Southeast Asia, home to 642 million people, has gone through a rapid economic transformation as a region, emerging as an important global force. To further spur their growth together as a region, the ten member states of the Association of Southeast Asian Nations (ASEAN), founded in 1967, are committed to driving economic integration in the region. Since the cooperation began 50 years ago, ASEAN has almost doubled its share of the world’s gross domestic product (GDP) from 3.3 percent in 1967 to 6.2 percent in 2016. ASEAN as a community has emerged as the world’s 6th and Asia’s 3rd largest economy. This growth is expected to continue as the population of the region is estimated to reach 782.8 million by 2040, reflecting an annual average growth rate of 0.9 percent. Acknowledging this background, ASEAN as a region faces a great challenge to fulfill the needs of its people in a sustainable way, especially in meeting the rising demand for energy to fuel its economic growth.
Demand for energy to double by 2040
Based on a projection period of 25 years from 2015 to 2040, the 5th ASEAN Energy Outlook (ACE, 2015) supports the notion that ASEAN is growing rapidly. According to measures of total final energy consumption (TFEC), energy demand is projected to increase by more than double between 2016 and 2040, from 427 million tons of oil equivalent (Mtoe) to 1,046, with a growth rate of 5.85 percent annually, exceeding its previous annual growth of 3.4 percent from 1995 to 2015.
Within TFEC, industry, transport and residential sectors will still continue to dominate the share with the composition shifting moderately overtime as shown in Figure 1. In 2015, transport and industry sectors already represented more than half of TFEC; combined, they will increase to two-thirds of the TFEC by the end of the projection period. The increasing energy demand in transport and industry sectors indicates an urbanization trend, which leads to increased need for transport services and as a consequence brings ASEAN to a shift from an agricultural to a more industrialized region.
Following the projected development trend, it is expected that ASEAN will experience an expanding demand for all kinds of fuel in the projection period. Demand for oil products will increase considerably from 168 Mtoe in 2015 to 472 Mtoe in 2040. It is expected that oil will keep its dominance in all sectors at a share of 40-50 percent between 2015 and 2040. On the other hand, with an increase from 82 Mtoe in 2015 to 207 Mtoe in 2040, the power sector held the second highest share in TFEC after oil and the power generation sector is projected to grow along with the industrial and residential sectors.
As the electricity demand increases, overall power capacity of 205 GW in 2015 will increase to 323 GW in 2025 and rise further to triple its base value to 629 GW in 2040. To cater to this enormous demand for electricity, most of the ASEAN member states are projected to still rely on fossil fuel based electricity followed by a slight increase in renewable energy (RE) usage. The projection shows that coal will remain as the main resource for power generation in ASEAN following the commissioning of numerous coal power plants in the region starting from the early 2000’s. Electricity from coal is expected to rise from 63 GW in 2015 to 119 GW in 2025 and will reach 267 GW in 2040. Moreover, natural gas-based power plants are projected to approximately double the base value, from 77 GW in 2015 to 156 GW in 2040. However, despite the region’s reliance on fossil-fuels, RE is also projected to flourish—RE-based electricity is projected to rise from 50 GW in 2015 to 93 GW in 2025 and 183 GW in 2040.
Consequently, all ASEAN member states are expected to experience expanded energy consumption, with Cambodia, Lao PDR and Vietnam growing the most during the period. However, in terms of TFEC, the leading consumers of energy are still Indonesia, Thailand, Vietnam, Malaysia and the Philippines, with a combined share of 388 Mtoe (90.8 percent) in 2015 to 972 (92.9 percent) in 2040. In ASEAN, Indonesia remains the most energy-consuming country with 417 Mtoe (39.9 percent) of TFEC in 2040. Following the vast development and the rise of energy consumption, the energy supply as indicated in total primary energy supply (TPES—the sum of production and imports minus exports and storage changes) is also projected to grow.
Looking into the perspective of TPES as shown in Figure 2, ASEAN is estimated to experience a steady growth from 627 Mtoe in 2015 to 1450 Mtoe in 2040. In 2015, oil will still represent its dominance, having a 33 percent of TPES with 207 Mtoe, followed by natural gas at 23.7 percent or 150 Mtoe, and coal with the lowest share among fossil fuel with 18.5 percent or around 116 Mtoe. Further into the projection period, ASEAN is projected to still be dependent on fossil fuels—energy from oil, gas, and coal will be accountable for 78.6 percent or about 1,139 Mtoe of the total 1,450 Mtoe in 2040. Nevertheless, RE will experience a rapid increase in TPES with compounded annual growth rate of 4 percent during the projection period. In 2015, RE represents 13.6 percent of TPES, including 18 Mtoe (2.9 percent) of hydro, 12 Mtoe (1.9 percent) of geothermal, and 55 Mtoe of other RE (8.8 percent). In terms of TPES share by country, Lao PDR, Vietnam and the Philippines will experience the strongest growth during the projection period. While the five dominant member states in TPES will still be Indonesia, Thailand, Vietnam, Malaysia and the Philippines, it is expected that Vietnam will surpass Malaysia in 2023 to become the third largest contributor in TPES.
The balance between development and environmental protection
ASEAN clearly faces a challenge in its effort to keep the balance between providing affordable energy to support development while ensuring sustainability and protecting the environment. In planning its strategy to achieve energy sustainability, affordability, accessibility and security at the regional level, ASEAN established an ASEAN Plan of Action for Energy Cooperation (APAEC) 2016-2025, which serves as a blueprint for member states, complementing each’s national energy targets. With the strong support of the ASEAN Centre for Energy (ACE)—an intergovernmental organization within the ASEAN structure that represents the 10 member states’ interests in the energy sector—the member states implement seven program areas that are of collective importance; ASEAN Power Grid (APG), Trans-ASEAN Gas Pipeline (TAGP), Renewable Energy, Energy Efficiency and Conservation (EE&C), Civilian Nuclear Energy (CNE), Cleaner Coal Technology (CCT), and Regional Energy Policy and Planning (REPP). Among these program areas, ASEAN aspires to have a regional target to increase the share of RE in its energy mix to 23 percent by 2025 and aims to reduce its energy intensity (EI) regionally by 20 percent by 2020 (which has been reached in 2016), by achieving an aggregate EI reduction of 21.9 percent. Now ASEAN is moving forward to meet their mid-term target of 30 percent EI reduction by 2030.
Up to 2015, RE’s share of ASEAN TPES reached 13.6 percent, showing a considerably large gap of around 10 percent towards the goal of 23 percent share. To be able to reach the target, it is crucial for members states to accelerate its efforts in deploying RE. Moreover, it is an appropriate time for ASEAN to amplify the implementation of RE in a large scale as the region can now benefit from more affordable RE technologies and increasing RE investments.
Geographical differences and different energy potentials
To boost RE implementation, ASEAN should take the diversity of each member state’s energy resources and economic development into account. These differences translate into different energy planning priorities within ASEAN. For example, some of the member states have reached 100 percent electrification while others are still focussed on providing electricity to all their citizens. Furthermore, the diversity of the member states’ geography makes for different energy sources potentials. For example Cambodia, Lao PDR, Myanmar, and Vietnam have abundant hydropower potentials while Indonesia and the Philippines are rich in geothermal resources. In creating a regional strategy to boost RE development these differences must be considered.
However, ASEAN should also see those differences as strengths and opportunity for a more inclusive regional energy integration. The diversity opens the door for innovations, especially ones to enhance resilience against energy crises and to achieve regional connectivity. Enhanced multilateral interconnection projects could be the gateway to resource sharing, which would then increase RE deployment in order to electrify rural and remote areas and consequently reduce the member states’ reliance on fossil fuels. For that purpose, ASEAN needs to overcome technical and regulatory barriers. Long-term agreement and commitment as well as good interconnection frameworks for legal and technical issues would be the necessary step to drive the interconnectivity at a regional scale. Steps to move forward towards interconnection have been taken by some member states under the APG framework. The Lao PDR-Thailand-Malaysia-Singapore (LTMS) Power Integration Project is the first multilateral electricity trading in the region. Serving its role as a catalyst to unify and strengthen ASEAN energy cooperation and integration, ACE assisted the Heads of ASEAN Power Utilities/Authorities (HAPUA), the specialised energy body in charge of APG), to realise the Energy Purchase and Wheeling Agreement signed in 2017 by Lao PDR, Malaysia, and Thailand. With the agreement, Malaysia will purchase up to 100 MW of electricity from Lao PDR, using Thailand transmission line. This notable collective feat marks an important milestone for ASEAN.
Those concerted efforts and collaborations are driving the region to close the gap between the current RE level and the regional target under APAEC. As a regional catalyst, knowledge hub and a think tank that serves to enhance ASEAN energy cooperation, ACE conducts multiple studies and capacity building activities in support of the member states towards the achievement of APAEC targets. ACE is collaborating with dialogue partners and international organizations like Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH and Japan-ASEAN Integration Fund, in pushing RE and EE&C in the region by developing studies, organizing capacity building activities, and establishing initiatives with member states. For instance, ACE develops ASEAN Energy Outlooks to better analize the region’s energy needs and identify recommendations for a better ASEAN energy profile. ACE also released the Levelized Cost of Electricity of Selected Renewable Technologies in the ASEAN Member States study for renewable technologies in ASEAN to encourage a competitive RE market.
Such efforts that engage multi stakeholders to benefit from their knowledge exchange and collaborations will provide member states with resources and skills to create better energy plans and translate them into concrete policy measures. Additionally, as the region is moving with the rest of the world towards various global trends such as digitalization, ASEAN is expected to be able to advance its energy development more progressively. With the strengthened cooperation among member states’ governments and their partners, as well as the development of new and innovative technologies, ASEAN can see a future of enhanced energy connectivity and market integration to achieve energy security, accessibility, affordability and sustainability for all, as aspired by APAEC.
Christopher G. Zamora is Manager of the ASEAN Plan of Action for Energy Cooperation (APAEC) at the ASEAN Center for Energy (ACE), based in Jakarta. His role is to coordinate and facilitate implementation of APAEC 2016-2025 in collaboration with the ASEAN member states and energy organizations, partners and international organizations
In the picture gigantic synthetic tree-shaped structures stand in the center of Singapore, close to the Marina Bay artificial lake. On the trunks, which are 25 to 50 meters tall, grow over 160,000 plants of over 200 different species. The photo is by Ryan Koopmans that is a Dutch-Canadian photographer with a particular interest in the built environment and societies shaped by those environments.