Clean energy has become vital to the Asia Pacific (APAC) region and central to the Association of Southeast Asian Nations (ASEAN) growth and development strategy. By 2030, the global renewable energy market will likely reach over USD 2 trillion. Statista Research and Next Move Strategy Consulting note that environmental concerns about the damage caused by fossil fuels, the effects of rapid urbanisation, and emission-enhancing economic factors, such as manufacturing, will influence the sector’s growth.
According to the International Energy Agency (IEA) report, Southeast Asia Energy Outlook 2022, Southeast Asia’s renewable energy must grow to meet the high energy demands of the region. The report shows that energy demands will rise by 50%-60% over the next two decades. This increased demand presents investors with considerable opportunities to back companies in the sector, boost the renewables ecosystem, and get a sizable return on their investment.
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Southeast Asia needs to implement green energy from solar, wind, hydro, and geothermal sources and will address climate change concerns, protect the environment, and meet energy demands. Unfortunately, there are several challenges to overcome.
Clean energy challenges in the region
ASEAN has a very fragmented renewable energy sector and infrastructure. Therefore, green energy companies must adjust to the different levels of clean energy transition in which each nation operates. Some, like Indonesia, need more infrastructure, whereas others have yet to invest much in the renewables sector. Moreover, varying regional laws may limit investment commitments, financing, and foreign energy company support.
Statista Research discovered that countries in APAC found it challenging to use renewable energy for several reasons. Firstly, it was expensive to implement because of maintenance costs and the need to build infrastructure to make it a viable resource. Secondly, clean energy solutions may take up more land than is available in some countries. Thirdly, some of the required facilities—for example, manufacturing—are currently unavailable.
The war in Ukraine has also affected supply chains and energy prices, forcing countries to spend money they could otherwise pump into green energy. Furthermore, many countries still rely on fossil fuels and other non-renewable energy sources to power their activities and economies. The World Economic Forum (WEF) says that 83% of Southeast Asia’s energy comes from fossil fuels.
Finally, digitalisation has yet to take root fully in ASEAN. Thus, some areas have slower tech adoption than others, and there needs to be more tech talent to manage emerging renewable energy technologies.
Opportunities for clean energy in ASEAN
The WEF believes that ASEAN—the world’s fourth largest energy consumer—will significantly benefit the world if it transitions to clean energy. Many countries in the region have committed to achieving Net Zero by 2050, whereas Indonesia plans to do so by 2060. Southeast Asia is also blessed to have many essential raw materials used in clean energy, such as rare earth elements, tin, and nickel, meaning it can produce green solutions and supply them to the world.
Government support is essential in getting ASEAN to switch to cleaner energy. Each country needs alternative energy sources to meet future energy demands. Southeast Asian leaders have set ambitious plans and laws to push their countries to have a higher percentage of renewable energy by 2030 and beyond. Foreign investors are partnering with local companies to help the regional governments meet their environmental targets.
One of the key findings from the IEA report is that current government policies will increase fossil fuel imports, energy demand, greenhouse gas emissions, and a failure to meet clean cooking goals by 2030. Energy security vulnerabilities will also increase if the effort to transition is not robust enough.
Another finding is the need to attract high-level energy investments. It will require changes to regulations and clean energy policies. There are opportunities in the electric vehicle and motorcycle sectors, with foreign car companies setting up regional manufacturing plants. With the help of subsidies and investments, it may be possible to meet the goal of shifting to electric vehicles in the coming years.
In addition, investment and innovations in alternative fuels, such as bioenergy and low-carbon hydrogen, should be considered to reduce reliance on fossil fuels, especially in the transport industry.
As the world faces the devastating effects of pollution, greenhouse gas emissions, and environmental damage, there is a growing movement to make clean energy the best path for the globe. While the renewable energy Southeast Asia needs may take time to implement, it brings vast opportunities for startups, innovators, investors, and environmentalists to protect the environment and create jobs and returns on investment.
The green energy Southeast Asia is adopting faces many challenges. Still, with government support and public-private partnerships, it is possible to build a new, clean, renewable energy ecosystem to benefit the whole of ASEAN.