Basic Regional Profile
Southeast Asia is one of the fastest developing regions in the world, with some scenarios projecting overall energy demand to grow by 60% and power demand by 100% in 2040 compared to 2018 levels. Despite the region’s vast renewable energy potential, fossil fuels, especially coal, are still favoured to meet the lion’s share of this new demand. Already heavily reliant on coal power (40% of power generation in 2018), the region still has nearly 100 GW of new coal capacity in the pipeline as of January 2021. As such, it remains one of the few global regions still planning to significantly expand coal resources.
Declining costs of wind and solar, combined with rising public concerns over emissions and local pollution impacts, are nevertheless slowly beginning to shift the balance away from fossil fuels. The region added 6.8 GW of wind and solar in 2019, more than in the last 10 years combined, driven mainly by over 5 GW solar in Vietnam, which accounted for over 80% of additions. Still, wind and solar account for less than 2% of power generation in the region. In contrast, 11 GW of fossil fuels were added in 2019, and nearly 85 GW over the past decade.
Key Challenges
Despite a strong endowment of renewable energy potentials, the region remains heavily dependent on fossil resources. In 2018, over 75% of electricity generation was from fossil-fuels, of which more than half was from coal, compared to less than 2% from wind and solar (IRENA, 2020). The ASEAN Plan of Action for Energy Cooperation (APAEC) 2016-2025 aims to reduce energy intensity by 30% and increase the share of renewable energy in primary energy to 23% by 2025. Given the diversity and dynamism of the region, the primary barriers and challenges to achieving the targets set out in APAEC and further advancing the energy transition is largely due to country-specific contexts (IRENA, 2020).
The lack of a robust and transparent policy planning framework and poor alignment between countries and government ministries delays the implementation of a more ambitious energy transition across the region. The predominant regional intergovernmental organisation, ASEAN, serves to promote intergovernmental cooperation in the region, including on energy and environmental topics and has been the driving body behind the APAEC.
The absence of a coordinated long-term policy vision or roadmap for renewables significantly impacts all other dimensions relevant to the energy transition across the region. This is due in part to a pervasive lack of ownership of the energy transition by national governments, which in turn can be attributed to opaque and exclusive policy and decision-making processes again leading to a lack of a participatory approaches. The current regional power structure — focussing on the intra-regional emerging powers and influential actors in the regional energy sector — acts as a barrier to cooperation.
Poor policy planning frameworks are further evidenced by slow progress on regional grid and market integration. Although grid integration is part of the APAEC, it remains low on the agenda, with investments related to the power grid lower in 2018 than in 2010, as governments persist in their focus on domestic energy security. Regional grid integration benefits are not yet well understood, especially the potential to integrate higher shares of variable renewables throughout the region. In the end, however, energy planning processes remain within the remit of national borders, not only in SEA. The lack of trust, a common vision, and knowledge sharing further lead to unambitious plans for renewables deployment.
The development of wind and solar in the region is diverse and dynamic according to the different resource and market conditions. As such, grid integration challenges will begin to appear separately in each country as they continue to be deployed, however, current policy planning, market design and system operations in the region are often using outdated processes and assumptions that represent additional barriers to the integration of renewables (e.g., prevailing idea of grid management with baseloads).
Securing affordable finance for renewable energy projects remains a common key challenge impeding the energy transition in the region. High financing costs, for both debt and equity, have a significant impact on the competitiveness of renewable energy compared to fossil fuels in CASE countries. Despite the cost of wind and solar systems having significantly reduced in recent years, their perception as riskier investments by financial institutions remains.
This outlook reflects several real and perceived barriers that stem from a variety of informational, technical, regulatory, financial, and administrative sources. Renewable energy investments are perceived as high risk due to underlying policy barriers such as regulatory, licensing and market inefficiencies. This is compounded by a weak technical understanding of local financing institutions which tend to overestimate the risks of RE projects and have little control over de-risking mechanisms. While not directly addressing the underlying policy barriers, such mechanisms can mitigate or transfer risks from the developers to the public sector but besides being poorly understood also do often not yet exist in the countries.
Despite a significant endowment of renewable energy potential in CASE countries, the region remains reliant on fossil-fuels. For most CASE countries, energy security and affordability of supply are prioritised at the national level, yet regional solutions are rarely considered. Within this context, the concept of energy security is still pinned to the security of fossil-fuel supply. For energy-importing CASE countries, conventional energy from fossil-fuels is still perceived as more affordable and reliable. For those countries with high concentrations of domestic fossil reserves and resources, energy production and export contribute considerable revenues to state budgets. Consequently, fossil-fuel interests, either through state-owned enterprises or petrochemical corporations, retain a dominant influence in policymaking, which is amplified when governments rely on the energy sector to support other developmental policies or initiatives.
Poor knowledge sharing, data availability and limited capacity building opportunities are some of the key non-technical challenges facing the energy transition in the region. The lack of a clear, independent ‘knowledge holder’ for the energy transition means that a lot of expertise is imported from outside the ASEAN region, and consequently may not be fully aligned with national or regional interests. The lack of a regional institution has spill-over effects to the development of early career academics and young professionals: many study abroad or gain experience outside of the region, and a system of intraregional experience sharing is generally absent. A culture of knowledge sharing within the region is still in its nascent stages, which is reflected in poor access to power system data, e.g., transmission loads, project performance or sub-national data.
Policy Windows of Opportunity
Relatively few energy-specific regional policy processes exist outside of ASEAN’s Plan of Action for Energy Cooperation (APAEC) and the United Nations Framework Convention on Climate Change (UNFCCC), so events represent the main family of opportunities to disseminate evidence and engage policymakers. As such, key windows of opportunity also focus on specific summit meetings of the
ASEAN institutions, including the Senior Officials Meetings on Energy, meetings of the Heads of ASEAN Power Utilities and Authorities (HAPUA), and ASEAN Ministers of Energy Meetings (AMEM)
ASEAN institutions, including the Senior Officials Meetings on Energy, meetings of the Heads of ASEAN Power Utilities and Authorities (HAPUA), and ASEAN Ministers of Energy Meetings (AMEM). These meetings provide the blueprint to the annual ASEAN leader’s summits. Through formal partnerships with ACE, other international institutions have been invited to participate in some of these meetings in years past, to present specific analysis completed in collaboration with ACE.
The ASEAN Energy Outlook (AEO)
ASEAN institutions, including the Senior Officials Meetings on Energy, meetings of the Heads of ASEAN Power Utilities and Authorities (HAPUA), and ASEAN Ministers of Energy Meetings (AMEM). These meetings provide the blueprint to the annual ASEAN leader’s summits. Through formal partnerships with ACE, other international institutions have been invited to participate in some of these meetings in years past, to present specific analysis completed in collaboration with ACE.
The Asia Pacific Economic Cooperation (APEC)
The Asia Pacific Economic Cooperation (APEC) is a wider intergovernmental organisation for the 21 economies in the Pacific rim that includes the ASEAN member states. Despite the broader scope, APEC meetings and events, especially those focused on climate and energy-related issues, present further windows of opportunity, as they can directly impact discussions within ASEAN. Some ASEAN meetings also coincide as side-events to APEC events.
ASEAN and APEC events and activities are thus an opportunity to directly engage with policymakers.
ASEAN and APEC events and activities are thus an opportunity to directly engage with policymakers. Meanwhile, impactful direct engagement is also possible at the country levels and could be key to influencing decision-making at the regional level. Other energy and renewables focused events in the region also provide ample opportunity for stakeholder outreach and engagement, including government officials. Many of the events, including the Asia Clean Energy Forum, Singapore International Energy Week and ASEAN Energy Business Forum are well attended by government officials and have also been used as outlets for national policy announcements.