This is an extract from a recent report “Potential Utilisation of Fuel Ammonia in ASEAN Countries” prepared by ERIA. It provides updates on power generation, power development plans, and decarbonisation initiatives within the five case countries: Indonesia, Malaysia, the Philippines, Thailand, and Viet Nam.
Indonesia:
Power generation mix
Indonesia is the 4th and most populous nation in the ASEAN region. It has sustained robust economic growth in recent years, paralleled by an increase in energy demand. The nation’s energy policy is clouded by a significant reliance on coal-fired power generation. This dependence gives rise to a critical concern, as Indonesia contributes approximately half of the total GHG emissions from ASEAN countries, posing a pressing challenge for the nation’s ambition of sustainable economic growth. Coal-fired thermal power accounts for up to 66%, followed by natural gas-fired thermal power at 18%. The combined share of fossil energy reaches 87%. Mitigating emissions from the existing generation fleet is a major issue for the country’s power development planning.
Power development plan
To address the challenge of emissions reduction, Indonesia is actively deliberating a forthcoming power development plan. Aligned with this effort, the country’s Nationally Determined Contribution (NDC), established in July 2021, states that it would comply with the National Energy Policy enacted in 2014 – Indonesia’s latest energy policy document (President of the Republic of Indonesia, 2014). The National Energy Policy lists the following goals for clean energy sources in 2025 and 2050:
- Increase new and renewable energy (NRE) to 23% or more in 2025 and 31% or more in 2050.
- Decrease oil below 25% in 2025 and below 20% in 2050.
- Decrease coal below 30% in 2025 and below 25% in 2050.
- Decrease gas below 22% in 2025 and below 24% in 2050.
Recent movement towards decarbonisation
There are a few other notable developments towards decarbonisation in Indonesia. The first involves the Asian Development Bank (ADB) implementing the Energy Transition Mechanism (ETM). The primary goal of the ETM is to expedite the closure of existing coal-fired power plants and replace them with cleaner power plants such as renewable energy sources.
The second notable development towards decarbonisation is the planning of ammonia co-firing adoption by Indonesia. In addition, on 4 March 2023, the Ministerial Meeting of the Asia Zero Emission Community was held in Japan, during which Indonesia signed 12 memorandums of understanding (MOUs). Amongst them, six MOUs were for hydrogen co-firing in gas turbines and ammonia co-firing in coal-fired power plants.
Malaysia:
Power generation mix
In the power generation mix of Malaysia, natural gas and coal take almost the same share (approximately 40%). Most of the remaining electricity supply comes from hydropower (approximately 18%) with a small supply from other renewable sources.
Power development plan
The Power Development Plan 2020, outlined in the ‘Report on Peninsular Malaysia Generation Development Plan 2020, 2021–2039’ issued by the Energy Commission, outlines a strategy (Energy Commission, 2021). It mandates the abandonment of that 2,100 MW of coal-fired power plants by 2031, followed by an additional 1,400 MW in 2033. Meanwhile, two new coal power plant projects are scheduled for commission: 1,400 MW in 2031 and 700 MW in 2037. The estimated coal-fired power generation capacity as of 2040 will be 6.0 GW and all coal-fired power generation in Peninsula Malaysia will be phased out in 2044. As for natural gas-fired power plants, the plan outlines the addition of 1,200 MW of Liquefied Natural Gas (LNG)-based power plants (Combined-cycle Gas Turbine (CCGT)) by 2029, followed by the operation of an additional 2,800 MW LNG-based plant by 2030.
Recent movement towards decarbonisation
The first notable development in Malaysia’s decarbonisation efforts is its introduction of a carbon pricing system. Malaysia has initiated its first Voluntary Carbon Market (VCM) as a measure to achieve its carbon emissions reduction target by reducing carbon emissions by 45% in 2030 and achieving carbon neutrality by 2050. With its extensive forest reserves, Malaysia has a large potential to generate carbon credits, although such activities are currently limited. The ‘Pelan Kelestarian Alam Sekitar Malaysia 2020–2030’ plan aims to introduce a carbon pricing system in Malaysia. According to MIDA ‘Malaysian manufacturers must prepare for this wave as it benefits both the business and the environment. Failure to do so may cause Malaysian exporters to lose trade worth billions of Ringgit to European countries due to their failure to produce goods with greater GHG efficiency.’
The second notable development is the establishment of the National Energy Policy 2022–2040 (NEP). The third important development involves initiatives to demonstrate ammonia utilisation. Malaysia is actively promoting ammonia use through several avenues.
Philippines:
Power generation mix
In the Philippines, coal-fired power generation constitutes 58% of the power generation mix (based on generation capacity). Renewable energy (including hydro power generation) holds a 22% share, while natural gas-fired power generation contributes 18%. The combined share of fossil energies in the power generation mix is 78%.
Recent movement towards decarbonisation
Several important developments in the country’s decarbonisation efforts have been observed since the last study. The first is the ongoing temporary moratorium on construction approvals for coal-fired power plants. According to a local newspaper, the Secretary of the Department of Energy in the Philippines stated that the country, following the Marcos administration, would continue the suspension on new coal-fired power plant approvals introduced by the former Duterte administration in October 2020. This measure aims to promote the use of renewable energy. Under the current policy, new coal-fired power plants are allowed only if they have already obtained licences and are in the stages of front-end engineering, material procurement, and securing financing.
The second is the pledge by Banco De Oro (BDO) Unibank, the largest bank in the Philippines, to cut its stake in coal-fired power plants. According to a local newspaper, BDO Unibank plans to reduce its medium and long-term loans to coal-related businesses by 50% from current levels by 2033 (Agcaoili, 2022). The bank also aims to have less than 2% of its total loans extended to coal related businesses over the medium to long term by 2023. It will continue to provide short-term loans to companies to get out of coal.
The third development pertains to the decision on foreign ownership in the country’s renewable energy sector. On November 15, 2022, the Department of Energy (DOE) issued Department Notice No. 2022-11-0034 (‘DOE Notice’), amending Article 19 of the Enforcement Regulations of Republic Act No. 9513, which is also known as the Renewable Energy Act of 2008
The fourth development involves a joint study on co-firing of ammonia in coal-fired power plants. On February 10, 2023, JERA Co., Inc. and Aboitiz Power Corporation, a subsidiary of Aboitiz Equity Ventures Inc., a major conglomerate group in the Philippines, signed an MoU in the presence of the Filipino President Ferdinand Marcos during his Japan visit. This MoU marks the start of a collaborative feasibility study of co-firing ammonia at Aboitiz Power’s coal-fired power plants to advance their decarbonisation efforts (JERA, 2023).
Thailand:
Power Generation mix
In the power generation mix in Thailand, natural gas-fired power accounts for 63% of energy mix in Thailand, followed by coal fired power generation at 21% and renewable energy power (including hydropower) at 16%.
Recent movement towards decarbonisation
In 2022, a notable decarbonisation effort emerged through the adoption of a carbon pricing scheme. Thailand introduced the Voluntary Emissions Trading System (V-ETS) in October 2014, piloting emissions trading in key sectors like cement, pulp and paper, steel, and petrochemicals. A recent development involves the Ministry of Finance’s announcement to introduce a carbon tax on industrial greenhouse gas emissions. The government targets 30% of its EV production by 2025 to counter declining fossil fuel excise tax revenues. As part of this, changes to EV excise tax rates are under consideration with a lower rate for EVs compared to fossil fuel vehicles.
The second action towards decarbonisation involves adopting fuel ammonia. Collaborations between power generation, plant engineering, and trading companies, mainly from Japan, are planned with Thai counterparts for ammonia co-firing and supply chain development in thermal power sectors. In January 2023, four memorandums were signed, including ammonia co-firing in coal-fired power plants and considering CCU in cement plants.
The third notable development involves a surge of carbon credit transactions. In 2022, Thailand experienced a sharp increase in carbon credit transactions. The Thailand Greenhouse Gas Management Organization (TGO), an independent administrative agency supervised by the Natural Resources and the Ministry of the Environment, launched the Thailand Voluntary Emission Reduction Program (T-VER) in 2014. Companies seeking credits submit documents to TGO, which, upon certification by an external validation and verification body (VVB), issues the credits. Credits issued through T-VER lack international certification and are limited to domestic use.
Viet Nam:
Power generation mix
Viet Nam’s power generation sector, like other ASEAN countries in this study, heavily depends on coal-fired power generation. Coal power contributes 50% of the Viet Nam’s power generation, followed by hydropower at 30%, natural gas power at 15%, and renewable power like solar PV at 5%. The substantial coal power share is due to Viet Nam’s abundant coal reserves. Making good use of domestic coal aligns naturally with Viet Nam’s goals for energy security and cost competitiveness.
Power development plan
On May 15, 2023, the eagerly anticipated Power Development Plan VIII (PDP8) was finally approved. According to the approved plan, the country’s power generation capacity will expand from 81 GW in 2022 to 151 GW in 2030, with an estimated investment of $134.7 billion.
In terms of generation capacity, natural gas-fired power plant will account for 25% (including LNG) of the total generation capacity by 2030, increasing from 11% in 2022. While there are currently no operational LNG based power generation units, the PDP8 expects 22.4 GW capacity across 13 plants by 2030. PetroVietnam Gas has already completed an LNG-fired power plant in Ba Ria Vung Tau, which will initially use domestic natural gas and transition to LNG later.
PDP8 places high importance on coal-fired power generation. Coal has played a major source of the country’s power supply in the past and will continue to do so until 2030. The generation capacity of coal-fired power plants was 26.1 GW by the end of 2022, and this generation capacity will increase to 30.1 GW by 2030, which will account for 20% of the power generation mix.
As for renewable energy, PDP8 first aims to maximise the potential of hydroelectric resources. The hydro power capacity is expected to increase to 31.7 GW by 2030 from 23.0 GW in 2022. The plan envisions further growth to 36 GW by 2050. Wind power capacity will grow from 5.1 GW by the end of 2020 to 27.9GW by 2030, including 6 GW in offshore zones. Solar PV capacity will reach 12.8 GW by 2030, constituting 9% of the total generation capacity.
Recent movements towards decarbonisation
According to JETRO, there is a plan to produce green hydrogen in Viet Nam (JETRO, 2022). In Ben Tre Province in southern Viet Nam, a local company, TGS Green Hydrogen, plans to start construction of a green hydrogen plant using German hydrogen production technology at the end of June 2022. Its annual output targets 26,900 tonnes of green hydrogen, 168,000 tonnes of ammonia, and 218,000 tonnes of oxygen. Future expansion aims to more than double the capacity to 67,000 tonnes per year for hydrogen, 420,000 tonnes for ammonia, and 549,000 tonnes for oxygen. The total investment amounts to 19.5 trillion Vietnamese dong (VND), equivalent to approximately $821 million.
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