Piles of imported coal are seen at a coal terminal of a port in Lianyungang, Jiangsu province, China July 26, 2018. (Reuters Photo/Stringer)

Southeast Asia's Renewables Held Back by Policy Inaction: Irena


NOVEMBER 03, 2018

Singapore. Southeast Asia is a potential hotspot for renewable energy, yet the region has not met expectations because it lacks policy frameworks that would encourage investment, the International Renewable Energy Agency (Irena) told Reuters.

Renewables across the world have typically been boosted by policies like price subsidies and guaranteed grid takeoff.

In Southeast Asia, though, barring some exceptions such as in Thailand, support for renewables has been smaller, and the region lags far behind others in renewable output despite its potential, especially for solar, geothermal and wind power.

One of the factors holding back renewables is the region's abundance of thermal coal, of which Indonesia is the world's biggest exporter.

"Some of the ministers here believe coal is one of their cheaper alternatives," Irena's director general Adnan Amin told the Reuters Commodity Summit interview series this week.

Glencore, the world's biggest thermal coal exporting company, said on Thursday that "Southeast Asia will drive future economic growth and demand for coal."

The miner said "coal will account for 40 percent of energy growth" in Southeast Asia by 2040 despite the emergence of renewables in the region.

Catching Up

Global renewable capacity, excluding hydro, has soared from under 100,000 megawatts (MW) in 2000 to more than 1 million MW in 2017, according to Irena data.

Only a tiny portion of that has come in Southeast Asia.

Europe and North America were the first regions to seriously boost renewable energy, and today, China is the leader in the sector, with India catching up.

Now, there are also efforts underway in Southeast Asia: the Association of Southeast Asian Nations (Asean) plans to generate 23 percent of its primary energy needs from renewables by 2025, up from just over 10 percent now.

To help achieve that, Asean and Irena signed an agreement this week to boost renewable investment and deployment.

"I think the adoption of the 23 percent target is a very good step, but that needs to be translated now into policy actions," said Amin.

"Over the next decade, a total of $290 billion will have to be invested for Southeast Asia to reach its targets, a ten-fold increase on the annual investments we're seeing today," Amin said, speaking to Reuters while attending Singapore's International Energy Week (SIEW).

Amin said renewable investment, including in Southeast Asia, would receive a boost from "dramatic reductions in the cost of renewables."

Solar panel prices have crashed to under 50 cents per watt of electricity, from around $70 per watt in 1980 as technology and manufacturing efficiency have improved.

"Solar is very dynamic right now, and is going to take the largest share of investments ... We're seeing over the next decade another 50-60 percent decrease in costs, which will bring electricity cost very close to zero," Amin said.

At the same time, Amin said capital markets were starting to price carbon risks, raising the cost of fossil fuels.

"Financial institutions have started to bail out from financing coal, so, cost of investments in coal will rise while cost of investments in renewables are decreasing," Amin said.

The latest major bank to pull out of coal financing was Britain's Standard Chartered in September.

Renewable investments have soared over the past decade, though, reaching almost $1 trillion since 2015, Irena said.

Amin said solar would also start to compete with natural gas, an industry that has so far seen itself as complementary to intermittent renewables.

"We see the momentum on renewables going so fast that they've become competitive with gas power generation. Increasingly as people do the math about investments ... the renewables will start to play a bigger and bigger role."