There is no doubt that the Association of Southeast Asian Nations (ASEAN) represents a growing region. It is growing from a demographic point of view, with a population that has nearly doubled in the last thirty years from 350 million to 650 million. It is growing from an economic point of view, with trade in goods reaching a value of USD 2.8 trillion, while foreign direct investments rose from USD 41.9 billion in 2005 to USD 154.7 billion in 2018. These two trends form the basis of the different directions taken on the energy issue in Southeast Asia, with new opportunities and challenges that have—and will continue to have—an impact not only on the region, but also on the entire planet. Although effective energy demand is still low compared to the global average, what is particularly interesting is the time span in which this demand has increased for ASEAN and the effects it could have on future political and economic decisions. Greater industrial output, expansion of population centers and an increase in the quality of life (from access to safe and high-quality energy sources to the most sophisticated home appliances) are just some of the elements that increase the energy demand in ASEAN countries. The response to this is increasingly immediate needs, which fall mainly under the term “energy security.” Energy security plays a leading role in the development of modern economies and societies, given that access to energy resources has become the cornerstone of most human activities. Traditional research on energy security usually revolves around nations and their efforts to ensure the required amount of energy at an appropriate price. Energy resources are also a commodity exchanged between countries and often play a key role in shaping diplomatic and commercial relations. Precisely to meet these needs, the same group of the ten nations of Southeast Asia has decided to establish a mechanism for dialog and cooperation called the ASEAN Centre for Energy (ACE).
A heterogeneous group
In the nations of the ASEAN group, energy demand has grown by 80 percent since the year 2000, but problems have also increased. The first of these problems concerns continuous access to energy sources, risk free and as cheap as possible for the member states. The geography of the ASEAN countries is extremely varied and the distribution of population is uneven: for some member states, the resources are abundant and not sufficiently exploited, in others creating a widespread basic electricity grid is still a challenge. For example, Indonesia produces 835,000 barrels of oil per day, while in Cambodia only 17.4 percent of the population has access to stable and safe sources of energy for cooking. The second factor is the nature of the energy mix, i.e., the breakdown of a country's energy demand. A heavy dependence on imports can be a serious threat to national energy security. Furthermore, the type of energy used can play a decisive role in social and economic areas, in terms of public spending on infrastructure and supplies, as well as its impact on the environment and health. Coal, for example, has been the main choice for years because it is abundant and affordable, while green technologies until a few years ago seemed inaccessible because of the huge initial investments which are often described as “sunk costs.”
Growing sectors and trends
The sectors most affected by energy demand are those that are growing the fastest. Where there is rapid and massive development, reports the International Energy Agency (IEA), the demand for access to greater quantities of electricity is growing dramatically. Industry, transport and construction are among the critical variables in ASEAN energy consumption trends. The most energy-intensive industry (predicted to grow by 70 percent) is manufacturing, with peaks in demand especially in electronics, automotive, chemicals, steel and iron. Transport, on the other hand, now accounts for 50 percent of the energy demand of the ten Southeast Asian countries. According to the latest data, by 2040, ASEAN will reach 200 million tons of oil equivalent (Mtoe), slightly less than Europe, which today requires 289 Mtoe. Finally, the construction sector will grow by 35 percent, and in this case, energy demand will be influenced above all by purchases of household appliances and air conditioners, the latter linked to the history of climate change in the region.
The energy mix today and tomorrow
Fossil fuels make up over half of the ASEAN energy mix, with fluctuations reaching 80 percent of the total in some years. The percentage occupied by renewables is still low, but, considering the current pro-green energy policies, it could reach at least 40 percent of the energy mix by 2040. Coal consumption doubled between 2000 and 2018 and is now 40 percent of the total source used for the production of electricity. Consumption will continue to grow over the next twenty years, thanks to investments in technologies for what is being called “green coal.” The same is true for oil, which will follow a similar trend. In this case, however, supply is affected by the scarcity of local resources and the lack of stockholding capacity. Explorations continue in the search for new fields, such as in Cambodia and Myanmar. Gas is also rapidly assuming pride of place in the energy mix of ASEAN countries; demand is estimated to grow by 85 percent by 2040 and, according to the IEA, it could balance dependence on coal and oil, especially thanks to the portability of liquefied natural gas (LNG).
The issue of renewable energies is more complex. In addition to global climate agreements, the ASEAN countries have also entered the global discourse on energy transition, albeit often starting from a “blank slate” in terms of infrastructure and technical capabilities. Today the share of renewables for the energy production of the whole group is 24 percent (of which 18 percent is hydropower) and, according to estimates, it will grow slowly, much below the levels reached by China, India and other members of the group such as Vietnam. Wind and solar energy have an opportunity to grow given the decrease in the market price of raw materials. Energy derived from biomass is a separate topic. Organic material has always been an important source for families in the form of wood and raw waste from agricultural production, but the discourse now extends to more sophisticated sources such as biofuels, biomass and biogas. Indonesia and Malaysia, in particular, are major producers of biofuels, which are cheap to produce relative to their efficiency. Today, the role of biofuels is brought into question due to the environmental impact of the crops used to produce them, as they are still planted on land reclaimed using “slash and burn,” which destroys the habitat of wildlife and generates carbon dioxide that often affects neighboring countries in the form of toxic fumes. The drive toward renewable energy in the official statements of the ASEAN countries remains positive and promises to cover 70 percent of the energy mix. This is why the nuclear option makes an appearance. The idea of focusing on nuclear energy as an alternative to the zero emissions goal is very attractive within the ASEAN energy cooperation scheme. Today, none of the member countries has reactors in operation, with the exception of the Philippines, which has one completed plant that has never been put into operation. However, the optimism toward the high efficiency of nuclear energy is dampened by the initial costs for plant construction, as well as by the challenges related to public acceptance of nuclear power and the level of technical knowledge available in each country. This is why, in March 2021, ACE signed a Memorandum of Understanding with the World Nuclear Association (WNA) to cooperate at group level on the issue.
Energy for the ASEAN of tomorrow
Given its fundamental role and the mobilization of resources it requires, energy has become one of the priority issues on the ASEAN agenda. In this area, cooperation and dialog can play a decisive role in the development of the ten countries of Southeast Asia. To improve energy security, the IEA and ACE agree that networking can serve to lay the foundations for a secure and economically sustainable energy supply system. The proposals on the table include regional import schemes where fossil fuel storage and transport capacity is lacking. Work on the distribution of electricity is also of primary importance, and it already counts for more than half of energy investments. It is also important to specify that in Southeast Asia, the goal is not only to reach all families, but also to prevent and limit damage: Asia-Pacific is among the regions most exposed to natural disasters, with UN forecasts estimating at least USD 160 billion in losses per year by 2030.
The author: Sabrina Moles
Expert in China and Asian geopolitics, with particular focus on environmental issues. She is part of the team of collaborators at the Associazione Italia ASEAN, for which she mainly covers energy and sustainability. Editor of China Files, for which she writes the column Sustainalytics, she writes for various Italian newspapers on Asian issues.