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50 Years of ASEAN: Meeting the Energy Challenges

27 November 2017

By Badariyah YosiyanaASEAN marks its 50th anniversary this year. The grouping, with a population of about 630 million people and a combined gross domestic product (GDP) of US$2.4 trillion, is one of the fastest-growing regions in the world. Its economy, the third-largest in Asia and sixth-largest in the world in 2015, is projected to ascend to the fourth position by 2040. With an average annual GDP growth rate of 5.3% over the last 8 years, ASEAN has consistently outperformed global growth. In its golden anniversary, ASEAN has evolved into a vibrant economic community and global trading hub.

ASEAN’s fast-expanding economies and growing populations mean a rising consumption of energy resources, especially on the continued use of fossil fuels. Like many other countries, ASEAN has been struggling to answer the energy trilemma.

The ‘energy trilemma’—a term introduced by the World Energy Council—sums up the difficulty in finding secure energy supplies and in providing the rising energy demand without prices becoming unaffordable, all the while reducing greenhouse gas emissions. This ‘trilemma’ has been addressed in ASEAN’s current energy blueprint, the ASEAN Plan of Action for Energy Cooperation (APAEC) 2016 – 2025, a document produced every 5 years as an energy guiding policy document for the region.

APAEC Phase I:  2016-2020 focuses on enhancing energy connectivity and market integration in ASEAN to achieve energy security, accessibility, affordability and sustainability for all.

Indeed, energy is one of the key elements in the realisation of ASEAN Economic Community (AEC) which calls for a well-connected ASEAN to drive an integrated, competitive and resilient region.

Established in late 2015, AEC offers opportunities as well as challenges to meet the primary energy requirement that has grown at an average of 3.6% annually in the period 2007-2015 and projected to grow at about 3.9% over the 2016-2025 period according to the recent ACE report, 5th ASEAN Energy Outlook (AEO5).

The AEO5 projects the energy landscape along with its challenges until 2040. The publication was launched during the 35th ASEAN Ministers on Energy Meeting (AMEM) in Manila by the Philippine Secretary of Energy, Alfonso G. Cusi.

The findings of AEO5 highlight the need for the region to focus on energy security, as energy demand is expected to grow as much as 2.3 times over long-term projections to 2040, in the business-as-usual scenario. ASEAN’s energy demand continues to surpass global growth, driven mainly by economic development.

While sustainability concerns call for cleaner energy sources, at present, the region is prioritising the use of affordable and locally available resources at present.

This has led the region to continue to rely heavily on fossil fuels, with coal outstripping natural gas as the main fossil fuel to meet electricity demand starting in 2020.

Oil continues to be the main source of fuel for the transportation sector, accounting for about 45% of total final energy consumption during the AEO5 projection period(2015 – 2040).

The aim of clean energy has to be weighed against the increased use of fossil fuels to sustain economic growth. This challenge is addressed in AEO5 by outlining the feasibility of substantial energy savings through significant energy efficiency (EE) and renewable energy (RE) injection, as demonstrated in the advanced scenario which assumes greater ambition regarding EE and RE.

Renewables could replace fossil fuels to dominate in the power sector by 2035, with hydro and solar as the biggest sources. Solar PV and wind, due to significant price reduction, are projected to experience the highest growth among RE sources.

The ASEAN region is blessed with huge RE potentials; thus the role of RE will become more important in a diversified energy mix. Indonesia and the Philippines have tremendous geothermal potential, while lots of potentials also exists in Indonesia, Malaysia and Thailand with biomass, as well as in Cambodia, Lao PDR, Myanmar and Vietnam with hydropower.

Most importantly, the potential for solar power is huge throughout the region. Several ASEAN Member States (AMS) like Indonesia, the Philippines, Thailand and Vietnam have identified significant wind power potential and have begun its deployment.

It is important for ASEAN to address its energy challenges as well as to achieve its targeted 23 per cent RE share in the primary energy mix by 2025 and to reduce energy intensity (EI) by 20 per cent by 2020. The AEO5 also contains recommendations for ASEAN to address these challenges.

First, ASEAN needs to enhance synergies between RE and EE targets. Improving RE and reducing EI will lead to lower requirements of power capacity and generation. AEO5’s findings show that ASEAN is well on track to reach its EI target, but stronger efforts are required to achieve the RE target. ASEAN should consider tightening the EI target component and thereby help to reach the RE target.

Second, ASEAN needs to implement stronger policies in both RE and EE. The EE policies shall include massive public transportation, a harmonisation of labelling and minimum energy performance standards for EE. Regarding RE, the region needs to impose carbon pricing, consider electricity market reforms, rationalise electricity tariff subsidies and RE auctions.

Third, ASEAN should also focus on deploying RE in the end-use sector, such as modern biomass, biogas, biofuels, as well as solar thermal applications.

The region needs to continue to strengthen and improve the availability and reliability of data as it is key for policy and planning development. Improving data availability in AMS should be a continuous effort to be effective for long-term policy formulation.

During the 35th ASEAN Ministers on Energy Meeting last September, the Member States expressed their commitment to monitoring improvements in technologies while capitalising on the global trend of rapidly decreasing costs of variable RE sources.

The governments also acknowledged that robust policies and investments were still very much needed to transform the energy landscape in ASEAN.

The ASEAN community can look back at our achievements of the last 50 years with pride, but it is equally important that we look forward with determination and commitment to walking the path towards greater regional integration and the realisation of the AEC.

The article originally appeared on The Jakarta Post (Opinion) on 27 November 2017.