Although nearly all residents of Brunei Darussalam are connected to the electricity grid and benefit from a well-developed, reliable and low-priced utilities system, electricity consumption per capita in the Sultanate is among the highest in the world, while difficulties in accessing new power supply have hindered expansion of some industrial enterprises in recent years. Residential consumers continue to account for the majority of consumption in the Sultanate, even though prices were changed from a regressive to progressive tariff system in 2012.
Recent government efforts to increase industrial investment have highlighted utilities challenges facing non-residential, energy-intensive projects – a problem further exacerbated by a regressive commercial and industrial tariff system that encourages high levels of consumption at discount rates. With the Sultanate feeling the impact of low global oil prices, a new emphasis on conservation and renewable energy projects will reduce costs and encourage economic diversification. Additionally, the government is moving to develop a more detailed electricity policy for industrial consumers, which will further improve the Sultanate’s energy and economic outlooks. ”The Energy and Industry Department of the Prime Minister’s Office (EIDPMO) has brought a lot of structure within the energy and industry sector. Indeed, it has established a level playing field for all industry players in the oil and gas industry, and empowered us local entrepreneurs to be aligned with Wawasan Brunei 2035,” Supna Karwanamurthi, managing director of local oil firm Flux OS, told OBG.
Brunei Darussalam’s electrical power system is split into three independent networks, including Network 1, which supplies power to the Brunei Muara, Tutong and Belait Districts, Network 2, which provides power to the Temburong District, and Network 3, which is in place to help manage selected load centres within the Brunei Muara District. The Department of Electrical Services (DES), under the umbrella of the EIDPMO, operates networks 1 and 2, which include four generating plants with a total installed capacity of 449 MW. The Sultanate’s sole private operator, Berakas Power Company, operates Network 3, which contains three generating power plants with a total installed capacity of 259 MW, and is interconnected to networks 1 and 2 by a triangular network separated from the DES grid. An estimated 99.7% of Brunei Darussalam’s population is connected to the electrical grid, although 1000 remote rural residents remain unconnected, and use small portable generators for their power needs.
According to a 2014 report titled “Electricity Consumption in Brunei Darussalam: Challenges in Conservation”, and published in the International Energy Journal, the Sultanate’s per capita electricity consumption is among the highest in the world, standing at 2948 KWh per person annually, compared to 1386 KWh in Singapore and 797 KWh in Malaysia. Brunei Darussalam’s energy consumption is also higher than Japan’s and that of high-income OECD countries. The report also found that houses and residential areas account for 38% of electricity consumption in the Sultanate, and comprise 63% of the consumer base, while government departments are the second-highest users of electricity, and comprise 29% of total consumption and 6% of electricity customers, followed by the commercial and small and medium-sized enterprises (SME), at 18% of total consumption, and the oil and gas sector, which consumes 15% of electricity in the country.
A major driving force behind over-consumption of electricity is the Sultanate’s regressive tariff regime for commercial and industrial premises, which essentially offers a discount for increased consumption. Commercial and industrial tariffs are charged at BN$0.20 ($0.14) per KWh for the first 10 KWh, BN$0.07 ($0.05) per KWh for the next 60 KWh of consumption, BN$0.06 ($0.04) for the next 100 KWh and BN$0.05 ($0.04) for any consumption beyond that. This is opposed to the Sultanate’s progressive tariff system for residential electricity prices, in which increased consumption of electricity correlates with higher prices.
Despite being a wealthy nation with a GDP per capita of $40,980 in 2014, according to World Bank data, electricity prices are also highly subsidised by the government, which benefits from Brunei Darussalam’s large reserves of liquefied natural gas (LNG) that account for the majority of generation in the Sultanate. The International Energy Agency reported in 2013 that subsidies in Brunei Darussalam were the highest in South-east Asia on a per capita basis, with the average resident paying just BN$0.06 ($0.03) per KWh, while the Brunei Economic Development Board (BEDB) reported in 2014 that electricity tariffs for industrial consumers averaged $0.09 per KWh.
Brunei Darussalam ranked 10th in Asia and 45th worldwide in the World Economic Forum’s “Global Competitiveness Report” in the “quality of electricity supply” category. Brunei Darussalam’s Department of Economic Planning and Development (JPKE) reported that total electricity production in Brunei Darussalam rose by 2.3% to hit 4.05bn KWh in 2014, after rising by 2.6% in 2010, 1.9% in 2011, 6.5% in 2012, and 6% in 2014. The only exception was 2013, with the JPKE reporting that consumption fell that year by 1.5%. The 2014 report, which was written by researchers at the University of Brunei Darussalam, also found that the Sultanate’s power demand has risen by an average of 7% to 10% annually since the early 2000s, which is higher than the global average.
With few incentives in place to encourage conservation, consumption has risen steadily in recent years, which could present challenges to industrial development in the country. Although low electricity tariffs should offer the Sultanate a competitive advantage in attracting new investment, major new projects have faced challenges in linking to the grid due to lack of available infrastructure, and on the World Bank’s “Doing Business 2016” survey, Brunei Darussalam slipped four places in the “getting electricity” category, falling from 64th to 68th place out of 189 economies surveyed. Lack of available utilities infrastructure has been a particular hindrance to ongoing work at the Hengyi integrated refinery, a multi-billion-dollar project currently under construction in Pulau Muara Besar, where utilities infrastructure remains limited. “The current energy policy caters to residential and commercial customers, not industry. For every new investor coming in, there’s a debate about how to get power and water,” P C Huang, vice-president and country director of Hengyi Industries, told OBG.
Some residential customers are also facing challenges under current electricity policies. In August 2015 local newspaper The Brunei Times reported that 10% of residents in the sub-district of Labi, located roughly 110 km southeast of Bandar Seri Begawan, are without electricity supply as a result of failing to provide housing plans which are required before applications for electricity supply can be considered. According to the district leader, Hanapi Mohd Siput, Labi’s Town and Country Planning Department introduced a measure requiring homeowners to provide housing plans before the DES can supply electricity – even if the houses were built decades ago. The plans, which cost an average of $1000 to draw up, have been burdensome to low-income families, with Hanapi arguing that affordability, rather than availability, is the most significant challenge for Labi residents.
The government has taken note, and in November 2015 Pehin Dato Muhammad Yasmin bin Haji Umar, the minister of energy, told attendees at the Sixth International Energy Forum in Qatar that Brunei Darussalam’s population does not understand the true value of energy due to heavy subsidisation, and called for new public awareness campaigns to reduce consumption, in addition to improving access to credit for energy investors, particularly in the renewables segment.
To encourage smaller, personal investment in new electricity projects, the government is currently examining policies such as net metering, which would allow consumers to generate electricity on site using, for example, solar photovoltaic projects, and sell the excess generation back to the national grid. Romeo Pacudan, interim CEO at the Brunei National Energy Research Institute, told OBG that the government is also looking at reforming the Sultanate’s current commercial and industrial tariff structure, which would involve a shift more towards progressive tariffs, in addition to improving electricity availability for industrial consumers. Coupled with proposed fuel subsidy reforms, these efforts should help the country withstand the near-term challenges of declining oil revenues and bolster its diversification efforts.