Mecon Project Overview and Key Results (Myanmar)

Effective energy efficiency policy implementation targeting “New Modern Energy CONsumers” in the Greater Mekong Subregion

Aung Thet Paing

9 October 20152nd Stakeholders Workshop

Myanmar Engineering Society

MECON Project overview and key results

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MECON project objectives

• Identify the opportunities and barriers to the adoption of EE technologies for low income households before they become middle income: “new Modern Energy CONsumers” in Greater Mekong Subregion

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MECON project consortium

Myanmar Engineering

Society (MES)

Joint Graduate School of Energy &

Environment (JGSEE) Royal University of Agriculture

(RUA)

Hanoi University of Science & Technology

(HUST)

National University of Laos

(NUOL)

University College London (UCL)

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MECON project approach

PHASE 1: background information PHASE 3: dissemination

PHASE 2: development & consultation

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• Energy efficiency is most cost-efficient solution for CO2 emission reduction and improved energy security

Energy efficiency: something to gain for everyone

World energy-related CO2 emissions abatement in the 450 Scenario relative to the New Policies Scenario (WEO, 2012)

IEA World Energy Outlook, 2012

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Energy security: increasing energy demand due to growth middle income households

• A new middle class – the population living above the poverty line but still with low incomes - is emerging, especially in Asia: responsible for large share of increase energy demand

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New Modern Energy Consumers


• In 2008, new modern energy consumers accounted for 45.4% of the population in Thailand.

• MECON share has already peaked in Thailand; peaking in Vietnam; and yet to peak in Cambodia, Laos and Myanmar.

• Thailand will decrease to 24% by 2030.• In Laos, Cambodia and Myanmar, the share of the MECON is expected to be in the range of

40-50% in 2030

Thailand

VietnamCambodia

Laos

Myanmar

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MECON Energy Consumptions


• Three scenarios have been developed for each countries (residential sector only) using LEAP model• Business As Usual (BAU) Scenario• High Energy Efficiency (HEE) Scenario• Moderate Energy Efficiency (MEE) Scenario

• Modeling MECON households during 2013-2030• Assumptions on share of EE appliances in 2030 is

country and technology specific

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Energy consumptions under different scenarios in GMS countries


• In 2030, EE can reduce residential (MECON) energy consumptions by 2% (Thailand) -20% (Myanmar) in MEE and 16% (Thailand)-38% (Myanmar) in HEE compared to that of BAU scenario

• Highest potential, in terms of percentage reduction, is in light bulbs

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Electricity ConsumptionsLow Income HH


2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 -

50.000

100.000

150.000

200.000

250.000

300.000

350.000

Myanmar BAU scenario

Myanmar High EE scenarioMyanmar Medium EE scenario

Thou

sand

Ton

s of O

il Eq

uiva

lent 20% to 38%

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Highest potential reduction; Lighting


2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 -

20.000

40.000

60.000

80.000

100.000

120.000

Myanmar BAU scenario

Myanmar High EE scenario

Myanmar Medium EE scenario

Thou

sand

Ton

s of O

il Eq

uiva

lent

45% to 80%

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Potential reduction; Other appliances


20142016

20182020

20222024

20262028

2030 -

10.000

20.000

30.000

40.000

50.000

60.000

70.000

80.000

Thou

sand

Ton

s of O

il Eq

uiva

-le

nt

20142016

20182020

20222024

20262028

2030 -

5.000 10.000

15.000 20.000 25.000 30.000

35.000 40.000 45.000

Thou

sand

Ton

s of O

il Eq

uiva

-le

nt

20142016

20182020

20222024

20262028

2030 -

5.000

10.000

15.000

20.000

25.000

30.000

Thou

sand

Ton

s of O

il Eq

uiva

-le

nt

20142016

20182020

20222024

20262028

2030 -

5.000

10.000

15.000

20.000

25.000

30.000

35.000

40.000

Thou

sand

Ton

s of O

il Eq

uiva

-le

nt

Cooking Cooling

Entertainment Others

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Rebound Effect


• A simple questionnaire survey has been carried out (over 100 households) to understand what would household do with additional income coming from reduced energy bill

• The questionnaire focused on:• Information about the household• Household energy consumption• Rebound effect

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Spending Priorities• Spending priorities vary between the five countries, but some

trends:– Food is a priority– Electrical appliances were ranked 4-6 in most countries– Expenditure on cooking fuels was only ranked highly in Thailand– Healthcare was important in Cambodia, Myanmar and Vietnam– Education was important in Lao PDR, Myanmar and Vietnam

• Expenditure on energy is not currently a top priority for MECON households, but this may change as incomes rise

• MECON households may consume more energy when their income increased on cooking fuels, purchase of new appliances, and more usage on existing ones.

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Household survey


Cambodia

Laos

Myanmar

Thailan

d

Vietnam0

500100015002000250030003500

2517 2634

1664

32513037

Electricity consumption per household

kWh/

year

Common appliances found• Lighting devices (fluorescent)• Rice cooker• Refrigerator• Electric fan• TV

Policy makers should not neglect small appliances

For low-income households, small appliances (rice cooker and electric fan) can consume more electricity than large appliances (AC and washing machine) due to longer using hours and several amount of items per household.

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Household survey: EE awareness versus Price


• Initial price of the products still plays important role in consumers’ purchasing decisions.

• Financial barriers exist amongst low-income households.

• Low-cost access to finance may provide a potential solution by means of innovative financial models, for instance, “on-bill finance” or “microfinance”.

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Market survey: more focus on supply chain


• Retailers may need more education on EE.• Collaboration amongst retailers, wholesalers, and producers can encourage

higher awareness and knowledge sharing. • Upstream subsidy may provide incentive for retailers to stock more EE

appliances.

Consumer side• Purchasing behavior in consumers• Limited access to EE appliances

Supplier side• Low capacity to stock EE appliances• Low awareness and knowledge on EE

technologies amongst retailers

Low availability of EE products

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Awareness & Energy Labeling


Awareness

Lack of public awareness on Energy efficiency that can

save household expenditures

Energy Labels

Myanmar do not have own energy labels

Products with energy labels are available in the market

Lack of awareness on energy labels

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Market survey: energy labels in GMS


• Only Thailand and Vietnam have energy efficient label for household appliances.

• Most energy efficient products in the GMS countries are imported from Thailand and contain Thailand’s Energy Label No.5.

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Energy Labels in Myanmar


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Primary student knows Thailand Energy label 5 via Thai TV ad

Graduate, Electrical appliance retailer do not know EE labels

Awareness case


Mon & Kayin State

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Challenges for EE policy:amongst the GMS countries


Common barriers

Information failure: which appliance is more efficient?

Lack of awareness and low priority of energy efficiency

Availability of EE products, especially in remote areas

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Challenges concerning with Electricity Supply


Electricity tariff is too low (Electricity price)

Government subsidize on electricity generation

Quality of electricity is less reliable (Unstable electricity)

Damages on electric household appliances because of

Voltage fluctuations

Different payment methods in some rural areas

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Electricity Tariff for Residential


Electricity Consumption Price per unit (kyat/kWh)

Price per unit (USD/kWh)

The first 100 kWh (1-100 kWh) 35 0.035 (3.5 Cent)

The next 100 kWh (101-200 kWh) 40 0.04 (4 Cent)

Above 200 kWh 50 0.05 (5 Cent)

Maintenance fee 500 kyat per month 0.5 (50 Cent)

Electricity tariff is very low in the region

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Range of electricity consumption and cost (Residential)


Electricity consumption Electricity cost (kyat)

Electricity cost(USD)

The first 100 kWh (1-100 kWh/month) 535 ~ 4000 0.5 ~ 4The next 100 kWh (101-200 kWh/month) 4040 ~ 8000 4 ~ 8

Units above 200 kWh/month > 8000 > 8

Avg. Electricity Charges is about 3.5% of HH income

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Household Income Vs. Electricity Charges


MECON Income range:120,000 Kyat – 360,000 Kyat

Electricity Charges range:3,000 Kyat – 30,000 Kyat

Average Electricity ChargesHH Income range Avg. E-Charges120,000 – 180,000 : 5300 Kyat 180,000 – 240,000: 7500 Kyat 240,000 – 300,000: 8700 Kyat300,000 – 360,000: 10900 Kyat

Avg. Electricity Charges3.5% of HH income

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Power Transmission Lines


Existing Lines Planned Lines

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Fixed payment on each electrical appliance

Prevent interest on Energy Efficiency

Different Payment Methods


Shan State

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Cost – Benefit Analysis


Upfront cost of EE appliances are 2 to 5 time more than the

conventional types

After using several years, total cost (initial cost + operational

cost) of the conventional type appliances are still cheaper

than the EE appliances

Replacement for damage due to unstable electricity also

affects the cost of using EE appliances

Fixed cost for each products make choosing the low initial

cost products (or) choosing bigger is better idea

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Is it cost effective?


Simple equations were used to carry out cost benefit analysis for selected appliances (at least five per country): light bulbs, rice cooker, AC, TV, Fan and refrigerator.

The selections of appliances for the CBA are based on three criteria: energy consumption, ownership and future potential.

Sensitivity analysis were carried out with hurdle rates

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Cumulative discounted cost over the time: Myanmar


• Payback period for light bulb is 2 years and rice cooker is more than 10 years

• High initial cost of EE products and low electricity tariff

1 2 3 4 5 6 7 8 9 100.00

1.00

2.00

3.00

4.00

5.00

6.00

Fluorescent light bulb

LED light bulb

Year

USD

1 2 3 4 5 6 7 8 9 100

50

100

150

200

Conven-tional rice cooker

Efficient rice cooker

Year

USD

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Challenges concerning with Standards & Regulations


Lack of mandatory MEPS (Minimum Energy Performance

Standards)

Low quality low price products can enter into the market

Lack of economical incentives for EE appliances, e.g. tax

exemptions etc. on EE appliances

Retailers have not much interest on the EE appliances

End-users only interest on upfront cost

Lack of regulations for EE appliances market

No restriction on the product quality

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Policy considerations on Residential


Challenges Policy considerationsElectricity Supply Stable electricity supply should be provided

Electricity price should not be subsidized Payment methods should be gradually changed to become uniform Have to consider alternative short term programs for lighting and

cooking in rural areas (off-grid areas)

Standards and Regulations

Minimum Energy Performance Standards (MEPS) for appliances should be introduced

Regulations are issued according to the MEPS to control the quality of the products

Trade incentives on EE products should be made, E.g. tax exemptions Improvement is needed in financial mechanism & schemes

Awareness Awareness programs are promoted through public media such as newspapers, TV, radios etc.

Trainings, workshops, EE exhibitions should be done regularly Create Energy awards

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Institutional models for EE

34

Type Brief description Example

1Government agency (GA)

Agency with broad energy responsibilities U.S. Department of Energy


Agency focusing primarily on clean energy (EE/RE/SE)

Thailand: DEDE


Agency focusing entirely on EE Mexico: PROCEL

4Independent statutory authority (ISA)

An independent authority created by statute to promote EE or clean energy

U.K. Energy Saving Trust

5Independent corporation (gov. owned)

An independent corporation owned entirely by the government

Korea Energy Management Corporation

6Public-private partnership (PPP)

A corporation owned partly by the government and partly by the private sector

Germany: DENA

7Non-governmental organization (NGO)

Nonprofit or nongovernmental organization Austrian Energy Agency

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Institutional models for EE: pros & cons

35

Type Advantage Disadvantage

1GA with broad energy responsibilities

Greater credibility Have access to public funding

Large bureaucracy Rivalry with other energy programs

2GA focusing primarily on EE/RE/SE

Consistent focus with EEGreater voice in gaining resource for EE

Competition between technologies Narrower focus, less influence

3GA focusing entirely on EE

Pro-EE agency cultureMore dynamic management

Agency must compete for resourcesNarrower focus, less influence

4Independent statutory authority (ISA)

Operational discretionFlexibility

Require legislation to change scopeCompetition with public agencies

5Independent corporation (gov. owned)

Have access to private-sector inputFlexibility

Less access to public fundingCompetition with public agencies

6Public-private partnership (PPP)

More access to private-sector inputFlexibility

Conflicts between public and private perspectives

7Non-governmental organization (NGO)

Greater credibility to some stakeholdersFlexibility

May be lack of creditability to public and private sectors

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MECON analysis

36

1. Stakeholder mapping of institutions acting in the field of energy efficiency in each GMS country

2. Survey to capture the information on institutional structure related to EE

3. Analysis of energy prices to discuss energy price market failures

4. Development of tool to support discussions on institutional model and room for improvement

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Institutional settingof the GMS countries

37

Myanmar LAO PDR Vietnam Thailand Cambodia

Responsible government

agency

Energy Efficiency and Conservation Department, Ministry of

Industry (MoI)

Department of Energy Policy and Planning

(?), MoE

Energy Efficiency and Conservation (EEC) Office, Ministry of

Industry and Trade (MoIT)

DEDE (& EPPO), MoE

Department of New and

Renewable Energy, MME

Type of organization Model 1? Model 1? Model 1 or 3? Model 2 Model 1?

Further analysis

Is the department offering sufficient institutional capacity for EE?

Is the department offering sufficient institutional capacity for EE?

Is EEC a separate agency or part of MoIT? Sufficient capacity for EE?

Are roles and responsibilities DEDE and EPPO suff. distinctive?

Is the department offering sufficient

institutional capacity for EE?

Room for improvement?

New or adjusted institution. model recommended?






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