Imagine a Southeast Asia powered by renewable energy, where vibrant communities thrive amidst cleaner air and greener landscapes.

With nearly 680 million people still heavily reliant on fossil fuels, the diverse region is at the forefront of the global energy transition. But there are daunting challenges for Southeast Asian countries striving to meet escalating energy demand while combating climate change.

Current projections are sobering. By 2025, Southeast Asia’s adoption of renewable energy is estimated to fall short of targets, reaching only about 14 per cent of total primary energy supply. That’s well below the desired 23 per cent.

But there is hope.

Recent research from ANU Crawford School of Public Policy has distilled the transition into three categories: Demanding, Doable, and Dependent.

A focus on these categories would help policymakers support preparedness, convince stakeholders, and cement international support for necessary change. This is crucial for propelling Southeast Asia’s energy transition – the success of which is important for Australia, as a regional partner, and as a provider of resources for the global energy industry.

Demanding:

Energy transition in Southeast Asia will be demanding because of its substantial upfront costs. For instance, retiring the region’s relatively young coal power facilities, which are 14 years old on average, would cost over US$277 billion. This number was 13 per cent of Southeast Asia’s combined GDP in 2022.

This hurdle is exacerbated by concerns about potential energy supply disruption and electricity price increases. In Indonesia, for instance, coal power has been receiving substantial policy support, contributing to artificially low electricity prices, and phasing out coal could significantly affect consumers.

Additionally, countries must consider opportunity costs. Investment in energy transition can mean re-allocating resources for other vital infrastructure investments, such as hospitals, schools, or roads. Balancing these priorities is a challenge in a resource-scarce region.

Doable:

Southeast Asia boasts strong renewable energy resources, including solar, wind, hydro, and geothermal power. It has an estimated 31 terawatts of solar and wind capacity potential.

Additionally, the region’s growing population and economic expansion position it as a key player in the global clean energy market. Demand for electric vehicles (EVs) is rising, with countries like Thailand, Indonesia, Singapore, and Vietnam setting ambitious EV targets. Corporate demand for clean energy is also increasing, with more multinational and domestic companies seeking access to renewable electricity.

Combined, Southeast Asian countries are a major global manufacturer of solar photovoltaics – second only to China. Vietnam, Malaysia, and Thailand play significant roles in this market, and the region has access to vital resources for developing industries that facilitate energy transition, such as substantial nickel reserves in Indonesia and the Philippines, rich rare earth element deposits in Myanmar and Vietnam, and proximity to Australia.

Successful policy interventions, such as Vietnam‘s rapid adoption of solar and wind energy and Thailand’s promotion of electric vehicles, demonstrate the region’s capacity for transformative change.

Dependent:

Southeast Asia will struggle to achieve this potential alone. This is why its transition is also dependent.

While Southeast Asian countries can make initial progress through domestic policies, support from countries like Australia is essential to help it rapidly advance toward net-zero emissions, especially given the region’s potential for exporting renewable energy.

In conclusion, the energy transition in Southeast Asia presents both challenges and opportunities.

It’s in Australia’s interest to actively engage in this transition, to combat climate change and boost collaboration on economic development, as reaffirmed at the Australia-Association of Southeast Asian Nations (ASEAN) Summit in March 2024.

As a start, ASEAN and Australia could enhance their trade and investment in green hydrogen, critical minerals, and clean technology manufacturing with a focus on battery and solar supply chains. Australian businesses, innovators, and manufacturers can and should play a larger role in the energy shift in Southeast Asia.

Opportunities rarely come better than this. It’s time for Australian and ASEAN to take action.