Southeast Asia energy resources combined with large renewable energy opportunities hold the key to sustainable economic growth within Asean in the next 20 years.
Effective utilisation of the region’s renewable energy potential could play a major role in securing the energy supply critical to Asean’s planned economic expansion.
Recent studies by the International Energy Agency (IEA) indicate energy demand in Southeast Asia will increase more than 80 per cent in the next 20 years. This spectacular increase will be driven by ongoing economic growth, the continuing strong trend towards urbanisation, a growing middle class and a relatively young population.
While much of the discussion on future energy sources has concentrated on extending the use of fossil fuels such as coal and natural gas, there is also huge renewable energy potential in Southeast Asia, particularly in solar, geothermal and ocean energy.
Diversifying the energy mix makes sense economically and environmentally. The amount of renewable energy available in the region is equal to 18 times Asean’s current energy demand, but so far only 5.5 per cent of renewable energy potential is currently being exploited.
As the Bloomberg New Energy Outlook 2015 points out, economics rather than policy, will increasingly drive the uptake of renewable energy, which are abundantly available in the region.
Asean can leapfrog the learning curve by benefiting from the experience of other parts of the world. With its strong economic growth outlook a key opportunity for the region lies in adopting energy strategies which provide affordable energy for all, without resulting in exponential growth of greenhouse gases, and technologies that are resilient to the adverse effects of climate change.
Energy planners and policy makers must find a way to support industries because of their importance in employment and economic growth, while minimizing environmental deterioration and negative impacts on local air and water quality.
The environmental challenges currently facing the People’s Republic of China offer ample warning of the need to seek balance and sustainability in planning for fast pace energy and economic development.
Increasing energy efficiency
Another area of opportunity is increasing the overall efficiency of energy consumption in the region. Southeast Asia currently consumes more than twice the amount of energy per unit of GDP than the Organisation for Economic Co-operation and Development (OECD) average. Closing the gap would deliver between US$ 15 to 40 billion in annual cost savings.
What should be done to close the gap? Government fossil fuel subsidies amounting to US$ 51 billion USD a year should be reviewed for their relevance and genuine economic benefit. Annual expenditure of this size masks the real cost of energy, distorts energy markets and diverts money away from much needed investment in modern infrastructure.
With global oil prices at their current low levels, why not look again to see if these costly and inefficient subsidies need to continue? Energy poverty is clearly an issue in many countries, however fossil fuel subsidies do not only benefit the needy; in fact quite the contrary is true.
Higher prices are usually the best incentive for energy efficiency; government-led incentive schemes and regulatory regimes can bolster this. Requirement for energy certificates for buildings, consumer electronics, and tax or incentive credits for proven decrease in energy consumption, training and education about energy efficiency are all tools with which many countries have achieved significant savings in energy consumption.
Embracing New Technologies
New, disruptive technologies will affect the uptake of large scale renewable energy solutions as prices drop below those of traditional channels of supply.
With decentralized generation and storage systems available at increasingly affordable cost, micro grids will become a more frequent feature in rural areas, bypassing the need for large connection infrastructure.
Not only has technological progress made micro grids a popular option for isolated rural communities, innovation in solar cell manufacture and battery storage has helped overcome intermittency problems that were the main barriers for wide deployment of solar and wind power.
Parallel developments in microfinance and mobile banking, can also replace costly billing operations for these new energy consumers, which together with distance learning and healthcare services will shape the future of millions of people across the region.
Whereas microgrids can substitute the need for costly transmission infrastructure in rural areas, smart grids will replace traditional one-way transmission and distribution grids in urban centers.
Distributed generation will complement centralized generation as consumers also become generators. Smart grids will have the potential to optimize the supply and demand in every minute at every location, while shaving peak-capacity demand in this participative energy system.
The energy sector, like many other areas of business, is adapting to a rapidly changing society and business environment. Traditional policies and forward planning must now be complemented with a framework that enables simple, nimble and responsive solutions, while still meeting macro supply requirements.
With its projected economic development in the next 20 years, Asean offers a genuine opportunity for energy planners and policymakers to look at tried and tested practices and solutions from around the world in order to develop sustainable regulatory frameworks.
The pressure for more energy to support growing populations and economies in the region challenge us to find ways to encourage private investment, remove subsidies and policy inefficiencies, and remain flexible and responsive to renewable energy sources and rapidly changing technologies.
If we can achieve this, we can help transform the futures of hundreds of millions of people.
This article was written by Csilla Kohalmi-Monfils, head of strategy, new business and communications at ENGIE Asia-Pacific.
- Renewable Energy and Investment in ASEAN (Asean Briefing)
- Natural gas losing its shine as Asia holds faith in coal power (Reuters)
- Energy demand in region seen jumping 80% by 2040 (The Straits Times)
- Fossil fuels producers insist they have a future in a renewable energy world (The Sydney Morning Herald)
- Asean ‘needs RM10.6t investment in energy’ (The Malaysian Reserve)
Download: Key World Energy Statistics 2014
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