SOUTHEAST ASIA has been making substantial progress in clean and renewable energy even in the face of rising demand for electricity and pressures on cost, a new study said.
In its World Energy Markets Observatory, consulting firm Capgemini said governments in the region have been stepping up efforts to expand their renewable energy capabilities in the past few years, while boosting regional coordination and technical expertise.
This is among the key findings of the annual report of Capgemini, which also provides technology services and digital transformation.
It said the Philippines is aiming to become Southeast Asia’s liquefied natural gas (LNG) hub given its geographical advantage in the region. State-owned Philippine National Oil Co. (PNOC) has been tasked to put up an LNG terminal, which is also proposed to have a power plant with a minimum capacity of 200 megawatts.
“Although largely controlled by monopolies, Southeast Asia’s energy markets are now on the cusp of transformation. Rising energy demand is driving investment into innovative ways to generate power in a socially, economically, and environmentally sustainable manner,” said Gaurav Modi, Capgemini managing director for non-financial services in Southeast Asia and Hong Kong, to introduce the report.
“More must be done in terms of public-private partnerships to leverage and seek new opportunities in renewable power sources and grid optimization, predictive asset management, and enhancing business models,” he added.
The report said Southeast Asia is in an uphill battle against climate change, with its energy demand often outpacing growth in sustainable energy.
It cited a projection made by the International Energy Agency that pointed to energy demand in the region climbing by more than 80% between 2015 and 2040, leaving governments with the daunting task of producing enough sustainable energy.
“This is exacerbated by pragmatic energy policies favored by many governments, which facilitate the rising demand for coal amid its abundance and relative affordability,” it said.
Another key finding is that surging energy demand and mounting interest in sustainability across Southeast Asia is driving policy makers to review their energy mix, turn to deregulation and cross-border collaboration.
Capgemini said clean energy and climate have become a key agenda items for regional economies, resulting in a rising focus on transition to low carbon energy sources.
It said significant investment is expected in developing renewable energy in the region, with around $4.1 billion spent in 2016 on building capabilities in research and development, as well as new renewable energy and energy management technology.
“Governments in the region are catalyzing investment in the region’s renewable energy space,” it said.
In the Philippines, for instance, the Renewable Energy Act offered renewable energy projects incentives, including exemption from paying duties, the granting of income tax holiday and zero percent value-added tax rate.
“Southeast Asia countries are also moving towards deregulation of the energy market, transforming from the traditional single-buyer, monolithic structure with fixed tariffs, to an open market offering modular, configurable and flexible billing systems,” it said.
It also cited the Philippines’ passage of the Electric Power Industry Reform Act (EPIRA), which deregulated the power sector and led to the privatization of the assets of the National Power Corp.
“Similar to more mature markets like the US and Europe, increasingly more and more countries are collaborating with one another to meet energy security needs and address the challenges of individual countries. The Singapore-Malaysia interconnection, for instance, has connected both countries aimed at emergency security and peak demand support,” it said.
Capgemini said it also found early adopters of digitization and smart technology, such as the Philippines, are leading the disruption of the industry by leveraging Internet of Things and smart grid transformations to reap the evolving market dynamics.
“The accelerated pace of technological change is disrupting the power industry, especially in Singapore, the Philippines, and Vietnam. Cloud adoption in Southeast Asia is expected to continue bringing various systems together, such as infrastructure supporting modular or distributed topology and asset management, at scale and at an affordable cost,” it said. — Victor V. Saulon