Southeast Asia’s Growing Energy Needs

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By Justin Lee

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 industrialization and urbanization 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 neighboring 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 actualization, 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.

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