Energy transition readiness in Southeast Asia

Southeast Asia’s energy demand is expected to increase by 60% by 2040 in line with the region’s rapid economic growth, led by increasing industrial activities, growing population and rising incomes¹.

Today, Southeast Asia remains a net importer of energy products, with over 40% imports to meet its total energy requirement. With depleting reserves, the region needs to import more fossil fuels to cater to the rising demand. This brings the regional energy sector to a crossroad in terms of its energy future, with an urgent need to diversify its sourcing and supply, in order to cater to the growing demand. This makes the region’s transition to a cleaner and more energy efficient future a key imperative. This report highlights six key criteria to assess Southeast Asia’s readiness for energy transition and its respective challenges.

Southeast Asia’s varying energy transition readiness

Between 2006 and 2016, the region saw more than USD 27 billion invested in the renewable power sector in six major Southeast Asia markets – Thailand, Indonesia, Malaysia, Vietnam, Singapore and the Philippines². Two major Southeast Asia-wide initiatives were developed to facilitate the energy transition in the region, specifically,

ASEAN Plan of Action on Energy Cooperation (APAEC) Phase II and
ASEAN Interconnection Masterplan Study (AIMS) III.

Six key criteria to assess energy readiness

Energy accessibility

Southeast Asia is on track to achieve universal electrification by 2030. This is based on (1) latest electrification rates and (2) developments for rural electrification, including targets and regulations designed to achieve universal electrification.

Energy reliability

As demand for electricity grows in the region, each member state must increase their installed power capacity in line with the growing energy demand.
Reserve margins from peak demand and installed capacity used as an indicator.

Energy affordability

The price of energy supply within the limits of capacity to pay off economically weaker sections of society is crucial.
Cost of average household electricity consumption as a percentage of minimum wage is analysed.

Energy sustainability

The energy sector is expected to focus on clean energy as technologies such as renewables and electric vehicles become economically competitive.
Grid emission factor based on the amount of carbon dioxide emissions and electricity generation mix is considered.

Energy smartness

With the increasing integration of renewable energy in the electricity system, power grids are evolving to accommodate higher levels of complexity required for the flow of electricity from generation to consumption.
SP Smart Grid Index 2020 to measure smartness.

Energy trading

In 2019, we saw at least 35 TWh of electricity trade within Southeast Asia². The ASEAN Power Grid is the key initiative in enhancing cross-border electricity trade and unifying the energy sector.

The future of the energy sector

Many of the Southeast Asia countries have made great progress in meeting basic energy needs in terms of accessibility, reliability and affordability. There have been initiatives across the region to become greener, smarter and more interconnected – although to varying degree of progress among the Southeast Asia countries. Key challenges to achieving maturity in these domains largely lie in inadequate financial support, regulatory barriers, lack of access to technology, and embrace of traditional primary energy sources.

In order to improve on all the six criteria, the region has stepped up its collaboration efforts with the ASEAN Power Grid initiative. This development of interconnected grid systems will further increase uptake of renewable energy, boost energy security, and facilitate Southeast Asia’s energy transition journey.