ASEAN: Running its own race to decarbonisation

ASEAN countries have good reason to pace themselves in the green energy marathon, writes Melissa Fitzgerald.

Asia is frequently cast as the laggard of the energy transition: the slow mover who is letting the side down in the race to decarbonisation.

But is that fair? Or true? If decarbonisation is indeed a race, it is surely a marathon, and in turn, Asia will cross the finish line at some point. Won’t it?

We asked several key players in the sector to take the pulse of the energy transition in Asia, and in particular, the ASEAN region.

“Whereas the virtues of renewables are known in Europe, many Asian countries still associate renewables with being expensive and unreliable,” said Vincent Bakker, Group Controller of Entoria Energy, who adds that the paradigm shift is slow – but it will happen.

Olivier Duguet, CEO of the Blue Circle, says the renewable energy revolution “will hit ASEAN shores when local utilities recognize its cost competitiveness and cost visibility”.

He adds that the pricing of new energy sources when utilising renewables and battery energy storage will determine the ability of ASEAN countries to embrace new sustainable energy practices.

Of course, clean energy projects need funding and funding often needs incentives. There is a consensus that if ASEAN governments showed support for green energy initiatives and backed them with their own capital, it would send a green light to investors.

Comprehensive and straightforward policies around green energy investments would spur investors to move forward with financing ASEAN projects. ASEAN policymakers need to publicly back emission-reduction policies for transparency but also to entice investors.

Turning off coal

So why can’t – or won’t – ASEAN countries flip the ‘off’ switch on coal.

Rajakumar A. Gopal, Vice President I, Group Project of EDRA Power Holdings, says we must remember that the ASEAN region’s fossil fuel supply is plentiful, especially in Malaysia, Brunei, Indonesia and Thailand.

He says that due to the economic and political significance of oil, gas, and coal, completely removing these resources would not remove the dependency on them for ASEAN countries.

And consumers would bear the brunt with increased costs.

“Renewable plants have not reached the stage where they can be considered baseload,” says Gopal.

“The battery storage which needs to be expanded in achieving baseload power is still far [from realisation] in ASEAN countries due to current high prices.

“Hence, the dependence on fossil fuels for power generation will continue to dominate the ASEAN countries until such time as renewables can be reliably supplied as baseload plants.”

With this in mind, and despite the utilities of several countries committing to adding renewables to their energy mix – which is crucial for the earth’s survival – they are not equipped to do so yet. Organisations like the International Energy Agency have a decarbonisation timeline, as does the ASEAN region: they just do not align.

The economics

Eventually, coal does need to retire as a power source, but discontinuing its use today would negatively hit ASEAN countries economically.

Currently, most of these countries are not yet prepared to change their energy mix completely to renewables, although the process has begun.

Energy expert Bisman Bakhtiar says it is “impossible to stop fossil fuel projects in the next ten years”.

“There are two causes: Firstly, our energy needs. Today, most of our energy demand still relies on oil, gas, and coal.
“Secondly, the oil and gas plus coal sectors are among the main revenue contributors, especially when the price is attractive.”.

He explains that if we look to the Philippines, Energy Secretary Alfonso Cusi has said that the energy transition should be “fuel and technology-neutral” and have as little impact on the country’s inhabitants as possible.

“Cutting finance for oil, gas, and coal without considering efficiency and competitiveness would set back the Philippines’ aspiration to join the ranks of upper-middle-income countries,” he explains.

It is also important to note that the Philippines is a net importer of fuel, as is Vietnam, another ASEAN country also heavily dependent on coal.

However, the difference is that the Vietnamese energy mix has drastically changed with the substantial and successful shift to solar.

In 2019, Vietnam supplied an impressive 4.5GW of utility-scale solar power capacity in less than two years, and at the beginning of this year, ENV announced that solar power has penetrated a quarter of the national power system.

The recently released Vietnamese Power Development Plan places renewables firmly at the centre of its energy ambitions and makes the country a clean energy bright spot.

The race to zero

While some would say that the ASEAN energy sector has moved at a glacial pace in its bid to integrate renewables, there is now a flurry of activity towards changing the energy mix.

Narsingh Chaudhary, Managing Director of Black & Veatch’s Asia Power Business, believes net-zero emissions in Southeast Asia can be realized through multiple approaches, such as reducing fossil fuel investments and increasing renewable energy penetration.

However, he cautions that this add-on to the grid comes with its own challenges and careful planning is vital for the successful integration of renewables into a stable and efficient grid.

“To accommodate more renewable energy generation, the region will need more integrated solutions across generation, transmission and distribution, as well as the expansion of gas-fired generation and energy storage to improve grid efficiencies and stability.

“In the longer term, integrating hydrogen to support baseload generation could be another approach to decarbonize the electric sector.” Yatin Premchand, Managing Director for APAC at Black & Veatch Management Consulting, says we are only at the start of a significant change to Asia’s energy systems.

However, he stresses it is vital to keep a longterm perspective. While gas-to-power will be a critical element of the transition, there has been swift progress in low and zero-carbon technology, applied solutions, and their adoption.

“In general, the technologies are already here and proven, and over the next five to ten years, industry and government need to adopt a decarbonisation mind-set that fuels regulatory reform and creates enabling investment conditions.

“While investments in grid modernization and smart energy syst ems will be required, the cost of enabling technologies will continue to fall through the inevitability of greater adoption and scale.”

The technologies and methodologies are available for ASEAN to supercharge the RE implementation, but it remains to be seen if funding and government backing are also on board.

The energy sector is in the midst of a period of extraordinary change, and Asia is watching, evaluating and responding to these changes: in its own time, at its own pace.

Editor’s note: Please be aware that all responses are Mr. Rajakumar A. Gopal’s opinion which were shared in a personal capacity and do not represent EDRA Power Holdings views in any manner.