Energy Policy 85 (2015) 39–49

Contents lists available at ScienceDirect

Energy Policy
journal homepage: www.elsevier.com/locate/enpol

Renewable energy and policy options in an integrated ASEAN elec-

tricity market: Quantitative assessments and policy implications
Youngho Chang a,n, Yanfei Li b
a
Division of Economics, Nanyang Technological University, Singapore
b
Economic Research Institute for ASEAN and East Asia, Indonesia

H I G H L I G H T S

Energy market integration (EMI), carbon pricing, RPS, and FIT are examined for ASEAN.

EMI is a promising and feasible solution to promote renewable energy for ASEAN.

Along with EMI, FIT appears to be more cost-effective than RPS for ASEAN.

RPS of 30% by 2030 appears to be reasonable and feasible for ASEAN.

Coordinating FIT and RPS policies under EMI among ASEAN is advised.

art ic l e i nf o a b s t r a c t

Article history: Energy market integration (EMI) in the ASEAN region is a promising solution to relieve the current
Received 13 January 2015 immobilization of its renewable energy resources and would serve the fast increasing demand for
Received in revised form electricity in the region. EMI could be further extended with coordinated policies in carbon pricing,
6 April 2015
renewable energy portfolio standards (RPS), and feed-in-tariffs (FIT) in the ASEAN countries. Using a
Accepted 15 May 2015
linear dynamic programming model, this study quantitatively assesses the impacts of EMI and the above-
mentioned policies on the development of renewable energy in the power generation sector of the re-
Keywords: gion, and the carbon emissions reduction achievable with these policies. According to our results, EMI is
Energy market integration (EMI) expected to significantly promote the adoption of renewable energy. Along with EMI, FIT appears to be
Renewable energy portfolio standards (RPS)
more cost-effective than RPS and is recommended for the ASEAN region, albeit political barriers for
Feed-in-tariff (FIT)
policy coordination among the countries might be a practical concern. In addition, an RPS of 30% elec-
Carbon pricing
Renewable energy resources tricity from renewable sources by 2030, which is considered politically a “low-hanging fruit”, would
achieve moderate improvements in carbon emissions reductions and renewable energy development,
while incurring negligible increases in the total cost of electricity.
& 2015 Elsevier Ltd. All rights reserved.

1. Introduction
Strong economic growth of the Association of Southeast Asian
Nations (ASEAN) countries in the recent decade is coupled with
the commensurate growth in energy consumption but far stronger
growth in electricity consumption as shown in Table 1. The growth
rate of electricity consumption in ASEAN countries is more than
twice the world average growth rate of electricity consumption.
Such growth in demand for electricity imposes continuous pres-
sure on the supply side both for power generation and power
transmission capacities in these countries (ASEAN Centre for En-
ergy, 2010).
n
Corresponding author.
E-mail addresses: isyhchang@ntu.edu.sg (Y. Chang), yanfei.li@eria.org (Y. Li).
Like the rest of the world, fossil fuels dominate in the electricity
generation of the ASEAN countries. The share of oil is decreasing
while the shares of natural gas and coal are increasing. The share
of renewable energy, including hydro, geothermal and the others,
decreases from 18.6% in 1995 to 16.2% in 2007 (Fig. 1). However,
the absolute volume of installed renewable energy capacity does
increase, although slower than that of thermal capacities that use
fossil fuels in this region.
According to various energy statistics, ASEAN countries have
abundant renewable resources in the form of hydro, geothermal,
biomass, solar, and wind. However, these resources are unevenly
distributed among the member countries. It is estimated that
ASEAN has 254 GW of hydro resources, excluding Vietnam. Hydro
resources concentrate in countries like Myanmar, Indonesia, Laos,
Cambodia, and Malaysia. About 20,000 MWe or 40% of the world

http://dx.doi.org/10.1016/j.enpol.2015.05.011
0301-4215/& 2015 Elsevier Ltd. All rights reserved.
40 Y. Chang, Y. Li / Energy Policy 85 (2015) 39–49
Table 1
Growth in GDP, energy consumption and electricity consumption – ASEAN and
world average in 2000–2009.
Source: Authors’ estimation based on World Bank and Energy Information Ad-
ministration (EIA) data.
GDP (%) Energy consumption Electricity consumption
(%) (%)
ASEAN 5.2 4.8 6.6
World average 3.5 2.2 3.1
geothermal energy resources are found in Indonesia and the
country is the second largest geothermal energy producer in the
world. The Philippine also has abundant geothermal resources and
is ranked as the fourth largest geothermal energy producer in the
world. Indonesia, Malaysia, and Thailand each have 50 GW, 29 GW,
and 7 GW of biomass potential, respectively. Specially, Malaysia
has 41% of world palm oil production and it has the potential to be
one of the major contributors of renewable energy in the world via
palm oil biomass. Vietnam, the Philippines, and Laos have the
greatest theoretical wind power potential in the region (Abdullah,
2005; Do and Sharma, 2011; Lidula et al., 2007; Thavasi and Ra-
makrishna, 2009; Ong et al., 2011).
Despite of the strong potential in renewable energy, the utili-
zation of renewable energy for power generation is very low in the
region. In the rural areas of many ASEAN countries, most of the
biomass energy is still being used in the traditional way of burning.
The share of biomass used in this way has been as high as 73.8% in
Cambodia, followed by Myanmar (64%), Vietnam (60%), and Laos
(54.2%) in their total energy mix (Thavasi and Ramakrishna, 2009).
There are a few major barriers for ASEAN countries to adopt
modern technologies to harvest renewable energy and turn it into
the cleaner form, which is electricity, for consumption. While high
upfront investment costs of the advanced renewable energy tech-
nologies are the key barrier to adoption, the lack of financial means
and technology/knowledge transfer are the other critical barriers
(Das and Ahlgren, 2010). The uneven distribution of renewable
resources in ASEAN countries, such as abundance of hydropower in
Laos and Cambodia and geothermal in Indonesia and the Phi-
lippines, imposes an additional barrier. Institutional and systematic
solutions with regional collaboration are thus called for.1
The energy market integration (EMI) based on power grid in-
terconnectivity in ASEAN countries is a promising solution to re-
lieve the immobilization of potential renewable energy develop-
ment caused by the above barriers to a large extent. First, EMI
brings along an integrated regional power market, which would
enable poorer countries that have abundant renewable energy to
export their clean energy to richer countries – namely cross-bor-
der power trade. The ASEAN Power Grid (APG) that is planned for
power grid interconnection among ASEAN countries provides the
physical infrastructure for EMI. In this regard, Chang and Li (2013)
have shown that EMI could by itself promote the development of
renewable energy, mainly in the form of hydropower followed by
geothermal and wind, in the region. Second, EMI allows financial
resources to move from richer countries to poorer countries. It
thus relieves the financial constraint on renewable energy in-
vestment. Third, an integrated regional energy market also makes
1
Clean Development Mechanism (CDM) is one of the potential solutions.
However, the methodology used by the CDM in determining the amount of
emissions reduction prevents the least-developed countries from certifying their
renewable energy projects (Lim and Lee, 2011). Countries like Myanmar, Cambodia,
Vietnam, and Laos already have a high share of renewable energy in terms of
traditional biomass such as wood in their energy mix and using modern renewable
energy technologies to replace traditional renewable energy cannot qualify for
CDM credits unless there is a significant improvement in efficiency.
technology and knowledge transfer easier between the two groups
of countries in the region (Lim and Lee, 2011).
EMI could go further to implement three sets of coordinated and
regional-level policy regimes to promote renewable energy devel-
opment in the power sector of the region. First, ASEAN countries
could coordinate and impose renewable energy portfolio standards
(RPS) to a certain extent in the power sector of each member
country as Thailand and the Philippines have already been trying
(Lidula et al., 2007). Second, ASEAN countries could also seek to
coordinate to provide feed-in-tariff (FIT) to renewable energy de-
velopment in the power sector. The idea is to give indiscriminative
FIT to electricity consumed in each member country, being it pro-
duced domestically or imported. Third, it could also seek for the
establishment of a common carbon emissions right market in this
region, and the common prices of carbon emissions right could
serve as an additional incentive to investments in power generation
using renewable energy. This study is a practice to quantitatively
assess the effectiveness of these policy measures in the ASEAN
region. It provides an assessment of the theoretical potential of
these policies in ASEAN countries to promote renewable energy,
although it is noted that in reality the effectiveness will be dis-
counted mainly due to social, legal, and political constraints.
Indeed, EMI combined with regional-level renewable energy
policies, being it RPS, FIT or carbon emissions pricing, could mo-
bilize the unevenly distributed renewable energy resources in the
region to its greatest potential. For example, high-income coun-
tries such as Singapore, Malaysia and Thailand in the region would
not be limited to develop renewable energy, such as hydro, solar,
wind and geothermal, within its border, by introducing RPS or FIT
on imported electricity from renewable sources.
The literature shows that FIT works better than RPS in pro-
moting the development of renewable energy for power genera-
tion in most cases so far. Dong (2012) showed that FIT is more
effective in increasing renewable energy capacity than RPS, using
multi-country panel data, and that such is consistent with many
previous studies. The U.S. National Renewable Energy Laboratory
(NREL) reported that properly designed FITs could also be more
cost-effective than RPS according to European evidence (NREL,
2009). Using a micro-level analysis, Sawin (2004) and Butler and
Neuhoff (2008) showed that FIT works better than RPS, not only to
accelerate the adoption of renewable energy but also to incur
competition along the industry value chain to bring down the
costs of renewable energy.
However, there has been no quantitative analysis on how well
these policy options, namely EMI, carbon pricing, FIT and RPS,
could work in the ASEAN context, especially considering the
possibility of cross-border power trade in the region. This study
thus further delves into how these policies as well as the mix of
them can help the development of renewable energy in the power
sector of the region in the future. The simulation results from this
study, which is oriented to cost optimization, could thus provide
references to policy makers in the region in choosing the most
cost-effective policy options.
Section 2 briefly reviews renewable energy policy options at
regional level in integrated markets and their relevance to re-
newable energy development in ASEAN. It then presents the linear
dynamic programming modelling for quantitative simulations of
the impacts of the above-mentioned policy scenarios and de-
scribes the key data inputs for scenarios. Section 3 presents the
results from scenario simulations and the analysis of the results,
and discusses the effectiveness of policy options using the unit
cost of carbon emissions reduction and additional renewable en-
ergy capacity, followed by sensitivity analysis. Section 4 further
explores the feasibility of FIT and RPS in the ASEAN context. Sec-
tion 5 presents policy implications derived from the key findings
of this study and concludes.
 Y. Chang, Y. Li / Energy Policy 85 (2015) 39–49
Fig. 1. ASEAN Electricity Generation by Source, 1995 and 2007.
Source: The Third ASEAN Energy Outlook, Institute of Energy Economics Japan, ASEAN Centre for Energy, National ESSPA Project Team, Feb (2011).
2. Methods
2.1. A brief review of EMI, FIT and RPS
To promote renewable energy in the ASEAN region, efforts have
been made by each ASEAN member country to a different extent
and using various measures (ASEAN Centre for Energy, 2013).
However, it has been largely overlooked that ASEAN countries could
be facilitated by the APG-based power grid interconnectivity and
EMI to achieve a less costly but high volume of renewable energy.
There is also a lack of literature discussing the coordination of re-
newable energy policies such as FIT and RPS of ASEAN countries in
an integrated regional market. In the following, the literature re-
view on the relevant experience and issues in the European Union
(EU) provides the justification for the importance of the issues and
gives the inspiration on how to find solutions for the ASEAN region.
Tangeras (2014) raised the concern that EMI may be incon-
sistent with RPS or FIT if the latter two are implemented at na-
tional level individually, as in the EU case. RPS or FIT that targets
only at domestic renewable energy sources in each country –
decentralized policy – reduces the electricity cost differences that
used to motivate cross-border electricity trade. EU, which has to a
large extent integrated its regional power market, is on the way to
harmonize such policies and provide a regional-wide supportive
mechanism for renewable energy.
At the same time, an integrated power market supports further
adoption of renewable energy in the region as it provides a greater
capacity to absorb variable power production from renewable
sources (European Commission, 2014). For example, the coupled
French and German grid enabled Germany to absorb a high share
of renewable energy while France benefited from importing re-
newables from Germany during peak time.
Such is also true to ASEAN countries considering relatively a
small scale of each country’s power grid. The APG, with an in-
tegrated regional power market through EMI, will have a greater
capacity to coordinate and balance the grid given the variable
power production from renewable sources. In this way, EMI, like in
the European case, can improve the capacity factor of power
generation from renewable sources and reduce the system cost of
using renewable energy for ASEAN as a whole. However, it is noted
that, to fully harvest such benefits of EMI, the financial and ad-
ministrative incentives given in each participating country should
be coordinated (Bahar and Sauvage, 2013). For example, an ex-
cessive subsidy given to renewable energy resources in one
country may put undesired downward or upward pressure in
electricity prices on national and international power markets,
41
interfering the proper operation and development of other coun-
tries’ competitive power markets.
In the real situation, technical issues such as the order or
priority of dispatch to renewable energy resources and a close-to-
real-time gate closure trading regime that are often used as a
policy to encourage renewable energy development are also to be
coordinated among countries participating in the regional EMI. In
other words, the network code should also be harmonized and
optimized to facilitate the uptake of renewable energy under EMI
(Bahar and Sauvage, 2013).
The EU has long been considering developing a coordinated
renewable energy supporting mechanism such as FIT, RPS or
tradable Green Certificate in their respective region based on EMI.
However, it is also an undetermined issue in the EU regarding
what kind of policy is more effective. The practices of EU’s member
countries show that FIT seems to be less costly and more effective
to implement. But a policy at EU level may function differently
than at nation level (Poputoaia and Fripp, 2008). It is therefore a
meaningful practice for this study to model an ASEAN regional
power market and quantitatively assess the effectiveness of var-
ious renewable energy policies at regional level.
It should be noted, however, that just as the rich literature on
European EMI and renewable energy policies has revealed the
economic, social and technical complexity of the issue, this study
only focuses on economical assessment of EMI and some renew-
able energy policies in the ASEAN region. This study could show
policy makers that EMI and regional level renewable energy po-
licies have great potential benefits for the region and are worth of
pursuing. It is the beginning of more detailed discussions of the
complexity of the issue rather than a comprehensive conclusion.
Economic Research Institute for ASEAN and East Asia (2014) and Li
and Chang (2014) have studied the financial feasibility of APG
under EMI assumptions. Many more problems, including technical,
social, and political ones, remain to be studied or are in the process
of being studied.2
The political difficulties in the cross-border coordination of
renewable energy policies appear to be extremely critical,
2
The Heads of ASEAN Power Utilities/Authorities (HAPUA), an official me-
chanism for coordination and collaborations in the power sector of ASEAN coun-
tries, have done three ASEAN Interconnection Master Plan Study (AIMS), mainly on
the planning of APG and EMI. Recently, the HAPUA has started research projects on
several more streams, including a study on the Harmonization of the Legal and
Regulatory practices and to identify a possible financing modality for realizing the
APG, the Study on Public Private Partnership among ASEAN Power Utilities/Au-
thorities, the Study on Regulation of Taxation for Cross Border Power Transaction,
and the formation of Group of APG Transmission System Operators (ATSO), Group
of APG Grid Planners, and Group of Regulators (Ibrahim, 2014).
42 Y. Chang, Y. Li / Energy Policy 85 (2015) 39–49

although the discussion of it in depth is out of the scope and 2.2.1. Capital expenditure
purpose of this paper. However, the ASEAN framework, which is a The following models the capital expenditure (CAPEX) of a
political mechanism, has established a record for making pro- certain type of power generation capacity at a certain point of
gressive achievements. Such is evident in economic integration, time. Let xmiv be the capacity of plant type m, vintage v,5 in country
especially in trade and investment. Several official master plans for i.6 And cmiv is the corresponding capital cost per unit of capacity of
connectivity have been announced and continuously updated, the power plant. So the total capital cost during the period of this
serving the goal of ASEAN Economic Community.3 In terms of study would be ∑iI=1 ∑Tv=1 ∑m M
=1 cmiv ⁎xmiv . (In GAMS code, for con-
power grid interconnectivity and energy market integration, sistency in presentation with the other cost terms, we add a time
steady progress has also been made and political will to drive for dimension to the equation besides the vintage dimension. By do-
acceleration is also evident. For example, countries including Laos, ing that, we amortize capital cost using a capital recovery factor.)
Thailand, Malaysia and Singapore have recently started negotia-
tions for multilateral power trade among the four countries to 2.2.2. Operational expenditure
demonstrate the technical and economic feasibility.4 The following models the operational expenditure (OPEX) of a
certain type of power generation capacity at a certain point of
time. Let umijtvp be power output of plant m, vintage v, in year t,
2.2. Model
country i, block p on the load, and exported to country j. Let Fmitv
be the corresponding operating cost which varies with v, and θ jp
This study adopts a linear dynamic programming model de-
be the time interval of load block p within each year in the des-
veloped by Chang and Li (2013). In the model, taking a long-time
tination country. Opex(t) in year t is expressed as
horizon, a planner's objective is to choose power plant capacities
∑iI=1 ∑ jJ ∑tv=−V ∑Pp=1 ∑m
M
=1 Fmitv ⁎umijtvp ⁎θ jp .
and output levels across countries covered in the research scope so
as to minimize the present value of total costs while meeting the
2.2.3. Carbon emissions
growing demand for power over the modelling period. The model
The model considers carbon emissions of different types/tech-
assumes that the ASEAN Power Grid (APG) is in place so that
nologies of power generation capacity and takes the cost of carbon
countries in the region are allowed to trade power. The levelized
emissions into consideration. Let cem be the carbon emissions per
costs of generating electricity are embedded in the model. De-
unit of power plant capacity of type j plant, and cpt be the carbon
pending on the modelled policies on cross-border power trade, the
price per unit of carbon emissions in year t. The amount of
amounts of power to be traded among countries in each year of
carbon emissions produced are expressed as
the period are also optimized. The model is solved using GAMS. M I J T
∑m =1 ∑ i=1 ∑ j=1 ∑ v=− V umijtvp ⁎ θ jp ⁎cem , and carbon cost in year t is
The notations, parameters and variables of the model are as
follows:
M
CC (t ) = cpt ⁎ ∑m I
( J T
=1 ∑i=1 ∑ j=1 ∑v=− V umijtvp ⁎θ jp ⁎cem . )
Country i or j 2.2.4. Cross-border transmission cost
Plant type m The costs of cross-border transmission come in two forms. One
Vintage years of facility v is the tariff paid to recover the capital investment and operational
Year t cost of the grid line. The other is the transmission loss, which
Load block p could be significant if the distance of transmission is long. To
Duration of load block θip model the tariff of transmission, let tpi, j be the unit MWh trans-
Power demand of a country Qitp mission cost of power output from country i to country j. Let TC(t)
Capital cost per unit of capacity of the power plant cmiv be the total cost of cross-border power transmission in year t, we
Operating cost of the power plant Fmitv have TC (t ) = ∑iI=1 ∑ jJ=1 ∑Tv=−V ∑Pp=1 umijtvp ⁎θ jp ⁎tpi, j .
Load factor of installed capacity of power generation lfmi
2.2.5. Objective function
The energy factor of power plant in a country efmi As discussed earlier in the methodology section, our objective
Initial vintage capacity of a type of power plant in a country kitmi is to minimize the total cost of electricity during the period of this
Capacity of power plant xmiv study. The objective function is written as
Output of power plant umijtvp I T M T
Unit transmission cost of power output from country to tpi, j obj = ∑∑ ∑ cmiv ⁎xmiv + ∑ {Opex (t ) + CC (t ) + TC (t ) }
country i=1 v=1 m=1 t=1 (1)
Transmission loss in cross-border electricity trade be- tli, j
tween country and country
2.2.6. Constraint conditions
Rate of reserve capacity as required by regulation pr Optimizing the above objective function is subject to the fol-
Carbon emissions per unit of power plant output cem lowing constraints. Eq. (2) shows a first set of constraints, which
Carbon price per unit of carbon emissions cpt require the total power capacity to meet the total power demand
Level of RPS in the total electricity generated in a certain year RPS(t) in the region. Let Qitp be the power demand of country i in year t
Per unit subsidy from FIT policy on renewable energy fitmi (t ) for load block p.
I J M t I
∑∑ ∑ ∑ umijtvp ≥ ∑ Qitp
3 i = 1 j = 1 m = 1 v =−V i=1 (2)
Refer to the “2007 Memorandum of Understanding on the ASEAN Power
Grid” and the “Master Plan on ASEAN Connectivity”, published by ASEAN Secre-
tariat and available at http://www.asean.org. The “ASEAN Plan of Action for Energy
5
Cooperation 2010–2015” is another official document developed by the ASEAN Vintage indicates the time a certain type of capacity is built and put into use.
6
Centre for Energy in 2010. This variable represents investment in new power generation capacity. In-
4
Source: “$26-bn savings seen in Laos-Singapore power line”, the Nation, vestment is considered done once the power generation facility has been con-
available at http://www.nationmultimedia.com/business/$26-bn-savings-seen-in- structed and not at the moment when investment decision is made and con-
Laos-Singapore-power-line-30244139.html. struction commences.
 Y. Chang, Y. Li / Energy Policy 85 (2015) 39–49 43

The second one, shown in Eq. (3), states the constraint of load the power generated from specific types of renewable energy
factor lfmi of each installed capacity of power generation. Let kitmi sources, covering electricity both generated domestically and im-
be the initial vintage capacity of type m power plant in country i. ported. Our model incorporates FIT as a per unit subsidy (adder)
on the targeted renewable energy that excludes large hydro. In the
umijtvp ≤ lfmi ⁎(kitmi + xmiv ) (3) FIT policy scenarios, an FIT subsidy for each unit of electricity
The third constraint, shown in Eq. (4), says that the power generated from renewable sources is added into the objective
supply of all countries to a certain country must be greater than function as follows:
the country’s power demand. Let tli, j be the ratio of transmission ⎛ I J t P RES ⎞
loss in cross-border electricity trade between country i and subsidy (t ) = ⎜⎜∑ ∑ ∑ ∑ ∑ uRES, ijtvp ⋅θ jp ⎟⎟⋅fitmi (t )
country j. ⎝ i = 1 j v =−V p = 1 RES = 1 ⎠ (10)
J M t Here, subsidy (t ) is the total subsidy for all renewable energy in year
∑∑ ∑ umijtvp ⋅tlij ≥ Qitp t . fitmi (t ) is the per unit implicit subsidy from FIT policy on re-
j = 1 m = 1 v =−V (4) newable energy type m in country i.
To reflect the potential of small hydro and Carbon Capture and
Eq. (5) states that the total supply of power of one country to all
Storage (CCS) technologies in the region, these technologies are
countries (including itself) must be smaller than the summation of
now added into the model. To reflect the concern that the prices of
the country’s available power capacity at the time.
carbon emissions right in the future may still go through cyclical
J M t developments, our assumptions about the prices of carbon emis-
∑ umijtvp ≤ ∑ ∑ lfmi ⁎(kitmi + xmiv ) sions follows a similar pattern based on publically available U.S.
j=1 m = 1 v =−V (5)
carbon trading data.
The fifth constraint, shown in Eq. (6), is the capacity reserve
constraint. Let pr be the rate of reserve capacity as required by 2.3. Data inputs and scenarios
regulation. And let p = 1 represent the peak load block.
This study covers the ten member countries of ASEAN, which
I M t I
are Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the
∑∑ ∑ lfmi ⁎(kitmi + xmiv ) ≥ (1 + pr )⁎ ∑ Qit, p = 1
Philippines, Singapore, Thailand, and Vietnam. Technologies of
i m = 1 v =−V i (6)
power generation covered in this study include coal, coal-CCS,
Specially, hydro-facilities have the so-called energy factor diesel, natural gas, natural gas-CCS, hydro, small hydro, geother-
constraint as shown in Eq. (7). Let efmi be the energy factor of plant mal, wind, solar PV, and biomass. The period covered by this study
type m in country i. Non-hydro facilities will have ef ¼1. is 2012–2035.
P J The data required for this study mainly include the existing
∑ ∑ umijtvp ≤ efmi ⁎(kitmi + xmiv ) capacities of the mentioned types of power generation, the capital
p=1 j=1 (7) expenditure (CAPEX) and the operating expenditure (OPEX)7 of
these types of power generation, the load factor and the life ex-
Lastly, the development of power generation capacity faces a pectancy of each vintage of each type of power generation, the
resource availability constraint, which is shown in Eq. (8). Let energy resources available for power generation in each country,
XMAXmi be the type of resource constraint of plant type m in the peak and non-peak power demand and the duration of power
country i. demand of each country, the projected growth rate of power de-
T mand, and the transmission cost and transmission losses of cross-
∑ xmiv ≤ XMAXmi border power trade. Detailed data and sources of data are pre-
v=1 (8) sented in Appendix A.
The purpose of this study is two folds. One is to assess how
2.2.7. FIT and RPS policies such as energy market integration (EMI), carbon prices,
For the purpose of this study, the implementation of uniform RPS and FIT impact the patterns of power generation capacity
RPS and FIT policies in all countries of the region is modelled as development and utilization, as well as those of cross-border
follows. This study imposes an RPS constraint in each country to power trade in the region, with a special focus on renewable en-
ergy applications in the region. The other is to assess what level of
incorporate the RPS policy. The constraint says that the share of
policy intervention is most effective for each policy regime, in
electricity generated from renewable sources should not be lower
terms of the additional costs incurred and the additional capacity
than a specified level (RPS (t )) in the total electricity generated in a
development in renewable energy achieved.
certain year. The equation below represents this constraint.
This study specially focuses on testing various RPS and FIT
I J t P RES
policies, identifying the most effective level of RPS requirement or
∑∑ ∑ ∑ ∑ uRES, ijtvp ⋅θ jp subsidy on electricity from renewable sources. Table 2 presents a
i=1 j v =−V p = 1 RES = 1
list of the key assumptions and parameters of the scenarios.
I J t P M
The BAU scenario assumes that during the simulation period no
≥ RPS (t )⋅ ∑ ∑ ∑ ∑∑ umijtvp ⋅θ jp
i=1 j v =−V p = 1 m = 1 (9) coordinated policies such as carbon prices, EMI, RPS or FIT are
adopted to promote renewable energy in the power sector of the
Here, umijtvp is the power output of plant type m (power generation region.
technology), vintage v, in year t, country i, block p on the load, and The BAUCC scenario assumes that carbon prices are imposed on
exported to country j. θ jp be the time interval of load block p power generation in all countries in the region. But no EMI – free
within each year in the destination country. RES represents the
subset technologies that are categorized as renewable energy 7
To reflect the fact that renewable energy technologies as well as their supply
technologies. To create realistic RPS scenarios, it is assumed that chains are expected to keep improving and therefore reducing the costs of both
the policy is effective from 2020 onwards. acquisition and operation, this study assumed that the CAPEX and OPEX of small
FIT is a policy to provide a certain favourable price to purchase hydro, geothermal, wind and solar will decrease at certain rates over time.
44 Y. Chang, Y. Li / Energy Policy 85 (2015) 39–49

Table 2
Key assumptions and parameters of the scenarios.
Source: Authors.

Scenario Description

BAU (no carbon costs or EMI) Business-As-Usual (BAU) with no carbon costsa or EMI imposed on the power sector
BAUCC (carbon costs with no EMI This scenario assumes that carbon costs are) imposed to the power sector but the region has no effective EMI to allow free cross-
border power trade
BAUCCEMI (carbon costs with EMI) Both carbon costs and EMI are implemented in the power sector of the region
FIT10 USD 10/MWh of subsidy provided to electricity generated from renewable energy
FIT20 USD 20/MWh of subsidy provided to electricity generated from renewable energy
FIT30 USD 30/MWh of subsidy provided to electricity generated from renewable energy
FIT40 USD 40/MWh of subsidy provided to electricity generated from renewable energy
FIT50 USD 50/MWh of subsidy provided to electricity generated from renewable energy
RPS10 The share of renewable energy in total electricity is required to be above 10%
RPS20 The share of renewable energy in total electricity is required to be above 20%
RPS30 The share of renewable energy in total electricity is required to be above 30%
RPS40 The share of renewable energy in total electricity is required to be above 40%
RPS50 The share of renewable energy in total electricity is required to be above 50%
RPS60 The share of renewable energy in total electricity is required to be above 60%
RPS70 The share of renewable energy in total electricity is required to be above 70%
RPS30 by 2030 The share of renewable energy in total electricity is required to be above 30% from 2030 onwards
FIT10 RPS10 A combination of FIT10 and RPS10

a
Carbon costs usually come from Cap-and-Trade schemes for carbon emissions from specified sectors. Although ASEAN has no such scheme at the moment, carbon costs
from other markets such as the European Union and the U.S. could be applied to reflect the environmental cost of carbon emissions from power generation activities. As this
model is a sector model, however, it is not possible to endogenize the carbon costs that are derived from multi-sector markets.

cross-border power trade – is implemented. This scenario, when
compared with the previous BAU scenario, reflects the impact of
carbon prices on the development of renewable energy.
The BAUCCEMI scenario assumes that both carbon prices and
EMI are introduced. This scenario, when compared with the pre-
vious carbon-prices-only scenario, reflects the impact of EMI on
the development of renewable energy.
FIT10 to FIT50 is a series of scenarios that test the impacts of
various levels of FIT subsidies. RPS10 to RPS70 is another series of
scenarios that test the impacts of various levels of RPS require-
ments on the share of renewable energy in total power generation
to be met from 2020 onwards. The model is solvable at up to RPS
of 70% level (RPS70), meaning that the region has ample renew-
able resources, especially hydro, to enable this scenario. Both FIT
and RPS scenarios assume the implementation of both carbon
prices and EMI.
“RPS30 by 2030” is a special scenario that requires that 30% of
the power generated is supplied from renewable sources from
2030 onwards. This scenario is currently perceived as reasonable
by policy practitioners in the region. The model thus helps assess
the effectiveness of such a policy. “FIT10 RPS10” is another special
scenario that requires that FIT10 and RPS10 are combined and
implemented simultaneously. The scenario represents popular
thinking from the U.S. policy makers. This model also helps assess
if this policy would be favourable in the ASEAN context.
3. Results
3.1. Simulation results
Table 3 presents key results from the simulation of all scenar-
ios. The second column reports the subsidies to OPEX incurred
under the FIT scenarios to power generation. These subsidies are
also part of the social costs in producing the electricity. The actual
total cost is the objective value of the model, which includes the
total subsidies, the amortized CAPEX of newly added capacities
and vintage capacities, the OPEX, the transmission costs and los-
ses, and the carbon costs. The next column reports total CO2
emissions in the corresponding scenario. The second last column

Table 3
Key results of all scenarios.
Source: Simulation results.

Scenarios Total subsidy Actual total cost (Mil- Total CO2 emissions Renewable energy capacity Renewable energy capacity added
(Million USD) lion USD) (Million Ton) added (MW) w/o hydro (MW)

BAU 0 2,996,247 17,158 61,419 13,125

BAUCC 0 3,015,174 16,580 79,355 24,155
BAUCCEMI 0 2,999,162 15,177 117,041 20,819
FIT10 43,984 3,005,494 12,475 160,399 38,445
FIT20 109,749 3,022,570 10,293 181,922 51,253
FIT30 233,162 3,081,020 7408 197,425 74,970
FIT40 387,996 3,149,407 5634 213,709 83,004
FIT50 583,638 3,239,522 4257 250,859 93,702
RPS10 0 2,999,349 15,067 117,871 21,648
RPS20 0 3,002,229 14,460 123,725 27,487
RPS30 0 3,007,613 13,578 128,127 30,512
RPS40 0 3,021,351 12,351 139,903 40,325
RPS50 0 3,040,762 11,109 149,598 48,210
RPS60 0 3,069,532 9646 178,033 57,849
RPS70 0 3,124,184 8324 249,456 86,335
RPS30 by 2030 0 2,999,936 14,681 125,407 28,753
FIT10 RPS10 44,006 3,005,529 12,471 160,399 38,445
 Y. Chang, Y. Li / Energy Policy 85 (2015) 39–49 45

reports total newly added renewable energy power generation Table 4

capacities achieved in the period in the corresponding scenario. Percentage changes in costs and newly added renewable energy capacities under
FIT and RPS.
The last column is the newly added renewable energy capacities
Source: Estimations based on Table 3.
without considering hydropower (except for small hydropower).
There are seven general observations that are drawn from the re- Scenarios % Decrease in % Increase in % Increase in RE % Increase
sults reported in Table 3. First, without any policy intervention and carbon RE capacity capacity added in cost
emissions added w/o hydro
following the current track as in the BAU scenario, renewable energy
(MW)
will make moderate progress in the region, mostly driven by hydro-
power. Non-hydro renewable energy that includes small hydropower, FIT10 18 37 85 0.21
geothermal energy, wind, solar, and biomass, appears to make mini- FIT20 32 55 146 0.78
FIT30 51 69 260 2.73
mal progress. FIT40 63 83 299 5.01
Second, imposing carbon prices only without EMI (BAUCC FIT50 72 114 350 8.01
scenario) would greatly help the development of the non-hydro RPS10 1 1 4 0.01
renewable energy. RPS20 5 6 32 0.10
RPS30 11 9 47 0.28
Third, EMI (BAUCCEMI scenario) alone appears to significantly
RPS40 19 20 94 0.74
boost the development of hydropower, but cannot help non-hydro RPS50 27 28 132 1.39
renewable as compared to the carbon-prices-only scenario (BAUCC). RPS60 36 52 178 2.35
Fourth, in terms of additional costs to achieve more renewable RPS70 45 113 315 4.17
RPS30 by 3 7 38 0.03
energy development, the BAUCCEMI scenario appears to incur less
2030
cost but add much more renewable energy capacities than the BAUCC FIT10 RPS10 18 37 85 0.21
scenario. The beneficial impact of EMI appears to be evident.
Fifth, for the FIT and RPS scenarios that are built in addition to
the implementation of carbon prices and EMI, it appears that the
stronger the policy is, the more progress in renewable energy
development would be made.8
Sixth, the simulation shows that “RPS30 by 2030” does seem to be
the “low-hanging fruit” to achieve certain carbon emissions reduction
and the development of renewable energy capacities, with minimum
costs and commitments required. Moreover, such a policy is perceived
as a practical and favourable policy under the current situation in the
region, as several ASEAN countries have already set high renewable
energy targets. For example, Indonesia sets 25.9% as the target for
2025 and 39.5% for 2050, Thailand sets 25% by 2021, Malaysia sets 12%
by 2030 and 24% by 2050 (excluding large hydropower), and Phi-
lippines already have more than 50% of electricity from renewable
sources.9 However, more aggressive policies are needed subsequently
to achieve meaningful impacts.
Fig. 2. FIT vs. RPS in carbon emissions reduction.
Seventh, the combined policy scenario, FIT10 RPS10, looks not
much different than FIT10. RPS10 seems not to have much impact
on the results but add administrative complexity to the policy.
effective in reducing carbon emissions and promoting the devel-
opment of renewable energy. Figs. 2–4 clearly show such an ob-
3.2. Analysis on the effectiveness of renewable energy policies servation more obviously.
options Table 4 and Figs. 2–4 together present five important ob-
servations. First, in all simulated scenarios, FIT performs better
The comparison of effectiveness of FIT and RPS presents no- than RPS, as the curves of FIT in Figs. 2–4 consistently stay below
ticeable implications. Since FIT and RPS are two policies of very those of RPS except when RPS is raised to an unrealistic level of
different nature – one is a subsidy and the other is a regulation 70%. This means that for the same percentage of additional costs
standard, it is difficult to draw such implications from Table 3 incurred, FIT achieves both more carbon emissions reductions and
directly. However, the resulting impacts of the two types of po- more additional capacities of renewable energy. These observa-
licies could be compared. It is especially interesting and useful to tions echo the empirical findings in the literature about the ef-
look at the incurred additional costs and the additional capacity fectiveness of FIT and RPS in other parts of the world (NREL, 2009;
development for renewable energy. The following table and fig- Dong, 2012).
ures are developed to facilitate the comparison. Second, with up to 5% of the increase total cost of electricity
Table 4 presents the estimates of percentage change of each FIT and over 60% of increase in additional RE capacities in FIT40 sce-
and RPS scenario in total costs and newly added renewable energy nario, all curves appear to present diminishing marginal returns to
capacities, as compared to the baseline scenario BAUCCEMI. It additional costs.10 Namely as additional costs increase, the speed
shows that for similar increases in total costs, FIT policies are more of increases in carbon emissions reduction and the capacity of
renewable energy decreases.
8 Third, based on the previous point and in looking for the op-
RPS policy imposes restrictions on the share of electricity generated from
renewable sources (in MWh terms) rather than the share of renewable power timal level of policy intervention, the curvature in the FIT scenarios
generation capacities (in MW terms). A stricter RPS not only encourages the de- of Figs. 2–4 implies that theoretically it is possible to identify the
velopment of more renewable power generation capacities, but also encourages
higher utilization of the renewable power generation capacities built.
9 10
Source: ASEAN Centre for Energy (http://aseanrenewables.info) and Sus- Diminishing marginal return here means that the rate of changes in target is
tainable Energy Development Authority Malaysia (http://seda.gov.my). lower than the rate of changes in costs.
46 Y. Chang, Y. Li / Energy Policy 85 (2015) 39–49
Fig. 3. FIT vs. RPS in increasing renewable energy (RE) capacities.
Fig. 4. FIT vs. RPS in increasing renewable energy (RE) capacities (excluding
hydropower).
optimal (or efficient) policy to achieve targets in carbon emissions
reduction or renewable energy development.
3.3. Sensitivity analysis
Since there is currently no trading of carbon emissions right in
ASEAN, the simulations in Section 3.1 apply the patterns of the
historical prices of carbon emissions right from the U.S. Chicago
Climate Exchange (CCX). As the carbon market is artificially cre-
ated by policy, the prices usually fall significantly towards the end
of a policy or trading period. Besides, to extend the series to fit
period needed for the simulations, it is assumed that average
carbon prices increase by 10% every ten years. The data is pre-
sented in Table A7 of Appendix A, with notes on the assumptions
in estimating possible future carbon prices for ASEAN.
For the sensitivity analysis, the European Union Allocation
(EUA) future prices derived from the EU ETS, which are usually
several ten times higher than the CCX voluntary trading prices and
follow a different pattern of fluctuation, are used to see if the
observations from Section 3.1 would be changed significantly. This
practice also allows us to observe how higher carbon prices affect
the effectiveness of renewable energy policies.
With the alternative carbon prices, simulations shows that the
promotional effect of EMI on renewable energy development and
carbon emissions reduction is greatly enhanced. The additional
renewable energy capacity (without large hydro) due to EMI in-
creases by more than two times. However, the impact of both FIT
and RPS on renewable energy development will be weakened. The
relative advantage of FIT against RPS in terms of cost-effectiveness
in incurring additional renewable energy capacity does not
change. Therefore, in general, the key observations in Sections
3.1 and 3.2 are valid.
Similarly, the different assumptions on the changes of the costs
of renewable energy technologies are also tested in the simula-
tions. A faster decline in the CAPEX and OPEX of renewable energy
technologies will boost the promotional effects of EMI and carbon
pricing on renewable energy development and carbon emissions
reduction. The impacts of both FIT and RPS on renewable energy
development are weakened, as the renewable energy technologies
are more competitive by themselves. However, again, the relative
advantage of FIT against RPS in terms of cost-effectiveness does
not change.
4. Discussions: feasibility of FIT and RPS in the ASEAN context
Sawin (2004) gave a comprehensive review on the pros and
cons of FIT and RPS. Although neither FIT nor RPS has been a
successful story in every country or regime that applied them, the
successful cases of FIT are far more than those of RPS. It is also
noted that for both policies, a mix of complimentary policies are
needed, such as regulations and standards on connection to grid
and transmission lines, supportive financial systems and tax in-
centives, and the level and structure of competition in the elec-
tricity market. Therefore it does not necessarily mean that FIT is
superior to RPS, but other complimentary policies for FIT, together
with FIT itself, are usually easier to implement and adjust to
achieve desired outcomes.
There are several major differences in the outcome of the two
policies. First, RPS gives more certainty on the new renewable
energy capacity to be added as well as by when it will happen.
While FIT usually surpasses the desired new capacity of renewable
energy, it also incurs additional financial burdens on both the
government and the consumers. Second, RPS comes with com-
petition among renewable energy technologies in terms of costs
and therefore cheaper technologies and rich resources will be
developed first. FIT can be targeted to desired technologies and
areas. However, FIT terms should be carefully set up so that it does
not discourage competition or cost reduction. Third, FIT can give
the industry enough profits and thus support and incentivize R&D
activities to lower the costs of renewable energy in the long term.
Fourth, FIT is recognized as friendly to investment by small and
medium utility companies in developing countries and RPS is in
favour of large utility companies, which usually exist in developed
countries, in investing in renewable energy. Fifth, FIT makes fi-
nancing the investment projects easier as it gives certainty on the
revenue stream.
In the ASEAN context, EMI is steadily moving forward as dis-
cussed in Section 2.1. With increasingly escalated and liberalized
cross-border power trade, the issue of coordination of renewable
energy policies will inevitably become an important issue. In the
case of grid-to-grid exchange of power, renewable energy injected
into the grid of one country cannot be distinguished from the
power generated from other sources. The externality of RPS, FIT or
the mix of the two policies will have to be managed through a
regional framework or scheme. Such will take time and need a
political will. But once it is resolved, it will inject a further stimulus
to renewable energy development in the region as a whole.
5. Conclusions and policy implications
This study examines the impacts of various policy regimes on
the development of renewable energy in the power sector of the
ASEAN region. These policy regimes include carbon pricing, energy
market integration (EMI), renewable energy portfolio standards
(RPS), and feed-in-tariffs (FIT).
EMI in the ASEAN region is a promising solution to relieve the
current immobilization of its renewable energy resources and
 Y. Chang, Y. Li / Energy Policy 85 (2015) 39–49 47

would serve the fast increasing demand for electricity in the re-
gion. EMI could be further extended with coordinated policies in
carbon pricing, RPS, and FIT in the ASEAN countries.
Using a linear dynamic programming model, this study quan-
titatively assesses the impacts of EMI and the above-mentioned
policies on the development of renewable energy in the power
generation sector of the region, and the carbon emissions reduc-
tion achievable with these policies.
The following key policy implications are drawn. EMI in ASEAN
is expected to significantly promote the adoption of renewable
energy. Along with EMI, FIT appears to be more cost-effective than
RPS and is recommended for the ASEAN region, albeit the admin-
istration costs for implementation might be a practical concern.
In addition, the results show that, if an RPS of 30% electricity
from renewable sources by 2030 is in reality considered a rea-
sonable option by many policy makers. This study shows that the
policy seems to be the “low-hanging fruit” and would achieve
moderate improvements in carbon emissions reductions and re-
newable energy development, while incurring negligible increases
in the total cost of electricity.
FIT is theoretically more effective than RPS in terms of cost, the
amount of renewable energy added, and the quantity of carbon
emissions reduced. However, it sets a political challenge as whe-
ther a country in the region could extend a monetary subsidy to
renewable energy imported from other countries. RPS, on the
other hand, may be easier to be accepted politically since it only
requires the identification and recognition of renewable energy
imported from other countries. In both cases of FIT and RPS, it is
noted that regional collaboration and coordination mechanisms at
higher levels are required as compared to EMI, which means not
only the integration of energy market but also the integration of
energy policies in the region. ASEAN may have a long way to go to
reach there, but this study shows that the benefits definitely
accrue. Proactive actions are therefore called for to drive progress
in further regional integration.
This study is a continuation of the study by Chang and Li (2013)
that assessed the economic benefit of EMI in ASEAN by imposing
cross-border power grid interconnectivity. This study goes further to
discuss the impact of EMI on renewable energy development in the
region and what additional policy options could be effectively im-
posed. Since EMI has been identified with a significant impact in
terms of economic benefits, renewable energy development, and
environmental protection, a future study could focus on how to ef-
fectively establish EMI in the region, such as the issue of how to
effectively invest in the power interconnectivity in the region. Fur-
ther studies are also needed to assess the feasibility of coordinated
carbon pricing, FIT and RPS in ASEAN. These issues are all legitimate
and necessary components of the next stage of the ASEAN Economic
Community (AEC) envisioned by ASEAN political leaders.
Acknowledgement
The authors thank the Economic Research Institute for ASEAN
and East Asia (ERIA) for the financial support of this study, which
is part of the ERIA project on Energy Market Integration. Appre-
ciation also goes to Prof. Fukunari Kimura, Mr. Shimpei Yamamoto
and Dr. Han Phoumin of the ERIA for leadership as well as the
working group members of the project for comments and
suggestions.
Appendix A. The data inputs
See Tables A1–A7.

Table A1
Existing power generation capacity of ASEAN countries (base year 2009, Unit: MW).
Sources: EIA website, IEA website, and Energy Studies Institute (2012).

Brunei Cambodia Indonesia Laos Malaysia Myanmar Philippines Singapore Thailand Vietnam

Coal 0 0 12,203 0 9068.4 0 5584.4 0 10,719.2 3301.7

Coal CCS 0 0 0 0 0 0 0 0 0 0
Diesel 5.8 372 3328 50 685.4 279.08 1330.4 2511.2 269.3 580.5
Natural gas 753 0 10,929 0 13,380.2 980.92 3387.2 7934.8 32,088.6 5795.9
Natural gas CCS 0 0 0 0 0 0 0 0 0 0
Hydro 0 13 4872 1805 2107 1460 3291 0 3488 5500
Small hydro 0 1.87 21 7.8 0.1 39.7 151.3 0 128 75
Geothermal 0 0 1189 0 0 0 1953 0 0.3 0
Wind 0 0 1 0 0 0 33 0 0.4 8
Solar PV 0 0 0 0 0 0 1 0 10 0
Biomass 0 5.78 0 0 0 0 0 20 800 0

Table A2
CAPEX, OPEX, life, and availability of power generation assets.
Sources: International Energy Agency and Nuclear Energy Agency (2010) and EU SEC (2008).

Coala Coal CCS Diesel Natural gas Natural gas CCS Hydrob Small hydro Geothermal Wind Solar PV Biomass

CAPEX (Million USD/MW) 2.079 4.925 1.139 1.054 2.27 4.933 2.3 6.18 2.187 5.013 4.027
OPEX (USD/MWh) 31.86 37.6 229.75 43 46.87 4.32 4.68 14.23 20.58 19.52 28.87
Life (Years) 40 40 30 30 30 80 50 30 25 25 25
Load Factor (Percentage of A Year) 0.85 0.85 0.85 0.85 0.85 0.9 0.9 0.95 0.3 0.11 0.85

a
Due to the consideration of abundance in coal resources, countries including Indonesia, Malaysia, Thailand, and Vietnam are assumed to have 30% lower CAPEX and
OPEX in coal-fired power generation.
b
Due to the consideration of abundance in hydropower resources, countries including Cambodia, Indonesia, Laos, Malaysia, Myanmar, and Philippines are assumed to
have 30% lower CAPEX and OPEX in hydropower generation.
48 Y. Chang, Y. Li / Energy Policy 85 (2015) 39–49

Table A3
Energy Resources for Power Generation in ASEAN Countries (Unit: MW).
Sources: Lidula et al. (2007) and WEC Survey of Energy Resources (2010).

Brunei Cambodia Indonesia Laos Malaysia Myanmar Philippines Singapore Thailand Vietnam

Coal 15,000 15,000 50,000 15,000 50,000 30,000 30,000 15,000 50,000 50,000
Diesel 15,000 15,000 15,000 15,000 15,000 15,000 15,000 15,000 15,000 15,000
Natural Gas 15,000 15,000 50,000 15,000 50,000 30,000 30,000 30,000 50,000 50,000
Hydro 0 10,300 75,459 18,000 29,000 0 13,097 0 700 2170
Small Hydro 0 300 493 48.8 20.4 231 1287 0 556 1800
Geothermal 0 0 27,000 0 67 930 2379 0 5.3 270
Wind 0 452 7404 1600 452 1600 7404 0 1600 452
Solar PV 115 3771 37,800 4538 6192 12,967 6336 130.7 300 10,321
Biomass 0 700 49,810 0 29,000 4098 200 50 7000 400

Table A4
Power demand and duration of the demand in ASEAN countries.
Sources: HAPUA website (HAPUA, n.d.); Center for Data and Information on Energy and Mineral Resources (2011); Electricite du Laos Annual Report (2010); and Zhai (2008,
2009).

Brunei Cambodia Indonesia Laos Malaysia Myanmar Philippines Singapore Thailand Vietnam

Peak demand (MW) 454.7 291 23,438 350 12,990 1140 8766 5711 22,586 11,605
Peak duration (hours) 4681.7 4925.2 4681.7 4745 4681.7 2428 4015 5840 4015 2428
Non-peak demand (MW) 257 85 5338 60 8388 162 3394 1324 8692 6862
Non-peak duration (hours) 4078.3 3834.8 4078.3 4015 4078.3 6332 4745 2920 4745 6332

Table A5
Transmission loss and cost among ASEAN countries.
Sources: Claverton Energy Research Group http://www.claverton-energy.com/.

Distancea Transmission loss (%) Transmission cost ($/MWh)

0–1600 km 0.01 3
41600 km 0.087 5
43200 km 0.174 7.5

a
Distance is estimated as the distance between capital cities of countries.

Table A6
Carbon emissions coefficient for different power generation technologies.
Source: Authors’s estimation based on Varun et al. (2009) and EU SEC (2008).

Coal Coal CCS Diesel Natural gas Natural gas CCS Hydro Small hydro Geothermal Wind Solar PV Biomass

Carbon Emissions (Ton per MWh) 1.0 0.1 0.8 0.5 0.038 0.001 0.001 0.05 0.01 0.05 0.05

Table A7
Projected prices of carbon emissions right in ASEAN.
Source: Authors’ assumptions by referring to the pattern of the U.S. Chicago Climate Exchange historical prices of carbon emissions right, which is available at https://www.
theice.com/ccx.jhtml, and the pattern of the EU ETS historical EUA future prices, which is available at www.eea.europa.edu.

Year Assumed price of carbon emissions Assumed price of carbon emissions Year Assumed price of carbon emissions Assumed price of carbon emissions
right (USD/ton) (based on CCX his- right (USD/ton) (based on EUA future right (USD/ton) (based on CCX his- right (USD/ton) (based on EUA fu-
torical data)a prices)b torical data)a ture prices)b

2012 0.97 26.06 2025 3.51 21.26

2013 1.07 32.07 2026 4.12 21.69
2014 1.82 18.74 2027 1.03 30.17
2015 3.56 19.28 2028 0.10 37.13
2016 3.19 19.68 2029 0.06 21.70
2017 3.74 27.37 2030 1.18 22.32
2018 0.93 33.67 2031 1.29 22.78
2019 0.09 19.68 2032 2.20 31.68
2020 0.05 20.25 2033 4.31 38.98
2021 1.07 20.66 2034 3.86 22.78
2022 1.18 28.73 2035 4.53 23.44
2023 2.00 35.36
2024 3.92 20.66

a
The available CCX data is the 2003–2011 series. To use the data as a simple projection for possible carbon prices in ASEAN, the nine-year prices data is extended with a
10% increase in prices every five years.
b
The available EU ETS data is the EUA future prices 2005–2011 series. Only the data from 2007 to 2011 is used as the Phase I trading from 2005 to 2007 ended up with a
collapse in prices. To use the data as a simple projection for possible carbon prices in ASEAN, the five-year prices data is extended with a 5% increase in prices every five
years.
 Y. Chang, Y. Li / Energy Policy 85 (2015) 39–49
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