With over 670 million people, growing affluence, industrialisation and urbanisation, Southeast Asia’s energy demands continue to rise, by an estimated 60% by 2040. The 4% annual growth rate of energy consumption in Southeast Asia is nearly twice as fast as the rest of the world, citing immediate opportunities for operators to capitalise on. As illustrated by Figure 1 on the next page, space cooling was identified as one of the fastest growing uses of electricity in the Association of Southeast Asian Nations (ASEAN), accelerated by higher incomes and cooling needs at home or work.
However, just less than 20% of households across the region have access to air-conditioning, a trend that is likely to “skyrocket”, according to projections by the International Energy Agency — a trend that will raise overall electricity demand, and place ever-increasing strains on power systems. Concurrently, Southeast Asia is well on the way to achieving universal access to electricity by 2030. Millions of new consumers have gained access to electricity since 2000, yet some 45 million people in the region still do not have access, and many more continue to rely on solid biomass as a cooking fuel.1
All this culminates in an “energy gap” across every level of society and presents a broad spectrum of concerns that governments and energy operators must address.
Southeast Asia has considerable potential for renewable energy, but currently meets only around 15% of the region’s energy demand, excluding the traditional use of solid biomass.2
Rising fuel demand, especially for oil, has far outpaced production from within the region. Southeast Asia as a whole is now on the verge of becoming a net importer of fossil fuels for the first time.3
Within Southeast Asian countries, oil continues to dominate transportation demands, despite an increase in biofuels consumption. Electric mobility, with the exception of electric 2-3 wheelers, continues to make limited progress in the market, suggesting that little progress that region has made as a whole with renewables and transportation.
Though hydropower output has quadrupled since 2000, and the modern use of bioenergy in heating and transport has also increased rapidly, its use in modern-day applications remains limited. Moreover, despite falling costs, the contribution of Solar Photovoltaics (PV) and Wind remains small, though some markets are now putting in place frameworks to better support their deployment.4
However, the steady rise in demand for energy has now exposed various environmental, social, economic, and political concerns throughout the region that place energy transition as a top priority for nations and the region. Today, ASEAN countries share a common challenge of solving the drastic gap between the amount of energy production and consumption, as they face the increasing implications of over-reliance on traditional energy sources. As a benchmark, Southeast Asia is projected to register a net deficit in payments for energy trade of over $300 billion per year by 2040, almost entirely due to imports of oil — created as a result of the widening gap between native production and the region’s projected oil and gas needs. From declining resource availability to energy security and environmental problems, governments are under significant pressure and stress to enact policies and initiatives to transit to renewables.
Since energy is such a pervasive part of society and urbanization, the shockwaves of traditional energy reliance are amplified and can be felt at almost every level of society, spanning environmental, social, economic, cultural and political issues as time runs out. That being said, cracking the energy transition equation promises multiple novel benefits for entire societies to unlock new value, innovation, and ways of life that make energy transition an opportunity too good to miss.
Outdoor and household air pollution in Southeast Asia is estimated to be responsible for over 650,000 deaths by 2040, up from an estimated 450,000 deaths in 2018.5 If traditional energy continues to pervade our society, that number could go even higher. Assuming fossil fuel consumption and demand in the region continues on the projected path, CO2 emissions are expected to rise by almost two-thirds to almost 2.4 gigatonnes (Gt) in 2040. As a reference, emissions grew strongly in Southeast Asia in 2019, lifted by robust coal demand, as shared by the International Energy Agency6.
Making the transition to renewables promises multiple benefits throughout entire societies that can lead to a more efficient, healthier, and happier society. The transition to renewable energy can create new local employment opportunities, creating immediate value to the economy. With the rise of the “conscious” consumer, renewables promise better quality options for the customer, creating more value than typical, traditional-fueled transactions. Social development initiatives can be elevated too, with renewable energy enabling life standard improvements, the establishing of social bonds, and mature community development.
Southeast Asia has large potential for the sustainable use of modern bioenergy, both in terms of today’s technologies and in the development of advanced biofuels to improve the sustainability of its infrastructure, with a particular focus on the transport sector. Significant economic growth and progress throughout all facets of the economy can be realized by making the transition to renewables as the root power of economic development and prosperity.
While Southeastern Asia is a largely diversified, dynamic and ever-evolving region, one common element that policy makers share is an ambition to establish a secure, affordable and more sustainable pathway for the energy sector. That ambition has led to successful talks for a regional push to commit a set of goals for the region, with each country taking its own initiatives and leadership to meet these goals and beyond.
Agreements such as the establishment of regional targets of sourcing 23% of its primary energy from renewables by 2025 and the establishment of the ASEAN Power Grid — an ambitious project to interconnect the power systems in the region and establish multilateral power trading — have pushed energy transition efforts forward7. These efforts point to the successful raising of a common renewables grid in the region, promising stable supply of renewable energy that is stable, predictable, reliable and flexible to meet regional demands for energy.
There are several examples of energy intensity reduction efforts in the ASEAN region:
Singapore, one of the sunniest cities in the world, currently generates about 95% of its power from imported natural gas, with solar energy being its most viable renewable energy option9. As the city-state looks to diversify its energy supply and meet its goal of cutting net greenhouse emissions to net zero by the second half of the century, Singapore is also looking to import solar electricity to meet its energy transition goals.
In order to reduce its energy intensity by 35% in 2030; Singapore has initiated the use of energy-efficient standard lamps with labelling since 2015. In addition, the Energy Market Authority (EMA) aims to achieve a solar target of at least two gigawatts of peak power by 2030, up from the 260 megawatt-peak in the second quarter of 2019. That new capacity could meet about 4% of Singapore's current total electricity demand and could play an important role in its energy transition efforts.10
In 2014, the Singapore Government announced its commitment to raise the adoption of solar power to 350 MWp by 2020, which would constitute approximately 5% of the projected 2020 peak electricity demand. This target was achieved in the first quarter of 2020.11
Despite promising initiatives by regional leaders collaboratively and individually, Southeast Asia is currently not on track to meet these goals. Coal, oil and gas are currently supporting 80% of ASEAN’s energy demand growth, and in the absence of a central body that monitors progress, there are no political consequences for governments that fall behind on their targets.12 Without a stronger policy push, the share of renewables in the energy mix is projected to stay flat at around 15 per cent through to 2025. The International Energy Agency estimates that current energy plans could see the region more than double its coal-fired power capacity by 2040, when coal use is steadily declining around the world. In order to truly transform the energy landscape to one that is renewable, specific attention must be placed on the removal of subsidies to fossil fuels, regional market integration, common energy infrastructure and rapid implementation of initiatives of new and existing projects. Nonetheless, significant potential and opportunities await operators who are willing to put in the right investments to facilitate supply and demand in the region; working alongside government to provide much needed focus, infrastructure and talent on critical challenges that the energy sector faces.
Today’s investment levels still fall short of the IEA’s projected needs in the Stated Policies Scenario and are more than 50% lower than what would be required in the Sustainable Development Scenario.13 Mobilising investment to accelerate renewable energy transitions must be a joint participation from both the private sector and governmental efforts. Public sources have been vital to financing thermal power plant projects and large-scale renewables (such as hydropower or geothermal) that have large upfront capital requirements. In contrast, Wind and Solar PV projects have been more reliant on private finance, spurred by specific policy incentives.14 As the cost of renewables decline, and the environmental, social, economic and political aches of traditional energy becomes more evident, the need to push towards sustainable energy into the power mix is clear, making the renewable energy space an exciting space to watch (and operate in) in the near future.
Siew Hui Lim is Director, Natural Resources Asia, Willis Towers Watson Singapore. SiewHui.Lim@willistowerswatson.com
1 https://www.iea.org/reports/southeast-asia-energy-outlook-2019 2 https://www.iea.org/reports/southeast-asia-energy-outlook-2019 3 IEA (2019), Southeast Asia Energy Outlook 2019, IEA, Paris https://www.iea.org/reports/southeast-asia-energy-outlook-2019 4 https://www.iea.org/reports/southeast-asia-energy-outlook-2019 5 https://www.iea.org/reports/southeast-asia-energy-outlook-2019 6 https://www.iea.org/articles/global-co2-emissions-in-2019 7 https://www.irena.org/publications/2016/Oct/Renewable-Energy-Outlook-for-ASEAN 8 All data set out in this section is from the following sources: https://www.nea.gov.sg/our-services/climate-change-energy-efficiency/climate-change/singapore's-efforts-in-addressing-climate-change https://policy.asiapacificenergy.org/sites/default/files/philippines_energy_efficiency_action_plan2016-20.pdf https://www.eco-business.com/news/running-out-of-excuses-where-does-southeast-asias-energy-transition-stand-in-2020/ https://www.researchgate.net/publication/331908353_Renewable_energy_in_Southeast_Asia_Policies_and_recommendations
9 Jessica Jaganathan (2020, April 9th). Singapore considers solar energy imports to cut emissions Reuters. Retrieved from https://www.reuters.com/article/singapore-energy-imports-idINKCN21R0VC 10 Jessica Jaganathan (2020, April 9th). Singapore considers solar energy imports to cut emissions Reuters. Retrieved from https://www.reuters.com/article/singapore-energy-imports-idINKCN21R0VC 11 https://www.ema.gov.sg/media_release.aspx?news_sid=20200422F0KVcWTR1Urf 12 https://www.iea.org/reports/southeast-asia-energy-outlook-2019 13 IEA (2019), Southeast Asia Energy Outlook 2019, IEA, Paris https://www.iea.org/reports/southeast-asia-energy-outlook-2019 14 https://www.iea.org/reports/southeast-asia-energy-outlook-2019
