Energy pundits are keenly observing the ASEAN energy transition unfold. Not only is the transition affecting most facets of the power sector, but investing practices in the adoption of renewables (RE) or sustainable energy are ever-changing and expanding. This decade, the Asian-Pacific region is positioned to become a hot spot for investments, with capacity expected to rise by roughly two terawatts by 2030.
“The ASEAN region continues to show an impressive growth rate for energy demand. COVID notwithstanding, I think it’s a thorny issue when we talk about a ‘decarbonisation agenda.’ Still, one of the things which should be addressed is to discuss issues surrounding energy demand. Because as energy demand continues to grow, there are only so many different technologies available that can meet that demand,” said Kian Min Low, Chief Development Officer at JERA Asia.
Further investment will be needed to ensure innovative energy technologies continue to develop quickly, and there have been significant changes to energy investing trends. Still, Kian Min said the push towards lower emissions had altered the investment priorities more so than the endemic.
“The changes have been driven more by the decarbonisation agenda than COVID-19. The pandemic has obviously impacted demand, but power infrastructure is a much longer-term investment,” said Kian Min.
Decarbonisation is the driving force for investing
According to the International Energy Agency (IEA), “enabling” technologies like batteries, hydrogen, smart grids, and carbon capture has experienced rapid growth since 2017. “Around half the emissions reductions to get to net-zero by 2050 may need to come from technologies that are not yet on the market,” said IEA Executive Director Fatih Birol, who was recently named one of Time’s list of 100 of the world’s most influential people.
Investing in decarbonisation has become big business, and countries like Singapore have increased green spending significantly. The Lion City accounts for over 50 percent of green financing activity in the ASEAN region. In the last year and a half, roughly SGD 4.8 billion in green and sustainability bonds have been issued in Singapore. Also, Corporates in the country signed sustainability-linked loans for approximately SGD 10.2 billion, successfully tripling the amount of green and sustainable financing since 2018.
Kian Min residesKian Min resides in Singapore and has observed the green investing trends closely. “Decarbonisation has certainly impacted what investors seek to invest in, and as investors, we are increasingly looking to finance renewables as we head towards a zero-emission future. But increasingly we see energy storage solutions, whether they be batteries, hydrogen or ammonia becoming increasingly important as society pushes toward the carbon-neutral agenda.”
What attracts investors, and how can the government assist?
Showcasing the area as an economic dynamo, McKinsey & Company forecasts the ASEAN region to become the fourth-largest economy by 2050 and with green energy investing on the rise and major a focus, ASEAN is a powerhouse of vast sustainable energy potential.
The region is not without well-noted challenges for the adoption of sustainable energy. Although green energy investing in ASEAN is on the rise, the unclear government policies coupled with political uncertainty may make other regions more attractive, according to an HSBC Global Research report.
“Providing certainty and direction in terms of where the country is headed within the global energy transition would give comfort that the rules will not change abruptly. Also, providing protections would be helpful,” Kian Min said.
As a company, JERA is looking at long-term investments of at least 20-30 years but Kian Min said policymakers need to focus on providing a sense of security in energy investments.
“The government needs to seek to dispel some of those concerns when we’re talking about potentially shifting policies in response to society due to the pressures of decarbonisation. That, I think, is by far the most important criteria when we look at investments now into the ASEAN region,” Kian Min said.
Where does the most investment potential live?
“ASEAN is a bedrock of opportunities, with significant potential for growth – particularly in areas of supply chain diversifications, innovation & technology, and strategic partnerships & digitalisation,” said Benjamin Hung, CEO, Asia, Standard Chartered. However, Benjamin underlined corporates should be tactical and expand in a “conscientious manner.”
JERA tactically intends on investing in countries is Asia such as Indonesia, Bangladesh, Vietnam, and the Philippines in sectors such as generation assets, and LNG infrastructure. “In terms of businesses, we focus on the renewable energy sector and the LNG value-chain, from liquefaction, transportation, terminals, and regasification infrastructure to generation. JERA also disclosed its zero-emission policy where it seeks to achieve zero emission by 2050. That would mean that we would have to increase our investments in the renewable sector, as well as the very important new technologies that are emerging such as in hydrogen and ammonia,” Kian Min said.
Energy Transition and Investments
Renewable energy investing has accelerated at a rapid pace with no signs of slowing down. The IEA reported global investments had reached over $300 billion annually since 2015, and in 2017, roughly USD $150 billion or 40% was invested in Asia alone.
“Beyond profitability and ESG reporting, the aftermath of the pandemic presents an opportunity for companies to redefine their purpose in alignment with ESG principles and to think of how they can drive sustainability and positive impact whilst still creating value for their stakeholders,” Benjamin stated.
Kian Min believes that though there are significant investment opportunities, their attractiveness varies and he points out that government policy will provide some clarity on what investments are most attractive.
“While the energy demand outlook is strong and good, we will need to make sure, together with governments, that there is a clear roadmap in terms of what the countries want to achieve on zero emissions. Clear policies regarding what the specific countries wish to achieve and how they wish to achieve them are preferred” Kian Min said.