Southeast Asian countries will need to accelerate its transition to clean energy to limit their dependence on imported fuel and rein in inflationary pressures, analysts said.
Geopolitical tensions such as the Russia-Ukraine conflict and the Middle East crisis have disrupted the supply of fossil fuels and caused a spike in prices in the past few months. This has raised consumer prices among net oil and gas importers like the member states of the Association of Southeast Asian Nations. ASEAN imports at least 50 percent of their crude oil requirements from the Middle East.
Putra Adhiguna, the Jakarta-based managing director of independent think-tank Energy Shift Institute, said the geopolitical tension that is rattling oil prices is “just another reminder” for ASEAN to speed up its shift to renewable energy.
The World Bank said that if the conflict in the Middle East were to escalate, benchmark Brent crude oil prices could rise to over $100 per barrel. Brent crude futures are trading this week at over $80/bbl.
Apart from Indonesia, Singapore is also planning to import low-carbon energy from Cambodia and Vietnam
“In recent months, we have geopolitical concerns which are potentially impacting upon oil markets,” said David Broadstock, a senior research fellow and energy transition research lead with the Sustainable and Green Finance Institute at the National University of Singapore. This is why ASEAN “just fundamentally needs to move away” from its dependence on fossil fuel, said Broadstock.
He said regional cooperation initiatives, such as the Singapore-Indonesia solar power export deal, is also crucial in financing the shift to renewables. By partnering with each other, Broadstock said ASEAN economies can unlock investment opportunities which may not be possible if done individually.
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Rachmat Kaimuddin, Indonesia’s deputy coordinating minister for infrastructure and transportation, said the Indonesian government has given conditional approval to five local companies to export solar power to Singapore. The announcement was made soon after Indonesian President Joko Widodo met with Singapore Prime Minister Lee Hsien Loong at the Indonesia-Singapore Leaders’ Retreat in West Java on April 29. The solar power export deal was part of the meeting’s agenda.
Fabby Tumiwa, executive director of the Institute for Essential Services Reform think tank in Jakarta, said solar power exports will not only bring in revenues but can also help Indonesia’s reduce its reliance on coal power and fulfill its climate commitments.
“For Indonesia there is no choice other than decarbonizing,” Tumiwa said. He said local demand for solar power is increasing and that Indonesia can potentially export solar power to other ASEAN countries as well.
Apart from Indonesia, Singapore is also planning to import low-carbon energy from Cambodia and Vietnam. The city-state is currently importing hydropower from Laos which is coursed through a multilateral cross border trade that also involves Malaysia and Thailand.
Singapore mainly relies on imported renewable energy as its limited land space precludes it from generating its own clean energy and meeting its goal to achieve net zero emissions by 2050.
For Adhiguna of Energy Shift Institute, Singapore can promote regional cooperation in renewable energy because it has the financial resources to import clean energy and it is one of the few countries in Asia that has “priced” carbon emissions by imposing a carbon tax.
“This means that (Singapore) has an incentive to adopt green energy,” he said.
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Singapore implemented a carbon tax on 2019, with the tax level set at S$5 ($3.70) per ton of carbon dioxide equivalent (tCO2e) from 2019 to 2023. The carbon tax was raised to S$25/tCO2e this year and will be increased further in the succeeding years to “strengthen the price signal and impetus for businesses and individuals to reduce their carbon footprint in line with national climate goals,” according to Singapore’s National Climate Change Secretariat.
Other ASEAN countries are also boosting their renewable energy capacity to fulfill their commitment to the UN climate pact. For example, Laos and Vietnam are jointly constructing a wind farm 600MW onshore wind project in the southern Lao provinces of Sekong and Attapeu.
The Philippines is planning to raise the share of solar and wind power in its renewable energy mix to offset the decline in hydropower and geothermal energy. Vietnam’s Power Development Plan 8 (PDP8) includes diversifying its energy sources by 2030 by boosting the production of wind, biomass and solar power.
Leonardus Jegho in Jakarta contributed to this story.
