Demand for energy services in Southeast Asia is growing fast and the agenda facing the region’s governments is not a simple one. What are some of the choices facing decision-makers, the pathways that can be followed, and the consequences of these choices for energy security and sustainability?
This discussion paper was produced for Ecosperity 2019 by Temasek, drawing upon analyses and data from the International Energy Agency. It demonstrates the potential to accelerate clean energy transitions, the policies and instruments that can achieve this, and the opportunities that this presents for governments, investors and citizens.
There is an urgent need to accelerate and deepen global energy transitions. While there are signs of progress and the costs of key technologies have fallen significantly, the adoption of cleaner and more efficient energy technologies has not been fast enough to slow the growth of carbon emissions. As a result, emissions reached a new historic high in 2018.
Southeast Asia has seen one of the fastest rates of energy demand growth. Factors such as economic growth, urbanisation, industrialisation, expanded access to energy and growing populations have fuelled an 80% increase in energy demand since 2000. Within this, the region’s demand for oil and for electricity has grown twice as fast as the global average.
Countries in Southeast Asia have made major improvements in access to modern energy. The share of people with access to electricity increased from 62% in 2000 to around 90% in 2017. However, almost 60 million still people lack electricity access and an estimated 230 million people remain reliant on solid biomass as a cooking fuel.
While deployment of renewables has grown, Southeast Asia is the only region in the world where the share of coal in electricity generation has actually increased in 2018. Today, modern renewables account for almost 20% of power output, but the untapped potential for low-carbon energy remains huge.
The potential to improve energy efficiency is significant. The share of energy consumption covered by mandatory efficiency measures in Southeast Asia remains lower than the global average. This has significant implications for the region’s energy outlook. For example, relatively weak fuel efficiency standards pushes up demand for oil; and limited efficiency requirements on appliances mean higher electricity consumption.
Energy projections to 2040 based on existing or stated policies reveal some serious challenges linked to increased reliance on imported fuels and rising emissions. Governments in the region are therefore taking steps to meet rising demand in a secure, affordable and sustainable manner.
The IEA’s Sustainable Development Scenario (SDS) provides a blueprint for energy development consistent with the Paris Agreement and other sustainable development goals. Achieving this scenario would require a step-change in policy focus and investment flows, and would bring multiple benefits for energy access, air quality, greenhouse gas emissions and energy security.
Nearly $3 trillion of cumulative energy investment is needed between today and 2040 in Southeast Asia to realise a sustainable pathway. This represents a huge opportunity though allocation of this investment across different sectors will depend on how policies and business strategies evolve.
Moving towards a Sustainable Development Scenario for Southeast Asia would require concerted action across all parts of the energy sector. Multiple technologies and approaches would be required.
The discussion paper highlights five key areas of opportunity for policymakers and investors: