Figure 1. ASEAN Member States’ Flags
Southeast Asia is one of the leading regions which experienced rapid socio-economic growth, urbanization, industrialization, and growing demand for energy. The IMF predicts that by 2027, the region will foresee an average GDP growth of 6.2%. In addition, ASEAN[1] is home to more than 675 million people, which indicates a substantial energy demand.
Most of the ASEAN member states have committed to carbon neutrality or net-zero emissions and pledged to reach 23% of renewable energy in the energy mix with 35% in total installed capacity. However, although the member states have agreed on a collective target, they must work on domestic policies to attract foreign investment in the renewable energy sector. In addition, other than the Philippines and Singapore, all other states still adopted the single-vertically integrated utility model in their power market, making it heavily regulated by the government.
For decades, 75% of the energy needs within the region have been supplied by fossil fuels, with coal as its primary fuel. The installed capacity of coal power plants has increased by 7% annually since 2017 with the support of international investors. Renewables, on the other hand, only account for less than a quarter of the installed capacity, most of which comes from hydropower. The region has a high potential for solar energy as its location is within the equator; however, the growth is less significant than expected, except for Vietnam.
[1]ASEAN (Association of the Southeast Asian Nations) member countries: Brunei Darussalam, Cambodia, Indonesia, Lao PDR, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Viet Nam.
Vietnam
Over the past three years, Vietnam has been the leading country that shows significant growth in solar power, thanks to the implementation of the feed-in tariff scheme. In 2021, the total installed solar power capacity reached 22 GW, a remarkable boost from near zero in 2017. The installed capacity of fossil fuels in the country has been pushed down to below 50% due to the addition of these solar projects. However, relying on solar power without having a sound energy storage system will result in grid imbalance, which is becoming an issue in the country. In 2022, the government launched a pilot direct power purchase agreement (DPPA) scheme, allowing corporations to buy renewable power directly from independent power producers.
Philippines
The Philippines is expected to surpass Vietnam's renewable power capacity in 2030. Currently, around 80% of the electricity produced comes from fossil fuels. With strong economic growth, energy demand in the country will continue to spur; nonetheless, many predict that the gas reserve in the country wouldn't be able to supply more energy and coal itself has reached a record high within the past few years. The situation makes renewable the only independent power source the country could rely on. As a result, the government is pushing for foreign investment within the sector, which resulted in the capacity addition of solar and wind power that will come online in 2025-2027.
Indonesia
Indonesia, the biggest economy in the region, needs help developing renewable power. Since 2011, the share of renewable in the energy mix is fluctuating at around 11-12%. One of the reasons is that the country is rich in fossil fuel supply, where Indonesia is one of the largest coal exporters globally and the abundant resource of natural gas reserves. Despite the global increase in coal prices, the price of domestic coal for electricity generation is only USD 70 per ton. In 2016 the government introduced a feed-in tariff scheme for renewable power; however, in just a year, the tariff was adjusted again, making renewable has to compete with cheap domestic coal. The Ministry of Energy and Mineral Resources recently launched a domestic carbon trading mechanism for coal power plants by implementing a cap on their annual emission -- an action that hopefully sends a strong signal for decarbonization within the country.
Malaysia
Similarly to other ASEAN states, Malaysia relies on fossil fuels for its energy supply, and Malaysia is known as one of the region's largest oil and gas producers. Yet, coal and gas account for about 75% of the total installed capacity, and hydropower is the country's largest renewable source. Currently, two grid interconnections connect Malaysia to Thailand in the North and Singapore in the South; however, no regular trading utilizes the connection. The Malaysian government has implemented regulations intending to support renewable energy development. The feed-in tariff mechanism applies to renewable power plants with less than 30 MW capacity. There are a few more options for solar projects besides the feed-in tariff, such as net metering (for on-site / rooftop) and the large-scale solar bidding program.
Thailand
Thailand has heavily relied on fossil fuels for its energy needs, accounting for more than 78% of the installed capacity. However, in its power development plan 8 (PDP 8 ), published in 2018, the government has yet to make an immediate plan to increase the share of renewable energy in the energy mix, showing that 65% of the installed capacity still comes from fossil fuel. In addition, Thailand is also a net energy importer, which makes the economy very volatile. The situation is becoming the country's primary driver of renewable energy development, and it has been supported by implementing the feed-in tariff mechanism for renewable power.
Singapore
Although Singapore is the smallest country in the region, Singapore is one of the significant drivers for renewable development. Singapore is an energy import-dependent country, with over 95% of its energy supplied by fossil fuels import. The power market structure is the leader among other countries within the region with its full market liberalization. Since Singapore is very limited in its natural resources and land area, the government is pushing for international collaborations with its neighbouring countries to increase renewable energy supply domestically. Singapore recently purchased 100 MW of hydropower from Lao PDR, which will utilize the grid connection of Lao-Thailand-Malaysia-Singapore.
Brunei, Cambodia, Lao, Myanmar
The remaining member states of ASEAN also play an essential role in the decarbonization strategy within the region through renewable energy. For instance, Lao is an energy exporter exporting electricity from its abundant hydropower and cheap coal resource, mainly to Thailand and Vietnam. In addition, with its generous oil reserve, Brunei also needs to formulate its strategy moving forward and focus on the development of renewable. Myanmar and Cambodia have each set their carbon-neutrality target, which includes renewable energy in their approach.
Figure 2. Sidrap Wind Farm, Indonesia (Source: PT UPC Sidrap Bayu Energi)
ASEAN Countries, known for being agricultural and natural resources hubs, are undergoing a shift towards globalization driven by the presence of manufacturing industries and supply chain networks, making it one of the most critical regions globally. As a region with the fastest economic growth and massive industrialization, energy will play an essential role in future decarbonization strategies. Therefore, ASEAN member states must adopt a more comprehensive approach to developing renewable energy to accelerate the energy transition. International collaborations and domestic policy support are the key factors that can help achieve collective targets.
In addition, a strong demand for renewable energy from the public and private sectors could accompany the energy transition actions taken at a higher level. Industries, corporates, and even households can contribute by demonstrating a firm commitment to voluntary renewable energy consumption. By doing so, they can help accelerate the transition to a more sustainable future for the ASEAN region and beyond.
Reference:
IEA (2023), ASEAN Renewables Investment: Opportunities and Challenges, IEA, Paris. https://www.iea.org/reports/asean-renewables-investment-opportunities-and-challenges
IRENA (2022a), Indonesia energy transition outlook, International Renewable Energy Agency, Abu Dhabi. https://www.irena.org/Publications/2022/Oct/Indonesia-Energy-Transition-Outlook
IRENA (2022b), Renewable energy auctions: Southeast Asia, International Renewable Energy Agency, Abu Dhabi. https://www.irena.org/Publications/2022/Dec/Renewable-energy-auctions-Southeast-Asia
IRENA (2023), Malaysia energy transition outlook, International Renewable Energy Agency, Abu Dhabi.
IRENA & ACE (2022), Renewable energy outlook for ASEAN: Towards a regional energy transition (2nd ed.), International Renewable Energy Agency, Abu Dhabi; and ASEAN Centre for Energy, Jakarta. https://www.irena.org/Publications/2022/Sep/Renewable-Energy-Outlook-for-ASEAN-2nd-edition
Maguire, G. (2023), Column: Philippines set to go from renewable laggard to leader in SE Asia, Reuters. https://www.reuters.com/markets/commodities/philippines-set-go-renewable-laggard-leader-se-asia-2023-03-14/
Reuters (2023), Indonesia launches carbon trading mechanism for coal power plants, Reuters. https://www.reuters.com/business/energy/indonesia-launches-carbon-trading-mechanism-coal-power-plants-2023-02-22/
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