Introduction The Southeast Asia Energy Outlook 2022 is the fifth edition of this World Energy Outlook Special Report. Building on its important partnership with Southeast Asia, the International Energy Agency (IEA) has published these studies on a regular basis since 2013. The studies offer insightful prospects for the ten member countries of the Association of Southeast Asian Nations (ASEAN) – Brunei Darussalam, Cambodia, Indonesia, Lao People’s Democratic Republic (Lao PDR), Malaysia, Myanmar, the Philippines, Singapore, Thailand and Viet Nam. Since the last edition of this report, the energy prospects for Southeast Asia have been affected by the Covid-19 pandemic, new energy and climate policy commitments and, most recently, high and volatile prices exacerbated by the Russian Federation’s (hereafter, “Russia”) invasion of Ukraine. Covid-19 led to a major economic shock for countries in Southeast Asia and the economic recovery now risks being slowed by higher energy prices. In the run up to the UN Climate Change Conference (COP26) in November 2021, several governments in Southeast Asia announced ambitious targets for reaching neutrality and curbing reliance on coal-fired power.
Southeast Asia must attract much higher levels of energy sector investment to accelerate its
clean energy transition and meet the rising demand for energy services
Energy investment: attracting finance requires upgrading clean energy policy and regulatory frameworks and addressing a wide range of financial hurdles across the sectors Southeast Asia faces the twin challenges of increasing total investment in the energy sector while increasing the share of this investment going to clean energy technologies. Between 2016 and 2020, annual average energy investment in Southeast Asia was around USD 70 billion, of which around 40% went to clean energy technologies – mostly solar PV, wind and grids. Energy investment in the STEPS reaches an annual average of USD 130 billion by 2030 and in the SDS it reaches USD 190 billion. Improving regulatory and financing frameworks would help Southeast Asia reduce the costs of clean energy projects. For example, the levelised cost of energy (LCOE) of solar PV in Indonesia could be around 40% lower if its investment and financing risks were comparable to advanced economies. Boosting investment in clean energy technologies requires strengthening clean energy policy and regulatory frameworks and addressing a wide range of financial hurdles.
Power flexibility: growing deployment of wind and solar will require a more flexible power system – this must be a higher priority for governments and regulators
Southeast Asia is a major engine of global economic growth and energy demand Southeast Asia’s growing population and economy put its energy sector outlook firmly in the global spotlight. Its population has expanded by around 10% over the past 10 years and today there are around 660 million people across the region. Southeast Asia’s economy grew by around 4.2% on average each year between 2010 and 2019. Each of the 10 countries in ASEAN is distinctive in terms of its stage of development, industrial output, politics, history and geography. For example, energy demand per capita in Myanmar or Cambodia is about one quarter of the world average, while in Singapore it is about three times larger than the world average. Increases in manufacturing have been the driving force behind the economic development in Thailand and Malaysia, while the Philippines has seen much more growth in its service industry. Energy policy priorities also differ from country to country, with different approaches to securing new energy supplies to meet expanding energy demand, achieving climate goals and ensuring access to affordable, reliable and modern energy for all. Nonetheless, a common denominator is a commitment to regional cooperation as a way to secure future prosperity and security.
CO2 emissions: in the STEPS, emissions grow steadily to mid-century, while a trajectory consistent with the region’s declared ambitions would see a peak before 2030
Southeast Asia is still a long way off the pathway consistent with its clean energy ambitions Emissions of CO2 from the energy sector have increased steadily in Southeast Asia in recent years. Indeed, the pace of emissions growth has been higher than previously projected in our Outlook, despite the impact of the Covid-19 pandemic on energy use and emissions (see next pages). In the STEPS, emissions increase by slightly over 50 Mt CO2 each year to 2035. This maintains the average annual increase seen over the last ten years. The growth in emissions moderates slightly after 2035 as energy demand growth slows and as renewables provide an increasingly large share of the overall increase in energy demand, but there is no peak in emissions before 2050. Cumulative CO2 emissions between 2020 and 2050 in Southeast Asia total just under 75 Gt CO2 in the STEPS. Southeast Asia has relatively limited responsibility for historical energy-related emissions, accounting for 3% of the total over the past half century. Projected emissions to 2050 in the STEPS are equivalent to around 15% of the remaining global CO2 budget that is consistent with limiting the average temperature rise to 1.5 °C (with a probability of 50%); in 2050, Southeast Asia comprises around 8% of the world’s population and global GDP.
Energy imports: Southeast Asia faces huge payments and energy security challenges from rising fossil fuel imports, led by oil
Energy security concerns reinforce the case for rapid energy transitions Russia’s invasion of Ukraine has been a strong reminder of the importance of energy security. In the STEPS, rapidly growing fuel demands raise concerns about increasing the dependency on imports which could render the economy more vulnerable to fuel supply disruptions outside the region. In the SDS, import dependency is reduced, but this does not guarantee immunity from energy security hazards, including the risk of investment imbalances or bottlenecks in the availability of critical minerals (see next chapter). In the early 2000s, Southeast Asia was a net exporter of fossil fuels, but the cost of rising oil imports now more than offsets the revenue from exports of coal and gas. The average import bill over the past decade has stood at about USD 43 billion or 1.7% of GDP. In the STEPS, this vulnerability is exacerbated by rising imports, especially of oil. The energy import bill rises to about USD 190 billion by 2030, which is equivalent to almost 4% of the region’s GDP (and this assumes that oil and natural gas prices drop significantly from the very high levels seen in 2021 and so far in 2022). The import bill continues to rise after 2030, albeit at a slightly slower pace, but exceeds USD 300 billion by 2050. In the SDS, the import bill is considerably smaller, peaking at the beginning of the 2030s below USD 120 billion and declining to USD 80 billion in 2050.
Annual clean energy investment has never exceeded USD 30 billion but must rise by a factor of five this decade to get on track for the SDS
Tapping into Southeast Asia’s potential for coal-to-natural gas switching can yield benefits for emissions, but its potential is not easy to realise Natural gas occupies a difficult space in Southeast Asia’s energy transition. It results in lower CO2 emissions and air pollutants than coal or oil, meaning it can avoid emissions and improve air quality when substituting for these fuels. But the emissions reductions from fuel switching in the region have been modest, and can be easily reversed. Substituting gas for coal and oil avoided around 20 Mt CO2 emissions in 2010 compared to 2000, yet switching from natural gas back to coal between 2010 and 2020 meant that emissions were nearly 40 Mt CO2 higher in 2020 than in 2010. Most of the increase in natural gas consumption since 2010 stems from increases in energy service demand from economic and population growth, rather than from fuel switching. Overall, natural gas has been responsible for 16% of the total growth in energy-related CO2 emissions in Southeast Asia since 2010, and has met 20% of total energy demand growth.
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