Growing opportunities for sustainable infrastructure-
Rapid growth in the last few years has accelerated the need and demand for infrastructure such as energy, water, and transport in the Southeast Asian region. Policymakers, funders, and developers have focused a large part of their attention on the need for reforms and new capital to finance what is believed to be an annual investment requirement of almost $100 billion. A few players have embraced this challenge as an opportunity to leapfrog to more ecologically sustainable initiatives.
For many firms, technological innovations and the incorporation of eco-efficient principles have enabled them to experiment with products, projects, and best practices to support a greener way forward in infrastructure development. Hence, suppliers of such technologies and innovations have increased, resulting in greater cooperation with infrastructure developers to achieve the desired goals.
Dynamic market
The market for sustainable infrastructure is quite significant, with the biggest demand stemming from the energy sector, followed by water supply, waste management, and transportation. In the case of the energy sector, there are growing prospects for renewable and more efficient buildings and products. For the water sector, conservation constitutes the key driver for demand. Finally, the transportation scene has been characterised by an increasing shift towards greater investments in public transport.
A more detailed discussion of the market for sustainable infrastructure in each of these sectors is provided below.
Energy: Boosting usage of renewables and energy efficient products and services
Though the current share of renewables in the overall energy mix of Southeast Asia is low, it is poised to increase significantly in the coming years. Many countries in the region have put policies in place to ensure the competitiveness of renewable energy vis-à-vis conventional fuels, so that its share in the market could increase.
In particular, the Philippines, Thailand, and Malaysia, with over 10,000 MW of capacity under development, are the most attractive renewable markets in the region. Indonesia is also an emerging market: the government is seeking to increase the share of renewables in electricity generation to 17 per cent by 2025 from the current 5–6 per cent. As E. Kirkwijk, Managing Director, Asia Green Capital, a Singapore-based independent financial advisory and investment firm, states, “Some countries in the region are poised to increase their renewable energy share to 20–30 per cent of the energy mix.”
An area that has provided tremendous opportunity for improving the sustainability quotient of infrastructure is energy efficiency. Thailand and Singapore have instituted the most comprehensive policies to promote energy efficiency. Indonesia, Malaysia, and Thailand have also launched policies and programmes to drive energy efficiency improvements. The market size for energy efficiency products and services is expected to increase in the future, thanks to governmental measures that include:
- Singapore: Enactment of an Energy Conservation Act that comes into effect in 2013;
- Malaysia: Formulation of a Master Plan by the Ministry of Energy, Green Technology and Water to accelerate the development of energy efficiency for the 10th Malaysian Plan (2011–15); and
- Thailand: Establishment of the Thai Municipalities Project to encourage individual municipalities to identify, design, finance, and implement energy efficient measures, etc.
Many countries have instituted mandatory energy efficiency standards for buildings, household appliances, and automobiles. In addition, they are also promoting smart grid technologies. A 2011 study undertaken by Roland Berger, an international strategy consulting firm in Singapore, indicates that the region has potential for energy efficiency gains of between 12 and 30 per cent, which could translate into actual savings ranging from $15 billion to $43 billion.
Among the most promising segments for energy efficiency is green buildings. Singapore has one of the most developed markets for green buildings through the Green Mark Scheme that was introduced by the Buildings and Construction Authority in 2005. It has raised the environmental consciousness of the construction and real estate sectors in the city-state. In fact, the Singapore government plans to transform 80 per cent of all buildings into green buildings by 2030, which has created a new market for energy efficient products and services.
Water and waste management: Multi-pronged strategy
While the largest share of the sustainable or green market is dominated by renewable energy and energy efficiency, there is significant potential in the water and waste management sector as well. For instance, many Southeast Asian countries are recycling water through a combination of technological, social, economic, and political initiatives. A good example is Singapore’s water strategy that is centred on expanding the catchment area, the treatment of reclaimed water for reuse, and desalination, which has enabled the country to reduce its dependency on water imports. Thailand and the Philippines have followed practices for rainwater harvesting that has increased access to clean fresh water. In Indonesia, all buildings are required to have an infiltration well in order to combat the rise in groundwater depletion due to rapid construction and urbanisation. This legislation aims to reduce water shortages by 16 per cent.
Water and wastewater treatment technologies are also emerging as a big market in the region. As estimated by Frost & Sullivan, the market size for water filtration technologies was $1.3 billion in 2011; and the market is growing at over 7 per cent compounded annually. Within this segment, the membrane filtration technology market is growing rapidly, fuelled largely by industrial and economic growth. In the coming years, markets for such technologies in the industrial segment will be relatively bigger in countries like Indonesia and Thailand. At the same time, Singapore will create demand for such technologies in the municipal segment, as there is a vast opportunity for seawater desalination and municipal wastewater recycling in the country. Vietnam is also expanding its footprint in the desalination market with foreign investments that include the construction and assembly of membrane equipment.
Transport: Creating alternatives for cars
In the area of transport, the use of public transport is being promoted in a big way in the Southeast Asian countries. Currently, urban rail networks are operational in Bangkok, Kuala Lumpur, Manila, and Singapore; their combined length is about 240 km. Over the next seven years, the total operational metro network is projected to increase to over 770 km at an investment of about $33 billion. Apart from the expansion and inclusion of new lines in existing operational networks, new projects are also being implemented in Jakarta and Ho Chi Minh City.
Further, countries like Singapore and the Philippines are also promoting non-motorised means of transport such as walking and cycling through the development of infrastructure such as cycling tracks and pedestrian facilities. Singapore has set forth a strong case for the use of public transport by imposing high import duties, registration fees, fuel tax, and an annual tax for personal vehicles.
Thriving landscape for green solutions
With a strong mandate from governments and growing demand for green solutions, technology suppliers of clean energy and green products such as renewable energy, automation controls, energy efficiency, and building materials have responded by re-jigging their portfolios. T. Nonaka, Director, Environment and External Affairs Group, Panasonic, points out: “Such mandates will only spur businesses to continue developing energy efficient products and solutions in order to tackle climate change issues, and at the same time achieve energy sustainability, while pursuing business and economic growth.”
Companies such as Panasonic, Applied Materials, Rockwell Automation, and Siemens, which have been providing products and solutions for corporates and various industrial and city infrastructure projects, are seeing increasing uptake of such products. For instance, Panasonic has installed 2 MW solar panels in Malaysia at the Renewable Energy Park of Rimba Terjun in Johor. To further contribute to the generation of renewable energy, Panasonic is now implementing several MW-scale solar farm projects in Malaysia.
In Singapore, the company has initiated the Punggol Eco Town test bed project that aims to achieve zero carbon di oxide emissions for common areas of public housing. The rooftop solar panel installations in public residential buildings are supported by a pilot smart grid solution. The company has recently selected 10 households to participate in this test bed project: it has installed demand response-compatible air conditioners and the Panasonic Home Energy Management System in their homes. This system allows residents to visualise, monitor, and better manage their energy consumption via their smartphones. Nonaka explains further: “This project not only tests our technological concept under tropical conditions, but also evaluates consumers’ response to technology.”
In fact, the healthy uptake of solar panels in Asia has spurred the company to invest in innovations such as a portable power system that is accompanied by its own solar panel and energy storage, which can power appliances such as televisions and refrigerators. Generating 6.7 kWh of electricity a day, this portable power system can be employed for multiple applications to provide power for health, education, and communication facilities, as well as retail stores. Thus far, five such power systems have been provided in Indonesia, Tanzania, Japan, and India.
However, solutions providers are conscious that their offering of green and sustainable products has to go hand in hand with clients’ business goals. C. Van Rensburg, Process Solutions Manager for Southeast Asia, Rockwell Automation, sums up the win–win approach of integrating green solutions with business performance: “Solutions for sustainable production are designed to help customers turn sustainability challenges into business advantages by investing in environmental and social responsibility processes that strengthen business performance.”
Apart from providing green technologies that are client focused, firms are also incorporating sustainable solutions in their own assets and processes. For instance, when internationally acclaimed semiconductor manufacturer Applied Materials set up its 32,000 square metre base in Singapore, it installed advanced technical and design features that conserve energy and water. For its efforts, the building became the first industrial manufacturing facility in Singapore to receive the Green Mark Platinum Award from the Building and Construction Authority. Panasonic has also instituted incentives to encourage its staff to reduce water and energy consumption, thus reducing the company’s overall ecological footprint.
Governments have also benefited from their endeavours to encourage clean technology firms to set up shop in their countries. These industries employ modern production processes that are non-polluting, while creating significant local job opportunities. For instance, the Singapore government projected that the clean-tech sector would contribute S$3.4 billion to the country’s GDP by 2015 and create about 18,000 new jobs.
A greener and cleaner future
As Southeast Asian countries pursue investments in new infrastructure, they face the immense challenge of realising their objectives with limited funding, while promoting the well-being of their environment. Hence, the success of sustainable infrastructure projects in this early phase, which tend to be expensive, will play an important role in providing the necessary stimulus for the propagation of such projects and products. Moreover, the prospect that the dwindling natural resources (energy and water) would no longer keep up with the demand of industrial and economic growth will serve as another catalyst for increasing the share of clean technologies.
A large part of the market is also being driven by technology innovations that allow sustainable solutions to compete favourably with traditionally available options. In instances in which such innovations are expensive, governments have been providing policy support to bring these technologies into the marketplace because of their environmental or economic benefits. For instance, in most countries, governments permit higher-than-average tariffs for power projects using renewable energy.
Another factor that is boosting the growth of green infrastructure in the region is the increasing number of international companies with a strong sustainability focus. In response to the incentives and policies offered by the countries in the region, these companies are choosing Southeast Asia as their base for research and manufacturing. As a consequence, local solutions providers for technology have the opportunity to form collaborative partnerships with international firms.
Sustainable practices are also a strong brand differentiator in the market. Companies that have made sustainability a strong corporate culture believe that it would increase their companies’ market value in the long run. For instance, both Panasonic and Applied Materials have experienced the positive impact of their focus on innovative sustainable solutions, which have also enhanced their engagement with the local community and staff.
Finally, as more countries strengthen their policies and laws to protect the environment and local people, the market for sustainable infrastructure will continue to grow. This is especially true in countries (such as Myanmar) that have opened up their markets to international firms just recently. While donor agencies are providing technical assistance to strengthen regulatory frameworks, there is room for raising awareness about the benefits of infrastructure projects that incorporate sustainability parameters. In addition, there is a serious shortage of capital for financing clean-tech projects. As the countries in this region succeed in overcoming these barriers, the region could experience significant growth in the sustainable infrastructure market.
