RISING DEMAND FOR ENERGY WITH SOCIO-ECONOMIC DEVELOPMENT AND URBANISATION

Energy consumption in Southeast Asia nearly doubled between 1995 and 2015, growing at an average pace of 3.4% annually. This has fuelled economic growth and permitted higher living standards. Over the past decade, the most rapid growth came from Brunei Darussalam, Cambodia and Viet Nam. In 2015, Indonesia, Malaysia, Thailand, and Viet Nam accounted for most of the region’s total final energy consumption (TFEC). That year, the industry, transport and residential sectors accounted for roughly similar shares of region-wide energy consumption, although differences emerge at the sub-regional level (Figure ES.1). Industry was the largest consumer, with shares of the total consumption ranging from around 12% in Myanmar to nearly 40% in Viet Nam.

STRENGTHENING THE CASE FOR ENERGY DIVERSIFICATION THROUGH RENEWABLES

Over the long-term, meeting growing consumption through fossil fuels alone will come at the expense of energy security, with related economic costs for both exporters and importers, in addition to damaging the environment. Energy security concerns are rising as indigenous fossil fuels are depleted or are unable to meet growing demand. With some net exporting countries already turning into net importers, ensuring the security of fuel supply for long-term energy infrastructure is a high priority for all of Southeast Asia. Meanwhile, the concerns about the environmental impact of fossil fuels, from the local to the global level, combined with the lack of modern energy services for a large proportion of the population in several countries, have contributed to the pursuit of a diversified energy mix.

GROWING DEPLOYMENT OF RENEWABLE ENERGY TECHNOLOGIES

Renewable energy sources accounted for 17% of the region’s total electricity generation in 2015. Large hydropower comprised over three quarters of the renewable generation mix, although its share in total installed capacity decreased from 80% in 2000 to 75% in 2016. Bioenergy and geothermal energy are the other major contributors (Figure ES.4), with geothermal facilities being concentrated in Indonesia and the Philippines.Non-hydropower renewables have grown rapidly as a power source, with their installed capacity more than doubling in a decade, from 6 GW in 2006 to 15 GW in 2016. Despite rapid capacity additions, solar and wind power still account for a small share of the generation mix. Electricity trade, mainly of hydropower, is increasing as interconnection infrastructure is developed for the ASEAN Power Grid initiative. Lao PDR more than quadrupled electricity exports from 2.8 terawatt-hours (TWh) in 2000 to 11.5 TWh in 2015, with Thailand as the main destination.

For industry, bioenergy is the most common renewable energy application. Other sources of direct renewable heat suitable for industrial uses are solar and geothermal. In the residential sector, bioenergy represents 69% of TFEC, although the share is decreasing as modern fuels (e.g., liquefied petroleum gas) become more available. The use of traditional bioenergy still represents a significant share of residential energy consumption, notably in Cambodia, Indonesia, Lao PDR, Myanmar and Viet Nam. The share of renewables in transport fuels is small (equivalent to 3%) and primarily comprises liquid biofuels. Indonesia, Malaysia, the Philippines and Thailand are the major markets where biofuel use has grown, mainly driven by blending mandates.Based on current plans and policies, the share of renewables in TPES would increase to just under 17% by 2025 (compared to less than 10% in 2014). Therefore, the region must overcome a six- percentage-point gap to reach its goal of 23%. This requires further efforts to develop enabling policy and investment frameworks for renewable energy.

ENABLING POLICY AND INVESTMENT FRAMEWORKS FOR ACCELERATED DEPLOYMENT

Most countries in Southeast Asia have set renewable energy targets and have adopted some form of national renewable energy policy to meet them. Indonesia, Malaysia, the Philippines, Thailand and Viet Nam are comparatively more advanced in the region in terms of policy maturity and comprehensiveness.In the power sector, policies that have catalysed deployment have focused on dedicated financing schemes to support projects; permitting and licensing mechanisms and technical standards to facilitate grid interconnection; and guaranteed purchase of renewable power at attractive tariffs. Most countries have introduced technology-specific feed-in tariffs, often combined with other deployment policies such as net metering, like Malaysia did for roof-top solar power generation.

the Philippines, Singapore, Thailand and Viet Nam. Thailand attracted the largest share of that financing, with over USD 10 billion invested, followed by Indonesia and the Philippines. Bioenergy received most of the investment in the region (32%), followed by solar PV and geothermal energy (Figure ES.6).As the renewable energy sector has grown, the capital mix and the range of financing institutions engaged has also evolved. Development finance has been crucial in backing large hydropower, geothermal and bioenergy projects, followed by rising private sector investments, supported through public-private partnership models and carbon markets. Financial actors in the sector have become more diverse in recent years, providing equity anddebt financing and setting the stage to unlock more capital through new avenues, such as green bonds and climate funds.

HARNESSING RENEWABLE ENERGY TO MEET MULTIPLE SUSTAINABLE DEVELOPMENT GOALS

The value of renewable energy goes well beyond providing energy services. The deployment of renewables to meet the Sustainable Development Goals (SDGs) set by the United Nations would transform the global energy system. However, fulfilling SDG 7 (on energy) would also help countries meet other key goals, including the SDGs on poverty alleviation, health, water, nutrition, cities and climate. This holds true both in terms of expanding energy access and in other contexts.As several projects and programmes in the region have demonstrated, decentralised renewable energy solutions, such as micro-hydro and biogas plants based on local entrepreneurship and strong community participation, can greatly improve access to modern energy services. Such solutions in turn bring about substantial economic, social, health and environmental benefits, which contribute to several of the SDGs. In the non-access context, the role of renewable energy in supporting climate mitigation and adaptation, sustainable cities and communities, decent work and economic growth, among other SDGs, cannot be overstated.Maximising the benefits of renewable energy technologies requires a holistic view. This means considering the impact of renewables both within and beyond the energy sector.

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