Southeast Asia’s economy is likely to expand rapidly in the coming decades, and energy consumption is expected to skyrocket. The region is currently at a crossroads. On the one hand, it can continue to rely on fossil fuels, most of which are imported. These lead to increased emissions and expose the region to volatile and expensive global fuel markets. On the other hand, the region may be able to reduce energy costs and emissions and enhance regional economic development by using its rich and economical renewable energy resources.
To accelerate ASEAN’s energy transition, a significant increase in investment is required. Policy support for energy sectors and cooperation between ASEAN countries are critical for enabling capital to be reallocated to more sustainable alternatives and for ensuring the active engagement of a wide spectrum of investors. Certain critical energy-transition technologies will likely attract major investment in the short term, until 2030. Solar PV is an excellent example, as it is essential to this transition.
The 10 ASEAN member states’ energy transition is progressing slowly, according to the International Energy Agency (IEA) and a peer-reviewed report published by the Norwegian Institute of International Affairs. To meet ASEAN’s aim of meeting 23% of its total primary energy requirement from renewable sources by 2025, an investment of US$ 27 billion per year would be needed. ASEAN has emerged as one of the most attractive regions for investment since 2015. Total foreign direct investment (FDI) in ASEAN increased year on year from US$ 37 billion in 2015-2017 to US$ 74 billion in 2018-2020. By 2020, ASEAN countries’ official renewable energy policies were already more favorable than those of most other regions.
ASEAN’s population would expand by 40% by 2050 compared to 2018, and regional GDP will double at a CAGR of 4.6%, according to the latest research from the International Renewable Energy Agency (IRENA). The region’s final energy consumption is predicted to nearly triple by 2050, from 5,000 TWh to 14,000 TWh. Renewable electrical power generation, electricity transmission and distribution grid and infrastructure, energy efficiency and technologies (such as storage and EV charging infrastructure) would require more than US$ 7 trillion in expenditure by 2050. In the Planned Energy Scenario (PES), the region will spend US$ 28.3 trillion on its energy system between now and 2050, including fuel bills and maintenance, operating and financial costs.
According to table 1, a US$ 208 billion investment would be needed in the short term for renewable energy installation. Investment in EV development would also play an important role in the region’s overall energy transition effort. EV chargers are crucial, with approximately US$ 6 billion required to construct enough charging stations by 2030. As planning and construction procedures take time, investment in supporting infrastructure would be vital. International and domestic transmission, as well as local distribution, would require an investment of approximately US$ 122 billion.
With sustainable debt issuance exceeding US$ 1.6 trillion in 2021, there would be a significant push in industries such as renewable energy and energy-efficient equipment (residential and industrial), according to Bloomberg. Private equity and venture capital investment in renewable energy likely climbed 144% to US$ 11.92 billion across 33 transactions by mid-2022, according to S&P Global. This demonstrates that the renewable energy market is a solid area for investment, with ASEAN contributing significant traction.