ENERGY interventions by governments to mitigate the impact of the Iran war could undermine investor confidence and delay power sector reforms in the Asia-Pacific (APAC) region, a Fitch Group unit said.
“We expect this intervention to weigh on investor confidence in liberalized power markets across the region as it presents heightened regulatory risk for independent power producers and investors,” BMI Country Risk & Industry Research said in a commentary released on Friday.
“We believe that this will likely delay planned market reforms in markets undergoing liberalization such as Vietnam and Indonesia,” it added.
The Philippines’ decision to suspend trading at the Wholesale Electricity Spot Market was singled out as the “most prominent example” of government intervention in power and fuel markets to shield customers.
This followed President Ferdinand Marcos Jr.’s having declared a one-year national energy emergency in a bid to stabilize power prices and ensure supply reliability amid volatile global fuel markets due to Iran’s closure of the Strait of Hormuz.
BMI said interventions like these highlighted how governments were prioritizing energy security and price stability over market liberalization and green initiatives.
The Philippines’ suspension of spot power market trading was labeled a “major rollback of market liberalization.”
BMI noted that most Asia-Pacific energy markets remained largely regulated — Australia, Singapore, Japan and the Philippines are the exceptions — so higher power prices were not a particular problem. Governments, however, will have to absorb the costs, stressing their fiscal positions.
South Asian countries including Bangladesh, Pakistan and Sri Lanka have imposed measures such as industrial load curtailment, fuel purchase limits, reduced work weeks and electricity tariff increases as energy import costs surge.
The energy shock has also prompted a broader shift in power generation strategies across APAC, with many governments temporarily increasing reliance on coal and nuclear power to safeguard electricity supply.
Despite the return to fossil fuels, BMI said the energy crisis could strengthen the long-term case for renewable energy, battery storage and domestic energy sources as countries seek to reduce dependence on imported fuels.
“In sum, APAC’s response to the Hormuz disruption underscores a clear hierarchy of energy policy priorities: security first, affordability second and decarbonization third,” BMI said.
“The extent of this shift will vary by fiscal capacity and the availability of alternatives across markets,” it continued. “In the near term, elevated utilization of coal and nuclear will persist to safeguard supply.”
“Over the medium term, we expect stronger policy momentum to accelerate domestic renewables, battery storage and nuclear capacity as countries seek to structurally reduce import dependence,” it added.
