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Concept Note: The Need of Energy Indicators for ASEAN

Next week, 2-6 July 2012, I will fly to Cambodia for the 30th Senior Officials Meetings on Energy (SOME) and its associated meetings.  Responsible for ASEAN Energy Database System, I prepared a Concept Note regarding the development of ASEAN Energy Indicators. Here I share with you the draft note.

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Background

Like many other countries around the world, ASEAN Member Countries are also facing the complex and interlinked challenges of reducing energy consumption and associated GHG emissions while also meeting in harmony with the economic growth and the environmental sustainability of the region. Particularly for ASEAN, as described in the 3rd ASEAN Energy Outlook (ACE, IEEJ and National ESSPA Teams, February 2011), under Business-as Usual Scenario, the region’s primary energy consumption will have a faster annual growth rate 4.5% per annum to reach almost three times higher from 511 MTOE in 2007 to 1,414 MTOE in 2030. This is higher than global energy demand increases by 40% between 2009 and 2035 (New Policies Scenario, IEA World Energy Outlook, 2011).

ASEAN recognizes improving Energy Efficiency is one of effective way to balance economic development with environmental sustainability in order to promote greater energy stability, security and sustainability as a pathway to building the ASEAN Economic Community 2015. Through the ASEAN Plan of Action for Energy Cooperation (APAEC) 2010-2015 which was adopted in the 27th ASEAN Ministers on Energy Meeting (AMEM) held in Mandalay, Myanmar, on 29 July 2009, under Programme Area No. 4: Energy Efficiency and Conservation, ASEAN even view Energy Efficiency as one of the most cost-effective ways of enhancing energy security and addressing climate change as well as promoting competitiveness in the ASEAN Member States. Improvement of energy efficiency is considered as the most economic and readily available measures of improving energy security and reducing greenhouse gas emissions. In qualitative manner, ASEAN agreed to pursue the aspirational goal of reducing regional Energy Intensity of at least 8% by 2015 based on 2005 level.

Energy Intensity – the measure of energy consumption per unit of gross domestic product (GDP) – is one of the most commonly used aggregate indicators around the world to construct a “big picture” of patterns of energy use although the usefulness of this indicator is not for wide spectrum application and can be misleading as in actual fact since energy intensity is driven by many factors that are not necessarily related to energy efficiency.

As reported by EE&C-SSN to SOME of the 29th AMEM, on 29-30 June 2011 in Bandar Seri Begawan, Brunei Darussalam, ASEAN Energy Intensity Improvement is already 4.97% from the target of 8% by 2015 based on 2005 level. However, it is likely that the decline in energy intensity seen was linked more on economic factor rather than improved energy efficiency as ASEAN enjoyed a robust economic growth during this time frame. This shows that other energy indicators are also required and together will be used to identify and overview successful energy efficiency and programme of ASEAN.

For better understanding of the real factors that affect the reduction of energy intensity, there is a need for development of mechanisms that can gather all required data on a sector‐by‐sector basis and deliver a better picture that adequate enough to reflect country’s economic and energy situation and its associated trends.

However, collecting data and tracking trends in energy efficiency are not easy tasks. While overall energy consumption may be increasing due to robust GDP growth and/or an expanding population, energy efficiency may well be improving as it is only one of a number of factors that impact energy use beside population growth, a change in structure of the industrial sector, an increase in the level of ownership of appliances and/or equipment, etc. Moreover, every main sector – Industry, Residential, Service, and Transport – has various and different underlying factors that influenced the energy use. To that, detailed enough level of disaggregation from each sector to calculate energy indicators based on physical units on production is needed to provide an initial assessment of the effect of energy efficiency on energy consumption in related sector. Much more detailed – and disaggregated – data than are currently available in standard energy balances are needed for each main end‐use sector to assess the role of energy efficiency and the potential for further energy savings.

Proposal

Acknowledged this situation, the ASEAN Centre for Energy (ACE) proposes to develop the ASEAN Energy Indicators to construct and update energy efficiency indicators of ASEAN Member Countries which can cover indicators of energy use, efficiency trends and CO2 emissions for selected main sectors or sub-sectors. These indicators will be used to identify and overview successful energy efficiency policies and programmes in ASEAN on national and regional level. These indicators can also be used to monitor the progress or impact of energy efficiency initiatives. For instance, to monitor the progress of ASEAN in the inspirational target to reducing 8% energy intensity by 2015 based on 2005 level as mandated by APAEC 2010-2015, or in the future to harmonize with APEC that has agreed on a non-binding target of reducing energy intensity by 45% by 2035.

The development of ASEAN Energy Indicators itself actually has stipulated under APAEC 2010-2015 Program Area No.6: “Regional Energy Policy and Planning”, Strategy No. 1: “Enhancing energy policy and supply security information sharing network”, Action Plan No. 1.5: “Publish ASEAN Energy Review and Energy Indicators”.

The ASEAN Energy Review and Energy Indicators are important deliverables of the AMEM endorsed APAEC 2010-2015 that will provide valuable information on energy development and its trend in the ASEAN Member States. They will aid the ASEAN Member States in the formulation of a more relevant and appropriate energy policies and in planning the direction and thrust of the energy sector in the light of new perspectives and challenges in the regional and international scenes.

Development and Its Required Processes

Taking into consideration the diversity of the existence of the main sectors and sub-sectors within the region, the ASEAN Member Countries need to select the common energy sectors and sub-sectors as a basis towards the development of the ASEAN Energy Indicators. As shown by Figure 1, the associated proposed required processes in the development of ASEAN Energy Indicators will consist at least five (5) phases, as follows:

Figure 1: Associated Processes for Development of ASEAN Energy Indicators

Approach to the Proposed Selected Main-Sectors and Sub-Sectors

As the data varied among the countries, ACE proposes to use the list of proposed Main Sectors and Sub-Sectors below as the reference for the selection of the most common Sectors which the Energy Indicators data will be developed using two different approaches; top-down and bottom-up.

Top-down approach is commonly defined as the breaking down of a system to gain knowledge about its sub-systems. Assuming the industry to be such system, the GHG emissions level is formulated first for the whole sector. This overall business as usual baseline needs be refined in yet greater detail by specifying the contribution of each industry sub-sector.

Meanwhile, a bottom-up approach is the piecing together of systems (here industry sub-sectors) to form a larger systems (here the industry sector). Thus, the original systems become sub-systems. With regard to the industry, this means, that each industry sub-sector is specified in great detail first. Depending on the aggregation level started from according to the industrial classification, the classes, groups and/ or divisions are then linked together to form the industry sub-sectors, which then in turn are linked until a complete picture of the industry is formed.

The proposed list below could be added/modified subject to the inputs of ASEAN Member Countries refer to the situation in their respective countries.

Table 1: Proposed Indicators for Main Sectors and Sub-Sector

Required data for Energy Indicators: Sample – Industry Sector

To effectively assess the developments in energy efficiency trends, the impact of energy efficiency measures and the further potential for energy savings in the industry sector, detailed energy consumption data by industry and its sub-sector are required, as well as value‐added data in constant currency; and Physical production of key commodities, where possible.

This required data will be collected for each classification of the sub-sector of Industry sector. The classification can be made based on the products considering that the industrial landscape is highly diverse with thousands of companies producing tens of thousands of products in quantities varying from a few kilograms to thousands of tons, referred to the International Standard Industrial Classification (ISIC) from United Nations Statistics Division.

Table 2: Example of Industry data needed to develop basic energy and energy efficiency indicators (based on ISIC)

Conclusion

ACE plans to have the first draft of the publication in the 3rd quarter of 2012, subject to SOME Consideration and series of consultations with relevant ASEAN specialized energy bodies. If the required associated information was collected and consultation process was completed, the publications could be made available for distribution in the 30th AMEM in Cambodia in September 2012.

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