Warwick ASEAN Conference

The Future of Green Energy

Stories and movies depicting grey skies, raging wildfires, rising sea levels that could potentially sink entire countries beneath its waves conjure up the devastating effects of pollution and climate change. Under the impending threat of climate change, environmental awareness levels around the globe have risen rapidly in recent times, bringing about calls pushing for changes in the way we lead our daily lives. 

A picture of Jakarta’s polluted air

Intriguingly, the energy sector is no stranger to these changes and is perhaps even located at the epicenter of this paradigm shift that is enveloping modern society. For years now, various individuals and organisations have been pushing for the usage of renewable sources to generate electricity, such demands are driven by the worry that prolonged and extensive usage of fossil fuels (a major source of greenhouse gases), will inflict permanent damage to the natural environment and cause significant health hazards to communities. Towards these ends, government bodies in various regions around the world have been ramping up their efforts to create a business environment that would facilitate the growth of ‘green’ energy.
This observed trend is no less strong in the Southeast Asian region, home to nearly 10% of the world’s population. Evidently, the World Health Organisation (WHO) has ranked the region’s air pollution burden level to be among the highest globally – a ‘privilege’ that I had the chance to personally experience, having lived in the city of Jakarta, which had at one point earned the recognition of being the world’s most air-polluted city in 2019. This has come about following the region’s robust growth in economic activity, causing member countries to record an 80% increase in energy demand since 2000, with much of it being met through fossil fuel sources (IRENA).

If you don’t want to read the whole article for whatever reason, we have included several infographics right at the bottom of the article! These infographics provide a succinct summary of renewable energy, particularly within ASEAN, so do scroll down to the bottom of the page!

Climate change and the Growing Environmental Awareness Levels in Southeast Asia

In recent years, the Southeast Asian region has been facing a double challenge – adapting to climate change caused by strong global Greenhouse Gases (GHG) emission over the past decade while altering its growth and development strategies which are a primary contributor to global warming. According to the IMF, Southeast Asia is one of the regions that are most vulnerable to climate change due to its geographical position, and will potentially face intensifying climate hazards which could cause significant economic damage in the near future if GHG emission continues to increase, including severe flooding, drought, typhoons as well as rising heat and humidity. 
Following these revelations, environmental awareness and concerns have grown within the Southeast Asian community of late, propagated by the heightened fear for global warming from the world at large. On the bright side though, ASEAN member countries have been setting ambitious renewable energy targets that would greatly reduce carbon emissions in the region should they be realised. Furthermore, growing awareness has also meant that on an individual level, society has started doing their part to fight climate change. Various large corporations in the region have also followed the trend of crafting sustainability-related CSR initiatives, partly as it could allow them to capitalize on the growing sentiment for the environment and strengthen their brand image in the process.

Renewable Energy Outlook in Southeast Asia

Description Broadly speaking, the use of renewable energy refers to the generation and consumption of electricity through renewable sources and can generally be divided into four segments: hydroelectricity, wind energy, solar, bioenergy, and others (biomass, tide, geothermal, etc). 

While many observers have noted Southeast Asia’s massive potential for renewable energy, it still only met about 15% of the region’s energy demand in 2019 (IEA). We should note that the Association of Southeast Asian Nations (ASEAN) seems determined to increase the usage of green energy within the region, with the organisation hoping to secure 23% of its primary energy from renewable sources by 2025 (IEA). While this figure might not sound so impressive, it is undoubtedly an ambitious target for the member countries, especially when considering that the region’s energy demand is projected to grow 50% during that same timeframe. In this respect, individual policymakers across the ASEAN member countries have also been intensifying their efforts to secure more affordable and sustainable resources for the energy sector, which includes actions to facilitate investments in fuel and power supply in infrastructure, with a focus on the system’s efficiency.
Segmentation While it differs for each member country, when considering the wider Southeast Asian region, solar energy and hydro make up a majority of the region’s renewable energy mix and their outputs have been increasing in the region since 2000. Aside from that, the usage of bioenergy in heating and transport has also rapidly increased.

Figure 1: Southeast Asia Renewable Energy Product Segmentation
Historical Performance and Forecast

Historically, the Southeast Asian region has recorded strong growth capacity for renewable energy, at a Compound Annual Growth Rate (CAGR) of 6.7%. This figure is expected to contract in 2020 as a result of the Covid-19 pandemic delaying infrastructure projects in the green energy industry coupled with a general contraction in economic activity. Regional and local governments will still be putting in a lot of effort to meet the ambitious sustainable energy goals, suggesting a minimal impact of Covid-19 on the production and consumption of renewable energy within ASEAN countries. Mordor Intelligence even projects that capacity will grow at a higher rate than the historical one, at a CAGR of 7.3% (Marketline).

Figure 2: Installed Renewable Energy Capacity -Historical and Forecast

Key Drivers

Lack of Funding for Coal-Fired Power Plants 

While countries around the world have observed a declining trend of investments in coal-fired power plants during recent years, Southeast Asian countries are still dependent on coal-field power plants to meet their energy demand. However, funding for these projects is generally dependent on foreign investors and financial institutions, who have recently been rejecting these proposals following criticism from various environmental campaigners and organisations.
Intriguingly, in 2019, over 85% of financial market participants had not participated in the funding of coal-fired power plants (Mordor Intelligence), and according to the Institute of Energy Economics and Financial Analysis, over 200 major financial institutions have divested from these thermal coal projects. This could be positive news for the renewable energy sector in the ASEAN region; whilst energy demand is projected to rise rapidly, many coal-fired power projects will be halted or canceled, creating an opportunity for green energy to fill the demand gap. Furthermore, renewable energy costs have been on a decline in recent years, making it more competitive especially when compared to its alternatives.

Growing Environmental Awareness

Calls pushing for changes into more sustainable methods to meet our energy demand has no doubt been a major contributor to the rise of renewable energy usage, not just within the regional Southeast Asian market, but the global landscape too. New environmental studies published by academics have continuously reminded modern society about the urgency of the issue, driving up demand for renewable energy around the globe whilst incentivizing companies and governments to invest significant sums in R&D for new renewable technologies.

Key Challenges

Covid-19 Outbreak

The Covid-19 outbreak is expected to be a major short and medium-term restraint for the prospects of the transition to renewable energy among ASEAN member countries. Renewables are currently still a more expensive source of power due to its high sunk costs (infrastructure) and so are currently still reliant on financial support provided by the local government. 
However, as previously mentioned, the Covid-19 pandemic has significantly decreased local and global demand for goods and services, which is expected to prove detrimental to the export-driven economies of Southeast Asia. The projected contraction in the region’s GDP is expected to place financial pressure on government bodies, making it a challenge for them to sustain pre-coronavirus levels of funding for the industry. Furthermore, against the backdrop of the current global emergency, governments across the region will be expected to redirect the funds flowing into infrastructure development projects into the healthcare sector instead, as well as economic stimulus packages to mitigate increasing unemployment levels caused by the steep drop in economic activity.
Aside from that, Covid-19 has also adversely affected the renewable sector supply chain. Strict Covid-19 containment measures, including lockdowns and travel bans, have impacted the raw material industry in South America and the manufacturing industries located in China, India, and Southeast Asia – effectively delaying the development of renewable projects, further restraining growth.

Renewable Energy Outlook by Country
CountryRenewable Energy TargetsCurrent Status and Outlook
VietnamMeeting 23% of total energy demand through green energy sources by 2025In 2018, green energy had only accounted for less than 1% of Vietnam’s total primary energy consumption. However, the government has indicated its willingness to provide support for the industry in the future, including the implementation of policies that are expected to grow the solar photovoltaic (PV) market.  While Covid-19 is expected to reduce green energy production in 2020, this is projected to have a little lasting impact in Vietnam amid growing environmental concerns, slow development of the natural gas industry, and the fact that power demand in Vietnam is forecasted to double its current levels by 2030 (Mordor Intelligence). 
IndonesiaDraft of the National Electricity Plan (RUKN) had targeted renewable energy to make up 25% of the power sector by 2025. Indonesia’s abundance of renewable energy resources has led to the government  also setting ambitious targets for the country. While Indonesia has the potential to generate nearly 800,000 MW of power through renewable sources – over 14 times the country’s current electricity consumption- green energy only constituted 12% of the total volume of electricity produced by Indonesia in 2018 (Mordor Intelligence). This dismal figure could be attributed to limited infrastructure inevitably hindering renewable energy deployment, the limited infrastructure may perhaps be a result of its fragmented electricity grids resulting from Indonesia’s nature as an archipelago. 
PhilippinesSourcing 50% of total electricity generation through renewable sources by 2030Similar to Indonesia, the Philippines is a tropical country that is archipelagic by nature and has abundant renewable energy sources. Given the fact that the country is very vulnerable to the adverse effects of climate change, as demonstrated by the super typhoons Ondoy and Sendong, the government would seek to reduce fossil fuel consumption in the region out of fear of erratic rainfall patterns, a dramatic rise in sea level, and increased temperature.  The Philippines is also a signatory of the 2015 Paris Climate Agreement and is aiming to become the leading clean energy nation in Southeast Asia. A major challenge it would face in getting there, however, would be recovery from Covid-19, and just like Indonesia, the issue of fragmented electricity grids across the country.
ThailandMeeting 25% of total energy demand through green energy sources by 2037 (Norton Rose)Relative to most other ASEAN countries, Thailand has a large potential to harness energy from solar sources, particularly in the southern and northern regions of the Udon Thani Province and certain areas in the central region. In order to meet its green energy goals, the Thai government is expecting over 50% of the required capacity to be met by the growth of solar and biomass energy sources (Mordor Intelligence).
MalaysiaMeeting 20% of total energy demand through green energy sources by 2025To achieve the government-set target, it is projected that the sector would require an additional US$ 8 Billion in investments (Mordor Intelligence), which would likely comprise government spending, public-private partnership, and private financing. Considering the economic fallout caused by the Covid-19 pandemic, the Malaysian government might have difficulty sustaining that level of spending in the renewables energy sector. Its solution? To attract private financing by increasing incentives, such as the Green Technology Financing Scheme, among others.
SingaporeIncrease solar PV capacity to 350 MW by 2020 and 1 GW beyond 2020. Singapore imports most of its energy needs, as its geography presents limited options to generate renewable energy from. While its high solar irradiation makes PV a potential clean energy option for Singapore, there is limited land space available to install solar panels considering their high population density. This means that at present, Singapore isn’t able to generate sufficient electricity to meet their energy demand through renewable sources. That said, the government are still developing several initiatives  – including plans to install solar panels on rooftops if high-rise public housing and their floating PV project, which would pilot solar panel deployment on water surfaces at Singapore’s reservoirs.
BruneiAchieve a 10% share of renewables in the national energy mix by 2035 As an oil-rich country, Brunei has traditionally relied on the Oil & Gas sector to meet their primary energy needs, with renewable energy making up only 0.05% of the nation’s energy mix in 2018. That said, with growing global sustainability concerns and the rate at which green energy is becoming more cost-effective, Brunei is looking to expand its renewable energy production. Their plans to do this? By establishing grid-connected solar PV development targets, creating a business environment that facilitates public-private partnership to accelerate the implementation of PV projects in the sector, and to raise awareness concerning renewable energy like solar.
Myanmar12% of electricity production to be sourced from renewables by 2025To achieve this ambitious target, the government is looking to implement policies that would increase public-private partnerships that would develop renewable energy development in the region by providing incentives, such as their package of tax incentives foreign investors are typically entitled to in the renewable energy sector.
Lao PDR (Laos)Achieve a 10% share of renewables in the primary energy supply by 2025 To achieve this target, the government intends to encourage domestic and foreign investment at local villages to enable a functional electricity supply, leading to socio-economic benefits while undergoing sustainable development. Policy priorities in this regard would focus on small power development for self-sufficiency and grid connection, production of biofuels, and marketing. In conjunction, Laos would also look to implement green finance – that is, providing financial incentives to investors in the green energy sector, and improving the regulatory environment on renewable energy
CambodiaConnecting 100% of villages and 70% of households to the energy grid by 2030 In 2015, Cambodia’s energy mix was dominated by coal and hydropower, and to achieve its target, is planning to conduct large-scale dam construction projects with China’s help, for technical aspects and financially. While renewable energy (mostly hydro) already makes up about 48% of their electricity generation, Cambodia will be hoping to diversify into other green energy variants, as their reliance on hydropower is a challenge as well, considering production drops to 25% in the dry season.
What’s Next?

Renewable energy usage in the Southeast Asian region will likely grow rapidly in the medium-to-long term. Following growing environmental awareness levels over the impending damages of climate change, demand for green energy has gone up, and companies in the industry are provided with significant financial support from the government, although the extent of future relationships remain to be tested by the economic fallout caused by the Covid-19 pandemic. 
I personally believe that the renewables sector in Southeast Asia will remain an interesting topic for us to keep an eye on in the future, for how the issue plays out will definitely be an influencing factor in determining if we are able to still enjoy a clear, blue sky hanging over our heads in our home cities 20 years into the future.

Renewable energy infographic Royalty Free Vector Image
What-to-watch
A visual breakdown of green energy levels in ASEAN!
Country Profile – Malaysia
Malaysia
Singapore
Philippines
Thailand
Vietnam
Myanmar
Country Profile – Indonesia
Indonesia
Country Profile – Lao PDR
Laos
Country Profile – Brunei Darussalam
Brunei
Country Profile – Cambodia
Cambodia
References
  • Mordor Intelligence (2020), Southeast Asia Renewable Energy Market (2020-2025), https://www.mordorintelligence.com, accessed 7 October 2020.
  • International Renewable Energy Agency – IRENA (2018), Renewable Energy Market Analysis, https://www.irena.org/publications, accessed 8 October 2020.
  • International Energy Agency – IEA (2019), Southeast Asia Energy Outlook 2019, https://www.iea.org/reports/southeast-asia-energy-outlook-2019, accessed 8 October 2020.
  • Team, The ASEAN Post. “Renewable Energy Challenges In Southeast Asia.” The ASEAN Post, 23 Aug. 2020, theaseanpost.com/article/renewable-energy-challenges-southeast-asia. 
  • “Renewable Energy in Southeast Asia.” Renewable Energy in Southeast Asia | Center for Strategic and International Studies, 2 Nov. 2020, www.csis.org/analysis/renewable-energy-southeast-asia. 
  • “Renewable Energy Snapshot: Myanmar.” Global Law Firm | Norton Rose Fulbright, www.nortonrosefulbright.com/en/knowledge/publications/d63c2e71/renewable-energy-snapshot-myanmar. 
  • “Cambodia’s Renewable Energy Prospects.” Leaders In Energy, 5 July 2018, leadersinenergy.org/cambodias-renewable-energy-prospects/. 
  • “Renewable Energy Snapshot: Thailand: Global Law Firm: Norton Rose Fulbright.” Global Law Firm | Norton Rose Fulbright, www.nortonrosefulbright.com/en/knowledge/publications/2f5545da/asia-renewables-snapshot-thailand. 
  • Team, The ASEAN Post. “Brunei’s Shift towards Renewables.” The ASEAN Post, 6 May 2018, theaseanpost.com/article/bruneis-shift-towards-renewables. 
  • Singapore’s Approach To Alternative Energy, www.nccs.gov.sg/singapores-climate-action/singapore-approach-to-alternative-energy/. Idea. “Renewable Energy Development Strategy in Lao PDR – Policies.” IEA, www.iea.org/policies/6294-renewable-energy-development-strategy-in-lao-pdr?sector=Electricity.

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