At the peak: Steps are being taken to improve efficiency and reduce the power bill

In an attempt to improve efficiencies and reduce the power bill currently facing the government, Brunei Darussalam’s utilities sector is seeing several new investments. While the current generation capacity is enough to meet consumption, the government is keen to improve efficiencies and make power generation and distribution in the country more cost-effective.

ROOM TO GROW: In 2011 Brunei Darussalam had an installed capacity of 894 MW (this increased to 916 MW in the first quarter of 2012). Peak demand was considerably lower, at 606.1 MW. Total production reached 3723 GWh, while consumption stood at 3389.5 GWh, according to the Department of Economic Planning and Development. The largest share of this demand is coming from domestic retail customers. Indeed, they account for 35.5% of all demand. Industrial usage, on the other hand, accounts for only 15.5% of all consumption. Given the generous subsidy scheme, this outsized individual consumer demand places a considerable burden on government revenues and illustrates a high energy intensity in the Sultanate. According to a report in the Brunei Times, in 2010 the Bruneian government spent BN$40m ($31.2m) on its electricity subsidy (out of a total energy subsidy of almost BN$1bn, or $778.8m) and maintained the cheapest electricity rate out of all ASEAN member states, at BN$0.11 ($0.09) per unit. As such, the country has the highest energy intensity of all ASEAN members. The country also offers highly subsidised water. The tariff is BN$0.11 ($0.09) per cu metre for the first 54 cubic metres and BN$0.44 ($0.34) per cu metre for usage above this threshold. According to the Brunei Times, the Sultanate is also the highest water consumer in South-east Asia, with a consumption rate of 420 litres per head per day, compared to a rate of 150 litres per head per day in Singapore, where the water tariff stands at BN$1.17 ($0.91) per cu metre.

CHECK THE BILL: The government’s power bill extends well beyond these subsidies. Not only did the state itself consume 733.9 GWh of electricity in 2011 (in terms of lighting and power in the public sector), but it also paid the bill for unpaid utilities charges for the general public. In February 2012 the Brunei Times reported that the public owes BN$230m ($179.1m) in unpaid utilities bills. The government has absorbed consumer debt of BN$163m ($126.9m) for unpaid electricity and BN$67m ($52.2m) for unpaid water bills.

Given these trends, the government is working on a number of measures to reduce its expenditure on utilities from both the generation and subsidy sides of the equation. The most prominent move towards reducing energy consumption and improving efficiency was the move to change the electricity tariff and subsidy structure. Indeed, from January 1, 2012, the government introduced a new electricity tariff structure that was expected to reduce the government subsidy by more than half, according to the Brunei Times. The new regime has been labelled a “smart subsidy”, a description referring to the sliding tariff scale designed to reward more parsimonious electricity usage. Electricity is now charged at BN$0.01 ($0.008) per KWh for consumption between 1 KWh and 600 KWh, at BN$0.08 ($0.06) per KWh for consumption between 601 KWh and 2000 KWh, at BN$0.10 ($0.08) per KWh for consumption between 2001 KWh and 4000 KWh and at BN$0.12 ($0.10) per KWh for consumption at 4001 KWH and above. Speaking about the new subsidy in September 2011, the minister of energy, Pehin Dato Yasmin Umar, told local press that “it will be a tariff that helps the poor and the less fortunate people, but at the same time, it will penalise those wasting energy.”

OTHER MEASURES: The government is also looking at additional measures to improve energy efficiency and reduce the energy bill. Attention has turned towards supply and generation. The Sultanate has three separate power grids operated by two providers, the Department of Electrical Services (DES) and the Berakas Power Management Company (BPMC). The latter accounts for about 40% of power generation in the country, operating the Jerudong Gadong III and Berakas gas-fired power plants. Most of the BPMC supply is distributed to strategic customers, but the company also provides electrical power to residential areas through the DES. The company expects to add capacity in the next two years, though precise details are not yet available.

OVERSEEING THE GRID: DES is responsible for the independent grid serving the eastern district of Temburong and also distributes power throughout the country. The government provider operates four gas-fired power plants, Gadong I and II, Lumut and Bukit Panggal as well as a diesel fuelled plant in Temburong at Belingus. The government has now turned its attention towards improving DES’s energy efficiency.

In May of 2012 a memorandum of understanding was signed between the government, Brunei LNG and Brunei Shell Petroleum for the expansion of the co-generation plant at Lumut power station. The BN$300m ($233.6m) investment will entail an increase in capacity at Lumut by 66 MW to 246 MW by the middle of 2014. The use of co-generation technologies will lead to increased energy efficiency of 60% and an annual cost saving of BN$118m ($91.9m), according to the energy ministry.

Furthermore, the saving for the Bruneian government is not only in the reduction in generation costs. There is also an opportunity cost. With a more efficient generation plant, there is a fuel saving which will allow the government to redirect gas from generation towards LNG exports. As such, the government could also bolster natural gas export revenues.

OTHER MEASURES: Brunei Darussalam is also working on other measures to reduce the use of natural gas in power generation. In July 2012 the Ministry of Energy announced plans to upgrade all Brunei Darussalam’s power transmission lines to 275 KV by 2015, allowing it achieve interconnectivity with other Borneo states.

Brunei Darussalam hopes that it will be able to buy electricity from Sarawak at a rate below the cost of generation within the Sultanate. Hydropower is not always the cheapest source of energy. According to the US Energy Information Administration, the generation cost of hydro is $88.90 per MWh, compared to $66.10 per MWh for a gas-fired combined cycle plant. However, this calculation is based on a capacity factor of 53% – that is, the plant is only producing power to 53% of its maximum capacity if it was running at full capacity all the time. The capacity factor of Sarawak’s first two hydro plants is likely to be much higher.

Sarawak Energy bought electricity off Sarawak Hidro, the operator of the 2400 MW Bakun dam, at a cost of $0.20. This is significantly below the subsidised rate of electricity in the Sultanate, suggesting that it will be able to get power at a rate below current generation costs. The government is, therefore, well placed to reduce the use of natural gas in energy generation. The country is thus seems set to continue to provide both new savings and a more efficient system, making it an attractive option.

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The Report: Brunei Darussalam 2013

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