Abstract
AbstractThe ability of Southeast Asia's largest economies to develop renewable energy sectors is important for the reduction of carbon emissions. A popular policy tool for jump‐starting growth in renewables is feed‐in‐tariffs (FITs), whereby the government pays a long‐term and mutually agreed rate to independent power producers to develop renewable energies such as solar, biomass, wind, and hydropower. Indonesia and the Philippines have both adopted FITs in recent years, and the result has been a strong growth of renewable energy in the Philippines, but not in Indonesia. This difference can be partly explained by variances in policy design and political economic conditions that have impacted policy success. The Philippines enacted a FIT scheme that reflected several best practices in policy design. The political economic conditions of energy markets in the Philippines were also initially more favourable. The variance in these components helps to explain the divergent results of their respective FIT systems.
Highlights
At the 2015 Association of Southeast Asian Nations (ASEAN) Ministers on Energy Meeting, it was announced that ASEAN states had agreed to pursue a 20% reduction in carbon emissions by 2025 (Fadzell, 2015)
In the late 2000s, both Indonesia and the Philippines began exploring the enactment of FIT schemes to encourage investment in renewable energy sources
For the Philippines, a net importer of coal, increasing self-sufficiency in nonfossil fuel energy was seen as a way to enhance energy security by buffering against shocks to the global supply of commodities
Summary
At the 2015 Association of Southeast Asian Nations (ASEAN) Ministers on Energy Meeting, it was announced that ASEAN states had agreed to pursue a 20% reduction in carbon emissions by 2025 (Fadzell, 2015). They began targeting the adoption of feed-in-tariff (FIT) schemes whereby the government pays independent power producers (IPPs) a fixed and often above-market rate to purchase renewable energy (these agreements range between 20 and 30 years in Indonesia and a minimum of 20 years in the Philippines) Renewable energies such as solar, wind, biomass gasification, and hydropower typically have higher initial capital costs than fossil fuels such as coal, and FITs have historically been viewed as an important mechanism for inducing investment in nascent renewable sectors. Their energy sectors are structured in similar ways, with vertically integrated monopolies on the transmission and distribution of electricity They began exploring FIT systems in the late 2000s and began implementing tariff schemes at the same time targeting the same renewable sources (solar, wind, biomass, and hydropower). This dual approach of incentivizing investment in renewable energy through FITs, while raising the cost of coal
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