Electrifying Emerging ASEAN through Off-grid Distributed Renewable Energy Systems
By Han Phoumin
Some 134 million people in the Association of Southeast Asian Nations (ASEAN) region do not have access to electricity (IEA and ERIA, 2013). At the end of 2015 the ASEAN Community declared that lack of power and energy access could threaten the region's economic growth and its economic transition. Many industrial and commercial economic zones, and remote areas in ASEAN's emerging countries that contribute to economic growth, are sometimes faced with an unstable energy supply. This is likely to prevent companies and households from investing and providing economic activities such as goods and services. Off-grid Distributed Energy Systems (DES) using renewable energy could be a solution to this problem, thanks to the increasing availability of small power generation and renewable energy technologies.
Off-grid DES-related renewable energy sources include biomass, solar, and hydro, with generating capacities ranging from a few kilowatts to as much as 50 megawatts. Such renewable energy technologies can either be integrated into local distribution grids or used as 'stand alone' systems in areas where extension of transmission lines is not economically viable.
As energy supply from off-grid DES-related renewable sources will have a large potential to increase in emerging ASEAN countries, the Economic Research Institute for ASEAN and East Asia (ERIA) has attempted to estimate the off-grid DES-related renewable energy potential using both a Business-as-Usual (BAU) scenario and an Alternative Policy Scenario (APS). A BAU scenario was developed for each ASEAN country and outlines current energy policies and the expected foreseeable future of energy policies and economy-wide energy consumption assuming no significant changes in government policies. An APS was set to examine the potential impacts if additional energy efficiency goals, action plans, or policies were developed that are currently, or likely to be, under consideration. The results showed that the electricity supply from off-grid DES-related renewable sources will increase from 65,608 gigawatt-hours under the BAU scenario to 91,854 gigawatt-hours in the APS. The investment opportunity estimated for combined use of solar, wind, biomass, hydropower, and geothermal is about US$34 billion for the BAU scenario, and about US$56 billion under the APS. Amongst the DES-related renewable energy sources, investment in solar and geothermal power are expected to double under the APS compared with the BAU scenario, while investment in wind energy is expected to increase more than threefold to meet the expected generation output by 2040 (see Figure 1).
From the potential increase in off-grid DES-related renewable energy sources in ASEAN, it is also estimated that CO2-emission reduction in the ASEAN region as a result of the application of off-grid DES-related solar, wind, biomass, geothermal, and hydropower will be about 46.1 million metric ton in the BAU scenario, and 64.6 million metric ton under the APS scenario.
But to realise the potential off-grid DES-related renewable capacity and investment, an enabling policy framework that provides a long-term government commitment and credible targets will be needed. ASEAN may need to consider a wide range of policy options and instruments, although it has already targeted a 23% share of renewable energy in primary energy supply by 2025. The framework of policy options worth considering are:
- National policy design aims to provide a trajectory for the future energy mix. It includes a renewable energy target; a renewable energy law or strategy; a biomass and biofuels law or programme; and a solar heating, solar power, wind, and geothermal law or programme.
- Fiscal incentives aim to reduce the upfront cost by introducing fiscal policy instruments such as exemptions of value-added tax, fuel tax, income tax, import and export duties, and local taxes; and introduction of a carbon tax and accelerated depreciation.
- Grid access aims to give project developers confidence to invest through grid access priority and a transmission discount policy if electricity is produced from renewable energy.
- Regulatory instruments aim to provide incentives for investing in renewables through the implementation of energy policies such as feed-in tariffs, feed-in premiums, auctions, net metering, and quotas.
- Finance aims to reduce risk for investors through the implementation of currency hedging, dedicated funds, eligible funds, or guarantees.
In conclusion, the increase in off-grid DES-related renewable energy supply in the ASEAN region will have multiple benefits for people and the environment. Its expansion and application could promote energy access at lower cost and more efficiently, and it could also address the challenging issue of electricity access for about 134 million people whose rights have been denied. Its application would also contribute to CO2 reduction at the ASEAN level by reducing emission by as much as nearly 65 million metric tons in the APS scenario. ASEAN will enjoy quality growth by investing more in off-grid DES-related renewable energy sources.
ERIA's Senior Energy Economist Dr Han Phoumin has more than 20 years of professional experience working at various international and inter-governmental organisations and multi-disciplinary research consortiums related to energy market and technologies, environment, integrated water resource management, governance, and economic development in the region of ASEAN and East Asia. He specialised in economic development and policy and applied econometrics. Much of his career in the past 12 years revolved around power sectors, especially with sustainable hydropower development, renewable energy policy research (i.e., biomass power generation competitiveness studies, solar and wind), energy efficiency and conservation, clean coal technology, energy security, and energy demand and supply forecasting. He has been serving as an expert for APEC on energy security for oil and gas emergency responses since 2013 until now. He is also one of the peer review experts for Peru’s energy subsidy removal commissioned by USAID in 2015. He also has led a number of projects in the EAS region related to energy policy and planning, and also contributed articles and special issues for academic journals.