How to power a bright future for Asean

Philip Andrews-Speed and Harsh Vijay Singh / Khmer Times No Comments Share:
Electricity is not just a luxury, but a vital input to improved livelihoods, including standards of living, health and education. KT/Chor Sokunthea

After many years of being a net exporter of fossil fuels, Asean has steadily become a net importer of fossil fuels. This import dependence will place an increasing fiscal burden on member states. Because of this, Philip Andrews-Speed and Harsh Vijay Singh write a common regional vision is urgently needed in the sharing of best practices in areas such as energy efficiency, faster deployment of innovative technologies and solutions, and integration of renewable energy sources.

The Asean region is undergoing a phase of sustained economic growth and human development, notwithstanding the current trade wars and currency fluctuation. Urbanization and industrialization will lead to greater per capita material consumption of all types, including energy.

The International Energy Agency (IEA) forecasts that primary energy demand in the Asean region will increase by more than two thirds by 2040. As a consequence, the region will face several simultaneous challenges relating to energy security, investment, energy access and environmental sustainability. Success in addressing these challenges will be more easily achieved if member states work together with a shared vision and a long term roadmap.

The region is expected to consume significantly more oil and natural gas to meet its growing energy demand, according to forecasts. With gradual depletion of domestic reserves, this continuing dependence on fossil fuels raises energy security concerns for the region. After many years of being a net exporter of fossil fuels, Asean has steadily become a net importer of fossil fuels. This import dependence will place an increasing fiscal burden on member states.

The electricity demand in the Asean region is projected to grow by 250 percent by 2040, which is much faster than the increase in primary energy demand. Rising demand for electricity will require significant expansion of power generation and transmission infrastructure. In 2016, the IEA estimated that around $2.5 trillion of investment would be needed to supply Asean’s projected energy needs between then and 2040. About half of this is for the power sector, and the balance would be shared between fuel supply and energy efficiency.

However, the amount of FDI into Asean’s energy sector has been relatively low recently due to the paucity of attractive oil and gas prospects, the low level of domestic prices for gas and electricity, and the diverse range of regulatory obstacles.

Human development requires not just more energy for each nation, but increased availability and affordability for the entire population. Electricity is not just a luxury, but a vital input to improved livelihoods, including standards of living, health and education. However, at least 50 million people across Asean lack access to electricity, and an equivalent number receive a very unreliable supply. As many as 200 million rely on traditional biomass for cooking, a practice that is harmful to health and wasteful of labour, in the gathering of the fuel.

The final challenge relates to the environment. Asean member states must find ways to supply the required energy in a sustainable manner, minimising pollution of all types: air pollution, greenhouse gases, freshwater, groundwater and land. Within Asean, the risks posed by coal combustion and the development of biofuels are particularly prominent.

Meeting the challenges described above for an effective energy transition in Asean requires the mobilisation of cross-disciplinary expertise and resources, and a multi-stakeholder consensus over the destination of energy transition and the regional priorities therein. Planning for energy transition requires a transparent assessment of the current situation, clarity over the long-term vision and a roadmap leading to the destination.

The World Economic Forum’s ‘Fostering Effective Energy Transition: A Fact-Based Framework to Support Decision-Making’ allows for country-level assessment of current energy “system performance”, as well as the “readiness” of their macroeconomic and regulatory environment for an effective energy transition.

The relative benchmarking of Asean member states with major economies indicates opportunities for improvements in energy security and environmental sustainability, as well as in creating an enabling environment for effective energy transition by improving investment climates, fostering innovation and investing in human capital for new energy systems.

Asean member states are hugely diverse in many respects: physical geography; size and population; scale and nature of energy resource endowment; size and structure of the economy; per capita GDP; and political and economic systems. Of direct relevance to the energy sector is the variability of governance arrangements for industry and the energy sector, especially the role of the private sector and market mechanisms. Likewise, the availability of relevant skills and of investment capital is very uneven.

Notwithstanding the structural and economic diversity among Asean member states, their respective challenges around energy transition can be best met through increased regional cooperation. The benefits of increased regional integration are evident by the fact that intra-Asean trade and capital flows are larger than with any other external country or region. In terms of energy, regional cooperation has been initiated through cross-border integration of power grids and natural gas pipelines. These measures should be further strengthened to connect large energy-generating sources with demand centres separated across international borders.

Increased connectivity through physical infrastructure and energy trading will address the concerns of energy security and environmental sustainability, by diversifying the resource mix, helping replace coal with the region’s abundant natural gas supply in power generation, and improving dispatchability of renewable energy sources. However, maximising these gains will require multi-lateral market-based mechanisms to trade energy across national borders.

Skills and capital are also available both within and outside Southeast Asia, but the key is to mobilise them. Given that Asean member states are at different stages in their respective energy transition journey, developing a common vision can help in the sharing of best practices in areas such as energy efficiency, faster deployment of innovative technologies and solutions, and integration of renewable energy sources.

The overarching task that will allow these complementarities to be realised is to include fully the energy sector within the framework of the Asean Economic Community. The legal, regulatory and technical barriers that not only result in varying priorities among member states, but also actively constrain potential energy collaboration, must be addressed. Developing a shared vision that optimises energy system performance in the region will need sustained political will, a suitable investment environment and appropriate institutional frameworks that support cross-border integration of physical infrastructure and energy markets.

Philip Andrews-Speed, Energy Studies Institute, National University of Singapore, and Harsh Vijay Singh, Project Lead, System Initiative on Shaping the Future of Energy, World Economic Forum Geneva. This commentary first appeared in World Economic Forum on Asean.

 

 

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