Southeast Asia is growing rapidly, from populations and income to its colorful and bustling cities.
But its surge in economic growth has been accompanied by a voracious appetite for energy, and a cleaner energy regime will be needed if future growth is to be sustainable.
The region’s energy needs are growing twice as fast as the world average, according to the International Energy Agency. Unfortunately, much of this need is currently met by burning fossil fuels – mainly petroleum, natural gas and coal, the “dirtiest” form of fossil fuel – which release large amounts of carbon dioxide, contributing to global warming.
With the looming threat of more intense typhoons, flooding and sea level rise associated with global warming, the need for concerted action on climate change is clear and urgent.
The long coasts and low regions of Southeast Asia make it one of the most climate-vulnerable regions of the world.
Referring to the shift in the consumption and production of energy from fossil fuels to renewable sources such as wind, water or the sun, Eric Lim, Director of Sustainability at UOB, said: “Basically , energy transition is at the heart of climate action. “
What does Asean do?
ASEAN has set itself an ambitious goal of greening its energy mix, so that 23% will be renewable by 2025.
But if it continues on its current path, the region will likely miss that “ambitious” 5% target, according to the Asean Center for Energy (ACE).
Policymakers are strongly encouraged to act, given the dramatic drop in global costs of solar and wind power generation.
The International Renewable Energy Agency’s Global Renewables Outlook report estimates that with continued cost reductions, Southeast Asia could meet 41% of all its energy needs from renewable sources by 2030 and by doing so, even creating 6.7 million new green jobs by 2050..
However, renewable energy prices in the ASEAN region have not fallen as much, ACE notes in its Regional Energy Trends 2020 report.
The cost of solar and wind installations in the region can now compete with that of fossil fuels, but remains above global averages, due to economies of scale and lower levels of technology and expertise.
Senior analyst at energy research and advisory group Wood Mackenzie, Rishab Shrestha, said the stage was set for rapid, subsidy-free renewable energy growth in Asia-Pacific.
For example, the cost of electricity from renewables is expected to fall below that of coal for Thailand and Vietnam as of this year. Indeed, economic viability, combined with political will, has meant that these countries have funneled significant public funds to take advantage of the great sunshine they receive with large scale solar farms and rooftop solar installations.
Vietnam now generates almost half of Southeast Asia’s total solar capacity.
In Singapore, the government plans to increase total solar power capacity from 350 megawatts peak (MWp) in 2020 to 2 gigawatts peak (GWp) by 2030 – enough to power around 350,000 households – and 5 GWp in ‘by 2050.
But Mr Shrestha still sounds a word of caution, saying, “Despite the low cost of renewables, government policy is still key going forward to attract investors, manage grid reliability and transmission upgrades.” , and encourage the storage of batteries to manage the intermittence of renewable energies.
What role do the grids play?
Moving away from coal-fired power plants to installing solar panels and wind turbines is the most visible part of the energy transition, but it is only part of the entire process of greening the grid.
Solar, wind, hydro and other renewable energy sources must be connected to the grid, the backbone of the energy system.
As these were traditionally designed to carry predictable energy flows in a single direction – from large power plants to end users like factories and homes – the national grids of Southeast Asia are in need of modernization. .
More “targeted investments” are needed to integrate solar and wind power – subject to the vagaries of the weather – into national grids without compromising the stability and reliability of the power supply, ACE said in its sixth Asean report Energy Outlook.
This would include investing in improving the network through digitization, demand-side management technologies and energy storage systems. A more flexible grid is also a grid that allows energy to flow in multiple directions – from generators to users and from end users to the grid.
Recognizing the importance of improving grids, UOB’s Lim said that countries that encourage the uptake of renewable energy, including Singapore, have made significant investments in research and demonstration projects on renewable energy sources. smart grids to integrate renewable energies into their energy systems.
Singapore’s power grid operator, the SP Group, for example, is testing technology that transfers energy from the batteries of parked electric vehicles to the grid – a way to smooth the intermittency of solar power supply.
Save the environment, help the most disadvantaged
The bright lights of bustling Southeast Asian cities may overshadow the fact that 29 million people across the region – mostly in rural areas – still lack access to electricity. Here, renewable energies offer an opportunity to extend access in a sustainable way, via micro-grids.
Microgrids running from renewable sources such as solar farms located in isolated communities are one way to provide stable electricity, especially for the thousands of remote islands in Indonesia and the Philippines.
And these efforts can also pay off economically. In a report released in January this year, the International Finance Corporation said: “Distributed production of renewable energy and storage has emerged as a solution for delivering power to places with weak or no power grids, and stimulate local economies.
Financing the switch to renewables
Growing environmental awareness among banks has changed that as funding moves away from coal for renewable energy projects.
In April of this year, a report by the US-based non-governmental organization Global Energy Monitor said: “Declining demand for electricity and slowing development of coal-fired power plants following the Covid-19 pandemic, coupled with tighter funding for coal-fired power plants and lower costs for solar and wind power. power, close the door to coal in the regions.
In 2019, when all of Singapore’s banks announced that they would no longer finance new coal-fired power plants, they were the first in Southeast Asia to do so.
More and more of the region have since avoided opportunities to finance dirty energy. The Asian Development Bank announced in May that it would stop funding new coal-fired power plants, coal mines, and oil and natural gas production activities.
Several large coal-fired power plants are still under construction in Vietnam, Indonesia and the Philippines, but the drying up of funding is probably also shaping public policies on renewable energy.
It is also in 2019 that UOB set itself the objective of doubling its renewable energy portfolio by 2023, compared to 2018 levels.
The bank reached this target in 2020 – three years earlier – and renewables now represent 17% of its power generation portfolio.
Speaking of the bank’s approach in Southeast Asia, Mr. Lim says it works with large national anchors who have the will and capacity to implement diversification strategies and plans.
He adds that these anchor points include state-owned or government-backed energy companies that would be able to diversify their energy activities and help countries transition to renewables.
The bank also aims to make sustainable finance more accessible to businesses in the region, especially small and medium-sized businesses.
“For example, companies that can demonstrate how their operations promote a better quality of life for residents through the use of renewable energy and energy efficiency can apply for funding under the UOB Smart Sustainable Funding Framework. City, ”Mr. Lim said.
“Through the provision of sustainable finance, we are helping businesses seize the growing opportunities associated with sustainable development and, in turn, drive the region’s transition to a sustainable and climate resilient economy.
This is the sixth in a 15-part series in conjunction with