7 ways to boost Southeast Asia's shift to renewables
The Southeast Asian region offers rich renewable sector opportunities, as exemplified by the Philippines' current laudable efforts to introduce renewable portfolio standards or guide that would require utilities to source a portion of their power supply from eligible renewable sources. But all in all, the ASEAN is still global laggard in terms of renewable energy deployment and revolution.
The rapid economic growth which triples in size and a population that grows by a fifth with the urban population alone growing by over 150 million people have resulted to twice the region's energy consumption since 1995. The energy demand is only expected to continue to grow by up to 4.7 percent per year through to 2035.
But coal, a fossil fuel, largely feeds this energy need accounting for up to 40 percent or almost half of the consumption. The coal's impact on air pollution and climate change only presses the need for a transition to clean energy now more than ever.
Based on Eco-Business newsletter, experts say Southeast Asian countries should do the following to speed up the transition to renewable energy:
1. Scrap fossil fuel subsidies
For many decades, Southeast Asian governments have given fossil fuels industry with generous subsidies. As reported by the Asian Development Bank, fossil fuels subsidies in India, Indonesia, and Thailand were extensive at 2.7%, 4.1%, and 1.9% of gross domestic product, respectively in 2012. Total subsidies are higher than official government or international organization estimates.
But energy subsidies should be trimmed down or demolished altogether—except in cases where they serve a specific public purpose, such as giving the poor easier access to energy, or short-term incentives to get new clean energy technologies into the marketplace, says Peter du Pont of the Stockholm Environment Institute’s Asia Centre.
“There is no place for coal subsidies in today’s energy markets,” he says. “The cost of coal power in Asia does not include the significant negative health and environmental externalities caused by the combustion of this dirty energy source.”
2. Swap feed-in tariffs for auctions
Another energy policy which needs to be replaced is the feed-in-tariff (FiTs), which make payments to ordinary energy users for the renewable electricity they generate; a scheem that pays people for creating their own "green electricity." However, in countries like the Philippines, where energy policies like FiTs may get scrapped with each change of administration, this is proving to discourage renewable energy investors.
FiTs could be replaced instead with renewable energy auctions, where governments call competitive tenders to install a certain capacity of renewable energy-based electricity. "Project developers who participate in the auction submit a bid with a price per unit of electricity at which they are able to realize the project. The government evaluates the offers on the basis of the price and other criteria and signs a power purchasing agreement with the successful bidder."
Auctions, says Heymi Bahar, an energy analyst from the International Energy Agency, were the reason why India’s renewable energy investments topped those of fossil fuels last year. Investors were given confidence that they could recover their upfront costs over the long term, he says.
3. Open energy markets
In many Southeast Asian countries, power costs are high because of base load, or the minimum level of demand on the grid which most coal-powered utility companies impose on consumer. Ultimately, consumers pay for energy they do not use.
Sara Jane Ahmed, energy finance analyst with the Institute for Energy Economics and Financial Analysis (IEEFA), says that to override the base load factor, countries must adopt "least cost thinking," and find ways to produce energy at the lowest possible cost. This can be done by taking advantage of the renewable energy technologies to reduce the actual cost per kilowatt-hour (kWh) consumed.
IEEFA recently released a report that showed the Philippines can reduce electricity costs to just P2.50 per kWh and improve energy security by installing rooftop solar. The report showed that renewable energy has the ability to reduce overall systems costs, which will result in lower price electricity for the country.
Obtaining a range of different renewable sources such as solar, wind, and geothermal in the energy mix will boost the resilience of local energy supply. Of one source fails, other sources can back up.
4. Make energy data more accessible and transparent
Although increased rooftop solar in some countries has reduced demand for fossil fuels, it is seldom reflected in national energy demand projections. This causes governments to overestimate the energy capacity needed from coal, enabling them to continue to burn it, Ahmed says.
5. Prioritize energy efficiency
Heymi Bahar, energy analyst from International Energy Agency, points out that governments need to implement simple regulations to make certain appliances, such as energy-consuming cooling systems, more efficient.
“The economics is very clear,” says Bahar. “Using LED lights, for example, is a no-brainer: You will get back your money very quickly because you save on electricity bills.”
6. Wake up to stranded assets
Coal investors in Southeast Asia may not yet see the climate risks of power sector financing, but they will soon wake up to the reality of stranded assets, says du Pont.
Stranded assets is a financial term that describes something that has become obsolete or nonperforming well ahead of its useful life, and must be recorded on a company’s balance sheet as a loss of profit.
While conducting a study to examine investor perceptions of climate-related risks in power sector financing in the region, it was revealed that the potential severity of the stranded asset problem is not yet a major part of the discussion in the power sector investor circles. Du Pont cites the general lack of transparency on pricing and tariffs.
He argues, however, that commercial coal plants will be in decline in the next two to three decades, and consumers will be greatly affected and locked into paying higher rates for coal-powered electricity as the price of renewable energy continues to fall.
7. Lead corporate climate action
Climate-conscious companies are increasingly demanding clean energy in Southeast Asia and it's a good thing. Firms like internet giant Google, which is planning to build a third data centre in Singapore and uses more energy in a year than the city of San Francisco, want to only use renewable energy to power their operations. Just this year, Amazon, a global e-commerce giant, has reported to have installed close to 1600-kilo watts (kW) of solar power panels at its two fulfillment centers in Delhi and Hyderabad.
The collective strength of corporations and multinational brands will put pressure on governments to develop easier access to clean energy.
The region offers many opportunities in renewable energy such as solar PV, but challenges exist too. Solaready Philippines shares the vision of implementing efficient solutions to these challenges and dramatically improve energy generation in Southeast Asia.