Energy is one of the key pillars of the ASEAN Economic Community (AEC) vision of an integrated, competitive and resilient region. The ASEAN Plan of Action for Energy Cooperation 2016-2025 (APAEC) has identified opportunities to shape the energy development of the region. As phase one of APAEC concludes in 2020, Smart Energy International considers the roadblocks to achieving all of the goals set out in the plan.
Much of the framework upon which this is based has been developed in the context of the 2030 Agenda for Sustainable Development and the Paris Agreement on Climate Change and aims to address energy challenges and climate action measures which need to be taken.
The ASEAN Plan of Action for Energy Cooperation 2016-2025 (APAEC) has identified opportunities to shape the energy development of the region. As phase one of APAEC concludes in 2020, Smart Energy International considers the roadblocks to achieving all of the goals set out in the plan.
Phase one of the plan (2016-2020) includes increasing multilateral power trading between members with the aim of making the ASEAN Power Grid a reality. There is also an intention to implement higher aspirational targets against energy efficiency improvements and the uptake of renewable energy sources.
The aim is to enhance energy security cooperation and to take further steps towards connectivity and integration in this part of Asia.
According to Kamonphorn Kanchanaii, a Lecturer in the Faculty of Political Science and Public Administration at Chiang Mai University, it is anticipated that ASEAN will experience an increase in energy demand of about 50% by 2025. There is also an aim to increase the share of renewable energy sources to 23%.
The International Energy Agency’s Southeast Asia Energy Outlook 2019 puts the current share of renewable energy in regional primary energy supply at around 15%.
According to the IEA, energy demand is expected to grow at twice the global average and thereby challenge policy makers.
Along with two other regional studies, namely: The Future of Cooling in Southeast Asia and ASEAN Renewable Energy Integration Analysis (iii) a variety of priorities have been identified for the regional agency. These include regional power trade, renewables integration, cooling efficiency and investment.
“Southeast Asia is set to have a major impact over the next two decades, adding the equivalent of Japan’s entire energy system to global demand. This rapid growth underscores the importance of Southeast Asian countries’ energy policies for their citizens but also for the world,” said Dr Fatih Birol, the IEA’s Executive Director.
The proposed increase in renewable energy use will require a significant amount of investment into infrastructure development. Yet, in addition to the significant investment required, there are other challenges which may hamper the goals set out in the APAEC.
The role of hydrocarbons and affordability
Despite numerous renewable energy resources, the region is still heavily dependent on hydrocarbons. This does mean that in many cases, energy from hydrocarbons is considered more affordable.
The specific energy contexts for each country in Southeast Asia is partly responsible for the challenge of integrating energy policy across the region. The diversity of development within the region ranges from fully developed energy systems and industrial sectors, to those without nationwide access to energy services.
Kanchana says: “Developing countries are often not ready to pursue environmentally and socially acceptable energy investment since the electrification rate in some of these nations is low and a significant proportion of primary energy supply is still based on traditional biomass.”
Fuel demand has outpaced production within the region and Southeast Asia is now set to become a net importer of fossil fuels – mostly oil. In addition to the increased cost, this is a concern for energy security as the region becomes increasingly impacted by the unpredictability of both the global energy markets and geopolitics.
Southeast Asia’s overall energy demand has increased 80% since 2000. The demand has largely been met by doubling the amount of fossil fuels used. Oil has been the fastest growing and the resulting impact has been an increase in development and growth, but also an increase in air pollution and CO2 emissions.
According to the IEA, this trajectory could have troubling consequences: “The number of annual premature deaths associated with outdoor and household air pollution is projected to rise to more than 650,000 by 2040, up from an estimated 450,000 in 2018,” according to a statement. “The projected growth in fossil fuel consumption would drive a two-thirds rise in CO2 emissions, reaching almost 2.4 billion tonnes in 2040.” There are, however, promising signs.
Southeast Asia’s largest economy – Indonesia – is also one of the largest producers and exporters of coal globally. However, in February, the Indonesian government prioritised passing new legislation on renewable energy and legislators are working on a draft of the renewable energy bill.
Indonesia has pledged to cut emissions by 29% independently by 2030, or by at least 41% with international help.
As efforts to align national renewable energy goals and regulations on emissions proceed, the reality of addressing energy poverty and affordability is another consideration among some of the ASEAN countries. The goal is to enable a cleaner energy transition that takes into account the various context of each country. The ultimate aim is to spread the goal of 23% renewable energy across the region, instead of making it the responsibility of a few individual countries.
Threats to energy security
Energy security (and perceived threats to that security) is another barrier that needs to be addressed. Given the large amount of energy derived from hydrocarbons, this is a significant consideration.
According to Kanchana: “Energy security as a concept is mainly derived from the security of hydrocarbon supply — a negative-sum game between states.
The greater the energy resources a state acquires, the more secure its energy sector and system is – at the expense of others. Perceived threats are consequently related to supply disruption, including the physical unavailability of supply, overreliance on external energy resources to the point where energy trade is a political weapon, or the inability of an economy to afford increasing imported energy prices.”
Kanchana believes such perceptions hinder cooperation and are driven by fossil fuel energy. As uncertainty continues as to whether oil or gas pipelines will be used as bargaining chips, the concept of energy independence is a key policy consideration for many countries.
Full ASEAN cooperation will only be achieved when a strategy of mutual trust in regional energy security frameworks is in place. The transition to cleaner energy on a regional level will fail without regional cooperation.
Inter-regional investment is also a barrier to closer cooperation and a potential sticking point. While this type of investment contributes to enhanced connectivity, it also creates a regional power structure whereby some “Southeast Asian countries have launched their outward foreign investment in neighbouring countries where the output of power generation can be imported back into the investing countries. Thailand’s investment in Laos is one such case that has raised concerns.”
The concern is that locals end up paying more for locally produced power that is funded by ‘foreign’ money. This can also create a false impression of the amount of energy in a particular country when in actual fact, the end-users of that power are in a neighbouring country.
Kanchana cautions that “Phase I of APAEC demands ‘a roadmap with clear policies’ for electricity trade,” continuing that there are currently no such policies or guidelines for good governance of energy trade and governance. Without these structures, a transition at an ASEAN level are at risk of failing completely.
The IEA have proposed a four pillar strategy which may help steer the region onto a healthier and more sustainable path, although it would require concerted action across all parts of the energy sector and a major increase in investment.
The pillars of this strategy are:
- Scale-up renewable energy deployment. This can be helped by “greater integration of regional power systems and by leveraging the region’s modern bioenergy potential in a sustainable manner;”
- Focus on improving energy efficiency in sectors such as cooling and road transport;
- Phase-out fossil fuel consumption subsidies and encourage more sustainable energy consumption and investment decisions;
- Address legacy emissions from inefficient coal plants. Technologies such as carbon capture, utilisation and storage are vital options to reduce emissions here.
Despite the above, and in light of the COVID-19 pandemic, ASEAN member states may need to reconsider both national and regional plans as delays impact the construction of solar plants and wind turbines.
In fact, Dr. Yongping Zhai, energy sector group leader of the Asian Development Bank (ADB) has recommended that developing economies turn to domestic suppliers instead of relying on international suppliers, contractors and materials.
“Learning from these experiences … the countries should develop local expertise for the design, installation, operations and maintenance of renewable energy technologies,” said Zhai, during the COVID-19 and the Energy Sector: Technical Perspectives and Opportunities session of the ADB’s virtual Asia Clean Energy Forum in June.
Southeast Asian countries including Malaysia, Singapore, Vietnam and Thailand manufacture photovoltaic components and assemble solar modules with imported cells and system integration – and mostly for export markets outside of Southeast Asia.
Zhai urged these countries to target more regional markets as they develop.
He said: “It is very important to develop the local demand with a sizable market, so that local manufacturing, operations and maintenance can be developed. The key is to ensure a renewable energy policy that is consistent and stable so investors can make their long-term investment decisions.”(iv)
The message that has been often repeated is one of coordination between government stimulus and the ongoing energy transition – a message recently repeated by the United Nations Environment and Social Commission for Asia and the Pacific (UN ESCAP).
Michael Williamson, Chief of Sustainable Energy Development Section and Anis Zaman, Economic Affairs Officer, UN ESCAP, said in a blog post: “For policymakers, economic recovery and sustainable energy do not have to be mutually exclusive.
There are many good examples of stimulus packages supporting sustainable energy development post-crisis. Australia’s Northern Territory has legislated a COVID-19 solar stimulus package. Following the global financial crisis, 8% of the Republic of Korea’s $38 billion stimulus package and about 40% of China’s $586 billion package were allocated to sustainable energy investment.”(v)
Thus far, many of the guiding objectives behind the ASEAN Plan of Action on Energy Cooperation (APAEC) are on target to be achieved. These include the development of guidelines to integrate energy efficiency standards across the region through the ASEAN Electrical and Electronic Equipment Mutual Recognition Agreement.
Importantly, according to Dr Nuki Agya Utama, Executive Director of the ASEAN Centre for Energy (ACE): “ASEAN has achieved a 24.4% reduction in energy intensity (EI), exceeding the aspirational target of 20% reduction in EI by 2020 based on 2005 levels. On renewable energy, ASEAN achieved a 14.3% share of RE in [the] region’s total primary energy supply (TPES) in 2017.”
The APAEC Phase II: 2021-2025 explores more ambitious targets to enhance energy security and sustainability in line with the objectives of the global energy transition, Sustainable Development Goals (SDG) and Paris Agreement.
Already plans are underway for the next phase of this agreement. In September 2019, two new energy efficiency and conservation deliverables, part of Phase II, were endorsed and adopted. These are the Regional Policy Roadmap for Minimum Energy Performance Standards for Lighting, a coordinated approach for the promotion of energy-efficient lighting and Guidelines for the Integration of Energy Efficiency to the ASEAN Electrical and Electronic Equipment Mutual Recognition Arrangement. This implementation will start with air conditioners and be expanded to other appliances.
With these and the development of a larger strategy for Phase II, collaboration at an ASEAN level will contribute to a better energy future for those within the region as they cooperate to tackle the challenges of energy transition together.
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i Association of Southeast Asian Nations (ASEAN). ASEAN member states are Brunei, Cambodia, Indonesia, Lao, Malaysia, Myanmar, Philippines, Singapore, Thailand and Viet Nam.
ii https://www.eastasiaforum.org/2020/04/14/ roadblocks-to-aseans-clean-energy-transition/