Positive demographic and economic trends have catapulted energy consumption in the Southeast Asian (SEA) countries over the past two decades. ASEAN’s population is expected to expand from 629 million at present to 715 million by 2025 while various international agencies have projected economic growth rates of 4-6 per cent for the region over the next five years. Energy demand, consequently, is expected to increase too. The region’s energy demand is expected to increase by over 50 per cent from 642 mtoe in 2014 to 956 mtoe in 2025, according to the International Renewable Energy Agency (IRENA). However, the region’s fossil fuel reserves are declining and are insufficient to meet this growing demand. Besides, higher dependence on fossil fuel to power future energy needs has adverse repercussions on the environment. Many countries are already facing extreme weather events. For instance, droughts are common in Vietnam and Cambodia while many low-lying coastal regions face the risk of increased flooding and typhoons. IRENA estimates that carbon dioxide emissions in the SEA region will increase 60 per cent by 2025 – one of the fastest rates in the world. The health and environmental costs associated with air pollution across the region could average $225 billion per year by 2025, or around 2.2 per cent of the region’s GDP.
ASEAN’s energy sector, therefore, presents significant opportunities and challenges – opportunities for new technologies for and sources of power generation and challenges related to mitigating externalities related to emissions and climate change. It needs to find a sustainable path to meet its burgeoning energy demand without compromising on the environment. Taking cognisance of the situation, ASEAN announced a target to obtain 23 per cent of its primary energy from renewable energy sources by 2025 at the 34th ASEAN Ministers on Energy Meeting held in Na Pyi Taw, Myanmar, in September 2016. The ministers underscored the importance of enhancing national and regional energy security amid declining fossil fuel resources, and called for optimising the use of renewable energy resources. The ministers also acknowledged the significance of energy efficiency in addressing energy security concerns, improving standards of living, reducing energy demand, and increase the region’s industrial competitiveness.
The SEA region needs to follow a multipronged approach to meet its energy needs in a sustainable manner. These include focusing on energy efficiency, using clean coal technologies, expanding renewable energy as well as introducing nuclear energy in the power mix albeit in a safe way. While the SEA countries have made some headway in the first three options, the last, that is, nuclear power, is still a distant dream. Southeast Asia Infrastructure presents an account of sustainable energy options for ASEAN.
Expanding renewable energy
The SEA region is bestowed with immense renewable energy resources. For instance, Myanmar and Lao PDR have huge untapped hydropower potential; the coastal regions of Vietnam, Thailand, Indonesia and Myanmar have ample wind resources; while Indonesia and the Philippines are rich in geothermal resources. Further, the region has abundant solar resources with an average solar irradiance of over 1,500-2,000 kWh per square metre annually. Renewable energy has seen decent growth in the SEA region in recent years. It grew at a CAGR of 8.2 per cent from 28 GW in 2007 to 57.7 GW in 2016. Among the renewable energy sources, hydropower has the highest contribution in the region.
ASEAN’s ambitious target of meeting 23 per cent of its primary energy needs from renewables by 2025 is more than 2.5 times the share in 2014 at 9.4 per cent. As per the International Renewable Energy Agency (IRENA), if existing and upcoming policies/programmes are followed in the region, it will fall short of reaching the target by 6 per cent, that is., it will be able to increase the share of renewable energy in primary energy only by 17 per cent by 2025. In an IRENA press release dated September 23, 2016, Dolf Gielen, director of IRENA’s Innovation and Technology Centre, says, “While the share of renewable energy each country can achieve varies, the fact remains that all ASEAN countries can contribute to the 23 per cent goal in their own way. Around the world, renewable energy is becoming a least-cost option for energy, and this is true for the ASEAN region too. Additionally, renewable energy can enable higher rates of electricity access enabling the region to meet its electrification goals.” IRENA’s “Renewable Energy Outlook for ASEAN” forecasts deployment of renewable energy in the SEA region in two scenarios – the Reference Case, which is the most likely case based on planned policies in the region but which will not lead to the achievement of the 23 per cent target and the REmap Case, which takes into account the additional renewable energy deployment required to meet this target. The power sector has the highest potential for deployment of renewables followed by end-use sectors like transport, industry and buildings. The share of renewable energy in total power generation is projected to increase from 20 per cent in 2014 to 27 per cent in the Reference Case and further to 34 per cent in the REmap Case. This translates into an absolute increase of 410 TWh between 2014 and 2025. Accordingly, the installed renewable capacity would increase from 54 GW in 2014 to 184 GW by 2025, accounting for 43 per cent of total power generation capacity in 2025.
Embracing clean coal technologies
Although SEA countries are incorporating renewable sources in their power generation portfolio, fossil fuels, 
especially coal, will continue to be an important source of power generation. As per a recent report by the Oxford Institute for Energy Studies, coal-based power accounted for a major share of 42 per cent (or 25 GW) in capacity addition during 2010-15. The region’s total coal-based power capacity is estimated at over 62 GW as of end-2015.
As per the IEA, ASEAN’s installed coal-based capacity is forecast to increase by nearly 150 per cent from the 2013 level to 163 GW by 2035. The World Coal Association (WCA) projects that coal would overtake natural gas by 2030 to become the largest source of power capacity as natural gas will be affected by the removal of subsidies, price volatility and international competition leading to relatively high cost of generation. In such a scenario, it is imperative for SEA countries to consider clean coal technologies such as pollution control, high efficiency low emission (HELE), and carbon capture and sequestration (CCS).
According to the IEA’s “Energy and Air Pollution” report, the SOx, NOx and particulate matter levels in ASEAN can nearly double by 2040, based on the current pipeline of coal-based power projects under construction. Therefore, policymakers need to notify stringent standards for pollutants emitted from coal plants while generation companies need to invest in pollution control equipment such as flue gas desulphurisation units.
Besides, HELE technologies such as supercritical and ultra supercritical are making inroads into the ASEAN power sector. As per the WCA’s recent report titled “ASEAN’S Energy Equation”, subcritical technologies represented more than 90 per cent of installed capacity and 70 per cent of coal capacity additions in the year 2014. However, latest research suggests that almost half of the coal stations under construction or development are expected to make use of advanced HELE technology such as supercritical and ultra supercritical. These technologies provide operational efficiencies of 37 per cent and 40 per cent respectively while subcritical technology has an efficiency of only 32 per cent. In terms of emissions, subcritical technology has an emission rate of 1.04 tonnes per MWh while emissions for super critical and ultra supercritical stand at 0.87 tonne per MWh and 0.8 tonne per MWh respectively. As per an excerpt from the report, “HELE is in line with international commitments to reduce carbon with the economic priorities of generating affordable and reliable electricity. The technology ensures that coal is part of the solution to the Paris Agreement for ASEAN.”
CCS is another significant technology for reduction of carbon in the region in the long term but it is yet to be commercialised on a large scale with only a few international installations at present. ASEAN, with its large pipeline of coal-based power projects, has an opportunity to leverage CCS opportunities in the future.
Focus on energy efficiency and nuclear energy
Amidst increasing energy demand, energy efficiency – the active implementation of energy saving measures by house holds, industries, commercial establishments, etc. – has emerged as a vital strategy for reducing demand. In the past few years, SEA countries have taken steps to implement programmes and policies to save energy in various sectors like residential, commercial and transport. The ASEAN Plan of Action for Energy Cooperation [APAEC] 2010-15 had set a target of reducing energy intensity by 8.5 per cent for 2015 but the target was achieved in 2013 itself (2005 level as baseline).
As per the APAEC 2016-20, the SEA region has a goal of reducing energy intensity by 20 per cent by 2020 and 30 per cent by 2025. To achieve this target, the ASEAN Centre for Energy (ACE) has outlined steps to harmonise energy efficiency standards for appliances in various countries to achieve energy savings to the tune of 5-10 per cent in the residential sector. For the 2016-20 period, the ACE plans to develop a regional policy roadmap for minimum energy performance standards. Besides, it will take steps to notify draft green building codes and encourage private sector participation through the energy service company (ESCO) model.
Further, the ACE regards civilian nuclear energy as a clean source of energy that can help ASEAN meet its growing energy demand. Under its aegis, the Nuclear Energy Co-operation Sub-Sector Network was established in 2008 to direct efforts towards cooperation and to facilitate information sharing and exchange, technical assistance, networking and training on the use of nuclear energy for power generation purposes.
Challenges
Given the looming threat of climate change, ASEAN needs to accelerate the adoption of sustainable energy options; however, the road is fraught with several challenges. One of these is vulnerability of the electricity grid due to increasing share of renewables. SEA countries need to expand and strengthen their transmission and distribution networks so that they are flexible enough to withstand variations in renewable power generation. Besides, flexible thermal capacity, pumped storage plants and electricity storage solutions also need to be developed to increase grid flexibility. ASEAN’s investment needs will also expand significantly in order to meet the 23 per cent renewable energy target although the recent declining trend in the cost of renewable energy technologies like solar and wind will work in its favour. As per IRENA, the region will require a total investment of $290 billion by 2025 in renewable energy capacity, of which 75 per cent will be accounted by the power sector.
Besides, unfavourable cost economics is a key concern relating to clean coal technologies. The typical capital cost of setting up supercritical and ultra supercritical power plants stands at $1.46 billion/MW and $1.7 billion per MW vis-à-vis $1.21 billion per MW for a subcritical power plant, according to the WCA. Policymakers in SEA need to introduce policies that promote the adoption of these technologies and encourage competition in the equipment market, given the high demand for coal expected in the future. Gencos in the region should also enter into more technology transfer arrangements and partnerships with global leaders in this space.
Affordability is also an issue on the energy efficiency front. Some commercial enterprises or industries are reluctant to invest in energy conservation, as it requires a high initial investment and yields limited savings in the short term. Some enterprises may simply not have adequate financial resources for the initial investment. Therefore, it is necessary for enforcement authorities to demonstrate profitable and technically feasible energy efficiency projects, as well as to devise innovative incentive/financing mechanisms. To do so, SEA countries also need to expand the market for ESCOs that provide financing for private investments in energy efficiency.
On the nuclear power front, ASEAN countries have historically faced obstacles owing to anti-nuclear sentiments among the population, heightened safety concerns especially after Fukushima and political hesitation. Although the Philippines built ASEAN’s first nuclear power plant at Bataan in 1973 owing to the oil crisis, it never commenced commercial operations. In August 2016, the energy secretary was reported to have reconsidered commissioning of the stalled project but the government is yet to establish a clear position in this regard. Vietnam’s plans to construct nuclear power plants have been reportedly delayed from 2016 to 2022 and are even expected to be shelved owing to disagreements in the government. Similarly, there has been little action to realise the nuclear power ambitions of Thailand, Indonesia, Malaysia and Myanmar so far.
