The long read: Clear winds of renewables change

From pv magazine 05/2022

Siemens released its “Asia Pacific Energy Transition Readiness Index” in April, and it reported that the region scores very low on the index, at 25%. It said this represents a “solid foundation, but there is a still a long way to go.” One of the key findings was that policy settings need to be addressed. You have been very critical of public policy in support of renewable energy adoption in Southeast Asia. What’s your reaction to this score from Siemens?

The Siemens result isn’t a surprise because if you look at the actual deployment of renewable energy, then Southeast Asia is a laggard. However, I think that we can now finally detect very clear winds of change. I will take you through a quick tour of the region to explain that a bit further.

Starting with the richest country in Southeast Asia, Singapore. In October 2021, Singapore issued a request for proposal (RfP) for companies to tender to supply it with renewable energy and stated its goal that at least 30% of its electricity supply should come from renewables by 2035, while releasing expert studies that its power sector can go net zero by 2050. That is seismic change in the positioning of Singapore in terms of renewable energy. Previously, Singapore was always saying that it didn’t have space [for renewable energy], because it is a small country. Now it has moved decisively to rely on renewable energy nonetheless and issue an RfP to developers to build that capacity around Singapore and then export it to Singapore.

Vietnam, as you know, has already been at the vanguard because it achieved a record-speed deployment of renewable energy in 2019/20/21 – and Vietnam is now up there with the best of the world in terms of what it is doing on renewables.

The Philippines is also in very good shape because it has legally binding Renewable Portfolio Standard obligations imposed on the utilities. These force the utilities over time to increase their renewable energy percentage. So, when we talk about Southeast Asia, I think that Singapore, Vietnam, and the Philippines are now in line with the most progressive countries on renewable energy.

If those three are the leaders, how would you describe the laggards?

In terms of the big markets, there is Thailand, Indonesia, and Malaysia. I would say in all three cases we are seeing clear movement as well, although there are no overarching nor ambitious goals that have been announced. Indonesia has had a goal for a while, but it is not delivering on it on the ground – however, we do see things changing at the developer level across the country. In Thailand we see developers gearing up for a change in the posture of the regulator. And Malaysia has been making some progress on renewables.

We should layer into this what is going on in the gas markets. A lot of these countries are highly dependent on gas. For example, 95% of Singapore’s electricity is powered by natural gas. A large proportion [of electricity generation] is similarly dependent on gas, such as in Thailand. With gas multiplying in price by anywhere between a factor of two and 10, it is very clear that people are taking another look at the sun and the wind. I expect all of these countries to ramp up their efforts because of the volatility in the gas markets, on which a lot of them are dependent. Out of all these countries, only Indonesia is energy independent.

And while Indonesia’s energy independence is based on coal, there was a recent report from Rystad Energy that noted that gas production in the region has been declining for many years and will never recover.

That’s correct and strengthens the argument: The volatility of supply and price of natural gas is a reality all of ASEAN are aware of today and thinking through.

Something that was promising but appears to have been snuffed out, was the 1 GW solar auction in Myanmar. The recent military coup has stalled progress on the successful projects awarded in the tender. Do you have any information as to whether the solar development plans will get back on track?

I think you have to ask some of the developers who were bidding to find out more. But the short of it is that Myanmar became unbankable, and it doesn’t have anything to do with renewable energy itself, but because of political risk. But I should note that even TotalEnergies stopped investing in fossil fuels in Myanmar. And if Total, which is notorious for investing in all sorts of high-risk projects and countries, is not investing in Myanmar, then I am not sure that renewables has anything to do with that conversation at all.

Looking at Indonesia, I am aware that the International Energy Agency (IEA) has been doing a lot of work with the Indonesian government. How encouraging is that kind of work?

It is encouraging! And a lot of people have been working closely with the Indonesian government, effectively nudging them forward but also counteracting a lot of the propaganda that comes from the coal industry against renewables.

Activity on the ground doesn’t lie, and what we do see is small Indonesian renewable energy developers popping up all over the place and starting to develop deals, in a way that we were not seeing even a year ago. That is a very good sign because it means that the country is communicating that it is turning the corner on renewables. Usually, you need to watch what the locals are doing to get an inkling as to what the trend might be. That certainly was not the case a year ago. So, the IEA and everyone else working with the government helps, because it helps set the direction of travel.

In Indonesia, there is state-owned PLN, a vertically integrated utility. That is not an uncommon situation in Southeast Asia. Do you see that as being a positive or an inhibitor of renewable energy development in the region? Because we know that these kinds of utilities have a captive market and would want to maintain it.

Personally, I think it is neutral. If we contrast Vietnam with Indonesia, both have the same type of setup. You have PLN in Indonesia and EVN in Vietnam and both have monopoly positions. However, Vietnam built renewables at the fastest pace globally for a couple of years, while Indonesia did nothing. So, it is not just about the structure of your utility system for the installation of renewable energy. But there are also liberalized energy markets that work better than others. It is certainly one factor, but it is neither the leading factor nor the least important.

Much more importantly, it is about political will. What we need in Indonesia is to have the political will to make that decisive turn to renewables, so that the monopoly government owned utility gets with the program. It is not going to do it of itself and on its own for precisely the reasons that you mentioned.

And from Vietnam, can we deduce that when given the right signals in terms of the adoption of renewables, that things can move very quickly?

Yes we can. All it took in Vietnam was political will and a determination to accelerate renewable energy deployment. Then, it happened, very fast, because renewable energy is cheaper and cleaner and preferred by local communities.