The floating solar PV plant of EDPR Sunseap Group, a unit of Energias de Portugal SA, in Woodlands, Singapore, on Wednesday, December 7, 2022.
Brian van der Beek | Bloomberg | Getty Images
Southeast Asia is home to some of the fastest growing economies in the world. With the increasing demand for energy, the region is turning towards renewable energy to protect its energy security.
Energy demand in Southeast Asia has increased at a rate of 3% annually over the past two decades – a trend that will continue until 2030 under current policy settings, according to the International Energy Agency.
But fossil fuels still dominate the region’s energy mix, making up about 83% in 2020 compared to the 14.2% share of renewables in the same period, research by the ASEAN Energy Center showed.
The center said that by 2050, oil, natural gas and coal will constitute 88% of total primary energy supplies.
This “heavy dependence” on fossil fuels increases the region’s energy exposure He said price shocks and supply constraints Zulfikar Yornaidi, Director of Energy Modeling and Policy Planning at the ASEAN Energy Centre.
Global events such as the pandemic and Russia’s invasion of Ukraine have sent prices soaring in recent years, with benchmark oil prices reaching their highest level in more than a decade in March last year. Just last week, oil prices rose nearly 6% as tensions escalated in the Middle East following the air, sea and land attack by Hamas militants on Israel.
“Our financial capacity is different from Europe,” Jornaidi said. “We cannot beat everyone to get our gas supply.”
In particular, the gas and coal power sectors in Southeast Asia have expanded with energy growth, increasingly exposing these markets to volatile international market fossil fuel prices, said David Thu, energy and low-carbon energy analyst at BMI Fitch Solutions.
Overall, the region’s policies and trends show that countries are keen to transition to clean energy.
Zulfiqar Al-Yurnaidi
ASEAN Energy Centre
If Southeast Asian countries do not make significant discoveries or add to existing production infrastructure, the region will become a net importer of natural gas by 2025 and coal by 2039, the ASEAN Energy Center estimates. This will raise fossil fuel prices and put more pressure on consumers.
To prevent this, the region must diversify its energy sources for economic growth and security, Jornaidi said.
Most, if not all, Southeast Asian markets have taken strides to announce renewable energy targets and formulate their plans for transitioning to low-carbon energy, Tho said.
“In general, the region’s policies and trends show that countries are keen to transition to clean energy,” Jornaidi said.
Energy transitions from Malaysia to Indonesia
Malaysia launched its National Energy Transition Roadmap in July, which will increase its renewable energy capacity and reduce its increasing dependence on natural gas imports, according to the Ministry of Economy.
The roadmap identified 10 key projects, including plans to build a one-gigawatt solar photovoltaic plant – the largest in Southeast Asia – that can convert sunlight directly into energy, the ministry said.
Solar energy has remained the most encouraged sector in Malaysia’s renewable energy landscape since 2011, with a compound annual growth rate of installed capacity of 48%, according to authorities.
Other planned developments include an integrated renewable energy park, five large-scale central solar parks and three green hydrogen production plants. The ministry said these projects will take advantage of Malaysia’s technical renewable energy potential, estimated at about 290 gigawatts, to create a more resilient, low-carbon energy system.
In May, Vietnam announced its eighth energy development plan, which commits to promoting wind and gas power while reducing its dependence on coal.
Renewable energy sources such as wind and solar are expected to account for at least 31% of national energy needs by 2030, the government said.
Under the plan, all coal plants must convert to alternative fuels or cease operations by 2050, the statement said. Reuters said that although coal will remain an important source of energy in the near term, representing an estimated 20% of the country’s total energy mix in 2030, this will be a decline from about 31% in 2020.
Singapore’s Green Plan 2023 similarly emphasizes the uptake of renewable energy. The Ministry of Sustainability and Environment said it aims to increase solar energy deployment to at least 2 gigawatts by 2030, which will meet about 3% of expected electricity demand.
About 95% of Singapore’s electricity is generated from natural gas, a fossil fuel energy source, according to the ministry.
Although the geographical constraints that Singapore faces limit its options in renewable energy, the plan will implement measures such as rooftop solar panels as well as importing electricity and hydrogen from other Southeast Asian countries to reduce dependence on fossil fuels.
Last year, Singapore’s Cable Electric signed a two-year agreement with Laos to import up to 100 megawatts of renewable hydropower via Thailand and Malaysia. This is Singapore’s first import of renewable energy, as well as the first cross-border multilateral electricity trade involving four ASEAN members, local media reported.
“It is clear that the region recognizes the role of energy reliability and resilience amid various energy shocks,” Jornaidi said.
Southeast Asian markets are also looking to attract foreigners BMI’s Thu said that companies with expertise in renewable energy are working to develop their renewable energy sectors.
“Renewable energy sources (here) are somewhat less developed than in China and Western markets,” he added.
In November, the Philippines removed the Filipino ownership requirement In some renewable energy resources, allowing foreign investors to fully own projects involving solar, wind, hydropower or ocean energy resources, according to international law firm Baker McKenzie. Foreign companies could only own up to 40% of these energy projects in the past.
Foreign ownership is necessary to facilitate renewable wind power projects in the Philippines, which has the potential to install 21 gigawatts of offshore wind capacity by 2040, according to a World Bank report. This is equivalent to about a fifth of its electricity supply, the report noted.
The report stated that the Philippines relies heavily on imported fossil fuels, exposing it to the risk of supply constraints and price increases.
But the World Bank said Foreign companies can bring their knowledge and experience to the table, especially in helping renewable energy projects move from the pre-development stage to later stages that involve higher spending.
Indonesia has also eased some restrictions on foreign ownership to generate momentum in renewable energy investments.
For example, it now allows 100% foreign ownership of power transmission, distribution and power generation projects (with a capacity of more than 1 MW), according to the Asian Business Law Journal.
“We are optimistic that a lot of foreign investment will come in over the next few years, which will lead to more renewable energy projects in the region,” Jornaidi said.
(Tags for translation) Investment Strategy