It will have to pump around 120GW of added power capacity.
If there is a price tag for ASEAN’s dream to transition into a more renewable energy-focused and energy efficient region, then it is to the tune of upwards of US$160 billion in investments for additional power capacity in the short-term horizon. This is part of the findings of the latest 5th ASEAN Energy Outlook 2015 to 2040, along with the fact that the next decades could see decreased power investments if the region decides to step beyond its business-as-usual commitment to renewable energy. The outlook also showed that solar and wind as well as key nations such as Indonesia and Vietnam will play vital roles in the region’s target to incorporate 23% of renewable energy in their total energy mix and reduce energy intensity by 20% by 2020.
In order to reach the region's ambitious renewable energy diversification and energy intensity reduction targets, ASEAN would need around 120GW of added power capacity and US$160 billion in investments under the business-as-usual, or BAU, scenario which assumes there will be no significant changes to past practices among ASEAN countries, Badariah Yosiyana, manager of ASEAN-German Energy Programme at ASEAN Centre for Energy. Sharing the results of the outlook report in a webinar, she noted that of the additional capacity in this BAU scenario, 51% will come from fossil fuels.
Even more investments of more than US$200 billion will be needed by the region to hit its targets under two scenarios: ATS, which assumes official energy policies and targets at the national level are fully attained; and the ASEAN progressive scenario, or APS, which assumes a higher ambition level especially in energy efficiency and renewable energy technologies.
But Yosiyana said that the additional investments in the APS and ATS scenarios will result in more renewable energy capacity in the region's power systems. The challenge though is whether ASEAN nations will be able to commit or find financing to meet the incremental cost of US$1.3 billion.
To put the large costs in perspective and the critical role of the power sector, she said that for ASEAN to achieve its target of 23% renewable energy integration by 2025, it would need to allocate US$21.4 billion annually, or about 0.9% of the region's GDP in 2015.
“The power sector is one of the most significant contributors for the region to achieve its aspirational goal on renewable energy,” said Yosiyana.
Among the ASEAN countries, Indonesia and Vietnam will be the primary drivers for the region to achieve its targets, she said, requiring around 50GW and nearly 40GW, respectively, in total renewables capacity. Development of solar and wind renewables, which will account for large portion of this capacity, will also be a key factor beside hydro power to hit the target, she added.
Looking at the long-term horizon, Yosiyana said that power capacity will grow 2.9 times than than the 2015 base level under the BAU scenario. But the other two scenarios of ATS and APS, which focus more on renewable energy integration and development, will result in higher efficiency by lowering the total capacity requirement to only 2.7 times than the 2015 base level.
“Power capacity increasing is inevitable to cope with increasing electrification ratio and wealth in ASEAN - however, the enhanced efficiency of ATS and APS scenarios could lower the capacity requirements,” she said. “ASEAN’s goal for integration and sustainability of renewable energy can be sustained with significantly lower investments than BAU in the long term.”
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