How Is the Asian Region Leading the Renewable Energy Transition?

Last month, EY reported that there is a massive renewable energy potential in the Asian region as East Asian markets are fuelling renewable development. The three largest Northeast Asian economies – Japan, South Korea and China – currently championing advanced technologies, are expected to lead the transition towards green and clean energy in the region as they develop new and efficient low-carbon technologies. EY notes that the Southeast Asian region, including markets such as Singapore, Vietnam, Thailand and Malaysia, are set to follow a similar path to the north-eastern countries as their energy demands increase.

Securing the energy supply has become a prime concern for many countries. The rapid industrialization and urbanization of the region has contributed to its outstanding economic growth rates and rising living standards. Yet, this progress has also led to an increase in the global demand for energy. According to the International Renewable Energy Agency (IRENA), Asia and the Pacific region are already accounting for more than half of the world’s energy consumption and this is only expected to grow in the next few years, especially as countries recover economically from the COVID-19 pandemic.

In the last couple of years, there has been a visible global trend towards sustainable and environmentally friendly practices, which have facilitated the participation of renewable energy in the energy mix. Nonetheless, achieving environmental security sometimes conflicts with economic objectives, particularly in developing nations, who are still heavily reliant on fossil fuels to power their economies. As we transition towards low-carbon economies, governments all over the world will need to prepare to tackle the many obstacles on the way.

The three largest East Asian economies have declared net-zero carbon emissions targets prior to climate change negotiations in November 2021. Both South Korea and Japan submitted their 2050 carbon neutrality strategies. They plan to stop financing new coal-fired power plant constructions and shut down plants that are not operating efficiently. China has also pledged to become carbon neutral by 2060 and aims for non-fossil fuels to account for 70% to 80% of its energy mix. The PRC plans to develop a circular economy using advanced technologies. Today, it has positioned itself as “a leading manufacturer of green technologies, from electric vehicles to solar panels to wind turbines”. Although it has received much criticism for its unsatisfactory emissions target, being the largest carbon emitter in the world, China is expected to be a great influencer in the global low-carbon energy transition. There is a lot of expertise and experience to be shared with the neighbouring southern countries, particularly when it comes to hydrogen fuel. Japan is currently pioneering the renewable hydrogen economy, having established a hydrogen strategy that aims to reduce hydrogen costs to the same level of conventional energy by integrating policies across ministries. Hong Kong’s local electricity generator CLP Holdings plans to upgrade its natural gas power plants to 100% hydrogen-fired electricity by 2030.

Although East Asia has announced promising targets to reduce emissions, these countries are still heavily reliant on fossil fuels, accounting not only for carbon power plants within their borders but also those financed across Asia. For instance, in 2018, renewable energy made up just less than 4% of South Korea’s energy mix. China, on the other hand, would have to shut down approximately 600 coal-fired power plants in the next 10 years to meet its net-zero target by 2060. In times of economic crisis, countries might favour fossil fuels over renewables to recover, as they are cheaper and faster at meeting the growing energy demands. This view is shared by the Chinese Ministry of Ecology and Environment who argued that although China pledges to cut carbon at home, it cannot simply “stop supporting coal-fired electricity plants in developing countries…combating climate change is also about letting people in developing countries live good lives”.

In the Southeast, governments are facing similar international pressure to become carbon neutral by 2050. But unlike the northern neighbours, Southeast Asia has a geographic advantage in terms of natural resource endowments to produce renewable energy. However, this also means that the region is more exposed to environmental catastrophes; most of them are in areas that have at least 12 hours of sunshine, making them suitable for solar electrification. Vietnam, Laos, Cambodia, and Myanmar have large scale hydropower potentials due to the large number of rivers flowing through these countries. Despite the huge potential for developing sustainable energy sources, only 15% of the energy demand comes from renewable energy sources.

These economies currently face various challenges to developing renewables. Firstly, around 10% of ASEAN’s population does not have access to electricity, particularly in rural areas. This is due to two reasons. One being that some countries like Indonesia are archipelagic in nature, resulting in fragmented electricity grids which make it difficult to deploy renewable energy. Second, there is limited infrastructure for renewable energy sources due to the lack of investment and frameworks to regulate the development of renewable energy. In general, financial institutions and private investors favour fossil fuel projects rather than green projects as the latter are associated with higher risks due to the young nature of these technologies and their lower rate of return. Amid the health and economic crisis, Southeast Asia finds itself in a thorny situation: meeting its rising energy demands whilst mitigating the adverse impacts of climate change.

Although the region is making progress in addressing energy security by diversifying their energy mix, there is a growing urgency to decarbonise economies around the world should we commit to limiting global warming to below 2 degrees Celsius. This is particularly worrying when the global consumption of energy is predicted to grow by nearly 50% between 2018 and 2050. The research and analysis director of the HS Markit believes countries must “aggressively decarbonize their power and industrial sectors” if the new emission targets are to be met by 2050.

Eradicating the use of fossil fuels does not seem viable when economic revival has become a priority for many countries. Nevertheless, the global pandemic has also presented a unique opportunity for authorities to structurally reform the energy sector and at the same time “achieve twin goals of economic recovery and climate resilience through emissions reduction”. In fact, the ERIA’s Energy Outlook 2020 reported that even though fossil fuels will remain the primary source of power up until 2050, more renewables and clean sources, such as hydrogen, will be present in the energy mix composition of ASEAN countries, including Australia, China, India, Japan, the Republic of Korea, New Zealand, and The United States.

One thing is for certain, governments will have to design long-term and tangible strategic plans that incorporate energy efficiency measures, renewable energy policies, technology development policies, and energy supply security policies. Furthermore, the quality and scope of national action plans could improve significantly if regional collaboration and international cooperation regarding energy efficiency and renewable energy increases between countries. Should East Asia and Southeast Asia remain committed to their strategies, the global level of CO2 emissions could reduce significantly. Ultimately, finding a balance between economic recovery, environmental protection and energy security will ensure the path towards a low-carbon economic transition.

Written by Sophie Hassam

Sophie Hassam is a columnist at DecipherGrey.