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ACE Through ACCEPT II and ESI@NUS Leads Discussion on Financing Decarbonisation at SIEW 2023

08 November 2023

As the world grapples with the pressing challenges of carbon neutrality, ASEAN has emerged as a pivotal player in the global effort to transition towards a more sustainable and decarbonised energy landscape. The ambitious goal of achieving a 23% share of renewable energy (RE) in the total primary energy supply (TPES) by 2025 is within reach, but it demands substantial investments in renewable energy generation and infrastructure.

To address these issues, the ASEAN Centre for Energy (ACE) through the ASEAN Climate Change and Energy Project (ACCEPT) and the Energy Studies Institute at the National University of Singapore (ESI@NUS) recently co-hosted a roundtable discussion titled “Financing ASEAN Decarbonisation Roadmap towards Carbon Neutrality” during the Singapore International Energy Week (SIEW) 2023 which was organised by Energy Market Authority.

This roundtable aims to support the journey towards achieving ASEAN’s decarbonisation targets and was designed to align with the overarching theme of SIEW 2023, “Energy Transition Towards a Net Zero World.” The roundtable gathered an array of thought leaders, experts, and stakeholders in the energy sector.

In his opening remarks, Jonathan Goh, External Relations Director of Energy Market Authority, Director of Singapore International Energy Week (SIEW), and SOE Leader of Singapore, highlighted the collective commitment to achieving Paris Agreement targets and net zero objectives. He underscored the importance of comprehending the current energy investment landscape as paramount in the transition to cleaner energy sources.

Within Southeast Asia, where energy demand is witnessing substantial growth, there exists a pressing need for significant investments to facilitate decarbonisation. Jonathan acknowledged that global investments often concentrate on specific technologies and regions, inadvertently overlooking the potential of emerging markets in Southeast Asia.

Following up on that, Beni Suryadi, Manager of ACE, stressed the need for proactive adaptation to the region’s complex energy landscape, emphasising the importance of robust policies, sustainable investments, technology innovation, and regional cooperation to achieve renewable energy (RE) targets. He encouraged a collaborative regional approach to advance the ASEAN Strategy on Carbon Neutrality, and announced the development of the ASEAN Long-Term RE Roadmap which will support a cleaner, sustainable, and resilient energy future.

Associate Prof. Lee Poh Seng, Executive Director of ESI, emphasised the need for a well-balanced approach to the energy transition. This approach must encompass sound policies, effective collaboration between the public and private sectors, and technological advancements to shape the narrative of this transition. The synergy between green financing and technology plays a pivotal role in fostering innovation and the development of eco-friendly technologies.

Panel Discussion 1: Financing from a Policy Perspective

The first panel discussion, themed “Financing from a Policy Perspective,” was moderated by Dr Yao Lixia, Senior Research Fellow at the Energy Studies Institute (ESI). The panel featured three experts, including Jennifer Tay, Infrastructure Leader at PwC. Architrandi Priambodo, Senior Energy Specialist at the Asian Development Bank (ADB), and Dr Kim Jeong Won, Senior Research Fellow at Energy Studies Institute (ESI).

During the discussion, Jennifer Tay shed light on the trend of private sector financing, which primarily targets OECD countries, guided by individual investors’ risk considerations. She emphasised the importance of funding channels for renewable and green energy projects but noted the existing challenge of an imbalance between financing and project development, with certain sectors, like grid infrastructure and energy storage, still requiring adequate funding.

While Architrandi Priambodo underscored the significance of carbon financing as a pivotal tool for achieving net-zero emissions targets. She highlighted the emergence of domestic carbon markets in various countries and their potential to finance renewable energy projects, particularly as the price of carbon increases, making it more appealing to private sector investors.

Dr Kim Jeong Won shared insights into bilateral Official Development Assistance (ODA), which is expected to increase in the coming years due to its feasibility in establishing relations between two countries, driven by political and economic landscapes. The panellists collectively emphasised the role of ODA as the initial foundation for financing green projects, eventually paving the way for private sector involvement. Successful ODA implementation hinges on the capacity and involvement of the recipient country’s government.

Panel Discussion 2: Financing from a Technology Perspective

The second panel discussion, titled “Financing from a Technology Perspective,” was moderated by Aldilla Noor Rakhiemah, Senior Research Analyst at the ACE. The panel featured three experts, including Xiang Long Koh, Head of Corporate Finance at EDPR, King Lee, Head of Policy and Industry Engagement at the World Nuclear Association, and Lawrence Chen, Managing Director of Asia-Pacific Huawei Sales Financing at Huawei International.

During the discussion, Xiang Long Koh emphasized the critical need for a balanced approach to financing renewable energy projects, combining both public and private sector investments. He noted the private sector’s cautious approach to long-term power contracts and loan hedging and highlighted the ongoing challenge in the ASEAN region to secure long-term financial capacity. An important policy barrier discussed was the restriction of foreign capital flow, which significantly impacts the early stages of green project development.

King Lee stressed the pivotal role of nuclear technology in achieving carbon neutrality goals, acknowledging that traditional nuclear power plants have lengthy construction timelines of approximately 10 years. In contrast, small modular reactors (SMRs) offer a shorter construction duration due to their smaller scale. The key to success lies in choosing low-cost financing schemes and ensuring sustained government support throughout the construction and operational phases. He also noted the absence of nuclear energy in the ASEAN Taxonomy, posing challenges to its promotion in the region.

Meanwhile, Lawrence Chen highlighted the protracted commercialisation periods of green projects, typically around a decade, underlining the importance of cost-sharing among various financial institutions to enhance financing capacity. He emphasised the growing role of information and communication technology (ICT) and digital infrastructure in the energy sector, particularly in harmonising grid systems. Changes in interest rates can impact long-term energy project contracts, requiring a prudent approach that considers future value and potential fluctuations.

In Conclusion

The roundtable generated key takeaways, emphasising the need for a collaborative regional approach to secure the necessary investments for decarbonisation. The discussions underlined the three essential financing approaches: international public climate finance, domestic public/private climate finance, and private investment. While public finance has played a substantial role in clean energy investments in ASEAN, the need for increased private capital investments was emphasised.

Furthermore, the panel discussions noted the existing Clean Energy Financing mechanisms in ASEAN countries, including the ADB ASEAN Catalytic Green Finance Facility (ACGF). Barriers to investments in clean energy were discussed, focusing on access to finance, regulatory challenges, and technical issues. Successful ODA was emphasised as a foundational step to finance green projects, with the recipient country’s role, particularly the government’s capacity, playing a crucial role.

The roundtable marked a milestone in the journey toward decarbonisation in ASEAN, providing a platform for knowledge sharing and collaboration to realise the ambitious targets set by the region.