ASEAN was established in 1967 and aims to promote security, economic growth and socio-cultural development across its 10 member states: Brunei Darussalam, Cambodia, Indonesia, Lao PDR, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam.

According to World Bank data, the ASEAN region has a population of 685 million, and this figure is predicted to rise to nearly 788 million by 2050. The region has a GDP of more than $3.5tn, which is predicted to triple by 2050. By 2030 it will be the world’s fourth largest economy.

These factors will continue driving growth in energy consumption, which, according to data from the Energy Institute Statistical Review of World Energy is 2.5 times higher than in the year 2000 and has grown on average 3.5%/y over the past decade. ASEAN accounted for 11% of Asia-Pacific’s total energy demand in 2023, with Indonesia accounting for the highest proportion of this figure at 31%.

The region’s carbon emissions have also been growing at 3% per year on average over the past two decades, surpassing the global average of 1%. Brunei Darussalam, Cambodia, Lao PDR, Malaysia, Singapore and Vietnam have committed to net zero emissions goals by 2050; Indonesia by 2060; and Thailand by 2065. Myanmar has a partial net zero emissions target from land use, land use change and forestry by 2040. The Philippines is the only country not to have set a net zero target.

ASEAN accounted for 11% of Asia-Pacific’s total energy demand in 2023, with Indonesia accounting for the highest proportion of this figure at 31%. The region’s carbon emissions have also been growing at 3%/y on average in the over the past two decades, surpassing the global average of 1%.

Projections in the ASEAN Centre for Energy’s 8th ASEAN Energy Outlook show an increase in energy related greenhouse gas emissions by 2050 under the ASEAN baseline and ASEAN Member State Targets scenarios.

It is imperative, therefore, that ASEAN accelerate towards a just energy transition, but its member countries face challenges in balancing economic development and growth with energy security and access, and environmental sustainability.

What are the main decarbonisation challenges for ASEAN?  
ASEAN’s energy mix is dominated by fossil fuels, at around 80%; the carbon-heavy mix is entrenched in the region. From 2022–2023 ASEAN members Singapore and Vietnam had the largest increases in oil consumption, both with a growth of 12.2%, and Vietnam’s coal consumption grew by 22.2%. Many coal plants in ASEAN are relatively new and have received investments recently, so there is limited funding directed towards their phase-out. Additionally, power purchase agreements will likely prolong the operation of coal-fired power plants, as will the need for energy security among these developing countries. They are likely to prioritise the most affordable options to foster economic growth.

ASEAN’s renewable energy demand has been growing at an average rate of 8.3%/y over the past decade and currently makes up 14.4% of the region’s energy mix. However, their huge potential remains largely untapped. ASEAN aims to achieve 23% of its total primary energy from renewable sources and renewable energy constituting 35% of its installed power capacity by 2025.

Due to the tropical climate, the dominant source of renewable energy in ASEAN is hydroelectricity. It has a critical role in helping ASEAN achieve their net zero targets. Vietnam is the third largest producer of hydroelectricity in Asia (after China, 1,226 TWh, and India, 149.2 TWh) with an output of 80.9 TWh in 2023. According to the 2024 World Hydropower Outlook, the Philippines is planning to install a 800 MW pumped storage facility in Laguna, Thailand plans to have 3 GW of hydropower by 2037 and Indonesia plans to have 72 GW by 2070.

Over the past decade, solar and wind power have been growing at around 39%/y and 43%/y respectively. But as of a 2022 report from think tank Ember, more than 99% of ASEAN’s solar and wind energy potential remained untapped.

The scaling-up of renewables, along with improved energy efficiency and electrification, could help towards meeting rising energy demand in an affordable manner. ASEAN countries face ever-increasing oil and gas import bills, which by 2030 could reach over 5% of GDP, according to the International Energy Agency’s (IEA) Southeast Asia Energy Outlook (2022).

There will also be significant disruptions to job security, particularly in countries such as Vietnam and Indonesia that rely heavily on coal, as they move towards renewables. However, estimates indicate that by 2050, approximately 5.5 million jobs will be created in the ASEAN region solely within the renewable energy sector. That could help offset the number lost in the fossil fuel sector.

Fig 1: Key statistics for ASEAN countries
Source: World Bank for population and GDP; rest from Energy Institute Statistical Review of World Energy 2024
 

Infrastructure and accessibility challenges 
The region’s infrastructure requires significant development and modernisation to facilitate the expansion of renewable energy. Upgrading power grids and implementing energy storage systems are essential to manage the intermittent output from wind and solar sources. 

As of October 2023, all ASEAN countries bar Brunei Darussalam, Cambodia, Lao PDR and Myanmar had established smart grid roadmaps to integrate more renewable energy. However, implementation faces challenges including lack of sufficient cybersecurity and means of financing the capital cost of the plant and equipment required. Additionally, more cross-border grid infrastructure is needed to harness the potential of clean energy across different regions.

As of 2020, 3.4 million households in ASEAN had no access to electricity, due to factors such as location of rural and island communities, lack of power infrastructure and energy affordability, according to the 8th ASEAN Energy Outlook. Myanmar had the lowest electrification rate at 72.5% of households, followed by Cambodia (88.4%), Lao PDR (95.3%), Philippines (96.2%), Indonesia (99.6%). Brunei Darussalam, Malaysia, Singapore, Thailand and Vietnam have all achieved 100%. 2030 is the target for all nations to reach 100% electrification. Many mini-grid and rural off-grid projects are helping improve access to electricity.

Financial challenges 
It is predicted that $200bn/y will be needed until 2030 for ASEAN to meet its COP21 renewable energy goals. Public finance and international funding will not meet these financing needs on their own. Unfortunately, private financing is difficult to attract, due to the perceived risk of low-carbon energy projects.

Blended finance – whereby public funds are strategically used to attract private sector finance – plays a key role in ASEAN countries and should be leveraged to a greater degree. Some $10.3bn of blended finance transactions in Convergence’s Historical Deals Database had targeted renewable energy projects in the ASEAN region, representing 13% of global climate blended finance, according to a report from the IEA and Imperial College Business School Centre for Climate Finance and Investment in 2023.

Political challenges 
Corruption is a serious concern in some ASEAN countries, and this leads to poor governance. Across ASEAN, regulations frequently lack alignment, and policies often contradict each other. All are substantial political hurdles to navigate, according to the World Economic Forum.

Potential solutions 
Just Energy Transition Partnerships (JETPs) are multilateral financial agreements and were launched at COP26 as a way for developed countries to help emerging countries reliant on coal accelerate the transition from fossil fuels towards clean energy. Indonesia secured the second JETP at the G20 Bali Summit in November 2022 with $20bn of finance. This was followed by Vietnam’s JETP agreement of $15.5bn in December 2022.

The Asian Development Bank’s Energy Transition Mechanism (ETM) was launched at COP26, and is a financial initiative to retire coal plants early and fund clean energy projects in Asia and the Pacific. It initially focused on pilot studies in Indonesia, Philippines and Vietnam. At the end of 2023, an agreement was reached to retire Cirebon-1, a 660 MW coal plant in Indonesia, seven years early.

The ASEAN Power Grid (APG) initiative is a component of the ASEAN Vision 2020 plan. Its goal is to create cross-border interconnections to integrate electricity systems across the region. It is anticipated that the APG will foster electricity trade, which will in turn improve energy access and meet escalating electricity demand in the region. As of April 2024, eight out of 18 key interconnections proposed under the APG had been completed, totalling 7,720 MW of cross-border transmission capacity.

ASEAN Leaders for Just Energy Transition (ASEAN JET), a group of industry and business leaders, is facilitated by the World Economic Forum. Its objective is to elevate ASEAN as a prime destination for global investments in the energy sector; advocate for policies that foster equitable growth of clean energy; engage in initiatives to accelerate the energy transition; and enable technology and knowledge transfer with international organisations. Its vision, according to the Shared Aspirations Statement published in January 2024, is to ‘accelerate a just energy transition for ASEAN countries that leaves no one behind by ensuring equitable and reliable access to clean energy for all’.

Initiatives such as these show that progress toward decarbonisation is possible even in the complex environment and tight budgetary constraints of high-growth developing economies such as ASEAN.

• Further reading: ‘Asia-Pacific countries play catch-up with renewables’. South-east Asian countries lag far behind more advanced economies when it comes to renewable energy investment on the road to net zero. A new joint report by the International Energy Agency and Imperial College London aims to persuade investors to respond to the region’s strong resource potential.
• Decarbonising the energy supply across the 10 member states of ASEAN could see a reduction of $800bn in costs through power interconnectors, hydrogen networks and energy storage infrastructure, according to new research by DNV.