How ASEAN can seize its energy opportunities

This article is brought to you thanks to the collaboration of The European Sting with the World Economic Forum./

Author: Espen Mehlum, Head, Energy Transition Intelligence and Regional Acceleration, World Economic Forum

• The ASEAN region is home some of the world’s fastest growing economies, but this growth has been driven by soaring energy demand.
• Countries now need to meet future energy demand in an affordable and secure way, while also reducing carbon emissions.
• Policy and collaboration between stakeholders will be key to enable ASEAN make a green transition and help countries reach net zero.

In a fast-evolving global landscape, ASEAN countries must seize the moment to accelerate the energy transition. This is critical to build a greener path for growth, while delivering on energy security and affordability, and meeting climate targets.

The 10 ASEAN countries are home to about 650 million people and are some of the world’s fastest-growing economies. To power this growth, the region’s energy demand has over the last two decades increased on average by around 3% a year – to become the fourth largest in the world after China, the United States and India. In Vietnam alone, electricity demand is rising by around 8% a year – and that requires a rapid expansion of capacity.

The once slow but steady worldwide energy transition is now a rocky and uncertain global energy landscape for countries and companies to operate within. The global economic contraction in 2020 prompted by COVID-19 led to a reduction in global energy demand, carbon emissions and investments at an unprecedented scale, followed by an equally strong bounce in energy demand and emissions a year later.

The war in Ukraine then tipped a tight energy market situation into a truly global energy crisis that impacted ASEAN countries through higher energy costs, supply chain bottlenecks and energy security concerns.

These circumstances made evident the need to build stronger resilience to shocks and accelerate energy transition. Meanwhile, the need to tackle and adapt to climate change is becoming increasingly acute – both globally and locally. Nine out of 10 ASEAN countries have set net zero targets and many are among those most vulnerable to climate change.

Challenges of ASEAN energy transition

To meet future energy demand in an affordable and secure manner while reducing emissions, the challenge countries face is how to cut the energy intensity of economic growth and the carbon intensity of energy consumption and production. This is not easy, but it is possible.

Improving energy intensity means using less energy for every unit of economic output, and such higher energy productivity can be achieved in different ways, including promoting greater energy efficiency and building digital solutions such as smart grids into the energy system.

Electrification of industry and transportation is another way to gain efficiency and reduce emissions. Demand for electric vehicles (EVs) is booming globally, with sales expected to leap 35% this year after a record-breaking 2022. As the global car industry is investing heavily in e-mobility and competition increases, more affordable car and motorbike models will come to market.

ASEAN countries must incentivize and invest in e-mobility. Breakthroughs such as the CATL’s sodium-ion battery technology can pave the way for further advances in e-mobility and energy storage. Fast growth is possible: there was a 2022 electromobility boom in India, Thailand and Indonesia, where EV sales more than tripled relative to 2021.

Carbon intensity – the amount of emissions per unit of energy produced and consumed – can also be improved. Scaling renewable energy can be highly cost-effective and improve both energy security and affordability. Moreover, the ability to buy sufficient clean power can also be an important differentiator for ASEAN countries to attract investments from global companies already committed to net zero and looking to green their value chains.

Progress is being made. For instance, ASEAN’s Plan of Action for Energy Cooperation 2016-2025 includes targets of achieving 23% renewables share in total energy supply by 2025. Vietnam is among the fastest movers having achieved a milestone of 16.5GW of installed renewables capacity in 2020 and now needs more investments in grids to be able to further grow renewables at similar pace.

Vietnam and Indonesia have also pioneered just energy transition partnerships (JETPs) to replace coal with renewables. Indonesia announced at the 2022 G20 Summit in Bali plans to retire 10.1 GW of coal-fired power plants by 2030 through a JETP that should unlock $20 billion in international finance over a few years.

https://cdn.jwplayer.com/players/gy26lfu5-ncRE1zO6.html

As ASEAN countries seek new pathways to transition their energy systems and create tipping points in areas such as electromobility and scaling of renewables or clean hydrogen, there will be two key points for success – policy and collaboration.

Energy, climate or economic policy incentives will set the pace, while net zero and green growth targets can help define a clear direction of travel. These targets must then be translated into clear plans and policies that incentivize and de-risk investments. For instance, Malaysia’s National Energy Policy 2022-2040 positions energy as a key element of the country’s green growth strategy.

Policy must adapt to national circumstances. Auctions to expand renewables is one such example, while carbon pricing is another that can help reduce emissions. Some countries like Singapore have carbon pricing schemes in place, but carbon pricing is at a nascent stage in ASEAN.

Cross-border energy infrastructure needed

Collaboration among stakeholders is also key. Important synergies can be unlocked between countries at state level by developing cross-border energy infrastructure, shaping a 2025-2035 ASEAN Plan of Energy Cooperation and learning from each other.

Companies from across sectors need to collaborate and work with policymakers. The World Economic Forum’s ASEAN Energy Leaders for Just Energy Transition – a community of CEOs from companies from across the energy system – highlights how companies from across sectors can create a common vision and accelerate change by working together.

Discover

How is the World Economic Forum driving the energy transition?

The World Economic Forum’s Platform for Shaping the Future of Energy, Materials and Infrastructure works across six industries: electricity, oil and gas, mining and metals, chemicals and advanced materials, engineering and construction, and advanced energy solutions. It enables government and business to work together to accelerate the transformation of energy, materials and infrastructure systems.

• In collaboration with Accenture, the Forum is implementing a toolbox of solutions and city sprints to boost sustainability and reduce emissions in urban settings, through the Net Zero Carbon Cities programme.
• The Fostering Effective Energy Transition report summarizes insights from the Energy Transition Index in an effort to assist the world in readiness for energy transition.
• The Mobilizing Investment for Clean Energy in Emerging Economies initiative enables collaborative actions to scale clean energy finance in emerging and developing markets.

Contact us for more information on how to get involved.

And energy consumers must be included in any just and inclusive energy transition and can play a vital role by adopting more energy-efficient behaviour.

In the spirit of fostering stronger collaborations, the Malaysian government and the World Economic Forum announced the creation of a Malaysia Centre for the Fourth Industrial Revolution with a dual focus on energy transition and digital transformation.

The centre will foster public-private collaboration and innovation to benefit Malaysia’s energy transition and move the region one step further to a greener future.