Southeast Asia’s growing energy needs

Southeast Asia's growing energy needs

ASEAN nations have an urgent call-to-action to limit the negative impacts of climate change by emphasising a less carbon-intensive development path and by adding more renewable energy to its fuel mix.

Southeast Asia is a rapidly developing region of ten countries, consisting of Brunei, Cambodia, Malaysia, Indonesia, Philippines, Vietnam, Singapore, Lao PDR, Thailand and Myanmar. These ten countries are in a regional grouping called the Association of Southeast Asian Nations (ASEAN). According to the ASEAN Centre for Energy (ACE), population will increase to 715 million by 2025 while economic growth is expected to grow on an average of 5% annually. This will contribute to a rapid industrialisation and urbanisation of the ASEAN nations, leading to a strong growth of 4% in energy demand annually from 2014 to 2025, while electricity demand will double over the same period. To meet the energy needs of the region, installed energy generation capacity has to increase to 428 GW and 550 GW by 2025 and 2040, respectively. Fossil fuels are expected to continue to dominate the fuel mix, with coal and natural gas the main contributors.

Despite the endowment of rich energy resources, rising energy demand would outpace the supply of local fossil fuels, raising dependence on imported fossil fuels and concerns of energy security. In 2014, ASEAN's total primary energy supply (TPES) was 642 Million Tonnes of Oil Equivalent (MTOE), mostly from coal and oil. By 2025, TPES is expected to grow to 956 MTOE, with coal being the most important fuel source. Currently, Indonesia, Malaysia and Brunei are exporters of oil and gas. But by 2035, IEA estimates that Indonesia would become a net importer of oil, while Brunei and Malaysia would divert more of these resources to meet domestic demand. This growing reliance on fossil fuels would place considerable financial strain on the region's foreign reserves, which IEA estimates to cost almost $240 billion, or 4% of GDP in 2035. Reducing reliance on fossil fuels could reduce this financial strain and reduce the likelihood of a competition with neighbouring giants India and China for scarce fossil fuel resources, thus improving the energy security of the Southeast Asian region.

In light of these changes, energy from renewable sources can help to alleviate the region's dependence on fossil fuel imports and mitigate the environmental impact of carbon emissions. Between 2006 and 2014, ACE reports that installed power capacity from renewable sources has more than doubled, reaching 197,581 MW. The countries along the Mekong River have tapped onto the hydropower potential of the delta. Today, hydropower is the main source of renewable electricity generation, accounting for up to 78% between 2006 to 2014, with Vietnam having the largest share at 41.05%. Strong growth in the hydropower energy sector is expected to continue as Cambodia and Lao PDR have plans to develop hydropower further to meet their energy needs. As a result, ACE expects renewable energy to contribute 17% of ASEAN's fuel mix in its reference case for analysis by 2025, while aspiring to a more ambitious 23%.

Achieving this aspiration of 23% would be a challenge but it is attainable. The renewable energy potential of the region is massive, and more can be harnessed to mitigate the region's reliance on fossil fuel and its negative environmental impact. According to IEA, the technical potential of hydropower is 170 GW, more than four times the developed capacity of 37 GW in 2014. IEA estimates the Solar energy potential to be between 3.6 to 5.3 kWh/m2 daily, but has only 1550.2 MW of installed capacity in 2014.

To close the gap between ASEAN's renewable energy potential and actualisation, more government effort and investments have to be committed to this aim. ACE aims for renewable energy's share of electricity generation to be at 34% by 2025, in line with ASEAN's 23% renewable goal. To achieve this, an additional 410 terawatt-hours (TWh) of renewable power must be added between 2014 and 2025 by installing an estimated 133 GW of generation capacity.

ACE estimates that US$27 billion of investments is needed annually to invest in the entire energy system, including generation capacity and transmission infrastructure. Solar PV is expected to take the lion's share of these investments, at US$7.5 billion annually, while hydropower and biofuel receive US$ 6.3 billion and US$ 5.3billion respectively. ASEAN nations will need to find ways to finance these projects. This could take on various forms — public financing, private financing, foreign investments, or a combination of these.

Often it will require governments to provide a certain degree of funding or support to secure the financing of these projects. Thailand, which has witnessed a large growth in Solar PV, is supporting the country's solar sector with feed-in-tariff subsidies of up to 6.85 baht ($0.2) per kilowatt-hour paid to energy producers until 2040. This has increased the attractiveness of Thailand's Solar PV market by providing foreign investors a sense of certainty and signal of commitment. Attracted by the boom in Thailand's solar market, Japan's Kyocera Corp, U.S.-based First Solar and China's Yingli Green Energy are among the investors in Thailand's Solar PV market.

Currently, China is the largest foreign investor in renewable energy projects in the ASEAN region. Its presence is largest in the hydropower projects in Lao PDR, Myanmar and Cambodia. Chinese investments in the hydropower projects are both a boon and bane. While it provides much needed funds to finance these projects, it has raised tensions within countries, casting a wary eye on the superpower's motivations. This has meant that governments have a delicate act of balance between gaining traction for these projects while addressing the simmering concerns.
Although the immediate challenges ASEAN nations face are immense, the sustained benefits of a larger share of renewable energy in the fuel mix would payoff in the long run. By 2030, ACE expects ASEAN to be a net gas importer, while coal reserves would decrease by more than half. A diversified energy mix with a reduced demand for imports of fossil fuels would improve the region's energy security. Air pollution would also be reduced as carbon dioxide emissions from power generation would be approximately 14% lower if ASEAN meets its renewable energy goals. A greener and cleaner future in Southeast Asia would help nations reduce healthcare and productivity costs associated with the negative consequences of air pollution. ACE estimates lower air pollution in ASEAN to reduce external costs by close to US$10 billion annually, while OECD projects that a more carbon intensive growth could cost 5% of its GDP by 2060.

According to IEA, ASEAN is expected to emit 2.4 gigatonnes of carbon dioxide due to energy-related activities — double of its emissions in 2013 and roughly equivalent to Japan's current carbon dioxide emissions. Consequently, such growth in carbon dioxide emissions would double ASEAN's share of global emissions to 8%. Climate change has an immense impact on ASEAN nations, due to its strong reliance on agriculture for sustenance and exports, providing employment and a source of income for many. ADB reports that an increase in 1 degree celsius could contribute to a 10 percent decrease in rice yield. This would amount to an approximate decline in 3.1% of the global rice production, affecting many livelihoods that depend on agriculture as their main source of income.

This all means that ASEAN nations have an urgent call to action to limit the negative impacts of climate change by emphasising a less carbon-intensive development path and by adding more renewable energy to its fuel mix. It has shown substantial progress over the past decade, especially for hydropower generation. However, to reach to its aspired 23% of renewable energy and beyond, capacity in Solar PV and biofuel will need to be developed rapidly over the next decade. To achieve this, substantial investments would be required which governments will need to either attract from overseas investors or to finance the projects themselves. These are certainly challenges, but a higher deployment of renewables will reap benefits — increasing energy security, creating a cleaner and healthier environment, and helping combat climate change.

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Link to Original Article: https://medium.com/thebeammagazine/southeast-asias-growing-energy-needs-6f86d6a577e

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John Diecker
APT Consulting Group Co., Ltd.

www.aptthailand.com