificant level to 1GW in ■■ The Law on Electricity of 2004 (Law on Electricity) 2020 and to 6.2GW by 2030. outlines the major principles for the establishment

of the power market in Vietnam. It is the first law ■■ Biomass power and power co-generation at sugar plants to regulate the country’s energy sector. The Law on are expected to have total capacity of approximately Electricity aims to stimulate development and diversify 500MW in 2020, and increase to 2GW by 2030. forms of investment in the energy sector and encourage ■■ The Renewable Energy Development Project, which economical use of electricity. was launched by the World Bank in 2002, serves as the ■■ Decision 1208/QD-TTg (PDP 7) dated 21 July 2011 framework for renewable sector development. Its aim provides for the national master plan for power is for large-scale development of renewable projects to development for the period 2011 to 2020, with an deliver rural electrification. outlook towards 2030. ■■ Various policies have been introduced to strengthen ■■ Decision 26/2006/QD-TTg dated 26 January 2006 domestic energy supply, increase international promotes the establishment of a competitive electricity cooperation, improve energy efficiency, develop the market to attract investment. By 2022, Vietnam aims oil industry and to develop clean fuels through nuclear to have a competitive electricity retail market where energy and new renewables. retail distribution companies compete to sell power, and ■■ Diversification and reduction of Vietnam’s reliance customers will have a choice of whom to buy power from. on imported fossil fuels have been key themes within ■■ Decision 1604/TTg-KTN dated 12 September 2011 government renewable energy policies. addresses the main issues in a BOT contract and government guarantees with respect to BOT thermal Hydropower power plants. With regards to BOT contracts, the parties ■■ Vietnam has thousands of lengthy rivers, which confer can choose foreign laws to govern the contract, and a high potential for small and large-scale hydropower English as the prevailing language for BOT documents. production. Indeed, hydropower already contributes Moreover, the price of electricity as stated in the nearly half of the country’s energy supply. contract can be quoted in USD (but payable in VND). The decision also provides the right for the investor to ■■ The Hoa Binh hydropower plant in North Vietnam is mortgage assets attached to land, and for government the country’s largest electricity generator.

guarantees for the obligations of the Vietnamese party. ■■ There are a number of hydropower plants either under As this decision only applies to thermal power plants, construction or recently commissioned, including the other energy projects would need to seek such benefits/ Son La Project (see below). guarantees directly from the Government, which would ■ be considered and approved on a case-by-case basis. ■ Small hydropower plants are estimated to have a potential capacity of 2.87GW. A number of small hydropower facilities were built by EVN in the districts RENEWABLES INDUSTRY OVERVIEW bordering China from 2007 to 2010.

■■ PDP 7 gives priority to the development of renewable energy as a source of electricity. The percentage of Wind energy

electricity generated from renewable resources is ■■ According to a survey conducted by the World Bank in expected to increase from 2% in 2010, to 4.5% of total 2009, Vietnam has the potential to produce more wind electricity production in 2020 and 6% in 2030. power along its coast than Thailand, Laos or Cambodia.

■■ Vietnam’s extensive coastline and high wind speeds averaging 5.6m/s in coastal regions are the reasons for the estimated 713GW of wind-generation capacity in the country.

www.dlapiper.com | 93 ■ ■ The provinces of Ninh Thuan and Binh Thuan are ■■ The overlap of government bodies in overseeing the especially suited to wind generation. The only grid- renewables industry, as well as the lack of legislative connected wind power project is located in Binh guidance, are general barriers to renewable energy Thuan. investment.

■ ■ Currently there are over 65 wind projects at various ■■ The contribution of hydropower to the country’s stages of development, each with a power generation electricity generation is already high by regional and range from 6MW to 150MW. even global standards. The environmental impact and inefficiencies of some plants has proved controversial Solar energy in the past. In early 2013 for instance, the Government

■■ Vietnam has approximately 2,000 to 5,000 hours of decommissioned 21 hydropower plants in Kon Tum. sunshine per year. RENEWABLES LAWS ■■ 5,000 sites around the country have stand-alone solar

PV systems. ■■ There is currently no “renewable energy act” or

■■ The Solar Laboratory of Vietnam Science Institute, the designated renewable energy regulation.

Institute of Energy and the Renewable Energy Centre ■■ Decree 102/2003/ND-CP dated 3 September 2003 are particularly active in the solar energy space in on energy savings and the efficient use of energy, Vietnam. introduces a raft of energy-saving measures, particularly for large consumers of electricity. Geothermal energy ■■ The Prime Minister stated at a national meeting in June ■■ Vietnam reportedly has 269 hot streams, with 2012 that a Green Growth Strategy to 2020 is under temperatures ranging from 30 to 148 degrees Celsius. development. This strategy would build on the National

■■ The estimates for Vietnam’s total geothermal Strategy for Climate Change Adaptation, which was generation capacity range from 200MW to 649MW. ratified by the Prime Minister in December 2011.

■■ Decision 37/2011/QD-TTg dated 29 June 2011 provides Biomass energy a feed-in tariff mechanism to support the development ■■ Biomass, including wood fuel and agricultural residues of wind power projects in Vietnam (see below). (rice husk, rice straw, coffee husk and bagasse), is widely used for energy production in rural areas of GOVERNMENT INCENTIVE PROGRAMS Vietnam. ■■ An avoided cost-based electricity tariff was introduced ■■ Estimated potential for biomass in Vietnam is between in Vietnam in 2008. To be eligible for this tariff, a grid- 1GW and 1.6GW. connected renewable energy plant must meet certain

■■ Around 25,000 biogas digesters have been installed criteria, such as having an installed capacity of less since the 1960s. than 30MW, complete renewable generation (as opposed to a hybrid system) and the project must ■■ Three sugar plants in the Mekong Delta region supply use the standardised power purchase agreement for the surplus electricity to the power grid, amounting to sale of electricity. 50MW. Additional turbines were commissioned in 2006 to increase generation capacity. ■■ Presently, a feed-in tariff is only available for wind- generated power. Despite being widely predicted CURRENT ISSUES IN THE RENEWABLES as a turning point for wind investment when it was INDUSTRY introduced in 2011, the tariff has not proven sufficient to entice much investment as the rate itself is low by ■■ Since 2004, the Government has gradually sought regional standards. to diminish the influence of EVN and establish competition in the electricity market.

94 | Renewable Energy in the Asia Pacific ■■ The Government has introduced a land fee tax RELEVANT INTERNATIONAL TREATIES exemption and an import tax exemption for renewable ■■ Vietnam ratified the Kyoto Protocol in 2002. It is a energy generators. non-annex one party to the United Nations Framework

■■ Investments in small-scale hydropower, wind, solar, Convention on Climate Change, so it does not have any geothermal, biomass and biofuels projects receive binding emissions targets. Government support through PDP 7. ■■ Vietnam joined the Inter-Governmental Agreement on Regional Power Trade in the Great Mekong Sub-Region MAJOR PROJECTS/COMPANIES in 2002.

■■ Wind Power Plant Farm No. 1 in Binh Thuan, with a capacity of 30MW, was the first wind project RELEVANT WEBSITES commissioned in South East Asia. ■■ Vietnam Electricity – http://www.evn.com.vn/Home/

■■ The Son La hydropower plant, which is the largest tabid/41/language/vi-VN/Default.aspx (Vietnamese) hydropower plant ever built in Vietnam, and cost ■■ Ministry of Industry and Trade – http://www.moit.gov. over US$3.2 billion, was officially put into operation vn/web/guest/home (Vietnamese) in December 2012, three years ahead of schedule. Its installed capacity is approximately 2.4GW and will ■■ Presentation from Mr Ta Van Huong, General Director also increase the capacity of the Hao Binh hydropower of the Energy Department, on Vietnam’s Energy station (which is downstream). The Son La project was Development Policy up to 2015 – http://www.egcfe. billed as the “project of the century” by state media. ewg.apec.org/publications/proceedings/CleanerCoal/ HaLong_2008/Day%201%20Plenary%20%20%20 ■■ In 2010, a US$59 million biomass plant in the town of 1%20-%20Ta%20Van%20Huong%20Vietnam%20 Phong Chau in the Phu Ninh district was constructed. Energy%20Policy.pdf

■■ The Vietnamese Renewable Energy Joint Stock Company runs the only grid-connected wind REFERENCES generation facility. The project comprises 20 wind turbines, each with a capacity of 1.5MW. ■■ Reegle, Country Energy Profile Vietnam, accessed at: http://www.reegle.info/countries/vietnam-energy- ■■ The World Bank has given Vietnam US$225 million profile/VN credit to improve energy efficiency in the country. ■■ Austrade, Clean Energy to Vietnam, accessed at: http:// www.austrade.gov.au/Clean-energy-to -Vietnam/ FOREIGN INVESTMENT/OWNERSHIP default.aspx

■■ For a variety of historical reasons, foreign investment ■■ Vietnam News Agency, Son La Hydropower in Vietnam has been minimal. Plant – project of the century, accessed at: http://

■■ Recently, the Prime Minister has been playing a direct en.vietnamplus.vn/Home/Son-La-Hydropower-Plant-- role in approving foreign investments. project-of-the-century/20132/31987.vnplus

■■ The Law on Electricity and PDP 7, as well as other relevant strategies and plans, encourage foreign investment in the energy sector.

www.dlapiper.com | 95 Business environment explanatory note

Ease of Doing Business Report The Ease of Doing Business Report is an annual publication of the International Finance Corporation (a member of the World Bank Group). The report looks at laws that may affect domestic firms in 185 economies. The report ranks these economies against 10 criteria, which are: starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting investors, paying taxes, trading across borders, enforcing contracts and resolving insolvency. The 2013 report uses data from June 2011 to May 2012. Source: http://www.doingbusiness.org/

Global Competitiveness Index The Global Competitiveness Report 2012/13 assesses the competitiveness landscape of 144 economies. The report is released on an annual basis by the World Economic Forum and ranks countries across 12 pillars: institutions, infrastructure, macroeconomic environment, health and primary education, higher education and training, goods market efficiency, labour market efficiency, financial market development, technological readiness, market size, business sophistication and innovation. Source: http://www.weforum.org/issues/global-competitiveness

Index of Economic Freedom The Index of Economic Freedom is produced on an annual basis. It is authored by the Wall Street Journal and the Heritage Foundation. The index is designed to assess the implementation of Adam Smith’s theory of economics which places great importance on liberty, prosperity and economic freedom. The index evaluates each country based on 10 criteria, which include: business freedom, trade freedom, fiscal freedom, government spending, monetary freedom, investment freedom, financial freedom, property rights, freedom from corruption and labour freedom. The 2013 index, which assesses 177 countries, uses these criteria to arrive at a ranking for each country with the first ranked country being the ‘most free’. Sources: http://www.heritage.org/index/

Corruption Perceptions Index Transparency International’s Corruption Perceptions Index ranks countries according to the perceived levels of public sector corruption. The index also gives each country a score out of 10. A score of zero means a country is perceived as highly corrupt, while a score of 10 denotes that a country is perceived as clean of corruption. There are 176 countries assessed in the 2012 index. Source: http://www.transparency.org/

Other Information The population, income and GNI per capita figures were based on data supplied by the World Bank. The GNI per capita in each profile is stated in purchasing power parity (PPP) terms. As a result, the figure is expressed in international dollar terms, rather than US dollar terms. An international dollar has the equivalent purchasing power over GNI as a US dollar has in the United States. It is thus a useful comparative figure when assessing the per capita wealth of different countries. Sources: http://data.worldbank.org/country

96 | Renewable Energy in the Asia Pacific Feed-in tariff rates comparison table (as at 24 June 2013)1

Set out below is a comparative table of the feed-in tariff rates for various Asia Pacific countries. The feed-in tariff rates for select European countries have also been provided for benchmarking purposes.

Asia Pacific countries

Hydropower Wind Solar Biomass

China2

RMB/kWh 0.29 to 0.45 0.51 to 0.61 1 to 1.15 0.65

USD/kWh 0.05 to 0.07 0.08 to 0.10 0.16 to 0.19 0.11

Indonesia3

IDR/kWh 656 Yet to be introduced Yet to be introduced4 850 to 975

USD/kWh 0.07 Yet to be introduced Yet to be introduced 0.09 to 0.10

Japan

JPY/kWh 25.20 to 35.7 23.1 to 57.75 31 to 37.8 13.65 to 40.95

USD/kWh 0.26 to 0.36 0.23 to 0.59 0.32 to 0.38 0.14 to 0.42

Malaysia

MYR/kWh 0.005 Yet to be introduced 0.00 to 3.466 4.057

USD/kWh 0.00 Yet to be introduced 0.00 to 1.08 1.26

Mongolia

MNT/kWh 64.69 to 143.75 115 to 215.63 215.63 to 431.25 Yet to be introduced

USD/kWh 0.045 to 0.1 0.08 to 0.15 0.15 to 0.30 Yet to be introduced

Philippines

PHP/kWh 5.90 8.53 9.68 6.63

USD/kWh 0.13 0.20 0.22 0.15

1 All efforts were made to ensure the accuracy of the information provided herein. The rates shown have been confirmed by at least two publicly available sources and/or confirmed by local counsel practising in that jurisdiction where possible. Many of the rates are expressed within a range. This is because rates often vary depending on the size, location and/or the specific type of renewable energy project that is generating electricity. 2 Investors should acknowledge that feed-in tariff rates vary across different regions in China. The rates set out above are based on information made available to us by local counsel and we are advised that these rates are a general estimate only. 3 Indonesia also has a feed-in tariff rate for geothermal energy ranging between USD 0.105 to USD 0.19. 4 An announcement is expected on a solar feed-in tariff in 2013. The rate could be as high as USD 0.25/kWh. 5 For small hydro and “available for MW installed capacity for FiT Applications” only. The rate changes half-yearly. 6 For solar PV and “available for MW installed capacity for FiT Applications” only. The rate differs from individual and non-individual proponents. The rate changes half-yearly. 7 For “available MW installed capacity for FiT Applications”. The rate changes half-yearly.

www.dlapiper.com | 97 Hydropower Wind Solar Biomass

Thailand

THB/kWh 0.8 to 1.58 3.59 to 4.510 6.5 0.311 to 0.512

USD/kWh 0.03 to 0.05 0.11 to 0.14 0.21 0.01 to 0.02

Vietnam

VND/kWh Yet to be introduced 1,640.73 Yet to be introducted Yet to be introduced

USD/kWh Yet to be introduced 0.078 Yet to be introduced Yet to be introduced

European Countries

Hydropower Wind Solar Biomass

Germany

EUR/kWh 0.034 to 0.127 0.035 to 0.19 0.018 to 0.244 0.06 to 0.25

USD/kWh 0.04 to 0.17 0.05 to 0.25 0.02 to 0.32 0.08 to 0.33

Italy

EUR/kWh 0.096 to 0.257 0.127 to 0.291 0.0013 0.125 to 0.257

USD/kWh 0.13 to 0.34 0.17 to 0.38 0.00 0.16 to 0.34

United Kingdom

GBP/kWh 0.032 to 0.217 0.042 to 0.217 0.069 to 0.154 0.092 to 0.152

USD/kWh 0.05 to 0.33 0.06 to 0.33 0.11 to 0.24 0.14 to 0.23

Exchange rates (as at 24 June 2013) Country Exchange rate/USD Country Exchange rate/USD Australia AUD 0.92/USD Mongolia MNT 1,437.55/USD China RMB 6.13/USD Philippines PHP 43.72/USD India INR 59.27/USD Thailand THB 31.16/USD Indonesia IDR 9,925.00/USD Vietnam VND 21,035.00/USD Japan JPY 98.37/USD Germany; Italy EUR 0.76/USD Malaysia MYR 3.20/USD United Kingdom GBP 0.65/USD

8 For mini and micro-hydropower facilities <200kW only. 9 >1MW. 10 <1MW. 11 >1MW. 12 <1MW. 13 Solar feed-in tariffs ceased on 6 July 2013.

98 | Renewable Energy in the Asia Pacific key CONTACTS (asia pacific)

Stephen Webb Partner and Head of Renewable Bill Glover Energy Sector Group Partner (Melbourne, Australia) T +61 7 3246 4208 T +61 3 9274 5255 [email protected] [email protected]

Carolyn Dong – Hong Kong/China Head of Energy – China Koji Ishikawa T +852 2103 0505 Partner (Tokyo, Japan) T +8610 6561 1788 T +81 3 4550 2825 [email protected] [email protected]

Dan Brown Daniel W. Lee Partner (Brisbane, Australia) Partner (Seoul, Korea) T +617 3246 4005 T +82 2 6270 8899 [email protected] [email protected]

Nicolas Groffman Supreedee Nimitkul Partner (Beijing, China) Partner (Bangkok, Thailand) T +8610 6561 1788 T +662 686 8535 [email protected] [email protected]

Robert Caldwell Jolyon Ellwood-Russell Partner (Hong Kong, China) Partner (Hong Kong, China) T +852 2103 0536 T +852 2103 0516 [email protected] [email protected]

Heng Loong Cheong Carrie Follas Partner (Hong Kong, China) Partner (Sydney, Australia) T + 852 2103 0610 T +61 2 9286 8175 [email protected] [email protected]

www.dlapiper.com | 99 our relationship firms

We are grateful to Khaitan & Co, Zaid Ibrahim & Co (a member of ZICOlaw), DLA Phillips Fox (New Zealand), and PJS Law.

INDIA – Khaitan & Co Philippines – PJS Law (www.khaitanco.com/) (www.pjslaw.com/) Joy Jacob Regina Jacinto Barrientos T +91 22 6636 5000 T +632 840 5025 [email protected] [email protected] Monalisa C. Dimalanta Rahul Arora T +632 840 5025 T +91 22 6636 5000 [email protected] [email protected] Najha Katrina J. Estrella T +632 840 5025 MALAYSIA – Zaid Ibrahim & Co. [email protected] a member of ZICOlaw (www.zicolaw.com/) Loh Wei Lian T +603 2087 9999 [email protected]

New Zealand – DLA Phillips Fox Brian Bray T +64 4 4 74 3236 [email protected]

Acknowledgement: a special thanks to the research and writing contributions of the above firms and individuals as well as to several DLA Piper contributors, in particular our project managing editor Jeffrey Sheehy (DLA Piper). Also thanks to Alison Dodd (DLA Piper), Gerald Arends (DLA Piper), Laura Betts (DLA Piper), Maxime Damphousse (DLA Piper and Ministry of Finance, East Timor), Jonathan Brooks (DLA Piper), Caera Lee Huan Yin (Zaid Ibrahim & Co), Stewart K. Diana (DLA Piper), Ted Yi (DLA Piper), Don Kim (DLA Piper), Ittipol Narkbenjaporn (DLA Piper), Matteo Falcione (DLA Piper) and Mileto Giuliani (DLA Piper).

Sincerely Stephen Webb (on behalf of DLA Piper).

100 | Renewable Energy in the Asia Pacific OUR GLOBAL PRESENCE

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