Clean energy trade in Asean has the wind beneath its wings
[SINGAPORE] Even as global energy markets face uncertainty, Asean is in a prime position to not only step up green energy production, but also trade it throughout the region.
On Monday (May 26), several South-east Asian energy players – including Singapore's Sembcorp Industries – formed a partnership to evaluate the feasibility of exporting renewable energy from Vietnam to Malaysia and Singapore via a new subsea cable.
This partnership rides on Vietnam's rich renewable energy resources, especially offshore wind power. Another tailwind is the strong demand for clean energy imports from Singapore. The city-state aims to import about 6 gigawatts (GW) of low-carbon electricity by 2035 – accounting for a third of its energy demand then.
Such projects are increasingly economical as clean power becomes cheaper. Between 2010 and 2020, the cost of wind and solar power fell by 55 per cent and 85 per cent respectively, according to a report by energy think-tank Ember. Wind and solar energy are expected to generate between 23 and 25 per cent of electricity in Asean by 2030, up from 4 per cent currently, the report estimates.
The key constraint of both wind and solar power is intermittency, due to variations in the availability of sunlight and sufficiently-strong wind. There is also the risk of curtailment, where the amount of electricity generated has to be restricted as the grid infrastructure is not sufficiently developed.
However, such constraints create a strong opportunity for the export and trade of renewable energy, as part of a broader 'Asean power grid' – a concept mooted way back in 1997, which has only begun to gain momentum more recently.
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There have been two big multilateral projects: the Laos-Thailand-Malaysia-Singapore Power Integration Project (LTMS-PIP), launched in 2022, and the Brunei-Indonesia-Malaysia-Philippines Power Integration Project (BIMP-PIP), unveiled the following year. Bilateral projects are also in the works, such as Sarawak Energy's deal for a hydropower project that could supply Singapore with 1 GW of green electricity.
'By linking national grids, countries can share clean energy resources across borders – reducing the risks of curtailments and smoothing variability from solar and wind over a wider geographic area,' said Ember in the report.
The think tank estimates that a regional grid could add another 24 GW of solar and 5.6 GW of wind capacity in Asean. This could lift the bloc's gross domestic product growth by 0.8 percentage point to 4.6 per cent, while adding 182,000 jobs.
That said, the Asean power grid can only happen with strong political will, a common set of regulations, and sufficient investments. Filling the financing gap will be especially challenging, as many investors shun regional grid projects for being too complex and requiring too much time. The current backlash against green energy – led by US President Donald Trump – and the impact on energy prices could add to investor jitters.
That said, the economics of clean energy trade in Asean are undeniable. As geopolitics cast a pall on global energy markets, an Asean power grid can not only help the region decarbonise, but also insulate against energy shocks. The onus will be on Asean governments and development finance institutions to come up with innovative financing structures that draw in investors.
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