Asean's soaring energy challenge

Michael Richardson, For The Straits Times 26 Jul 10;

SINGAPORE'S energy policy report in 2007 surveyed options for electricity generation and decided that - for the time being - natural gas, the cleanest fossil fuel, was the best bet for the Republic.

Lack of space makes it difficult to deploy renewable energy technologies, such as wind and solar power farms. Furthermore, sheltered Singapore has an average wind speed that is less than half the level required for efficient wind power generation. And not only are wind and solar power intermittent, they are also more expensive than coal, oil or gas.

Solar power costs, especially for photovoltaic panels that convert some of the sun's rays into energy, have fallen sharply in the past three years. Nonetheless, a recent study by the International Energy Agency (IEA) reached the same conclusion as that of Singapore's officials: The island state has very low potential for harnessing renewable power.

This limits Singapore's options mainly to gas-fired or nuclear power if it wants to restrain or reduce the carbon emissions blamed for climate change.

Much of the rest of the world, including Singapore's Asean partners, have a far more generous smorgasbord of energy sources to choose from, although nearly all the renewable ones will come at a higher financial cost than fossil fuel or nuclear power.

Still, those costs are coming down as technology improves, governments act to promote green power and market competition increases.

Indeed, twin reports earlier this month by the United Nations Environment Programme and the Renewable Energy Policy Network for the 21st Century show that last year, for the second year in a row, both the United States and Europe added more electricity generating capacity from alternative sources than from conventional sources.

By next year, the world as a whole will add more capacity to the power supply from renewable rather than from non-renewable sources. However, there is a significant difference between capacity and production. Last year, renewable energy represented 25 per cent of electricity generating capacity but only 18 per cent of production.

As Singapore's energy policy report noted three years ago, one limitation of intermittent renewable energy, such as wind and solar, is that such sources either have to be fully backed up by other (base-load) power sources or require investments in energy storage to maintain the reliability of the power supply. These requirements increase costs.

Nonetheless, the 27 nations in the European Union aim to generate at least 20 per cent of their energy from renewable sources by 2020. The EU is in the midst of upgrading its electricity supply, transmission and distribution networks to integrate rapidly rising wind and solar power generation.

Worldwide, in the past five years, wind power capacity has grown 27 per cent a year on average; solar hot water, 21 per cent; ethanol petrol additive production (mainly from corn and sugar), 20 per cent; and biodiesel production (mainly from South-east Asian palm oil and European vegetable oil), 51 per cent.

Annual investment in renewable power capacity rose to US$100 billion (S$138 billion) last year, with Asia just behind Europe and surpassing the US for the first time.

Where is Asean in this race to tap renewable energy? The IEA working paper focuses on Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam. Although they make up only six of the 10 Asean members, they accounted for more than 95 per cent of the region's energy demand in 2007.

A snapshot of that year shows these six Asean states got their energy from fossil fuels (74 per cent); combustible biomass and waste, ranging from wood to dung (22 per cent); geothermal power from underground heat (3 per cent); and hydro (1 per cent). Renewable energy - mostly geothermal and hydro - accounted for 15 per cent of electricity generation.

IEA researchers calculate that with the exception of Singapore, the other five in this group of six Asean economies have the potential to increase the use of renewable electricity as much as 12 times by 2030. However, most of this potential is still untapped. The region's report card is hardly impressive.

The IEA researchers say that to unlock sufficient investment in renewable energy in South-east Asia, it is essential to implement effective policies with a long- term strategic perspective. Deterrents to investment include regulatory and administrative hurdles, fossil fuel subsidies and lack of incentives to support the expansion of renewable technologies best suited to local conditions.

This is clearly a big challenge, but also a large opportunity for Asean.

The writer is a visiting senior research follow at the Institute of Southeast Asian Studies.