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The Launch of Renewable Energy Financing Study in ASEAN: Impact Analysis and Review on Governance of Renewable Energy Financing Schemes in ASEAN

Online, 29 November 2022

The newest renewable energy (RE) financing publication was launched on Tuesday, 29 November 2022. The event was attended virtually by the government officials, development bank representatives, and energy experts from ASEAN Member States (AMS).

The report called Impact Analysis and Review on Governance of Renewable Energy Financing Schemes in ASEAN was prepared by the collaboration between ASEAN Centre for Energy (ACE) and Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH, under the ASEAN-German Energy Programme (AGEP) Phase II. The report formulates the needed financing measure to achieveing the goals in the ASEAN Plan of Action for Energy Cooperation (APAEC) Phase II: 2021-2025, which is to reach the RE target of 23% in total primary energy supply (TPES) and 35% in total installed capacity by 2025, and enhance the interconnectivity of ASEAN Power Grid.

The launching event was opened by the remarks from Dr. Nuki Agya Utama, Executive Director of ASEAN Centre for Energy, and Mr. Sergey Makarov, Principal Advisor of GIZ AGEP. In their remarks, they highlighted that the report aims at promoting the existing RE financing schemes as well as to make the funding more attractive, effective, and sustainable to fulfil the funding requirement of 80 billion USD to develop 40 GW additional RE instalment that the region needs to reach RE share goal in TPES by 2025.

Ms. Monika Merdekawati, Sustainable Energy, Renewable Energy and Energy Efficiency Officer of ASEAN Centre for Energy, as the lead researcher and one of the report’s authors, presented the key findings of the just launched report.

In the beginning, she explained three challenges in clean energy projects in ASEAN. The first challenges are the poor regulations in the energy market certainty, permit issuance, grid management and transmission, among others. Secondly, in technical and labour aspects, challenges are the limited number of skilled and qualified labour and poor management capability to execute RE financing and business plan. And lastly, the challenge in financing includes off-takers, demand risks, and others. Moreover, from the clean energy project profile risk in ASEAN, since the highest risk takes place at the early development of the project, thus most investors can only give funds after the project feasibility study, land acquisition, and project equity has been confirmed and released to avoid project failure. Therefore, she highlighted that to best tackle the associated risks and challenges of RE financing, policymakers can utilise the method of policy de-risking, financial de-risking, and direct incentives. Among these options, investing in de-risking methods is far more effective than providing direct incentives.

Moreover, the report analyses some effective and weak policy instruments on RE financing in all AMS. The key markets of RE funding are also identified thoroughly. Briefly, the RE financing source is categorised into public and private, while the RE financing type to fiscal and non-fiscal. Some funding from multi-development banks on RE development in ASEAN are Green Climate Fund, Climate Investor One, and ADB Clean Energy Financing Partnership. Later in the report, some key actions to driving down the RE cover are detailed. These are clear and stable regulatory frameworks, competitive and transparent auctions, effective guarantee schemes, and long-term grid planning for RE capacity expansion.

After the presentation, Ms. Rika Safrina, Energy Modelling and Policy Planning Officer of ASEAN Centre for Energy, moderates the panel discussion with Dr. Yaowateera Achawangkul from the Department of Alternative Energy Development and Efficiency of Thailand, Ms. Wei Huang from Energy Policy Associates of Asian Infrastructure Investment Bank (AIIB), and Ms. Monika Merdekawati.

Dr. Yaowateera Achawangkul revealed that the target of RE share in Thailand is increased to 50% in installed power capacity by 2040, with biogas and biomass as the priority. Meanwhile, challenges to RE development in Thailand include policy formulation on emerging RE technology and biogas and biomass deployment, financial support from investors, and public acceptance of new RE projects. In response, Ms. Wei Huang disclosed her perspective from the development bank’s point of view. To secure more financing for RE development, a stable policy framework is highly crucial as the government signals that they are willing to support RE projects in the long term. This is to ensure the high risk from the project’s early development can be handled properly. Moreover, according to Ms. Wei Huang, another crucial thing is a stable pricing framework with certainties for at least 20 years. If everything is prepared, financiers can then construct financial modelling to know how much cash flow to expect during the time of a low tenure. Lastly, Ms. Monika Merdekawati added that clear prioritisation of RE type to be developed in each AMS also affects the success of RE financing and long-term project development. A successful example can be seen in Vietnam, where the RE prioritisation has been made, and the solar capacity has grown from less than 1 GW to over 4 GW in just one year.

To understand more about the topic, event recording can be accessed at here.

To download the report, please follow this link.

To download the presentation, please follow this link.

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