Asia-Pacific

ASEAN Renewables Transition may Need US$6 Trillion Investment

IRENA report says region “at a crossroad” between clean energy and fossil fuels.

South-East Asia is surging towards a future in which renewable energy meets the majority of demand.

A report from the International Renewable Energy Agency (IRENA) says the region will be able to supply two-thirds of the power needed from non-carbon sources by 2050.

In transitioning from a 19% renewable energy share in final energy in 2018 to 65% by 2050, ASEAN countries can reduce energy-related CO2 emissions by 75% compared to current policies, said IRENA.

But determination and private investment will be needed to overcome obstacles, not least the current widespread dependence on coal-fired power plants.

Francesco La Camera, director-general of IRENA, said: “With its massive renewable potential, South-East Asia stands at a historic crossroad between moving away from fossil fuels towards a renewable energy transition that meets the region’s economic growth and rising energy demand.”

The ten-nation Association of South-East Asian Nations (ASEAN) will need colossal investment to reach this renewable energy future over the next 28 years, said IRENA, running at three times current levels.

When renewable power, energy transmission, biofuels, energy-efficiency measures, hydrogen energy and electric vehicles are taken into account, this may top US$6 trillion, but would be offset by reductions in energy costs overall.

ASEAN’s progress on low-carbon energy transition to date is mixed, according to IRENA.

Against a target of 23% of primary energy being supplied by renewables by 2025, ASEAN only achieved a 14.3% share in 2021, in line with its record over the past decade. However, it has performed better against its target of achieving a 35% share of renewable energy in installed capacity; recording a 33.5% share in 2020, far outstripping previous performance.

“While the installed capacity share looks within reach, the primary energy target will be a challenge,” said IRENA.

Swerving health and environmental costs

Development institutions, the private sector and government are all potential sources of this investment, said IRENA, noting “significant regional business and investment opportunities”.

A paper published in January by the ASEAN Centre for Energy (ACE) highlighted the need for coordination between public policy and private sector innovation and investment. “Transitioning towards renewable sources of energy will not be easy for ASEAN, given that it requires certain innovations to bridge the gap between the clean energy supply and the region’s rising demands for power.”

It added: “Although some member states have formulated policies to decarbonise the sector, others have resorted to an alternative pathway. Adopting carbon capture, utilisation, and storage (CCUS) and high-efficiency, low-emission (HELE) technologies are two promising approaches that can be taken to support CO2 mitigation.”

That ASEAN is home to one of the youngest fleets on coal-fired stations in the world underlines the region’s dependence on coal. The paper says: “Coal is a critical baseload energy source, able to provide the affordable and reliable energy needed for post-pandemic recovery. But its growing environmental impact needs to be addressed.”

Should ASEAN countries achieve the necessary investment, said IRENA, “the avoidance of costs related to health and environmental damage caused by fossil fuels can bring savings of up to US$1.5 trillion cumulatively to 2050”.

Two main scenarios

In the short term, IRENA said emphasis should focus on key transition technologies. As renewables have become the cheapest power option in much of Southeast Asia, renewable capacity additions can cost-effectively increase up to 40% of total power capacity by 2030 compared to one-quarter today, it said.

This initial focus would need to be augmented by regional power system integration to utilise renewable power capacity as well as expansion and reinforcement of transmission and distribution grids.

A further key factor was the electrification of end-uses, including transport, buildings, industry, electric vehicles, electric cooking and clean hydrogen production. “The electricity share in final energy will need to rise from 22% today to more than half by 2050.”

Of hydrogen’s potential role in the region’s future clean energy mix, the report said: “Clean hydrogen and its derivatives also provide an alternative for de-carbonising transport modes like shipping, and some heavy manufacturing industrial processes. It will also bring significant supply-chain opportunities, for example in battery, green commodities and green materials manufacturing.”

IRENA has sketched out two main energy scenarios for ASEAN countries between now and 2050. One is labelled the “1.5% Celsius scenario”, a reference to attempts to limit global warming by that amount. The second is the Planned Energy Scenario (PES), based on current and planned policies.

Under the first scenario, demand growth will run at 2.4% annually, while the PES would see demand growing by 3% a year, driven by economic and population growth. Were the 1.5% Celsius scenario adopted, it would save 19% of consumption compared with the outcome of adopting the PES.

Nuki Agya Utama, Executive Director of ACE, said: “Climate commitment require concerted and accelerated action that must begin now to have a hope of success. Accelerating energy transition is crucial in order to meet climate goals and support the region’s economic growth.”

ASEAN members are Thailand, the Philippines, Malaysia, Singapore, Indonesia, Brunei, Vietnam, Lao PDR (formerly Laos), Myanmar and Cambodia. Papua New Guinea and East Timor have observer status.

IRENA is an inter-governmental agency for global energy transformation.

To Top
Newsletter SignupReceive all the latest stories from the ESG Investor editorial team

Subscribe to our free weekly newsletter below and never miss a story.

Share via
Copy link
Powered by Social Snap