The Southeast Asia region will see rapid economic growth averaging 4.6% annually in the coming decades. In turn, energy use will grow rapidly. Today’s energy supply is dominated by fossil fuels, which make up over 85% of primary energy. Southeast Asia stands at a crossroads. Either it can continue its reliance on fossil fuels – more of which are coming from non-indigenous sources, thereby increasing exposure to volatile, and increasingly expensive, global commodity markets – or the region can utilise the ample, affordable and indigenous local renewable energy resource in an energy transition pathway. The International Renewable Energy Agency has release a report titled, “Renewable Energy Outlook for Asean: Towards a Regional Energy Transition”. REGlobal provides a brief extract of the report covering the roadmap; minigrid, bioenergy and hydrogen technologies; and the investment needs going forward…
Roadmap
Total final consumption in Southeast Asia is expected to grow 2.5 times in the Planned Energy Scenario (PES) from 2018 to 2050. With electrification across all sectors and energy efficiency measures, the final consumption will grow more-slow to 2.3 and 2.1 times in the Transforming Energy Scenario (TES) and 1.5-S (1.5°C Scenario for ASEAN aligned with the WETO targeting net-zero emissions globally by 2050).
Electricity demand in the region is expected to grow on average 4.1%, 4.7% and 5.0% in the PES, TES and 1.5-S, respectively. The additional demand growth is mainly driven by EVs in the transport sector, where almost 80% of the total road fleet by 2050 will be EVs. Hydrogen will also have a growing importance, especially in the industry and non-energy sector within the region, with a lesser role in transport, accounting for 3.7% of total final consumption by 2050 in the 1.5-S. Bioenergy use will also triple from 2018 to 2050 across all scenarios, with a slightly higher share in the 1.5-S (19%) to meet more ambitious biofuel blending rate targets, and increased use in the industrial sector. A breakdown of measures across each sector for each of the scenarios is provided in the following sections.
Total renewable energy installed capacity grows substantially, reaching 62%, 77% and 82% in the BES, PES and TES, respectively, by 2050 from 27% in 2018, with variable renewable energy (VRE; mostly PV) accounting for one-half to nearly three-quarters of this renewable capacity. The two 1.5-S cases see VRE installed capacity grow to become between 80% and 90% of total installed capacity by 2050, with total renewable energy installed capacity in both the 1.5-S cases reaching above 90%. The non-renewable installed capacity will still be present in the form of natural gas, together accounting for 12%, 13% and 9% in the BES, PES and TES. The 1.5-S RE90 (sensitivity for the power sector with 90% renewable power generation) case sees an 8% share of these technologies in the system, while it is 0% in the 1.5-S RE100 (sensitivity for the power sector with 100% renewable power generation).
Electricity generation in 2050 will be dominated by renewable energy in all the scenarios except the BES, from 60% in the PES to 100% in the 1.5-S RE100. The TES will see three-quarters of ASEAN’s electricity generation produced by VRE sources, and this value reaches almost 80% in the 1.5-S RE100. Achieving all these generation mixes will require significant expansion of the power system, and most will need a transformation in system operation to integrate an increasingly variable supply and demand by making and valuing flexibility as a cornerstone of system operation.
ASEAN’s total energy sector emissions in 2018 were 1 434 MtCO2eq, with power, transport and industry the most emitting sectors. Voluntary mitigation targets towards short-term emission reductions have been announced by several ASEAN Member States (AMS).
In the PES, emissions are expected to rise, reaching 1.5 times their 2018 value, at a rate of 3.4% annually until 2030, before slowing down to 1.3% annually towards mid-century. ASEAN’s energy sector emissions in 2050 will be about double 2018’s value under the current policy (PES). As hard-to-decarbonise sectors, industry and transport emissions grow the fastest at average rates of 3.5% and 2.4%, respectively, over 30 years. The industry sector increases its emission share from 17% in 2018 to 27% in 2050. ASEAN’s aspirational target to increase renewables’ share of capacity to 23% by 2025 will result in the power sector’s emissions growing at a slower rate of around 1% annually and reducing its total emissions share from 43% in 2018 to less than one-third of total energy sector emissions by mid-century.
After 2030, when the established energy targets in the 1.5-S have been met and the investments in end-use technology have been made, gains in emission reductions can be expected. Emissions in 2050 may be reduced by more than one-half and three-quarters in the TES and 1.5-S, respectively, over the PES. The power sector provides the largest emission reduction gains, remaining at only about 15 MtCO2eq in the 1.5-S by 2050, coupled with the rapid deployment of renewable energy, in particular solar PV and battery storage, to curb the use of fossil fuel power plants.
The transport sector will account for half of the region’s remaining emissions in the 1.5-S, followed by industry, emitting 28% of the total energy sector’s emission by mid-century. Despite an increasing share, both of the sectors’ emissions will reach 16% and 19% below today’s level by 2050, driven by massive development of EVs, electrification of industrial activities, use of bioenergy and direct use of renewables, as well as the transition towards energy efficient technologies. The remaining emissions come from fossil fuel consumption in the heavy-duty transport sector – mainly large trucks and high-temperature industry processes.
The end-use demand sectors, which include buildings, industry and transport, are the key drivers for energy demand growth in ASEAN. ASEAN’s energy demand will grow 3% annually, reaching over 2.8 times today’s value in the PES by 2050. Energy efficiency, fuel switching and electrification in the 1.5-S will slow down energy demand growth by around 20% compared to the PES, yet growth even in the 1.5-S will be significant and require energy sources that are zero carbon.
Electricity dominates end-use energy consumption in both the TES and the 1.5-S. Industry will be the major consumer of end-use sectors’ energy demand in all the scenarios, followed by transport. The building sector’s energy demand will grow overall but will reduce demand in the 1.5-S by 27% over the PES in 2050 due largely to electrification and energy efficiency improvements.
Energy solutions for Islands in the southeast Asian region: minigrids and stand-alone energy systems
Southeast Asia is a vast region that consists of mainland Southeast Asia and a string of archipelagos to the south and east of the mainland, also known as insular Southeast Asia. The archipelagic geography of the insular Southeast Asia region comprises many remote and small island communities, and the smallest and most remote remain without access to electricity or are electrified mainly by diesel generators.
Rural electrification through the extension of the existing electricity grid infrastructure to these remote locations is often unviable – leaving mini-grids and stand-alone energy systems, especially those incorporating renewable energy, as an ideal solution. The archipelagic nature of the ASEAN region makes providing electricity in many isolated islands and remote communities a challenge. Diesel mini-grids are mainly used to provide limited electricity supply in these areas. This entails covering the high cost of delivering these services as well.
To accelerate the deployment of renewables for off-grid electrification, a holistic energy access strategy must be backed by dedicated policies and regulations designed for decentralised renewable energy solutions. A stable regulatory framework is necessary to attract private investment in all areas of the sector where public funding falls short. The framework must be aligned with the objective of universal energy access (That isleaving no one behind) and provide adequate guidance and incentives to reach the very last household, firm or public facility through the most optimum solution, and to ensure permanence of supply through both default and last-resort providers (GCEEP, 2020).
Sustainable bioenergy potential and availability in southeast Asia
According to the World Energy Transition Outlook (WETO), bioenergy today makes up over 50% of renewable energy use. Achieving the net-zero goal will not be possible with renewable electricity and energy efficiency alone. Bioenergy would represent 25% of TPES by 2050 in IRENA’s 1.5°C Scenario. That would require just over 150 EJ of biomass primary supply, or around a threefold increase over 2019 levels – a challenging scale-up effort.
In ASEAN the scale-up is similar. In absolute terms, the increase will be from around 2.7 EJ (primary) to 7.6 EJ by 2050 in the 1.5-S. In 2018, around 14% of final energy came from bioenergy sources, with a little under half from traditional sources of bioenergy. By 2050 in the 1.5-S, the share will increase to 19%, with all traditional uses of bioenergy replaced with modern bioenergy. However, due to an increase in overall energy demand, total consumption will triple.
The supply of biomass feedstocks will need to expand if it is to meet the need for its use as energy. Global and regional estimates suggest, however, that biomass could reach the needed resource levels through a prudent and sustainable expansion in bioenergy. This expansion can be achieved with policies that promote a wider use of biomass sources, coupled with strong, evidence-based sustainability governance procedures and regulations.
In the ASEAN region, all renewable energy sources have a role to play in the energy transition. However, when it comes to the potential for sustainable bioenergy to serve Southeast Asia’s energy demand, a recent study from IRENA identified 13 sustainable bioenergy pathways that will enable bioenergy to compete economically with fossil fuels in the region’s energy markets (IRENA, 2022e).
The analysis demonstrates an abundance of untapped bioenergy in Southeast Asia, with at least 7.1 EJ of selected feedstock per year by 2050 in the five countries studied. It also identifies immediate opportunities for adopting bioenergy in Southeast Asia’s energy markets, demonstrating the potential for the selected sustainable biomass to economically meet 2.8 EJ of the energy demand.
The economic costs and benefits of an energy market transition to sustainable biomass were appraised for the 13 potential pathways, revealing potential benefits of USD 144 billion of net present value of socio-economic benefits in 2050, creating over 452 000 new resilient jobs and saving around 442 MtCO2eq of GHG emissions per year.
Sustainable bioenergy pathways must link demand in energy markets with secure bioenergy supplies. There are four key market “push and pull” factors that decision makers must consider in this regard: availability, sustainability, accessibility and market. The high productivity of Southeast Asia’s agriculture sector generates considerable volumes of under-utilised residues.
Private financiers of renewable energy projects often cite security of bioenergy supply as one of the biggest obstacles to investing in bioenergy projects. Various factors determine the total available volumes of bioenergy, including biomass scalability and seasonality. One way that governments can mitigate the seasonality of biomass outputs is by forming a central collection agency to map the collection of residuals from various agricultural practices and crops throughout the year and distribute them systematically according to demand.
Hydrogen uses in ASEAN
In the PES, zero-carbon hydrogen demand sees limited use within the region. In the 1.5-S case, zero-carbon hydrogen demand is expected to grow significantly to 1.5 EJ or 11 Mt by 2050. Zero-carbon hydrogen is either considered green, produced from electrolysis using carbon-free electricity, or blue, produced generally from natural gas utilising CCS to capture the significant CO2 emissions produced during production. IRENA’s study on global hydrogen trade to meet the 1.5°c climate goal (IRENA, 2022g) discusses in more detail the economics and green hydrogen production in the future.
Hydrogen can be used directly, or it can be used as a feedstock used to produce derivates. Overall, most of the use of the fuel is expected to be in the industry sector – for example, in the production of iron and steel – and also as feedstock for the production of ammonia and methanol, which are key fuels required to decarbonise international shipping. The majority of the demand is expected to come from Indonesia, Malaysia, Thailand and Viet Nam, where there will be a stronger base for hydrogen production.
In the 1.5-S case, the expectation is that two-thirds of the hydrogen demand will be green hydrogen sourced from renewable electricity from 2030 onwards. The additional electricity demand in the sector is expected to be 40 TWh in 2030 and 340 TWh in 2050. However, the ASEAN region as a whole has further technical potential to become a hydrogen hub. It is estimated that between 6 EJ and 60 EJ of low-cost green hydrogen (less than USD 2/kilogramme [kg]), can be produced in the region (IRENA, 2022g).
Investment needs
A substantial increase in investments is required to accelerate the energy transition in ASEAN. Policy support for energy sectors and co-operation among the ASEAN countries are crucial to enable the reallocation of capital towards sustainable solutions and to ensure active participation from a wide range of investors.
In the shorter term up to 2030, some crucial energy transition technologies will see significant investment. Solar PV is a good example, as it will be key to the region’s short-term energy transition. The additional 240 GW of installed capacity will need investment of around USD 150 billion. Investment related to the development of EVs will also play an important role in the overall energy transition effort in the region. Electric chargers are crucial, with the installation of nearly 4 million units necessary by 2030, requiring nearly USD 50 billion. Investments in enabling infrastructure will also be crucial, as planning process and construction take time. Around USD 105 billion needs to be invested in international and domestic transmission, with another USD 69 billion needed in local distribution.
In the long term, an average annual investment of USD 210 billion would be needed up to 2050 in the region to achieve the 1.5-S. This is more than two and a half times the required investment in the PES during the same time horizon. If the region pushes further for 1.5-S RE100, an average investment over the period would need to total USD 230 billion per year.
Many technologies in the 1.5-S have higher upfront investments but are critical mainly to enable the accelerated deployment of key renewable energy technologies in the power sector or to scale up the electrification of transport, buildings and industries as well as green hydrogen projects. The total required investment in the 1.5-S case out to 2050 is sizable, equal to over double the total region’s GDP in 2018 and about 60% of 2050 values. However, it is spread out over multiple decades, and on an annual basis it is only around 2-7% of ASEAN’s GDP, depending on the year.
On a sector level, investment in the building sector is mostly related to energy efficiency improvement measures. This includes a wide range of renewable and energy efficiency technologies, including light emitting diode (LED) lamps, more efficient appliances and the development of low energy buildings. The building sector will account for 10% of the region’s total energy transition investment until 2050, requiring an annual investment of USD 21 billion.
The transport sector will see higher investment needs, including USD 14 billion annually for EV chargers. The construction of EV charging infrastructure takes up over half of total transport investment. This investment is front-loaded. It needs to grow 60% annually in the short-term heading into the 2030s and then will decline to 8% annually in the latter two decades as we near 2050. Additionally, and initially, there will be an incremental cost of EVs. The energy efficiency investment in the transport sector in ASEAN will require USD 13 billion annually until 2050 under the 1.5-S. Investments in biofuel supply will need to average USD 7-8 billion per year under the 1.5-S up to 2050, which is roughly double what would be invested under the PES.
The industry sector will need to invest over USD 500 billion until 2050 under the 1.5-S, over double the PES level or equal to USD 9 billion in additional annual investment. Industry investment will need to focus on energy efficiency, including best available technologies, practices and processes, as well as circular economy and renewable-based generation technologies.
The power sector will require the largest investment. Investment in generating capacity, grids and storage, and other flexibility measures generally make up around two-thirds of energy system investment in the transition scenarios. In the PES, total investments will reach nearly USD 1 780 billion 2050, with the majority of these investments being in solar PV, coal (including both abated and unabated) and hydro. In the TES, 1.5-S and 1.5-S RE100, however, investment is considerably higher at nearly USD 2 900 billion, USD 4 050 billion and USD 5 120 billion, respectively. Generally, capacity investments make up around two-thirds of power sector investment, with the remaining one-third going into grids, infrastructure, storage and other enabling technologies.
The full report can be read here
