Green Energy Pathways in Southeast Asia

By Theodorus Ng

The Association of Southeast Asian Nations (ASEAN), a regional bloc comprising ten member states, is slated to become the fourth largest economy in the world by 2030, with an anticipated 4.7 percent average annual increase in real GDP through to 2050. Yet, the region is already the fourth largest consumer of energy in the world, with consumption expected to quadruple by 2050. ASEAN’s steep economic growth and rise in energy consumption are corollaries of its steadily growing urban population, burgeoning digitalization, and the diversion of global supply chains to the region amid U.S.-China competition.

Although seven out of ten ASEAN member states have committed to net zero emissions by 2050, 75 percent of the region’s energy remains generated by the burning of fossil fuels like coal, oil, and natural gas. Underpinning the disjunct between ASEAN’s ambitious climate rhetoric and laggard action is a policymaking dilemma between economic growth and energy transition—a fear that the costs of transitioning to greener energy undercuts growth margins. For instance, most coal-fired power plants in the region, which supply over half of ASEAN’s energy, are considered young, with an average age of 11.8 years in 2022. Because many possible replacements either pale in efficiency or are still emerging and untested, early retirement of these plants incurs perceived risks that both public and private sectors may be unwilling to swallow.

Yet, growth and transition are not mutually exclusive; sustained growth requires complementarity of both imperatives. A 2024 report by Bain, GenZero, Standard Chartered, and Singapore’s Temasek estimates that unlocking ASEAN’s green economy could generate an annual value of $300 billion by 2030, equivalent to approximately 5 percent of the region’s projected 2030 GDP. Investing in the green economy presently could thus compensate for transition costs and help ASEAN reap long-term economic gains. With the expected rise in energy demand, and the depletion of finite fossil fuels, sustained economic growth for ASEAN depends on the availability and efficient utility of green energy. 

Southeast Asia’s total solar and wind energy generation surged nearly twelvefold from 2015 to 2022. However, these energy sources remain intermittent given their dependence on environmental factors that are not present at all hours of the day. Furthermore, hydropower and geothermal technologies have seen increasing costs of installation requiring large scale investment. Given these limitations, ASEAN members are now increasingly exploring hydrogen sources and civilian nuclear power. 

The Asia-Pacific region currently accounts for half of the global industrial hydrogen demand, with the fastest growing market for green hydrogen. Unlike blue and gray hydrogen, which are byproducts of burning fossil fuels, green hydrogen is entirely renewable. Surpluses of energy generated through other renewable sources like solar and wind can be converted and stored as green hydrogen, thereby improving circularity and potentially addressing intermittency issues. Singapore is ASEAN’s first member state to develop a comprehensive National Hydrogen Strategy, aiming to supply up to half of the island’s energy needs with hydrogen by 2050.

Among all extant low-carbon energy sources, nuclear power produces each unit of energy at the lowest emissions. Several member states had plans to develop nuclear power plants, but such projects were largely suspended after the 1986 Chernobyl and 2011 Fukushima incidents. However, Interest is growing again with the advent of safer nuclear technologies like small modular reactors (SMRs). SMRs have a generating capacity one-third that of a conventional plant but are smaller, faster and less costly to build, and safer by design given low operating pressure. With efficiencies in cost and construction, SMRs can be deployed incrementally to match increasing energy needs. Malaysia, Vietnam, Thailand, and the Philippines, are considering the refurbishment of  defunct reactors and the adoption of SMRs, aiming to generate civilian nuclear energy by the 2030s.

Accelerating ASEAN’s energy transition requires improvements in both regulatory and fiscal mechanisms. Firstly, there must be a gradual removal of fossil fuel subsidies with guarantees of a “soft-landing” for the entrenched interests of related stakeholders. Between 2021 and 2022, the region’s total fossil fuel subsidies dramatically increased from about $48 billion to $117 billion while investment in renewable energy fell more marginally from about $30 billion to $26 billion. Such subsidies lead to below-market prices for fossil fuels and distort returns for renewables. Expanding domestic carbon credit markets, to align them with international standards, can support the phase-out of fossil fuel subsidies, while increasing revenue for companies actively engaging in decarbonization. Additionally, the introduction of structured insurances for renewable technology adoption can mitigate risks perceived by private investors.

Promoting the adoption of renewable energy technologies and incentivizing the shift away from fossil fuels require hefty capital investment. Blended financing, which leverages public and philanthropic sources of capital to attract further private investments, can be scaled up by seeding more proof-of-concept projects. Based on patterns observed in successful projects, more niche, issue-specific investment taxonomies can be developed; as opposed to today’s exhaustive coverage of ESG initiatives. Refining such guidelines allays uncertainties in the private sector by providing targeted information for investment decisions.

More importantly, in preparation for widespread deployment of these renewable energy sources, robust cross-border energy trade and grid interconnections are needed to ensure collective regional economic growth. This will overcome the uneven dispersal of resources with renewable potential in the region, and will create value propositions for all based on each member state’s comparative advantages. However, the ASEAN Power Grid (APG)—a planned energy grid to connect the whole region—has been gridlocked in negotiations since the late 1990s given the lack of political will and financing. To date, only nine out of 18 planned interconnections have been completed, mostly on a bilateral basis. The Lao PDR-Thailand-Malaysia-Singapore Power Integration Project (LTMS-PIP), which pipes 100 megawatts of hydropower from Laos to Singapore, has been the only instance of multilateral energy trade. Progress on the APG could be revitalized by the establishment of an ASEAN Common Energy Market, where member states could sell surplus energy to other members who are unable to produce sufficient energy independently. Continued mutualistic energy trade relies on a functional and effective grid; a consideration that should propel greater multilateral cooperation.

ASEAN stands at an inflection point. For the bloc to continue capturing current economic momentum, it must view growth and green imperatives as inextricably intertwined and collectively develop credible energy transition pathways on which whole-of-ASEAN approaches can traverse.

Theodorus Ng is a sophomore at Tufts University studying International Relations and Computer Science.

Image: One of the world’s largest floating solar farms in Singapore (Sembcorp)