South-East Asia Will Become a Green Industry Power
Countries in Southeast Asia, such as Vietnam, Thailand, Indonesia, and the Philippines, have increased investments in renewable energy sources like solar, wind, hydroelectric, and geothermal power.
The transition to a primarily green energy mix in Southeast Asia will amplify the region's economic output. Investments in green technology as well as jobs in the sector will increase. The Southeast Asian region will overall improve on its environmental targets.
Analysis
Several Southeast Asian countries have been
building and expanding their manufacturing capacities for renewable energy technologies. They are producing solar panels, wind turbines, batteries for energy storage, and other components crucial for green energy production. Southeast Asia can generate up to
28 Gigawatts (GW) of solar power, 930 GW through wind energy projects, and these numbers are expected to increase further in the coming years.
Geothermal power generation in Southeast Asia is expected to reach
276 million megawatt-hours by 2050, a tenfold increase from 2020. Southeast Asia's manufacturing potential will also cater to international markets.
Competitive Edge
The ASEAN region will be a natural substitute for Chinese green technology products.
According to the International Energy Association, the cost of producing solar panels within the ASEAN bloc is only about 4% higher than in China. The Lao People's Democratic Republic (Lao PDR) is aiming to be a major supplier of renewable energy for the region. The ASEAN Power Grid (APG) and the Lao PDR-Thailand-Malaysia-Singapore Power Integration Project (LTMS-PIP), which is intended to pave the way for larger-scale imports of up to 4GW to Singapore by 2035, will support the increase in domestic demand.
Three companies – Singapore's Keppel Corp, Thai Impact Electrons Siam Co Ltd (IES), and Envision Group – signed an
agreement to develop low-carbon electricity; the project and its expansion could offset over 90 million tons of carbon dioxide throughout its lifetime. IES alone has more than 1,900 MW of wind and solar assets in development and operations in Thailand, Japan, Lao PDR, and Vietnam. Planned partnerships like these will lower the cost of investing in Southeast Asia compared to the European Union even further. The cost of investing in green energy in the EU is already
50% higher than the cost of investing in Southeast Asia. Vietnam, Malaysia, and Thailand stand out as the ASEAN countries most likely to benefit from the green transition.
Transnational Collaborations
The ASEAN region will collaborate for battery making and electric vehicle parts. The EU's launch of an anti-subsidy investigation into Chinese electric vehicles (EV) and components will encourage European automotive firms to source from alternative suppliers. ASEAN economies are competing to attract investment in EV manufacturing. Thailand provides incentives for both consumption and production such as exemption of import duties on significant electrical parts and subsidies of up to a maximum of 100,000 baht (US$2,760) per car. Indonesia plans to develop its own supply chain by leveraging access to local raw materials used in batteries. The Philippines, Vietnam, and Myanmar will also benefit from the transition due to their already existing industrial base and corresponding supply chains in this sector, much of it shaped by Japanese and South Korean automotive firms. All ASEAN countries will benefit from further agreements to collaborate.
Government Support
ASEAN governments have introduced policies and measures to boost energy security and energy access. Energy demand in Southeast Asia has increased on average by approximately 3% per year over the past two decades; this
trend will continue until 2030 under today's policy settings.
Economic growth is also set to return after a slump during the COVID-19 pandemic and the region's economy will expand in all scenarios by 5% per year on average.
Energy access has been improving in Southeast Asia in recent years, around 95% of households today have electricity and 70% have
clean cooking solutions such as liquefied petroleum gas and improved cook stoves. Governments across Southeast Asia have set out long-term growth plans that refer to sustainability. Six Southeast Asian countries have already announced net zero emissions and carbon neutrality targets.
Energy Investments
Southeast Asia is steadily attracting higher levels of
investments in the energy sector. To accelerate its transition to clean energy and meet the rising demand for energy services, upgrading the clean energy policy and regulatory frameworks and addressing a wide range of financial hurdles across sectors is necessary to reduce the costs of clean energy projects. An example of this is countries in the region boosting
investment in clean energy technologies while phasing out fossil fuel subsidies.
Indonesia, Malaysia, Thailand, and Vietnam announced more ambitious climate targets, including updated expansion plans for renewables, and changes in power purchasing agreements (PPAs).
Investment in Low Emission Fuels
Southeast Asia's energy transition depends primarily on the rollout of renewables, improvements in efficiency and the electrification of end uses; together, these close well over 50% of the emissions gap between the Stated Policies Scenarios and Sustainable Development Scenarios in 2050. Thus, there is a significant role for
low emissions fuels, such as modern bioenergy, hydrogen, hydrogen-based fuels, and Carbon Capture, Utilisation and Storage (CCUS).
Brunei has started exporting small quantities of hydrogen to Japan, while Indonesia, Malaysia, the Philippines, and Thailand are piloting green hydrogen and fuel cell systems for power provision. Malaysia and Indonesia are conducting feasibility studies to co-fire ammonia in coal power plants, and there are plans to do so in Singapore, Thailand, and Vietnam. At least seven large-scale
CCUS projects are in planning in Southeast Asia, including several linked to enhanced oil recovery and natural gas processing with offshore storage.
Growing Demand for Critical Minerals
Growing global demand for critical minerals will bring renewed investor attention to Southeast Asia. Southeast Asia will play a major role in clean energy supply chains and as a
key supplier of critical minerals.
- Indonesia and the Philippines are the two largest nickel producers in the world. Indonesia and Myanmar are the second and third largest tin producers.
- Myanmar accounts for 13% of global rare earth elements production; and Southeast Asia provides 6% of global bauxite production.
- Malaysia and Vietnam are the world's second and third largest manufacturers of solar PV modules.
- Thailand is the 11th largest vehicle manufacturer in the world and could also become a key hub for the manufacturing of EVs.
- Indonesia is implementing policies to attract mid to downstream battery industries.
- The region is developing domestic value chains for multiple industries and the revenue from the production of nickel, tin, copper, and rare earth elements in Southeast Asia to grow by almost 2.5 times to nearly USD 60 billion by 2050.
Conclusion
The collective efforts of ASEAN countries indicate Southeast Asia's growing significance as a manufacturing hub for green energy technologies. As the global transition towards sustainable energy intensifies, the region's role in producing components and systems for green energy will transform the region into a
major green industry power by 2050.
Rithika Chekkera is a Master of Arts in Global Risk candidate at JHU-SAIS. She comes from a multidisciplinary background with a Bachelor's in Economics, Mathematics, and Statistics, a Master's in International Studies, and a diploma in Security Studies. Rithika is passionate about leveraging data-driven insights to address complex global challenges, and she is interested in pursuing a career in Risk Consulting.