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Renewables in Southeast Asia: Subsidies not required, thanks

What’s needed for renewables to take off is leadership, vision and a commitment to a better society from the Asean political class, writes Assaad Razzouk.

In October, the Intergovernmental Panel on Climate Change (IPCC) issued a clarion call for the world’s governments to increase renewable energy capacity to 85 per cent of electricity by 2050 to urgently tackle climate change. 

The United Nations body for assessing the science related to climate change said this will help contain warming to below 1.5°C.

But Southeast Asia is blatantly ignoring the IPCC’s plea.

The Association of Southeast Asian Nations, a bloc of 10 countries in the region called Asean, comprise some 650 million people which make up 14.3 per cent and 8.5 per cent of Asia’s and the world’s population respectively. Yet it represents just 6.6 per cent of Asia’s renewables capacity and 2.8 per cent of the world’s.

Worse, Asean’s share of global renewable energy has been decreasing after peaking in 2012, down 24 per cent since then.

Vietnam, for example, claims (and is commonly perceived) to be a leader in renewable energy while in reality, its leaders have been pushing coal. Its current power development plan does not indicate any transition away from fossil fuels, and proudly projects that future electricity demand will be met by more polluting fossil fuel sources. For instance, coal will increase to 53 per cent of its energy mix in 2030, up from 33 per cent in 2016 .

To compound the mystery, Vietnam is inviting more investments in its solar sector with feed-in tariffs that are attractive on the surface. But the result is this increased capacity cannot be handled by the current transmission infrastructure and therefore is guaranteed to lose investors a lot of money.

Meanwhile in Thailand, the government recently doubled-down on natural gas instead of backing renewable energy. Thailand’s most recent power development plan increased the share of this hydrocarbon fuel in its power mix from 30-40 per cent in 2036 to a staggering 53 per cent in 2037, while at the same time delaying investments in new renewables until 2025 or later.

Over in Indonesia, installed utility-scale solar power for this sunny country of 260 million people is less than the solar power deployed in one of the world’s northernmost countries, Finland. In Singapore, the city-state is making hesitant headway in solar energy but is still heavily dependent on natural gas; while Malaysia distinguishes itself globally as the only country where the number of solar panel installations has actually declined in recent years.

The barriers standing in the way of a clean energy-powered Asean are not what one might think at first. 

No, renewable energy in the region doesn’t require subsidies: Utility-scale solar and onshore wind are competitive today with fossil-fuel electricity in Asean without any subsidies whatsoever and without taking into account their massive health and environmental benefits.

No, coal doesn’t alleviate poverty and can’t deliver electricity access to the poor. Indeed, some 1.1 billion people around the world still lack access to electricity after more than 100 years of coal-fired power.

No, intermittency is not an issue with renewables. Solar and wind can be combined (often when the wind blows, the sun isn’t shining, and vice-versa), and they can be integrated with dispatchable or on-demand renewables (such as waste-to-energy, hydropower and geothermal).

Utility-scale solar and onshore wind are competitive today with fossil-fuel electricity in Asean without any subsidies whatsoever and without taking into account their massive health and environmental benefits.

Together with energy storage and demand response, renewables can create a power system that reliably matches real-time energy demand. Consider this: How did California – the world’s fifth largest economy – enact into law a requirement that it must be 50 per cent powered by renewable energy by 2026 and impressively, 100 per cent by 2045? Because it can be done.

Renewables are clean, cheaper than fossil fuel electricity, rapidly deployable, and Asean weather conditions are some of the best in the world for them.

What stands in the way of the region’s adoption of renewables are three somewhat invisible and rarely discussed barriers.

First, once you build a solar or wind power plant, there is no need to procure fuel for operations. The sun and wind are abundant and free. When you build or operate a coal or natural gas power plant however, you need to supply it with fuel for forty years or longer. That’s a lot of coal and gas to be mined or fracked, transported, shipped, processed, and transported again.

For example, the Indonesian electricity monopoly, PLN, needs 100 million tonnes of coal to fuel power plants this year, which means it will be paying out $10 billion in cash for to the coal industry in 2019 alone – and possibly again and again for the next decade or two. Imagine the influence, vested interests, perverse anti-renewables incentives and power that goes with that. The sun and wind can’t compete.

A case in point: A recent NGO letter to Southeast Asia’s largest bank DBS Group pointed out that the bank’s funding of a coal plant for PLN directly contradicts the bank’s stated reason for continuing to fund coal—to bring power to the 65 million people in Southeast Asia who lack electricity access.

The new complex is being built to supply a grid that has some of the highest rates of electrification in Indonesia, at 99.99 per cent, so why is it being built at all? This makes no sense unless we keep in mind that powerful vested interests are in play.

Second, governments make a lot of money taxing petrol. In the European Union, for example, taxes on oil and gas bring around €420bn in government revenues, with 75 per cent of this contribution coming from the downstream segment. This refers to the fuel taxes paid by gasoline and diesel cars, buses and trucks.

In Singapore alone, taxes on fuel for motorists amount to about S$1 billion, or 1.35 per cent of total tax revenues. Electric cars and buses therefore have an uphill battle to fight: Even if they are cost competitive and much cleaner, which they are, they are not welcome unless there is some way for the government to make up for the lost revenue. 

It’s not that complicated, of course. All you need to do is increase the taxes on dirty fuels as the number of electric vehicles rise. To some extent, Singapore for example is already doing that: it doubled diesel duty to 20 cents a litre in its recent Budget last month. But that’s too little and very late.

Governments can also make up for revenue losses by relying on carbon taxes or increases in value-added taxes on electric transport, and more importantly, doing the right sums by taking into account the negative externalities of fossil fuel and intrinsic benefits of clean energy on public health, air quality and the environment.

Third, money and access are powerful barriers to change. Almost nowhere is this more evident than with Big Oil in America today. Similarly, the oil, gas and coal industries have influential voices and tentacles everywhere in Asean whereas the clean energy industry (small and poor by contrast) does not.

Asean is of course not alone in struggling with these hidden barriers to the clean energy revolution. All around the world, different countries in some way face the same barriers.

The good news? All of them can be surmounted easily with vision, leadership and a commitment to a better society for all. Many countries close to and far from South East Asia such as Iceland, Costa Rica, Sweden, France, India and China have already demonstrated those qualities. It’s high time for the Asean political leaders to do the same.

Assaad W. Razzouk is a Lebanese-British clean energy entrepreneur, investor and commentator. He is Group Chief Executive and Co-Founder of Sindicatum Renewable Energy, a Singapore-headquartered award-winning developer, owner and operator of clean energy projects in Asia; and serves as a member of the international Board of Advisors for Eco-Business; and on the International Council of the National University of Singapore School of Medicine.

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