July 14, 2020 Read More →

Instability, high prices result of mistaken “lock-in” of fossil fuels for Southeast Asian customers

Asian Power:

A mistaken “lock-in” of fossil fuels, mainly coal, as the source of power generation in Southeast Asia has led to energy instability, high prices, and high levels of subsidy, according to a presentation by the Institute of Energy Economics and Financial Analysis (IEEFA).

The culprit for the high prices is the capacity fee, a minimum payment to ensure that the investor of the coal plant recovers their investment, which is typically a 14-15% internal rate of return (IRR), explained IEEFA’s energy finance analyst Sara Jane Ahmed.

Because of this, even if demand drops, consumers or governments still need to pay a minimum payment, leading to a higher per unit price of electricity. This either burdens the end user in the case for the Philippines, or the taxpayer through more government subsidies, which is the case for Indonesia and Vietnam. 

[Staff Reporter]

More: Fossil fuel lock-in worsens electricity prices for Southeast Asia

Posted in: IEEFA In the News

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