ASEAN on the renewable energy course. Gdansk’s “Business Mixer 2024” a chance to initiate regional cooperation

By Marek Grzybowski

Hydropower, solar, wind and hydrogen will provide ASEAN countries with clean energy. By adopting an integrated regional strategy for switching to clean energy sources, ASEAN countries have the opportunity to reduce decarbonisation expenditure by USD 800 billion. This will happen if they approach the issue comprehensively and focus on cross-border energy connections, hydrogen installations and develop common energy storage infrastructure. This approach is the main conclusion of the ASEAN Interconnector Study conducted by DNV in 2024.

The conclusions from the study can be transferred to the Baltic Sea region in many cases. The expected investment boom in the area of ​​renewable energy may also be an opportunity for Polish companies interested in cooperation with this region. The “Business Mixer 2024” organised in Vietnam by the management of the Sea Port of Gdańsk is therefore a bull’s eye. It was initiated at a time when ASEAN countries are preparing for a great leap into new technologies related to the development of renewable energy. It is also worth including this aspect in the plans of meetings and discussion panels and not limiting it to Vietnam alone.
The goal of achieving net zero carbon dioxide emissions by 2050 is accepted by virtually all ASEAN member states. However, most decarbonization efforts have so far been limited to actions within individual national borders.

DNV’s 2024 ASEAN Interconnector Study delves into critical aspects of decarbonization across the Association of Southeast Asian Nations (ASEAN) member states. This comprehensive study examines how concerted efforts across Southeast Asian countries can significantly reduce costs and accelerate the transition to cleaner energy sources.

“Southeast Asian countries face multiple and geographically diverse challenges in decarbonizing their energy systems across a vast region characterized by dramatic differences in energy and financial resources, energy infrastructure, and regulatory policies,” notes Brice Le Gallo, Vice President & Regional Director, APAC, Energy Systems, DNV, in the introduction to the study.

The world’s fourth largest energy consumer

The Association of Southeast Asian Nations (ASEAN) is the world’s fourth largest energy consumer, with a growing population and an economy whose energy mix is ​​still dominated by fossil fuels, DNV experts note. They emphasize that Southeast Asia is one of the regions most exposed to climate change.

The region is particularly affected by the increase in average temperatures and the growing number of extreme weather events. The energy sector in this region is an industry that contributes to high carbon dioxide emissions.

Technological progress is being introduced slowly and as a result “this sector will not see significant and lasting reductions in annual carbon dioxide emissions.” And this will be the case in the near future. However, the longer term outlook is more optimistic, as ASEAN countries have recognized the threat and shown a strong commitment to the development of renewable energy.

The countries of the region have also matured to work together to increase the share of renewable energy in the energy mix. What’s more, most of them have committed to achieving net zero emissions by 2050. DNV emphasizes that this is a significant challenge for these countries because “However, the transition to a clean energy economy is a huge challenge, as it involves not only the adoption of new technologies, but also changes in the way the current system is designed and operated.”

“The Association of Southeast Asian Nations (ASEAN) is setting a course for a carbon-neutral future, and ASEAN economic ministers today endorsed the visionary ASEAN Carbon Neutrality Strategy,” informed the ASEAN communique after the meeting of economic ministers, setting a fast track for joint work on the development of green energy.

The strategy refers directly to the “Paris Agreement” and aims to complement the national initiatives of ASEAN member states with supranational actions. Importantly, ASEAN countries are not alone. This ambitious strategy will be implemented with support from the Australia for ASEAN Futures (AUS4ASEAN) initiative.

ASEAN governments are aware that countries in the region are particularly vulnerable to adverse climate change. Five of the world’s 20 most climate-threatened countries are located in the region. It has even been calculated that “uncontrolled climate change could reduce regional GDP by 11% by 2100 and displace 87 million people in flood-prone areas in Indonesia, Malaysia, Myanmar, Thailand and Vietnam.”

Decarbonizing the economy is not an end in itself, but is seen as a key factor in boosting economic activity and developing a growth-friendly economy. According to analysis by Boston Consulting Group, moving towards a carbon-neutral future could unlock between US$3.0 trillion and US$5.3 trillion in value-added GDP by 2050, attracting a significant amount of green investment of US$3.7 trillion to US$6.7 trillion and creating between 49 and 66 million additional jobs in the ASEAN region.

ASEAN at a turning point

Dr. Kao Kim Hourn, Secretary-General of ASEAN, emphasized that “ASEAN has reached a turning point where decarbonization is crucial to the region’s continued economic growth. The ASEAN Carbon Neutrality Strategy will be the springboard to drive our green transformation while unlocking enormous economic potential for ASEAN citizens.”

It also emphasizes that “the economic benefits of carbon neutrality will accrue across all ASEAN member states.” In addition, Cambodia, Lao People’s Democratic Republic, Myanmar, and Vietnam are currently projected to see the largest increases, with GDP growth of between 9% and 12% by the end of the century. Middle-income countries such as Indonesia, Malaysia, the Philippines, and Thailand will see growth of 4% to 7%. High-income countries such as Singapore and Brunei will see more modest growth of 1% to 2%.

ASEAN faces a variety of challenges. To achieve its carbon neutrality goals, the region must close a 2.6 gigatonne (GT) CO2 emissions gap. The region already has one of the lowest CO2 emissions per capita in the world. At just 3.9 tons of CO2 (tCO2) per person, it is below the global average of 4.8 tons of CO2. It should be emphasized that this is much less than the emissions in China (7.1 tCO2) and less than a quarter of those in the USA (14.0 tCO2).

The decarbonization program has drawn attention to ASEAN countries as attractive places and an attractive investment environment. And therefore also an attractive environment for the activity of banks and consulting companies. The scale is to be impressive, because the planned global investments in ASEAN are to increase with an average annual growth rate of 12% in the years 2023-2030. This will double the total capital from 962 billion US dollars in 2023 to over 2.1 trillion US dollars by 2030, predict ASEAN economic ministers.

The diverse economies and markets of the region are an opportunity to use the synergy effect in implementing a common development strategy. ASEAN countries with rich hydropower resources can provide significant amounts of zero-emission energy. Some countries have strong raw material resources (mainly nickel) necessary for the production of batteries. Other countries have a solid foundation for joining the development of the automotive industry. There is talk of producing electric cars. But this may be the first step in the production of cars that also use fuel cells.

ASEAN Economic Ministers emphasize that “The ASEAN Carbon Neutrality Strategy aims to leverage these synergies, committing to developing green industries, increasing ASEAN interoperability, embedding globally credible standards, and unlocking green opportunities. The strategy will reduce emissions in the energy, industrial processes, agriculture, and other sectors.”

Regional energy synergy

Regional cooperation based on cross-border connections will bring economic benefits to the region by reducing overall resource and land requirements, emphasizes DNV in the “ASEAN Interconnector Study,” and shows on the map that “regional cooperation with full resource sharing through cross-border interconnectors will bring significant changes to the ASEAN energy landscape.” The large capacity of interconnectors enables the transport of significant amounts of energy from countries with high renewable potential to countries with lower production levels or lower quality resources.

Countries with diverse solar, wind and hydro resources, such as Thailand and Lao People’s Democratic Republic, will be the drivers of the transition as large-scale exporters of clean energy. Energy and hydrogen will start flowing from north to south and from west to east to countries with less diverse or lower quality resources. Research results from DNV and its partners suggest that an energy transition with regional exploitation from fossil fuels to renewables in the region could reduce the required total installed solar capacity by up to 600 GW (20%) by 2050 compared to an individual approach where each country does not take regional connections into account.

In addition, the region would need 1.2 TWh less electricity storage and 16 TWh less hydrogen storage. One of the biggest benefits is that the need for hydrogen storage can be reduced by 24% and 58%, respectively, under moderate interconnection and regional cooperation, compared to individual approaches. Regional cooperation also reduces the area required for Southeast Asia’s energy transition by 13%, mainly due to the reduction in solar capacity needed for a fully interconnected ASEAN.

Eight Strategies

ASEN Economic Ministers have outlined eight strategies where regional cooperation is most beneficial in complementing ASEAN Member States’ national initiatives. The strategic actions include:

– accelerating green value chain integration,
– promoting regional circular economy supply chains,
– connecting green infrastructure and domestic markets,
– strengthening interoperable carbon markets,
– supporting credible and common standards,
– attracting and deploying green capital,
– promoting the development of green talent and mobility,
– offering sharing of best green practices.

According to DNV and partner calculations, “The main trade-off for the economic benefits is that the energy transition would require significant additional electricity interconnection capacity of up to 3.57 million kilometres of cable. This represents around 29% of the additional global demand for transmission cables compared to what was forecasted in DNV’s Energy Transition Forecast.

Regional cooperation offers the lowest total cost of the three ASEAN energy transition scenarios. Around US$0.8 trillion (around 11%) can be shaved off the total net present cost of decarbonizing ASEAN by 2050. This is significantly less than an approach where each country pursues decarbonization individually, without using a regionally connected grid.

In absolute terms, the relative net present cost (NPC) of decarbonizing a fully connected ASEAN region is US$6.4 trillion compared to US$7.2 trillion for the individual approach scenario.

The Energy Transition Strategy was endorsed by the ASEAN Economic Community Council (AECC) at the 43rd ASEAN Summit in September 2023. The leaders stated that they reviewed ASEAN’s progress and reaffirmed their commitment to further strengthening ASEAN as a strong and responsive organization, equipped with enhanced capacities and institutional effectiveness to meet today’s challenges and remain relevant to its citizens, the region and the world, “while continuing to serve as the epicenter of growth and prosperity for the region and beyond.” Among other goals, they also decided to cooperate in the development of green energy.