Achieving Universal Electricity Access in Southeast Asia

Improving access to electricity is an on-going challenge in ASEAN countries, given the fact that the demand for electricity is steadily increasing in tandem with economic and population growth. Although Southeast Asian states have abundant and diversified energy resources, the uneven distribution of these resources and various stages of economic development among them make alleviating energy poverty and meeting growing demand requirements a difficult task.

Initiated by KAS RECAP, the two-day workshop brought prominent energy experts from UNESCAP, Parliament, government think tanks, academic institutions, non-governmental organizations, multi-lateral organizations and private sector in Southeast Asia together to share best practices and lessons by examining the political, financial and technical frameworks of the national electricity markets.

On April 17, Dr. Peter Hefele, Director of KAS RECAP, introduced the workshop’s theme, highlighting several challenging issues in addressing the nexus between energy access, climate change and development in Southeast Asia. In his keynote presentation, Prof. Anthony D. Owen, Head of Energy Economics at the ESI offered an analysis on potential benefits and existing barriers in integrating power grids in ASEAN.

The second day of the workshop commenced with presentations about the current development of each national electricity market in ASEAN by participants from seven countries in Southeast Asia – the Philippines, Lao PDR, Indonesia, Cambodia, Myanmar, Thailand and Vietnam. ASEAN states face various sets of political, economic and technical challenges in expanding national access to electricity particularly in rural and remote areas, while they vary considerably in terms of their size, landscape, level of economic development, national energy resources, power sector regulations, market structure, and technical characteristics.

In the afternoon session, an intensive discussion was held on the following three perspectives:

• Political and Legal Framework

To effectively address electrification in rural areas, speakers suggested that national energy policies must be formulated holistically by comprehensively taking the relationship between energy and other sectoral polices into account. Although relevant policy with clearly defined goals and targets is in place in Southeast Asia countries, some governments possess negligible governance capacity to implement and enforce. In addition, large-scale energy projects which require a longer period of time to be carried out are usually constrained by budget and political cycles. Negative impacts posed by climate change are, furthermore, undermining the governments’ efforts in improving energy access.

• Financial Investments

Although the falling cost of renewable energy would drive electrification in Southeast Asia in a sustainable way, financing it remained a challenging block. Discussants acknowledged a vast majority of renewable energy projects via microgrids or offgrids in Southeast Asia are not bankable. Many commercial banks are concerned about high investment risks associated with electrification in rural areas. Against the backdrop that the ASEAN states rely considerably on official development assistance for energy development, new business models and financing schemes are required in the long run to ensure that electrification projects are economically sustainable.

• Technical Solutions

Attendees agreed access to finance is of critical importance to advance technological development of the energy sector in the region. Additional factors that affect technological transfer from advanced economies were identified such as openness to trade, FDI and talents, IPR protection and absorptive capacity. Although technological improvements have made microgrids commercially viable, large portions of state subsidies for fossil fuels slow down the deployment of renewable energy technologies. Integrating the renewables into the grid remains also a challenge. Capacity building has to be further enhanced to adopt new technologies especially at the local level.

A policy paper will be released soon to summarize the workshop. From September 2018 on, a series of workshops will be held in various ASEAN countries to discuss country specific challenges in widening energy access as well as to develop local and national solutions.