April 5, 2024
SINGAPORE – South-east Asia has to speed up in building its renewable energy capacities in order to hit the region’s net-zero targets, experts said on April 4.
The region’s annual renewable capacity additions have to increase by seven to 12 times for solar and onshore wind power, as compared with the region’s annual average from 2018 to 2021, said McKinsey & Company senior partner Vishal Agarwal at an event to discuss a report on South-east Asia’s transition to renewables.
The report was published by the Economic Development Board (EDB) and led by McKinsey, with Mr Agarwal as one of its co-authors. It was launched at 2023’s United Nations climate change conference, or COP28.
“It is important for South-east Asia to move more aggressively on the topic of renewables,” he said, noting that the region currently makes up about 5 per cent of global emissions.
This is expected to double to 10 per cent by 2050, not because the region is increasing its carbon emissions, but because it is not decarbonising fast enough, he added.
The report noted that South-east Asia significantly lags behind other regions’ markets, because it only recently started adding renewables capacity at scale.
The region has also historically capitalised on coal and gas to produce cheap power from subsidised fossil fuels, the report added. There are efforts to retire these coal power plants early, but the transition will still take time to take effect.
EDB executive vice-president Lim Wey-Len said in his opening speech: “South-east Asia is now at a critical cusp of growth for renewables.” He added that the International Energy Agency has projected that the clean energy investments in South-east Asia will need to quadruple by 2030.
He was speaking to an audience of about 100 industry leaders at Andaz Singapore hotel in Bugis.
Mr Agarwal said the region has significant renewables potential. Yet, over the past five years, it has attracted the second-lowest level of investments in solar photovoltaic and wind power globally, higher only than sub-Saharan Africa.
He added that the region is very diverse, with economic nuances between countries and different areas having different policies. One issue is that power tariffs are among the lowest globally.
“Many of the governments are trying to balance the energy transition with affordability and with energy security… so they’re not just struggling with one (issue) but they need to balance many of these complexities,” he said.
“The second reason is the tight, regulated framework. If you look at most of the countries in the region, it’s very tightly regulated; in many cases, it’s a monopoly, at least on the transmission and the distribution side. Although there is more deregulation on the generation side, it’s still not fully there.”
He added that project developers have to build local ecosystems. They also have to work with stakeholders to find innovative solutions.
Meanwhile, Singapore can also play a role in the region’s transition, although it is constrained by land size, Mr Agarwal said.
Opportunities for Singapore are on the side of financing and research and development, he added in a media roundtable after the event.
EDB’s Mr Lim also outlined three ways that Singapore can aid the region’s renewables transition. For one thing, it can be a reliable regional hub for such projects, he said.
“First, Singapore is well connected to the project opportunities in South-east Asia and the wider Asia-Pacific region. We have also announced the target to import up to four gigawatts of low-carbon electricity by 2035 and have signed memorandums of understanding with neighbouring countries such as Vietnam and Indonesia to advance cooperation on renewables import,” he said in his speech.
For instance, Sembcorp Industries has partnered a Vietnamese company to develop offshore wind farms in Vietnam and plans to import up to 1.2 gigawatts of low-carbon electricity to Singapore.
Singapore also serves as the Asia-Pacific headquarters to more than 100 international and local clean energy companies, Mr Lim said.
It can also be a green financing hub, he added, with the Monetary Authority of Singapore announcing the formation of a blended finance platform at COP28 to mobilise up to US$5 billion (S$6.7 billion) of capital across three key themes of energy transition, green investments and clean technologies.
“Finally, Singapore has built up a vibrant ecosystem of companies across the value chain ranging from clean energy solution providers, to project and legal advisories and financiers that can support the development and execution of renewables projects in the region,” he said.
For instance, global clean-tech company Engie set up research and development teams in Singapore to collaborate with institutes here on renewable energy integration.
EDB has also partnered energy management and automation multinational Schneider Electric to launch a new business venture which provides full life cycle management for enterprise power and cooling assets, Mr Lim added.