Solar can Solve the Energy Gap in Southeast Asia

Energy Demand is Increasing Rapidly

The rise in demand results from a combination of rapid economic, population and manufacturing expansions driving up consumption, the IEA opined, posing challenges for the region’s energy security and efforts to achieve climate goals. That increase means that Southeast Asia is on track to account for 25 percent of global energy demand growth between now and 2035, second only to India. The ASEAN Centre for Energy (ACE) estimates that Southeast Asia’s energy demand will more than double from 2022 levels by 2050, while the IEA predicts that the region’s energy demand will surpass the European Union’s by mid-century.

While renewable energy could meet more than two-thirds of the region’s energy needs by 2050, ACE estimates suggest, large upfront capital investments, profitability concerns and a lack of adequate grid infrastructure all stand in the way. A key part of the solution is regional interconnectivity, which is also essential for Southeast Asia’s decarbonised future.

Renewable Energy offers a Solution

Renewable energy could well meet much of the increased demand. Southeast Asia’s renewable energy market share is set to rise to 20 percent in 2025 and 66 percent by 2050, Source of Asia said. Vietnam and Thailand and are leading the charge toward renewables, driven in part by solar energy systems becoming increasingly cost competitive with fossil fuels.

Vietnam has emerged as a leader and is the largest market in solar energy within Southeast Asia, driven by favourable government policies and substantial private sector investment. Thailand, which leverages its power development plan (PDP 2018-2037), is also growing strongly due to both a strong domestic production centre and a commitment to reaching net-zero emissions by 2050. Thailand is also working on hybrid applications for both manufacturing and commercial operations, which integrate electricity generation from multiple sources into one system, and agrivoltaics, which combines farming with solar power production.

While Singapore gets about 99 percent of its electricity from petroleum and natural gas plants today, it is a leading proponent of the ASEAN Power Grid (APG) vision, which aims to link regions rich in renewable energy to demand centres and create a borderless network throughout Southeast Asia.

However, production of solar in some markets has lagged. Although the Ministry of Energy and Mineral Resources (MEMR) in Indonesia set ambitious targets, including 3.61GW of rooftop solar by 2025 and 26.65GW of floating solar by 2030, installation has lagged. And even though the Philippines is recognised by Global Energy Monitor as an emerging global leader in solar and wind energy, it is adding solar power somewhat slowly.

Investment Lags Current Needs

While clean energy sources such as wind and solar as well as bioenergy and geothermal are projected to meet more than a third of the growth in energy demand in Southeast Asia by 2035, the IEA said the region currently attracts only 2 percent of global clean energy investment despite accounting for 6 percent of global GDP, 5 percent of global energy demand and 9 percent of the world’s population. The current level of investment will require a fivefold increase, with US$190 billion needed in 2035.

The good news, though, is that investments in green technology have been increasing. Tech Collective found that the share of climate tech deals in the region rose from 3.2 percent in 2019 to 9.5 percent in 2023.

Solar is the top choice for investors within the green investments sector, according to a report by Bain, Temasek, Google, GenZero and Standard Chartered. Solar energy soaks up more than 30 percent of green investments, in sectors including solar and battery energy storage facilities as well as manufacturing plants for solar cells and panels.

A significant amount of investment has also come from China. In little more than a decade, Recessary said, the relocation of Chinese manufacturers to Southeast Asia has led the region to become one of the world’s top exporters of solar power equipment. Factories backed by Chinese solar heavyweights have transformed Malaysia, Vietnam, Thailand and Cambodia into world-leading production and export hubs for a range of solar components. Together, these countries account for more than 40 percent of global manufacturing capacity of solar modules outside China, and about 20 percent of worldwide exports.

Start-ups have Solutions

Shifts in US policy have put those exports at risk. However, there are also good prospects for alternatives.

Grant Hauber, senior analyst at the Institute for Energy Economics and Financial Analysis, told Tanahair that the disruption presents an opportunity for Southeast Asian renewables manufacturers to readjust toward rapid renewables adoption in domestic markets rather than focusing on exports. The shift also presents opportunities for faster growth of start-ups and newer companies that can sell domestically or that could be alternatives to Chinese-backed exporters.

Jakarta-based Xurya Daya Indonesia, for instance, installs and manages solar panels for factories or office buildings. Mongabay said it more than doubled its capital with a recent US$55 million raise.

Another is Arysun, which TN Global describes as an Indonesia-based climate-tech startup that aims to solve the accessibility gap for middle-class homeowners by providing an affordable line of solar solutions.

Sunpal Solar in Malaysia said its bifacial double-glass solar module has gained strong demand in international markets due to its high efficiency and durability. Its modules can obtain efficiency of 25.9 percent, as well as low attenuation.

Start-ups in Singapore are focusing on other types of innovative alternatives, given its limited land space. SunGreenH2 focuses on AI-powered solar energy optimisation projects, TN Global Tech Collective said, by leveraging AI to enhance solar panel efficiency so that renewable energy becomes more accessible and cost-effective. Quantified Energy Labs is deploying drones which use electroluminescence to identify cracks or other damage on solar panels that might otherwise be invisible. GetSolar, which provides a solar installation service that includes a rent-to-own model and has recently expanded into Malaysia, also offers diagnostics, repair and recycling services. And EtaVolt says it has figured out a way to expand the lifespans of solar panels, which it says lose significant efficiency due to the heat, humidity, and volatile weather in the tropics.

While the fast rise in demand could cause shortages if the lack of supply is not addressed, innovative solutions in renewable energy as well as policies to promote renewables could well overcome the potential gap before it happens.