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Asean

ASEAN should flick the switch to renewables

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Authors: Margareth Sembiring and Julius Cesar I. Trajano, Nanyang Technological University

The Southeast Asian region is now viewed as an oasis of socioeconomic development. But the region’s vibrant economic growth has led to a corresponding increase in energy consumption, an issue recognised by ASEAN as a key shaper of the post-2015 agenda. In order to reduce the region’s over-reliance on imported fossil fuels and build a more sustainable and environmentally friendly power system, ASEAN member states are exploring the use of alternative energy sources such as nuclear and renewable energy.

Despite the 2011 Fukushima disaster, nuclear remains a viable alternative energy source due to its mature technology and its capacity to produce a stable power supply. By contrast, renewable energy technologies are still being perfected and their intermittent power-generating characteristics make them appear less reliable.

However, the nuclear option has been considered but not implemented for decades, and meanwhile more recent renewable energy sources have already made inroads in the region. In 2011, renewable energy power sources, particularly hydropower and geothermal plants, made up about 15 per cent of total power generated in the ASEAN region. This was the third-largest amount after gas-fired and coal-powered power plants. Nuclear power is projected to enter the region’s energy mix only after 2023, assuming that nuclear plants are successfully commissioned in Vietnam.

Although countries in the region have set higher targets for renewables’ share in their national energy mix, overall the use of renewables in the region is still limited relative to their potential. In Southeast Asia, wind and tidal energy are largely untapped, with the huge solar potential in the region remaining underdeveloped.

As mechanisms of power generation from renewables are different from those of conventional energy sources, adopting renewable energy into existing national energy systems is indeed a challenging undertaking. Renewable energy developments are capital intensive and are far less economically competitive than the dominant fossil fuel-based energy sources.

In addition, renewable energy sources are often located in remote areas, rendering their connection to main power grids a significant technical hurdle. Cumbersome administrative processes arising from overlapping and uncoordinated regulations between relevant authorities further hinder renewable energy penetration. Limited access to financing and insufficient financial incentives dissuade investors from participating in renewable energy development in the region.

Apart from technical and financial barriers, renewables also have a completely different set of environmental and socioeconomic costs. Although hydropower has fuelled the power trade in the Greater Mekong Subregion, helping Thailand and Vietnam meet their rapidly growing demand for energy, hydropower dams have displaced communities, undermined the quality and quantity of the water supply, and continue to disrupt the livelihood of people living in the Mekong River Basin. In the Philippines and Indonesia, land acquisitions for geothermal developments are often met with strong opposition from local populations.

Realising the multiple challenges facing its member states in getting renewable energy on board, ASEAN has come up with a number of supporting initiatives. The ASEAN Plan of Action for Energy Cooperation (APAEC) 2010–15 envisions a collective target for renewable energy of 15 per cent of total power capacity by 2015. To this end, ASEAN has spelled out action plans directed towards enhancing awareness of renewable energy, and preparing the region as a renewable energy hub.

The ASEAN Centre for Energy (ACE) in cooperation with German Development Cooperation (GIZ) conducted a study to investigate the opportunities and challenges of renewable energy development in Southeast Asia. The resulting report noted that ASEAN member states currently stand at different stages of renewable energy market development with different sets of challenges. Thailand is the most advanced, followed by Malaysia, Indonesia, and the Philippines.

ASEAN cooperation with GIZ has also resulted in an online platform that facilitates the sharing of information, best practice, and progress updates among ASEAN member states. Such a platform is very useful to monitor renewable energy development in each country, although countries in the region need to become more proactive in supplying relevant information to the system.

Commendable initiatives taken by ASEAN must be supported by strong commitments from member states. As renewable energy is a relatively new form of energy source, governments need to establish investors’ trust in its profitability and people’s trust in its utility and reliability. Efforts to create a conducive environment for the renewable energy market are only a part of the equation, as public buy-in is equally important for supporting governments’ substantial spending on renewable energy and the ensuing infrastructure changes that come with it.

Creating an enabling environment for renewable energy investments by implementing policies, enacting reliable regulations, and simplifying administrative processes needs to take place at a national level.

When it comes to cooperation, governments need to identify priorities. Of the various recommendations made at the regional level, there are three collaborative initiatives that countries should collectively undertake to accelerate renewable energy development.

First, countries should conduct research to strengthen ASEAN’s capability to manufacture and operate renewable energy technologies and products, making them significantly cheaper. Second, innovative financing instruments and mechanisms should be established, with more secure finance better supporting the early stages of renewable energy development.

Third, ASEAN-made renewable energy products should be standardised and harmonised before the renewable energy market is fully developed, laying the groundwork for future cooperation. Getting things right from the outset, after all, will cost less than refurbishing them later. To this end, governments in the region need to stay strongly committed to renewable energy development.

Margareth Sembiring and Julius Cesar I. Trajano are energy security analysts with the Centre for Non-Traditional Security (NTS) Studies at the S. Rajaratnam School of International Studies (RSIS), Nanyang Technological University.

This article was first published here by S. Rajaratnam School of International Studies.

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ASEAN should flick the switch to renewables

Asean

ASEAN weathering the COVID-19 typhoon

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Vietnam's Prime Minister Nguyen Xuan Phuc addresses a special video conference with leaders of the Association of Southeast Asian Nations (ASEAN), on the coronavirus disease (COVID-19), in Hanoi 14 April, 2020 (Photo:Reuters/Manan Vatsyayana).

Author: Sandra Seno-Alday, Sydney University

The roughly 20 typhoons that hit Southeast Asia each year pale in comparison to the impact on the region of COVID-19 — a storm of a very different sort striking not just Southeast Asia but the world.

 

Just how badly is the COVID-19 typhoon thrashing the region? And what might the post-crisis recovery and reconstruction look like? To answer these questions, it is necessary to investigate the strengths and vulnerabilities of Southeast Asia’s pre-COVID-19 economic infrastructure.

Understanding the structure of the region’s economic house requires going back to 1967, when Southeast Asian countries decided to pledge friendship to one another under the ASEAN framework. While other integrated regions such as NAFTA and the European Union have aggressively broken down trade barriers and significantly boosted intra-regional trade, ASEAN regional economic integration has chugged along slower.

Southeast Asian countries have not viewed trade between each other as a top priority. The trade agreements in the region have been forged around suggestions for ASEAN countries to lower tariffs on intra-regional trade to within a certain range and across limited industries. This has lowered but not eliminated barriers to intra-regional trade. Consequently, a relatively significant share of Southeast Asian trade is with countries outside the region. This active extra-regional engagement has resulted in ASEAN countries’ successful integration into global value chain networks.

A historically outward-facing region, in 2010 around 75 per cent of Southeast Asian commodity imports and exports came from countries outside of ASEAN. This share of extra-regional trade nudged closer to 80 per cent in 2018. This indicates that ASEAN’s global value chain network embeddedness has deepened over time.

Around 40 per cent of ASEAN’s extra-regional trade is with the rest of Asia. From 2010 to 2018 Southeast Asian countries forged major trade relationships with four Asian countries: China, Japan, South Korea and India. Outside Asia, the United States is the region’s major trading partner. ASEAN’s trade focus on Asia’s largest markets is not surprising. Countries tend to establish trade relationships with large, geographically close, and culturally similar markets.

Fostering deep relationships with a few large markets, however, is a double-edged sword. While it has allowed ASEAN to benefit from integration in global value chains, it has also resulted in increased vulnerability to the shocks affecting its network connections.

ASEAN’s participation in global value chains has allowed it to transition from a net regional importer in 1990 to a net regional exporter in 2018. But the region’s deep embeddedness in a small and tightly-coupled network cluster of extra-regional global value chain partners has exposed it to disruption to any and all of its external partners. By contrast, ASEAN’s intra-regional trade network structure is much more loosely-coupled: a consequence of persistent intra-regional trade barriers and thus lower intra-regional trade intensity.

In the pre-COVID-19 period, ASEAN built for itself an economic house held up by just five extra-regional markets, while doing less to expand and diversify its intra-regional trade network. The data shows that ASEAN trade became increasingly concentrated in these few external markets between 2010 and 2018.

This dependence on a handful of markets does not bode well for risk and crisis management. All of the region’s major trading partners have been significantly affected by COVID-19 and this in turn is blowing the ASEAN economic house down.

What are the ways forward? The immediate task at hand is to get a better picture of the region’s position in global value chain networks and to get on top of managing its network risk exposure. Already there are red flags around the region’s food security arising from its position in food value chains. It is critical to look for ways to introduce flexibility into existing supply chains for greater agility in responding to crises.

It is also an opportune time for ASEAN to harness the technology transfer gains of global value chain participation and invest in innovation-driven diversification of products and markets. The region’s embeddedness in global value chain networks certainly places it in a strong position to readily access large export markets not just in Asia but also Europe and the Americas.

Over the longer term, ASEAN is faced with the question of whether it should seriously look…

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Asean

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