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The Answer to ASEAN’s Post-Crisis Energy Needs

COVID-19 has disrupted the status quo. Nobody can be certain what the new normal will look like, but the need for reliable, secure, sustainable power is a constant we can rely on.

Climate change could reduce regional gross domestic product (GDP) by 11% if left unchecked

Without a doubt, 2020 has demonstrated the huge social and economic responsibilities carried by the world’s utility companies. At the same time it has illuminated many of the vulnerabilities at the heart of the industry — most notably how devastating demand shocks can be to industry revenue. While residential demand surged during COVID-19 lockdowns, amplifying customer pressures on infrastructure, the valuable commercial and industrial segments went into freefall. Overall, global electricity demand is expected to fall by 5% in 2020.

These challenges in ensuring reliable revenue for industry, create consequent challenges in delivering reliable power to the world. In an industry as fundamental for societal success as power, this period of uncertainty has raised important questions about energy security for the future.

A Shared Answer to Energy

Each of Southeast Asia’s individual nations may boast unique challenges for energy security, but the region as a whole provides a shared opportunity to tackle those challenges in partnership.

Laos, Thailand, and Malaysia have been leading the way on regional cooperation, with Southeast Asia’s first tripartite energy agreement signed in 2017. This agreement saw Malaysia buying green energy from Laos, transported through joint-neighbour Thailand’s energy grid. The seminal deal marks a hopeful new twist for the long-discussed ASEAN Grid.

Cross-border infrastructure can greatly enhance overall energy security and adoption of renewable energy. The shared energy networks in Europe are largely credited with improving network resilience and security. With shared energy markets, nations can rely on each other’s energy supply to manage the intermittent and variable nature of renewable energy.

As with Europe, a shared ASEAN grid may optimise the integration of the region’s power assets. For example, across the northern borders of ASEAN; Vietnam’s more robust grid infrastructure offers an opportunity to electrify remote Laotian and Cambodian communities, which are far removed from their nation’s own grid infrastructure.

Southeast Asia’s pioneering tripartite agreement marked an important step for the region. This style of international agreement could be pivotal, particularly in a region where utility providers are often government-backed or government-owned.

Catalysing Economic Opportunities

Utilities across the region also play a vital role in kickstarting the economy. These include the exploration of new and emerging sectors – electric vehicles, hydrogen economy, bio jet fuel and hyperloop transport are just some of the new technology enablers identified by the Malaysian Institute of Economic Research (MIER), which could create new opportunities for the region.

Cross-border infrastructure can enhance overall energy security and adoption of renewable energy

Renewable energy is another key area of innovation for sustainable, low-carbon energy security. In Singapore, where renewable energy installation faces significant geographical challenges, local firm Sembcorp Solar are rising to meet the challenge. Sembcorp was appointed to build one of the world’s largest floating solar systems, using the waters of Tengeh Reservoir as a home for a solar installation which could power up to 16,000 homes. This represents an example of an innovative private-public partnership, with Sembcorp appointed by the national water agency PUB to meet the growing public needs for energy. This type of shared solution for renewables could be a key catalyst for rollout across the region.

P2P energy trading is another area that utilities are exploring to enhance future energy security in novel new ways. This style of system leverages the growing popularity of rooftop solar — predicted to reach 100 million units installed globally by 2024 — to provide person-to-person markets for self-generated power. Utilities will be fundamental to supporting this adoption in order to enable innovative new solutions to integrate with a reliable, secure national or regional energy network.

These kind of green-focused ideas will be increasingly important following COVID-19. A global survey by pollsters IPSOS reveals that 65% of adults believe government actions should prioritise climate change considerations in the economic recovery following the pandemic. That focus will build into consideration for governments and utilities alike.

Solar panels at Tengeh Reservoir. Source: Straits Times

Progress is Not Without Challenge

This transformation will not be without its challenges, chief amongst them the investment needs. The Asian Development Bank (ADB) estimates that Southeast Asia will require annual infrastructure investment of US$210bil until 2030 to meet the region’s economic growth while balancing the challenges of climate change. Once again, the role of private-public partnership may be critical, with private capital undoubtedly playing an important role in achieving that figure.

When it comes to energy security however, the negative impact of climate change marks an essential factor of any conversation. The ADB projects that climate change could reduce regional gross domestic product (GDP) by 11% if left unchecked.

Accelerating the green transition could deliver a US$100 trillion windfall to the global economy

On the other side of that climate coin, analysis by the IEA estimates that accelerating the green transition could deliver a US$100 trillion windfall to the global economy. This will require deepening of sustainably-focused investment, a trend which is growing both globally and in Southeast Asia.

In the end, building back better from COVID-19 is likely to return to that fundamental importance of collaboration and innovation. Public sentiment will be vital to driving change, while also recognising the potential short-term costs these transformations may incur. Collaboration between private and public organisations will be critical, both in encouraging the requisite investments, and also ensuring infrastructure plans come to fruition. Innovation will be the glue that holds this transformation together. That spirit of cooperation and imagination will be fundamental to future energy resilience.

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