Southeast Asia Energy Outlook - Microsoft · 2019-12-12 · Source: IEA (2019) Southeast Asia...

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IEA 2019. All rights reserved. Southeast Asia Energy Outlook 11 December 2019 Webinar

Transcript of Southeast Asia Energy Outlook - Microsoft · 2019-12-12 · Source: IEA (2019) Southeast Asia...

Page 1: Southeast Asia Energy Outlook - Microsoft · 2019-12-12 · Source: IEA (2019) Southeast Asia Energy Outlook 0 50 100 150 200 250 300 350 2010 2020 2030 2040 s Indonesia commercial

IEA 2019. All rights reserved.

Southeast Asia Energy Outlook

11 December 2019

Webinar

Page 2: Southeast Asia Energy Outlook - Microsoft · 2019-12-12 · Source: IEA (2019) Southeast Asia Energy Outlook 0 50 100 150 200 250 300 350 2010 2020 2030 2040 s Indonesia commercial

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Southeast Asia Outlook 2019

• Fourth edition of the IEA Southeast Asia Energy Outlook, free to download from the IEA website at: https://www.iea.org/southeastasia2019/

• The 2019 edition has three focus areas, reflecting the priorities for IEA-ASEAN cooperation discussed at ministerial level in Singapore in October 2018

- Future of cooling in Southeast Asia additional detail at https://www.iea.org/southeastasiacooling2019/

- Regional electricity trade / integration of renewablesadditional detail at https://webstore.iea.org/asean-renewable-energy-integration-analysis

- Power sector investment

• The Southeast Asia Energy Outlookdoes not forecast what will happen; it explores different possible futures:

- What if we reflect today’s policy intentions and targets? This is the Stated Policies Scenario (STEPS)

- What if we meet sustainable energy goals in full? This is the Sustainable Development Scenario (SDS)

Page 3: Southeast Asia Energy Outlook - Microsoft · 2019-12-12 · Source: IEA (2019) Southeast Asia Energy Outlook 0 50 100 150 200 250 300 350 2010 2020 2030 2040 s Indonesia commercial

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Southeast Asia is a major force in global energy…

Based on today’s policy settings, the pace of energy demand growth in Southeast Asia to 2040 is double the global average, spurred by rising incomes, industrialisation and a rising urban population

Increase in energy demand to 2040 by region

0

250

500

750

1 000

Latin America Southeast Asia Middle East Africa China India

Mtoe

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… mobilising all fuels and technologies to meet rising demand

The region’s longstanding reliance on oil, coal and natural gas is diluted only slightly by increased deployment of modern renewable technologies over the coming decades

Primary energy demand in Southeast Asia in the Stated Policies Scenario

Mtoe

0

300

600

900

1 200

2018 2025 2030 2035 2040

Coal Oil Gas Nuclear Hydro Other

renewables

Traditional use

of solid biomass

Page 5: Southeast Asia Energy Outlook - Microsoft · 2019-12-12 · Source: IEA (2019) Southeast Asia Energy Outlook 0 50 100 150 200 250 300 350 2010 2020 2030 2040 s Indonesia commercial

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Power sector transformation is happening, but very gradually

Policy support and investor appetite for renewable electricity projects are picking up but, as things stand, the growth in renewables would cover only about a third of rapid overall growth in electricity demand.

Southeast Asia’s average annual net capacity additions by type in the Stated Policies Scenario

2000-2018

Renewables

Gas

Coal

0 2 4 6 8 10 GW

Solar PV Wind Hydro OtherRenewables

Gas

Coal

2019-2040

Average annual additions

Page 6: Southeast Asia Energy Outlook - Microsoft · 2019-12-12 · Source: IEA (2019) Southeast Asia Energy Outlook 0 50 100 150 200 250 300 350 2010 2020 2030 2040 s Indonesia commercial

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Today’s policy settings push energy imports deep into the red

Southeast Asia faces an energy import bill of over $300 billion/year by 2040, largely due to soaring oil imports; the region would also become a net importer of LNG by the late 2020s

-300

-200

-100

0

100

2000 2005 2010 2015 2020 2025 2030 2035 2040

Bill

ion

do

llars

(2

01

8)

Coal

Gas

Oil

Annual net fossil fuel import bill by fuel in Southeast Asia in the Stated Policies Scenario

Page 7: Southeast Asia Energy Outlook - Microsoft · 2019-12-12 · Source: IEA (2019) Southeast Asia Energy Outlook 0 50 100 150 200 250 300 350 2010 2020 2030 2040 s Indonesia commercial

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There is no simple solution to Southeast Asia’s rising emissions

Southeast Asia is on track to achieve full electrification in the early 2030s, but reversing the rising trend for air pollutant and CO2 emissions would require a major acceleration in energy transitions across all sectors

CO2 emissions reductions between scenarios

Mt CO2

500

1 000

1 500

2 000

2 500

2010 2018 2030 2040

Efficiency

Renewables

Fuel switching

CCUS

OtherSustainable Development Scenario

Stated Policies Scenario

Page 8: Southeast Asia Energy Outlook - Microsoft · 2019-12-12 · Source: IEA (2019) Southeast Asia Energy Outlook 0 50 100 150 200 250 300 350 2010 2020 2030 2040 s Indonesia commercial

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Special focus area: Future of Cooling

Page 9: Southeast Asia Energy Outlook - Microsoft · 2019-12-12 · Source: IEA (2019) Southeast Asia Energy Outlook 0 50 100 150 200 250 300 350 2010 2020 2030 2040 s Indonesia commercial

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The stock of air conditioners in Southeast Asia is rising rapidly

Higher temperatures and, more importantly, higher incomes are driving up AC ownership and use.

Stock of air conditioning units in Southeast Asia in the Stated Policies Scenario

Source: IEA (2019) Southeast Asia Energy Outlook

0

50

100

150

200

250

300

350

2010 2020 2030 2040

Mill

ion

un

its

Indonesia commercial Rest of ASEAN commercial

Indonesia residential Rest of ASEAN residential

Historical Projections

Page 10: Southeast Asia Energy Outlook - Microsoft · 2019-12-12 · Source: IEA (2019) Southeast Asia Energy Outlook 0 50 100 150 200 250 300 350 2010 2020 2030 2040 s Indonesia commercial

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Rising demand for cooling could strain the region’s energy system

More efficient air conditioners and buildings would bring huge benefits for the region in terms of energy savings, reduction in peak demand, and reduction of carbon emissions.

Reduction in cooling’s share in peak demand

in the Sustainable Development Scenario

(SDS)

0

20

40

60

80

100

120

140

160

180

201

8

204

0 S

TEP

S

Equip

men

t

Effici

ency

Build

ings

Effici

ency

Dec

arbon

is

ing P

ow

er

204

0 S

DS

mill

ion

tC

O2

0%

10%

20%

30%

40%

50%

Southeast Asia

Sh

are

in

peak d

em

an

d

2018 2040 STEPS 2040 SDS

Decomposition of factors for reduction of CO₂ emissions between the Stated

Policies (STEPS) and the Sustainable Development (SDS) scenarios

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More efficient ACs are available, and not always more expensive or imported

Results of air conditioning market analysis in selected Southeast Asian countries

Least efficient Most efficient

Efficiency level (W/W) 3.08(proposed ASEAN 2020 MEPS level)

3.7 4.3 5 5.6 6.2

Availability of ACs

by efficiency level

Singapore

Thailand

Viet Nam

Indonesia

Philippines

Affordability of ACs

by efficiency level

Singapore

Thailand

Viet Nam

Indonesia

Philippines

Locally manufactured ACs

by efficiency level

Singapore

Thailand

Viet Nam

Indonesia

Philippines

Sources: IEA analysis based on information from CLASP, the Kigali Cooling Efficiency Program and the National registration da tabases of Indonesia and Singapore

Page 12: Southeast Asia Energy Outlook - Microsoft · 2019-12-12 · Source: IEA (2019) Southeast Asia Energy Outlook 0 50 100 150 200 250 300 350 2010 2020 2030 2040 s Indonesia commercial

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Special focus area: Regional power trade /

Integration of renewables

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Assessing the value of cross-border interconnections

How can cross-border trade help to accommodate rising

shares of variable renewables? This illustrative case

study examines trade between four regions in Southeast

Asia, which have existing cross-border interconnectors,

but trading is, at present, mostly limited to bilateral PPAs:

We examine two scenarios, one in which the share of

variable renewables approaches 10% by the 2030s (a

representation of the Stated Policies Scenario) and the

other in which it exceeds 20% (as in the Sustainable

Development Scenario). For each of these scenarios, we

model three cases:

• Bilateral trade (BT): the existing model of bilateral

trade continues, with no new interconnections

• Optimised trade (OT): power flows are optimised

across the regions, with no new interconnections

• Optimised and expanded trade (OT+): power flows

are optimised and cross-border transmission capacity

is expanded as well

NW

CE

S

C: Central (Thailand); E: East (Cambodia, Lao PDR and Viet Nam);

NW: Northwest (Myanmar); S: South (Malaysia and Singapore)

Four selected transmission zones in the case study

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The value of cross-border interconnectors rises with higher shares of wind & solar

Expanding cross-border trade reduces system costs, but achieving reduced system costs and lower emissions requires a strong alignment between power trade, infrastructure and renewables deployment

0

50

100

150

200

250

300

0

5

10

15

20

25

Bilat_trade Multi_trade Expanded_tx

Base VRE (~10%)

Vari

ab

le c

ost

s (U

SD

/MW

h) an

d C

O2

em

issi

on

(M

t)

Other variable costs Fuel cost CO2 emission (right axis)

0

50

100

150

200

250

300

0

5

10

15

20

25

Bilat_trade Multi_trade Expanded_tx

High VRE (~20%)

High VRE share (~20%)Base share of variable renewables (VRE) (~10%)

BT OT OT+ BT OT OT+

Page 15: Southeast Asia Energy Outlook - Microsoft · 2019-12-12 · Source: IEA (2019) Southeast Asia Energy Outlook 0 50 100 150 200 250 300 350 2010 2020 2030 2040 s Indonesia commercial

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A step-by-step approach to establish multilateral power trading

Southeast Asia has made significant progress in developing

the ASEAN Power Grid, but more work is necessary to

establish multilateral trading.

As part of its cooperation with ASEAN, the IEA has analysed

international best practices and has developed a set of

concrete recommendations

A key principle guiding these recommendations is the

principle of voluntary, step-by-step implementation

Three phases are critical:

1. Establishing and meeting minimum requirements (policy, technical, institutional)

2. Designing trade models

3. Implementation of trade models

Establish minimum requirements

Choose appropriate trade model per ASEAN member state

Detailed design phase of trade models

Capacity building and training

Implement multilateral trading in ASEAN

Page 16: Southeast Asia Energy Outlook - Microsoft · 2019-12-12 · Source: IEA (2019) Southeast Asia Energy Outlook 0 50 100 150 200 250 300 350 2010 2020 2030 2040 s Indonesia commercial

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Special focus area: Power sector investment

Page 17: Southeast Asia Energy Outlook - Microsoft · 2019-12-12 · Source: IEA (2019) Southeast Asia Energy Outlook 0 50 100 150 200 250 300 350 2010 2020 2030 2040 s Indonesia commercial

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Under any pathway, investment in Southeast Asia needs to step up

With today’s policy settings, investments over the next two decades total $2.5 trillion; in a sustainable pathway they rise to $3.2 trillion, with sizeable reallocation of capital across supply and demand

Energy investment in Southeast Asia compared with annual average investment

in the Stated Policies (STEPS) and Sustainable Development (SDS) scenarios, 2019-2040

0 10 20 30 40 50 60 70 80

SDS

STEPS

2018

SDS

STEPS

2018

SDS

STEPS

2018

Po

wer

sect

or

Fue

l

sup

ply

En

erg

y

eff

icie

ncy

Billion Dollars (2018)

Energy efficiency

and end-useOil supply

Gas supply

Coal supply

Biofuels

Fossil fuel power

Renewable

powerElectricity

networks

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State-backed capital has played a key role in investment

Funding for over three-quarters of generation investment has come from sources within the region. But public and domestic sources alone cannot cover the sizeable investment needs ahead

Sources of finance for power generation investment in Southeast Asia (by year of FID, 2014-2018)

0 20 40 60 80

Utility-scale

solar PV and

wind

Hydropower

and geothermal

Coal and gas

power

USD billion

Public

Private

Notes: FID = final investment decision. Includes only utility-scale projects ≥ 25 megawatts. Public finance includes the partici pation of state-owned enterprises,

development finance institutions, export-credit agencies and other public entities.

Page 19: Southeast Asia Energy Outlook - Microsoft · 2019-12-12 · Source: IEA (2019) Southeast Asia Energy Outlook 0 50 100 150 200 250 300 350 2010 2020 2030 2040 s Indonesia commercial

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Roadmap for enhancing capabilities to attract private investment

Reducing risks and improving policy and market approaches around four priority areas is critical to meet future power investment needs

Key investment priorities and risks for power markets in Southeast Asia

Market

Investment Priorities

Financial health of the

utilities

Procurement and

project bankability

Financing and cost of

capital

Integrated approaches

with demand side

Indonesia

Malaysia

Philippines

Singapore

Thailand

Viet Nam

Other (Cambodia, Lao

PDR, Myanmar)

Low risk/supportive factor for investment Potential risk factor/barrier for investment High potential risk factor/barrier for investment

Page 20: Southeast Asia Energy Outlook - Microsoft · 2019-12-12 · Source: IEA (2019) Southeast Asia Energy Outlook 0 50 100 150 200 250 300 350 2010 2020 2030 2040 s Indonesia commercial

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Conclusions

• Southeast Asia is increasingly influential in global energy trends, but will need to adapt its

energy development model to new energy security and sustainability challenges.

• The prospect of rising dependence on imported fuels presents a range of hazards that can

be mitigated by the pursuit of a more efficient, diversified energy mix

• Whichever pathway the region takes, meeting Southeast Asia’s energy needs and priorities

will require higher levels of investment, including enhanced efforts to attract private capital.

• There is no single solution to turn emissions trends around: renewables, efficiency & a host

of innovative technologies, including storage & CCUS, are all required

• The deepening engagement with ASEAN confirms the Agency as a “key strategic partner in

helping the region tackle its energy challenges across all fuels and all technologies.”

Page 21: Southeast Asia Energy Outlook - Microsoft · 2019-12-12 · Source: IEA (2019) Southeast Asia Energy Outlook 0 50 100 150 200 250 300 350 2010 2020 2030 2040 s Indonesia commercial

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