The agriculture sector, comprising farming, fisheries and forestry, is a key economic sector in Southeast
Asia. It contributed to 10.5% of the region’s gross domestic product (GDP) in 2020, with the sector playing a much stronger role in economies such as Myanmar and Cambodia (Table 1). The sector is
also a significant source of employment. In Cambodia, Myanmar and Lao PDR, the sector accounts for
33%, 50% and 45% of employment, respectively (ASEAN, 2021a). Agri-commodities also play a crucial role in exports, with agricultural products accounting for the largest share of total exports in Myanmar (24%), Lao PDR (23%), Indonesia (19%) and Thailand (14%) in 2019 (ASEAN, 2020).
The agriculture sector is an important driver of socio-economic development in the region. A key
infrastructure input to enable growth in the sector is access to modern, reliable and affordable energy.
At each step of the value chain – from primary production to post-harvest processing, storage, transport
and retailing – energy helps to increase yields, enable value addition, reduce losses and improve market
access. It is also important in the face of rising climate impacts that particularly affect smallholder
farmers. Adaptation and resilience measures to facilitate resource access (e.g. water) or enhance the
adaptative capacity of farmers and agri-enterprises (such as through processing and storage) require
access to energy, among a host of other infrastructure and soft supports.
This brief analyses energy use in the agriculture sector of Southeast Asia and examines the role of
renewables in meeting growing energy needs in an inclusive and environmentally sustainable manner,
while contributing to regional and national socio-economic development objectives. It specifically focuses on meeting heating/cooling needs1 given that this end-use sector is often overlooked in conventional discussions on energy transition. The brief uses detailed case studies, as well as numerous shorter examples, to extract lessons learnt from on-the-ground experience with insights into how to finance these technologies and how to design programmes for maximum impact.
Energy use in agriculture
Growth in energy use in agriculture takes place alongside the mechanisation of on-farm activities, increase in inputs (e.g. fertilisers), and building of processing and storage infrastructure, which can enable the development of inclusive supply chains culminating in equal access to food and nutrition for all. The sector accounted for about 2% of the region’s total final energy consumption in 2019 (UNSD, 2021). Between 2009 and 2019, energy consumption in the sector grew 35% to reach over 8 million tonnes of oil equivalent (mtoe). As the agriculture sector develops, energy use is anticipated to continue to grow in line with trends seen in other regions.
At present, a significant share of the energy used in the agriculture sector in the region is fossil fuel-based. This mainly comprises oil products and electricity mainly for powering on-farm equipment
such as pumps and agro-processing equipment (Figure 1). Beyond the farm gate, energy use in the
sector can also be significant, for example for processing. In the Philippines, for instance, the food and
tobacco sector accounted for over a quarter of all energy consumed in industry, the majority of which
was biofuels and waste, followed by electricity and oil products (UNSD, 2021). Biomass is extensively
used in the agriculture sector to meet thermal energy needs, including the use of bagasse as boiler
fuel for co-generation, rice and coconut husk for crop drying, and fuelwood and residues for oven kilns (Shead, 2017). Traditional biomass continues to be extensively used for cooking. While significant
progress has been made in recent years, at least 210 million people lacked access to clean cooking
fuels and technologies in the region in 2019 (ESMAP, 2021).
Enhancing access to reliable, affordable and environmentally sustainable energy is crucial to support
the development of the agriculture sector in the region, particularly for smallholder farmers in rural and remote areas. Sustainable energy use along agricultural value chains improves energy access and security, diversifies farm and value addition earnings, reduces produce waste and accelerates the energy transition. Energy needs can vary along various value chains (see Box 1 for examples from Myanmar). With abundant resources in the region, renewable energy solutions can meet many of the energy needs in agriculture for electricity, heating/cooling and transport in a manner aligned with sustainability, development and climate objectives (IRENA and FAO, 2021).
Renewables for energy needs in agriculture: A focus on heating/cooling
Energy is needed along each step of the agri-food, fisheries and livestock value chains. This sectionbdiscusses the role of renewable energy solutions for meeting heating/cooling needs at each stage.vIn the primary production stage, the direct energy needs are largely for traction and electricity or fuel for operating machinery such as irrigation pumps. Some agri-food value chains have heating/cooling needs at this stage. In Cambodia, for instance, modern pig farms consume large amounts of electricity for lighting and water pumping for evaporative cooling systems (Long and Louie, 2019). This leads to high operational expenditures, particularly in areas where diesel generators are used to meet all, or part, of the energy needs. Solar-based solutions have been supported through the Clean Energy Revolving Fund in one on-grid and six off-grid pig farms to reduce energy costs for cooling and improve access to water for livestock, irrigation and drinking water (see Case Study 1 for further details). In Viet Nam, where livestock production, particularly poultry, has been among the fastest-growing sectors in agriculture, energy costs for heating, incubation and ventilation equipment can be significant. In the Lao Cai province, solar-based solutions are deployed to improve energy efficiency and reduce energy costs for smallholder farmers and unlock new opportunities for livestock rearing, agro and herbal product and noodles processing, and fish and fruit drying (UNEP, 2021). For the majority of the most vulnerable people of the Southeast Asia region, dried fish is of important nutritional, economic, social and cultural importance.
The need for temperature-controlled storage may emerge along different stages of the agri-food
value chain depending on the nature of the commodity. In the fishery sector, an accessible cold chain
is necessary to preserve catch, reduce losses and access markets for value extraction by fishers. The
energy-intensity of ice-making, cold storage and refrigeration is a key challenge, particularly in off-grid/island contexts where access to reliable and affordable energy may be non-existent or limited.
Increasingly, renewables-based cold storage solutions are being rolled out to improve access to cooling
services for fishers (see Box 3). Beyond fishery, to reduce post-harvest losses, stand-alone renewables-based modular, on-farm cold storage infrastructure is also being deployed for perishable goods, such as fresh fruits and vegetables, in the Philippines (Manila Times, 2021).
At the final consumption stage, the use of modern renewables to displace the use of traditional biomass
for cooking/heating, as well as liquified petroleum gas (LPG) fuels, is increasingly relevant. Biogas-based solutions have significant potential in Southeast Asia due to its abundant feedstock, including agricultural residues and animal manure. Several countries in the region have introduced dedicated programmes to deploy household-based biogas digesters to replace wood, charcoal and biomass. In Viet Nam, for instance, over 290 000 biogas digesters were constructed between 2003 and 2020, improving energy access for cooking for over 1.7 million people while also addressing the waste management challenge of the growing livestock population. In Cambodia and Indonesia too, programmes were initiated to support the adoption of biogas digesters (see accompanying case studies). With the mechanisation of agriculture and reduced livestock at the household level, the feedstock supply may be at risk. Large production facilities that can produce biogas on a commercial scale may offer significant potential.
Measures to scale up renewables-based heating/cooling in agriculture
The case studies and examples presented here highlight the potential of renewable energy solutions
to meet diverse energy needs in the agriculture sector. The decentralised nature of the solutions enables them to be deployed in remote areas and strengthens energy access to support each stage of the value chain, from primary production to processing, storage and final consumption. Building on the experiences in the region so far, this section presents a set of measures necessary to scale up the deployment of renewable energy solutions in the agriculture sector.
Follow a value chain approach to identify high-impact renewable energy opportunities
Agri-food chain structures are diverse and can be highly complex, involving multiple actors and
interactions with varying products involving crops, livestock, forestry, fisheries and aquaculture. Using
a value chain3 approach to assess energy needs and gaps offers several advantages (IRENA and FAO,
2021). First, it enables the identification of energy needs and gaps at each stage, making possible
a “whole-of-system” intervention design to unlock maximum value and benefits. For instance, the
household biogas digester programme in Viet Nam aimed to mainly utilise livestock waste to produce
biogas for clean cooking and, in some cases, electricity production, with the bio-slurry being used on-farm as organic fertiliser or fish feed, or to be traded.
Further, maximising the job creation impact requires training and capacity building, which in turn
contributes to the sustainability of interventions in the long term. In the case of Viet Nam’s biogas
digester programme, for instance, more than 1 000 government technicians were trained in biogas
technologies, and more than 1 700 masons were trained in the construction of the various designs of
the brick, dome-shaped, domestic biogas digester. Furthermore, 355 teams have been supported in
establishing their biogas digester businesses. Over its 18-year lifetime, the programme resulted in over
20 000 person-years employment in some 250 enterprises (see Case Study 2).
FINANCING OF RENEWABLE ENERGY FOR FARMERS AND AGRI-ENTERPRISES IN CAMBODIA
Agriculture is a key economic sector in Cambodia, accounting for over 20% of GDP in 2020 (World Bank, 2021a) and employing over a third of the total employed population (World Bank, 2021b). Farming is heavily dependent on monsoon rains and floods to meet water needs, making them extremely sensitive to a changing climate. While electricity access rates have seen significant improvements over the past ten years, from 48% in 2011 to 93% in 2019 (ESMAP, 2020), there remain close to 5 million people – the vast majority of whom are farmers – who still have no access to the grid, instead using wood, batteries and other traditional fuels for energy (ADB, 2018). Many farms and agri-enterprises continue to rely on fossil fuel-based generators, making them susceptible to price shocks and contributing to emissions (Long and Louie, 2019). In recent years, solar and biogas-based solutions have shown great promise, although they face challenges associated with high upfront costs and a lack of appropriate financing products.
Energy needs vary depending on the nature of the agricultural activity. Solar-based solutions find wide
applicability, particularly for vegetable, fruit, spice and pig farms. Modern pig farms, for instance, consume large amounts of electricity for lighting and water pumping for evaporative cooling systems (Long and Louie, 2019). This leads to high operational expenditures, particularly in areas where diesel generators are used to meet all, or part, of the energy needs. The CERF supported the installation of solar-based solutions in one (Kampong Speu) on-grid and six off-grid pig farms to reduce energy costs for cooling and improve access to water for livestock, irrigation and drinking water.
FINANCE AND DEPLOYMENT MODEL
The Biogas Powered Agricultural Processing Initiative provided rice farmers with loans to switch from diesel-powered electricity to rice husk gasification-based energy. This was financed through two channels. The first was going through local investment banks, whereby mill owners were coached by REEEP on developing investment-worthy project proposals. Coaching involved basic financial management training and information loan requirements. In cases where this was not possible, given that the interest rate was too high or the conditions were unfavourable, mill owners were given a loan from a revolving fund that covers 80% of the investment cost (usually between USD 10 000 and 15 000), with a payback period of three years and an interest rate of 8%.
LESSONS LEARNT AND CHALLENGES
The experience of both projects demonstrates that offering affordable and unsecured loans is a viable option for small-scale renewable technology investments. The low percentage of defaults and timely payments show that the due diligence process selects appropriate customers and prices in the risks of an unsecured loan. However, moving forward, the cost and efficiency of the due diligence process5
(the backbone of the CERF initiative) must be improved upon – the current cost is too high relative to the size of the loan and the customisation needed for different types of borrowers. This can be achieved by growing the size of the investment portfolio and integrating medium- and large-sized loans, thereby meeting the considerable demand for unsecured loans in the region and reducing the mismatch between due diligence cost and loan sizing. Lastly, Nexus and REEEP are both trying to popularise this method for unsecured loans among local financial institutions, using data to demonstrate the viability of the CERF initiative. Ideally, local investment banks and enterprises could also start giving out unsecured loans in the style of CERF, thereby mitigating the current shortage of these loans.
THE BIOGAS DIGESTER PROGRAMME IN VIET NAM
The Biogas Programme for the Animal Husbandry Sector in Viet Nam was founded in 2003 with the objective of developing a commercially viable biogas digester market to increase sustainable lighting and heating services and to provide fuel for household cooking in rural areas. Up to the end of 2020, and combined with several spin-off projects, the programme facilitated the construction of over 290 000 digesters. Figure CS2.1 provides the cumulative number of household digesters under various programmes over the period 2004-2020. Combined, the biogas digesters resulted in access to clean, renewable and reliable energy while addressing the waste management challenge6 of Viet Nam’s growing livestock population and improving the living conditions of over 1.7 million people.
Where applicable, bio-slurry used as a fertiliser can result in increased yields of better-quality crops that can be sold at higher prices. It should be noted, however, that not all farming households with a biogas digester have agricultural land (nearby) to apply their bio-slurry, in which case it is either traded in the neighbourhood or discharged to surface water. Bio-slurry can also be used as fish feed. Due to its low biological oxygen demand, it consumes less oxygen out of water in comparison to other feeds, allowing the fish to grow larger. When diluted, bio-slurry can even be used as livestock feed, as a nutritional source of mineral. Valorisation of bio-slurry (fortification, pelleting, marketing) further expands its usage.
FINANCE AND DEPLOYMENT MODEL
The biogas programme was initiated by the Dutch government and the Vietnamese Ministry of Agricultural and Rural Development (MARD) in partnership with SNV Netherlands Development Organisation – which acted as the technical advisor – and was implemented by the Department of Livestock Production. This institutional framework helped ensure that the programme was nationally owned and managed. Between 2003 and 2014, the programme costs were funded by the Dutch government and the Vietnamese provincial governments, but the lion’s share was paid for by the farmers themselves. Since 2013, Energising Development (EnDev), an energy access partnership of six countries, has been the key donor. Around the same time, the programme started generating revenue from the sale of carbon certificates (managed in partnership with Nexus for Development).7
In 2012, the project was registered under the Gold Standard for emissions reduction.
The biogas digester programme has resulted in significant economic, social and environmental benefits since its inception (Table CS2.1).
NATIONAL AND LOCAL ACTIONS TO FACILITATE RENEWABLE ENERGY USE IN AGRICULTURE IN THE PHILIPPINES
Agriculture is a key economic sector in the Philippines, accounting for over 10% of GDP in 2020 and employing a quarter of the working population (Philippine Statistics Authority, 2021). Poverty among farmers and fishers has fallen over time, but it remains far higher than the national average, and nearly three times greater than poverty among urban households (World Bank, 2020). The lack of reliable energy supply and infrastructure, including cold storage and processing facilities, contributes to losses and farmers selling at lower prices, particularly in rural and remote islands. Post-harvest losses can
be as high as 40% among high-value crops alone (Cudis, 2021). The Philippines is also highly vulnerable to the effects of climate change due to its archipelagic geography, which is at high risk of flooding. The expansion of centralised energy infrastructure, including the grid, and distribution of fuels comes at a significant cost given the topographical challenges. The potential for decentralised renewable energy systems is high to meet local energy needs and fits well with the current agricultural population, which is concentrated in rural, remote areas.
Whereas male fishers are primarily involved in catching fish, women working in the fisheries sector are typically involved in pre-harvest and value-adding activities – the kind that benefit directly from the introduction of solar icemakers. The project also includes a dedicated gender-specific target to involve at least 50% women’s groups in the planning, design and operation of the post-harvest agri-fishery livelihood projects.
Island municipalities, such as Sitangkai and Sibutu, are particularly vulnerable to the impacts of climate change, seawater rise, natural disasters and economic shocks such as the economic impacts of COVID-19. Strengthening access to distributed renewable energy solutions, supporting a diversification of agriculture and fishery products, and improving market access improve resilience to climate impacts for local communities and enterprises dependent on agriculture.
The Philippines, and the specific case of the province of Mindanao, offers important insights on the role of government and cross-sector partnerships in strengthening renewables adoption in the agriculture sector. At the national level, a dedicated policy framework has been announced to promote the use of renewables in the agri-fishery sector. At the provincial level, the I-PURE project highlights the role donor funding can play in linking renewables with overall agriculture and socio-economic development initiatives. Implementation requires effective co-ordination among local actors, including government, distribution utilities, research institutions and communities. To ensure sustainability and inclusive outcomes, an extensive focus on awareness raising and local capacity building, including equal participation of women, is important.
MULTI-STAKEHOLDER PARTNERSHIPS FOR RENEWABLE ENERGY ACCESS
The agriculture sector in Indonesia contributed about 13.7% to the GDP (in current market prices) in 2020 (BPS, 2021a). Nearly 30% of the labour force is engaged in agriculture, with the majority of households facing poverty relying on agriculture as their main source of income (World Bank, 2021b; Nugraha, 2021). Despite its archipelagic nature, access to electricity and clean cooking fuels for households and enterprises has improved significantly in recent years. The number of people living without electricity access decreased from over 15 million in 2009 to 3.1 million in 2019, the majority of them living in rural areas (World Bank, 2021b). The figure is estimated to have dropped further to about 2.5 million people as of Q1 2021 (ESDM, 2021). In terms of clean cooking fuels and technologies, about 47 million remained without access in 2019, down from 156 million in 2009 (WHO, 2021).
The Sumba Iconic Island initiative must accomplish big tasks if it is to meet its 100% renewable energy target by 2025. Although electrification was increased from 24.5% to 70%, renewable energy accounted for 23% of the total mix. The initiative faced demand-side challenges that slowed down progress. Although Indonesia has a developed finance sector, it is difficult to find interest in decentralised mini-grids or small-scale renewable energy investment due to challenges with the existing regulatory framework for decentralised solutions. Thus, most of the demand from investment banks and private enterprises is focused on large-scale renewable energy projects for which the policy framework is clearer, a situation that hinders the development potential of mini- and micro-scale energy systems to serve small- and medium-size islands such as Sumba. To increase productive end use of energy in agriculture, a comprehensive demand-side assessment is required to understand whether renewable
energy would be well adopted or needed. Moreover, training agricultural end users to develop a market for renewable energies and fostering demand would bridge the disconnect between big finance in Indonesia and end users. In addition, research into loan partner organisations that are willing and able to undertake such investments would mitigate this barrier.