Can Red Sea attacks spur Southeast Asia’s next phase of clean energy transition?
- Southeast Asia’s green energy plans face a hard reality check – absorbing and distributing renewable energy through their largely legacy power grids
- Declining costs mean renewable systems can better serve the region’s far-flung communities, but moving to the next phase of energy transition requires more money and muscle
Global annual renewable capacity additions increased by almost 50 per cent last year – the fastest growth in two decades – yet clean energy accounts for less than 10 per cent of energy production in most Southeast Asian nations.
But their intentions are facing a hard reality check – absorbing and distributing renewable energy through their largely legacy power grids.
Unlike fossil fuels, wind and solar power generation fluctuates through the day and different seasons, even as weather extremes are becoming common due to climate change. Therefore, smart grid systems with backup storage are vitally needed for clean energy which can be distributed in tune with the needs of consumers.
While developing renewable energy capacity can be considered as the first phase of moving towards green transition, developing such a flexible grid system to provide a bridge to consumers is a crucial second phase.
Home to around 9 per cent of the world’s population and a major engine of economic growth, the region’s energy demand growth outpaces the global average, translating into the largest absolute growth of carbon dioxide emissions of any region, the IEA says.
Many of the nations have to balance carbon transition objectives with the growing demand for power to meet economic and social goals, but the good news is that declining costs mean renewable systems can better serve the region’s far-flung communities.
But moving to the next phase of energy transition requires more money and muscle.
“Asia is still a little bit of a laggard because a lot of the countries are still at the 1.0 stage. [But] Asia is in a very good position to move here quickly,” said Mike Lim, partner at TRIREC, a Singapore-based venture capital firm involved in decarbonisation.
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Many moving parts
Southeast Asian nations have been moving towards smart grids – with the ultimate goal of interconnectivity across the region – with the idea being that power surplus nations can supply power-hungry pockets within the region.
The response has been mixed so far.
“On the other hand, Vietnam, despite having a significant operational solar PV [photovoltaic] capacity, has not yet implemented any supportive policies for the integration of batteries into their energy infrastructure,” he said.
Putting all the parts together will probably be easier with the expertise of local companies rather than mega corporations. And given the long gestation period of projects, multilateral agencies are often the best bet for funding such small developers.
However, obtaining funds can take months of scrutiny because taxpayers’ money is involved and there is a lack of clear plans by local players. But the IEA and the International Finance Corporation say annual investments in clean energy in emerging markets will need to triple to US$2.2 trillion-US$2.8 trillion annually from the early 2030s.
Both the hubs have seen a burst of new green financial instruments in recent months, so crossing the line should be achievable. The United Nations says the Asia-Pacific region is six times more likely to be affected by natural disasters than other regions.
All hands on board are needed to reduce the region’s energy vulnerability and push it further towards clean transition.
