The Asia-Pacific region needs to accelerate the deployment of mature technologies, support emerging climate solutions and scale up finance for the energy transition in order to stay on track for the well below 2°C of global warming goal of the Paris Agreement. So says BNEF’s recent Asia Pacific’s Energy Transition Outlook report.

The study, which draws on insights from BNEF’s broader New Energy Outlook 2024, focuses on six key markets in the region: China, India, Japan, South Korea, Indonesia and Vietnam. It explores two key scenarios: the ‘Economic Transition Scenario (ETS)’ and the ‘Net Zero Scenario (NZS)’. Both scenarios provide a roadmap for how the region’s energy systems could evolve, but they present starkly different timelines and levels of ambition regarding decarbonisation.

Under the ETS, BNEF models a future where only commercially available technologies are deployed without significant new policy shifts. In this scenario, many climate targets are missed. The NZS, however, envisions a pathway where the region achieves net zero emissions by 2050, relying heavily on accelerated deployment of renewables, energy storage, and electric vehicles (EVs), alongside emerging technologies like hydrogen and carbon capture.

Growing economies, growing challenges

Home to some of the fastest-growing economies, the Asia-Pacific region faces a particularly complex balancing act between economic growth, energy security and decarbonisation. BNEF’s report underscores that while low-carbon solutions such as solar, wind and EVs are already cost-competitive and represent significant economic opportunities, achieving the region’s climate goals will require tripling investment in clean energy technologies between 2024 and 2030. The annual investment needs to rise to $2.3tn over this period to maintain progress.

Jon Moore, CEO, BNEF, identifies carbon markets as a critical funding mechanism that could help Asia-Pacific nations finance early-stage decarbonisation projects. By pricing carbon emissions, these markets could accelerate the phase-out of coal-fired power plants and provide a vital source of capital for emerging technologies, including hydrogen and carbon capture and storage (CCS). However, he cautions that many emerging technologies face substantial financing hurdles due to uncertainties around performance, supply chains and profitability. ‘Collaboration with development institutions and international banks will be necessary to mobilise the capital needed for these projects,’ he notes.

According to the report, only a handful of technologies – such as EVs, renewable power, energy storage and power grids – are considered mature and commercially-scalable today. These technologies are essential to the region’s decarbonisation efforts, but they will need to be rapidly expanded over the next decade to stay on track for net zero.

By contrast, technologies like nuclear power, carbon capture and storage (CCS), hydrogen, sustainable aviation fuels (SAF) and heat pumps are not yet cost-competitive or have not been deployed at the scale required to achieve the region’s ambitious climate goals, BNEF concludes. The report stresses that achieving long-term climate objectives depend on commercialising these technologies within the next 10 years.

ASEAN demand outpacing renewable growth  

Meanwhile, separate analysis from Ember sheds light on the energy challenges faced by the 10 member states in The Association of Southeast Asian Nations (ASEAN: Brunei Darussalam, Cambodia, Indonesia, Lao PDR, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam).

In 2023, the region saw electricity demand rise by 3.6%, an increase entirely met by fossil fuels, in particular coal, according to the energy think tank.

The report forecasts that ASEAN’s electricity demand will surge by 41% by 2030. To keep pace, renewable energy capacity – especially solar and wind – must grow three to five times by 2035. However, despite the falling costs of solar and wind, the region added only 2.7 TWh of solar capacity in 2023, far below what is needed to decarbonise the power sector.

With renewable costs falling, the region has the opportunity to rapidly accelerate renewables, particularly solar and wind, to meet rising demand and climate targets, the report suggests. One promising solution lies in the complementary nature of solar and wind resources. Solar generation peaks during midday, while wind power is often stronger at night in some areas, allowing for more consistent power generation when paired together.

Regional interconnections  

Interconnected energy grids across the ASEAN region are a key strategy for addressing energy shortfalls and balancing renewable supply and demand. According to Ember, eight out of 18 major interconnection projects have been completed, adding 7.7 GW of cross-border transmission capacity as of July 2023. The Lao PDR-Thailand-Malaysia-Singapore power integration project (LTMS-PIP), which allows Lao PDR to export hydropower to its neighbours, marks a milestone in regional cooperation, says the report. It also notes that wind generation from Lao PDR could further complement solar in Malaysia and Singapore, creating a synergistic effect that optimises renewable energy use across borders.

Recent advances in power purchase agreements, electricity trading and carbon markets in Vietnam, Malaysia and Thailand could also drive growth, suggests the report.

The report also finds that bioenergy is nearly four times more expensive than hydro in several ASEAN countries. Bioenergy costs range from $59–98/MWh in Indonesia, Malaysia and Thailand. Meanwhile, hydro costs around $25/MWh in Lao PDR, while solar and wind offer competitive alternatives, with prices between $43–73/MWh across Vietnam, Thailand and the Philippines.

However, despite adding 0.5 GW in new capacity, hydro’s 21 TWh decline in generation from 2022 to 2023 due to seasonal climate variations highlights the need for a more diversified clean energy mix, notes Ember. ‘Falling solar and wind costs, with price drops of 55–81% for solar and 35–53% for wind between 2012 and 2024, present viable options for diversifying ASEAN’s renewables landscape,’ it says.

Looking ahead, further development of clean energy technologies such as battery storage, smart grids and regional energy trading mechanisms will be essential to ASEAN’s energy transition, concludes the report.