Southeast Asia's Clean Energy Economy Blazes Ahead
It's no secret that Asia's manufacturing, industry and services sectors are growing, increasing demand for electricity across Vietnam and Indonesia. In too many countries, the result has been an increase in pollution from the power sector, meaning dirty air and more climate-warming greenhouse gas emissions.
Fortunately, regional leaders are blazing ahead with clean energy. More than 80 energy leaders from 12 countries -- including project developers, financiers, investors and government representatives -- gathered in Bangkok in March to discuss what's needed to build clean energy markets across Southeast Asia. The message was clear: regional leaders are committed. Business leaders see opportunities to make money and governments see renewable energy and efficiency measures as a way to grow productive economies.
Still, markets in the region aren't always set up for success. As deputy director of WRI's Energy Program, I've worked with peers from government and business in the last few years to build clean energy markets in the United States and India. Our experience gives us a perspective on what's needed to spark collaboration and build options for companies to buy clean energy at scale.
Energy Buyers Can Spur Demand
In the United States, India and several other markets, large energy buyers with good credit have succeeded in creating a powerful market signal by raising their voices for clean energy. In Southeast Asia, we've seen signals that companies want renewable energy.
Individual companies across the region are setting benchmarks and funding clean energy projects. Mahindra & Mahindra, the world's largest tractor company, developed metrics that help its CFO prioritize sustainability initiatives across the company, helping to ensure these important projects get funded. The result: a ten-fold increase in environment-focused projects.
Ayala Land, the largest real estate company in the Philippines, embedded sustainability metrics in performance evaluations and rewards its property managers for energy savings, resulting in a race to achieve savings. The company is committed to being 100 percent carbon neutral by 2022.
Likewise, lots of companies across Asia partner with multinational businesses that have clear clean energy goals and want their supply chains to reflect these targets. In April, three more Chinese companies in Apple's supply chain committed to 100 percent renewable energy.
But there's still a need to show governments and power companies the full extent of corporate demand for clean energy. Platforms like the Renewable Energy Buyers Alliance (REBA) are helping to raise the voice of large energy buyers and raise awareness about the renewable energy these companies demand. Large buyers and NGOs working together to aggregate clean energy demand globally and in-country can amplify the demand signal. Companies working together can learn about how to engage with clean energy suppliers, develop purchasing models and that reduce costs and improve benefits of different technologies.
At our March conference, participants often raised the fact that in many parts of Southeast Asia power utilities are not in good financial health. So if a project developer has a long-term agreement with a utility, investors will be wary of the utility defaulting and raise the cost of financing. Many countries are looking to revisit the utility business model to make it commercially viable. WRI has been working across the United States with utilities to offer innovative renewable energy products, and some of these models could be developed for Southeast Asia – if utility balance sheets improve.
Collaboration can help lower costs. If the utility balance sheet is not fixed, buyer platforms like REBA can be help bring large-scale, good credit buyers together to support renewable energy projects. Likewise, aggregation of clean energy demand in industrial parks could be a good opportunity for Southeast Asia. In Chennai, India, WRI is working with Mahindra World City to develop models for large-scale renewable energy projects that offer clean power to the many businesses located in a concentrated area.
Policy Structures for Clean Energy Investment
Plenty of governments across Southeast Asia have targets for clean energy. Indonesia aims to achieve 17 percent new renewable energy by 2020 (it's currently 10-11 percent). The Philippines aims to achieve 35 percent renewables in its energy mix by 2030. Vietnam set a target to achieve 25 percent renewables in its energy mix by 2030 and 45 percent by 2050.
In many countries, policy support to help achieve these goals remains unclear and has not been developed in a way that helps large buyers meet their demand for clean energy.
Collaboration with customers, utilities and government is critical to design effective policies that encourage investment. In Karnataka, India, companies came together with regulators to inform the design of a new, long-term, stable solar policy that has moved the private sector to invest in solar projects across the state.
Vietnam is making some progress. Earlier this month, Vietnam confirmed a feed-in tariff for utility scale solar projects. The country's trade and industry ministry is studying long-term policies that could support solar projects.
Southeast Asia has a real opportunity to build a productive clean energy economy that delivers affordable and reliable power to businesses. For people in these countries, a clean energy path will mean economic growth with less pollution.
At this month's Clean Energy Ministerial meeting in Beijing, expect to hear lots of discussion around global corporate demand for clean energy. The Renewable Energy Buyers Alliance will be there to support these regional and global goals.