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Southeast Asia: Poised for an energy revolution

Publication Date : 29-10-2012


The world's energy system has bestowed great benefits on society, but it has also come with an expensive price tag: Climate change due to human activities that led to the build-up of carbon dioxide and other greenhouse gases in the atmosphere.

The evidence of climate change is solid and humanity faces an increasing peril if we don't move decisively in the coming years from an economy based on fossil-fuels towards one that is based on cutting-edge renewable energy (RE) technologies.

The impressive economic growth of Southeast Asia despite global financial turbulence is unfortunately tied to increasing regional greenhouse gas emissions and air pollution due to fossil fuel burning.

Yet in recent years, Southeast Asia, particularly the Association of Southeast Asian Nations (Asean), has begun working more closely to foster RE development in the region. The main drivers for this apparent shift are the continuously rising costs of fossil fuel imports, environmental and health impacts of fossil fuel use and the devastating impacts of climate change.

Considerable effort has been put by countries in the region into setting RE targets with supportive policy frameworks that attract private sector investment. Six of the ten Asean countries (Malaysia, Singapore, Vietnam, Philippine, Thailand and Indonesia) have adopted medium and long-term targets for renewable energy, with some countries embracing carbon reduction targets. While targets are more ambitious in some countries than in others, they serve as important catalysts for increasing the share of renewable energy in the region.

Electricity from renewable sources in the Asean region, particularly in Indonesia, Thailand, the Philippines, Malaysia, Vietnam and Singapore, varies by technology as well as the installed capacity. But renewables-based power production in these key Asean economies is comparable at 15 per cent in 2007 to Organisation for Economic Cooperation and Development countries.

Solar and wind power are currently experiencing a boom in the Asean. Solar PV applications are now present in nine countries. The same goes for wind. In some countries however, such as the Philippines and Vietnam, the contribution of wind to installed capacity is more than that of solar PV.

Price support systems such as the feed-in tariff (FIT) have also been introduced. FITs are price-driven policies that are designed to support renewable electricity wherein electricity generated from renewable energy sources is paid a premium price for delivery to the grid.

As early as 2007, the premium model of FITs, or generally called "adder", was introduced in Thailand. Malaysia followed suit in mid-2011 when it presented its own version to catalyse RE generation.

While Indonesia has FIT for micro-hydro since 2010, it also only released its FIT rates for geothermal in July and is further setting its sights on releasing FITs for solar PV and wind in 2013. The Philippines meanwhile finally announced feed-in tariffs in July 2012.

However, there are still barriers to renewable energy development. Because the deployment of modern renewable energy technologies is quite recent in most Asean countries, RE development initiatives have focused primarily on the reduction or removal of economic barriers.

However, non-economic barriers—such as administrative, market, technical, financing and socio-cultural barriers—play an equally important role is shaping the cost of renewable energy projects but are often more difficult to address. This is because non-economic barriers are less obvious and often times linked to risks perceived by RE project investors and not by governments.

In Indonesia, one of the most detrimental market barriers perceived by industry stakeholders is the lack of transparency regarding subsidies for, and the full costs of electricity from, fossil fuels.

Since electricity and fossil fuel use is heavily subsidised in Indonesia, it does not allow for a level playing field for RE, making it appear to be an expensive choice in the eyes of the public. This unfair market distortion has led to a general negative perception of renewable energy and presents a strong obstacle for further development of renewable energy technologies.

And then there are socio-cultural barriers that arise from cultural perceptions of a certain population. There is a general lack of environmental consciousness across Asean countries. This is not surprising because a significant percentage of Asean populations live below national poverty lines. Information regarding the available and most appropriate RE technologies and the resultant benefits for income generation and improved quality of life are sorely lacking.

There are also land tenure issues that are linked to project developments in protected forest areas or land tenured to ethnic minorities. While considered to be less significant by industry stakeholders, strong public support and resulting demand for renewables nevertheless has the ability to trigger political decisions and act as a strong driver for RE development. The absence of these drivers could result in apathy, disinterest or mistrust in renewables.

For Asean countries to transition towards increased market integration of RE, policy makers need to reduce barriers and put focus on policy design and implementation. Distortionary subsides which unfairly favour fossil fuels must be removed so that renewable energy technologies can compete on a balanced playing field. It is also important to take into consideration the external benefits and true costs of all energy technologies, so that the so-called "cheapness" of coal will be exposed and the supposed "expensiveness" of RE debunked. To advance electrification and socio economic objectives, the off-grid applications of renewable energy must be made part of national governments' priority programs. Lastly, RE policies must complement climate change policies.

Despite these overwhelming set of obstacles, investment in new renewable energy capacity in the region is more encouraging than annual global growth rates. The year 2008 saw a sluggish annual global growth rate of 13-per cent for new renewable capacity compared to the global average annual growth of 60% in 2004-2007. This slowdown was mainly due to the financial crisis that hit the power sector from the second half of 2008 onwards.

However, the trend in Southeast Asia since 2004 is impressive with investment in renewable power generation assets amounting to US$ 1.2 billion in 2008. In fact, the World Bank's opinion is that the activities in some of the countries to foster low-carbon technologies in support of their respective renewable energy and energy efficiency policy frameworks is expected to catalyse almost $ 10 billion in co-financing from national governments, multilateral development banks, carbon finance and the private sector (IEA 2010 p 78).

It might be imperceptible to some, but big things are definitely happening in Asean's renewable energy development. But don't take my word for it, look around and see because you won't hear the Energy Revolution being announced on radio. The bright future for renewable energy is already silently underway.

Amalie Conchelle H Obusan is a regional climate and energy campaigner.


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