Renewable Energy in ASEAN: Outlook and Challenges
The rapid economic growth of ASEAN countries gave rise to the need for sustainable and environmentally friendly energy solutions. ASEAN member states have set an ambitious target of securing 23 percent of its primary energy from renewable sources by 2025 as energy demand in the region is expected to grow by 50 percent in the coming decades. According to the International Energy Agency (IEA), energy consumption in Southeast Asia is expected to reach nearly 1200 Mtoe by 2050. Renewable energy (RE), is therefore among the region’s fastest growing sectors.
Primary Energy Demand in Southeast Asia, 2018-2040
Thailand has been a frontrunner in ASEAN in promoting alternative energy development via government policies and investment incentives. Thailand’s solar capacity makes up 60% of the total installed capacity for ASEAN, while the country also has the largest share of bioenergy compared to all ASEAN states for industrial and transportation purposes. In early 2019, the Thai government approved the Power Development Plan (PDP) and Alternative Energy Development Plan (AEDP). Under the AEDP, RE in Thailand is projected to be 30% of the total energy production by 2037, increasing from the current 14.5%. Under the AEDP 2018, the proposed installed capacity of solar power generation is 15.6 GW, of which it is anticipated 10 GW will originate from rooftop solar installations. Biofuels in Thailand are anticipated to take over 44 percent of oil consumption by 2021. The key success factors of Thailand’s RE policy are: (1) high and attractive RE tariffs and (2) a supportive financial sector.
Indonesia’s National Energy Policy (NEP) has set the New and Renewable Energy (NRE) target to a minimum of 23 percent in 2025 and 31 percent in 2050. At present, the installed capacity of RE in Indonesia is approximately 9.86 GW, with RE in Indonesia originating from hydro (57 percent), Geothermal (22 percent) and bioenergy (19 percent) and others (2 percent). The deployment of RE in Indonesia has been slowing down in the last few years. Indonesia’s latest Electricity Supply Business Plan has shown preferences for fossil power plants over RE despite the declining prices of RE and the needs to meet the NEP target. The trend over the last three years shows that the PLN (Indonesia’s state electricity company) has only added an average of 250 to 350 MW of RE per year. To achieve the NEP targets, the Indonesian government must improve the investor confidence through by improving its regulatory framework and planning. A feed-in tariff (FiT) is set to be issued in 2020, but is likely to be delayed due to the COVID-19 pandemic. The level of FiT imposed on the regulation is crucial in determining the renewable investment climate in the near term.
In 2018, Malaysia announced a target of 20 percent RE in its generation mix by 2025. At present, the country is primarily powered by energy from non-RE sources, and recorded only 6.7 percent contribution by RE to its generation mix. The recent introduction of Net Energy Metering (NEM) program for solar PV, has received a positive response. Under the NEM program, solar energy will be first consumed and the excess delivered to national utility company Tenaga Nasional on a one-on-one offset basis. The Sustainable Energy Development Authority (SEDA) has introduced competitive bidding for small hydropower and bio-power technologies. In 2019, the government introduced e-bidding for small hydropower systems. With a series of measures taken by the government to increase collaboration with the private sector, Malaysia could secure more investments from private players in the RE sector, which could ultimately propel the country towards achieving its 2025 target.
Being a small, resource constrained country, Singapore has limited RE options. Singapore’s high average annual solar irradiation of about 1500 kWh/m2 makes solar photovoltaic (PV) one of the most feasible RE option for the country. However, Singapore has limited available land for the large scale deployment of solar panels and the presence of high cloud cover and urban shading poses challenges such as intermittency. To maximize the effectiveness of solar PV within the country, the government has launched initiatives to install solar panels on rooftops of high-rise public housing developments and water surfaces of reservoirs. In 2020, Singapore has met the 350 megawatt-peak (MWp) solar power target that it has laid out in the Sustainable Singapore Blueprint 2015. Recently, the Singapore government has announced plans to increase the current 260 MWp of installed solar capacity to 2 gigawatt-peak (GWp) by 2030. To achieve the new target, the government plans to continue the deployment of solar panels on the roof tops of public housing buildings and public sector buildings.
In Vietnam, hydroelectric currently accounts for the largest share amongst all RE sources, followed by wind and biomass. Despite the rise in investment within the RE sector, investors are facing numerous challenges such as lack of capital/funding, low tariffs coupled with high investment costs in newer technologies, lack of qualified human resources and underdeveloped supporting industries. With high capital requirements in the energy related projects, the government has allowed 100 percent foreign ownership of Vietnamese companies within the sector. Low feed-in-tariffs (FiTs) have deterred foreign investors due to large investment costs. To hasten the adoption of RE technologies, the government should support and promote domestic SMEs through capital subsidies and incentives such as tax breaks and preferential loans. A competitive supporting industry will help in reducing investment costs for renewable projects.
In Brunei, the Energy White Paper is currently the only document published regarding renewable energy (RE) policy. The target for electricity generation from RE sources is set at ten percent of the energy mix by 2035. Over the past five years, the utilization of RE within the country is still very limited due to the oil and gas focus in the Brunei’s national development plan. Most of the current RE installed capacity in Brunei comes from the Tenaga Suria Brunei Photovoltaic Power Generation Demonstration Project (TSB Project). RE implementation is in early stages in the country, the implementation of the TSB solar power plant represents a first step towards a cleaner energy future.
According to the Renewable Energy Management Bureau, the RE targets of the Philippines for 2011- 2030 are separated into three periods. The target is 1088 MW for 2011-2015, 5096 MW for 2016-2020 and 3746.8 MW for 2021-2030. At present, RE in Philippines is sourced from hydro (45 percent), geothermal (29 percent), solar (14 percent), wind (6 percent) and bioenergy (6 percent). From the installed RE capacity of 6.7 GW in 2019, at least 323 MW of installed capacity must be added annually to reach the 2030 target. The Renewable Energy Act of 2008 is the foundation of RE policies in Philippines. With its enactment, incentives for RE projects were provided, which includes tax benefits, FiTs and others.
The Myanmar Energy Master Plan, published in January 2016, makes projections of the long-term energy demand and fuel supply mix up to the year 2030. Recently, the Ministry of Electricity and Energy has introduced ambitious targets to increase the share of RE in electricity production to eight percent by 2021 and to 12 percent by 2025. Although Myanmar has potential solar resource at 27 GW, very little of this potential has been realized to date. Currently, Myanmar only has one utility-scale solar power project that has reached full commercial operation- the 170 MW Minbu Solar Power Plant. Large scale hydroelectric projects are considered state-controlled assets, but may involve participation from the private sector. There are a number of private investor driven hydroelectric projects in the pipeline, with the largest being the proposed 670 MW Shweli 3 Hydropower Project.
The RE Development Strategy in Laos aims to increase the share of RE to 30 percent of the total energy consumption by 2025. The investment promotion law is focused on hydro generation whereby investors are given privileges such as free access to land, tax holidays and other benefits. At present, the installed capacity of RE in Laos is approximately 6.04 MW, with 99% of RE in the country originating from hydroelectricity. The total installed capacity of RE resources in Laos has increased by 83% between 2014 and 2019 with hydroelectric capacity being the largest contributor to this growth. While solar installed capacity has grown tremendously by more than six times during this period, the contribution to the total installed capacity is considered negligible.
The installed RE capacity in Cambodia primarily based on hydroelectricity, with smaller fractions originating from solar and wind. At present, there is no specific RE target under a dedicated energy or RE policy. However, the RE targets for Cambodia have been indirectly in the rural electrification program which has the following targets: (1) by 2020, all villages in the country should have access to electricity and; (2) by 2030, at least 70 percent of the total households in the country should have access to quality grid electricity.
Jason Lee, Analyst