(EnergyAsia, March 21 2011, Monday) — Energy efficiency investors should focus on Thailand, Singapore, Malaysia and Philippines, and then gradually expand into Indonesia and Vietnam, according to a new report on “Energy Efficiency Investment Potential” in Southeast Asia by Singapore-based business consultants, ReEx Capital Asia.

Launched by the British Embassy in Bangkok earlier this month, the report assessed Indonesia, Malaysia, the Philippines, Singapore, Thailand, and Vietnam as destinations for energy efficiency investments, examining size, profitability, payback period, and regulatory environment.

The total market size for the six countries is about US$6.6 billion, with the industrial sector worth US$2.9 billion and the commercial sector US$3.7 billion.

The British Foreign and Commonwealth Office-commissioned study ranks Thailand as one of the countries with the most favourable environment for energy service companies (ESCOs) as well as the largest investment potential in the region.

The report noted that Thailand’s energy efficiency market is one of Southeast Asia’s largest at US$1.1 billion, and that it should continue to grow despite a variety of barriers that inhibit energy efficiency investments in the region.

The research revealed that the markets in Singapore, the Philippines and Vietnam were the most profitable while Malaysia, Indonesia and Thailand have the largest market size. It considered Indonesia and Vietnam as the least attractive investment destinations.

The report concluded that the six countries could save about US$1.4 billion by reducing energy consumption. The average payback period for energy efficiency investments was estimated to be 4.6 years, with 3.2 years for the industrial sector and 7.2 years for the commercial sector. In Thailand average payback is 5.7 years, with only 3.6 years for industry.

The study said policymakers should discourage fuel subsidies as they discourage low-carbon businesses.

Speaking at the seminar on “Energy Efficiency in Southeast Asia: Investment Opportunities”, Asif Ahmad, British Ambassador to Thailand, said that the international community is working to tackle the problem of climate change.

Last December, the UN Climate Change Conference in Cancun delivered official recognition of developing country actions to reduce emissions, and made significant progress on climate financing and reducing emissions from forestry. As international negotiations continue, some steps that can be taken immediately to encourage a low carbon economy include energy efficiency.

Frederic Crampe, managing director of ReEx Capital Asia, said that Southeast Asia has great potential to reduce its greenhouse gas emissions through energy efficiency improvements, and that investments in the region’s energy efficiency can be a cost effective way to reduce these emissions and also make financial savings.

In Thailand, the Ministry of Energy’s Department of Alternative Energy Development and Efficiency (DEDE) is now a focal agency to help promote greater investment in energy efficiency.

Danai Ekamol, director of DEDE’s Bureau of Energy Regulation and Conservation, said:

“DEDE has been a facilitator to create a good environment to encourage investments in energy efficiency projects in targeted sectors. Several financial supporting tools such as soft loans, tax incentives, and co-investment programmes are being offered to make sure that our target in promoting energy efficiency will be achieved.”

Alexander McKinnon, director of M&C Energy Thailand, said that volatility in the energy commodity markets led many companies to review their energy procurement policies and processes. The historical way of purchasing, “fixed price, fixed term” is now seen as out of date and requiring overhaul.

He added that, to overcome the problem, M&C Energy incorporated fully flexible managed price strategies, ensuring there is less risk to market position, protection against market volatility and increased budget certainty.