By 2050, solar and storage is expected to contribute 74% of South East Asia’s renewable energy, but transparency issues are deterring private investors
· Solar and storage will contribute 74% of region’s electricity by 2050
· International investment will be crucial with $190bn per year targeted
· But lack of transparency jeopardising investment
South East Asia is set to undergo an energy revolution over the next 30 years and energy storage will be a key driver of change. The region’s electricity grid generated 90 per cent of its electricity from fossil fuels in 2020, according to DNV, but this will shrink to only 10 per cent by 2050. Solar PV and solar coupled with storage will account for the overwhelming majority of the renewable energy supply by the middle of this century, contributing 74 per cent of the region’s electricity.
South East Asia’s current level of dependence on fossil fuels makes it extremely vulnerable from an energy security perspective, as the International Energy Agency (IEA) has highlighted. As a result, the IEA has said that the region has to make efforts to improve energy efficiency and accelerate renewable power generation.
The ten economies that make up the members of the Association of Southeast Asian Nations (ASEAN) – namely the Philippines, Indonesia, Singapore, Thailand, Vietnam, Cambodia, Laos, Malaysia, Myanmar and Brunei Darussalam – are among the world’s fastest growing. However, the transition to clean energy will be challenging for these economies and consequently international support will be critical in order to boost innovation and develop the necessary infrastructure such as renewable power generation and grids, along with facilities for low emissions fuels. Yet, while international investment will be a crucial component, the IEA has also said that ASEAN members could reduce financing costs and attract private investors by “signalling their clear commitment to deploy low-carbon energy and by improving regulatory and financing frameworks”.
Overall energy investment needs to hit $190 billion a year by 2030 to meet the region’s climate goals, according to the IEA, which is up from around $70 billion a year between 2016 and 2020. Much of this investment will be ploughed into solar and energy storage facilities as they will be the resources upon which South East Asia’s clean energy revolution will be built.
However, any headlong dash towards a clean energy economy in South East Asia is certain to present major challenges. As engineering, procurement, consulting and construction company Black & Veatch has highlighted, the introduction of “too much variable renewable energy may challenge reliable grid operations and performance across Asian electricity markets”. As a result, Black & Veatch has proposed integrating energy storage technologies at gas-fired power stations. Indeed, the company argues that this is an idea that is set to take off, partly because much of South East Asia’s gas-fired power infrastructure is less than ten-years old and investors will be seeking to extend the lifecycle of such facilities to improve returns and revenues – the key point here is that extending the lifecycle of gas-fired infrastructure can be achieved by integrating it with battery storage. For example, storage with durations of one to four hours can be utilised to avoid turbine operation when short duration run times are forecasted. In addition, adding battery storage to gas-fired power infrastructure goes a long way to addressing sustainability challenges as it offsets and reduces overall emission rates.
So what have been the latest developments concerning the deployment of energy storage in the ASEAN region’s leading economies?
In December last year, Sembcorp Energy Storage System, Southeast Asia’s largest storage project, which has a capacity of 285MWh and spans two hectares of land in the Banyan and Sakra region on Jurong Island, began operation. Commissioned in six months, the facility was the fastest in the world of its size to be deployed. Earlier this year, Singapore-based VFlowTech raised US$10 million in a Series A funding round, with proceeds being used to set up a manufacturing facility and scale up production of its 250kWh vanadium flow battery product.
In December last year, Energy storage company Fluence and the Electricity Generating Authority of Thailand signed a memorandum of understanding to develop the battery-based energy storage market in the country. At the time of the announcement, Fluence highlighted that the Thailand government, facing rising energy demand coupled with increasing reliance on imported sources of energy, had raised the country’s non-hydro renewable target from 20 to 30 percent by 2036. “With this rapid projected penetration of renewable energy into the energy mix, energy storage can play a key role in stabilising and strengthening the future grid,” a Fluence statement said. Also in December 2022, it emerged that Gotion High-Tech’s local subsidiary was planning to build a battery pack and module gigafactory in Thailand that would target the electric vehicle and stationary storage markets. Meanwhile, in November 2022, energy storage system supplier Sungrow and the Provincial Electricity Authority of Thailand (PEA) signed a Memorandum of Understanding (MOU) on energy storage and green hydrogen business. A Sungrow statement said the company viewed Thailand as a “significant market” and has already installed a total of more than 1 GW capacity of PV inverters and more than 140MWh energy storage in the country.
AMI AC Renewables, a joint venture formed by Philippines-headquartered power plant developer AC Energy (ACEN) and Vietnam’s AMI Renewables – in partnership with Honeywell – are developing a short duration 15MW / 7.5MWh battery energy storage system at the site of the 50MWp Khahn Hoa solar PV plant in the south central coastal province of Khahn Hoa. Meanwhile, last year, it was revealed that ABL Group’s onshore renewables consultant team had completed a feasibility study for the development of a battery energy storage system (BESS) co-located with solar PV projects in Vietnam. ABL’s scope of work included a detailed analysis of PV production data to assess curtailment, followed by modelling and optimisation of various BESS solutions. Modelling was carried out on a lowest levelised cost basis to assess the commercial feasibility of adding BESS to PV and the optimal specification of any solution. “Solar power makes up a rapidly increasing percentage of Vietnam’s overall energy mix, having grown from virtually no PV generation in 2018 to more than 5GW,” said Richard Abrams, ABL Group’s director of onshore renewables. “With such a rapid growth trajectory, BESS will be a critical technology to recover lost generation, whilst maximising the efficiency of these critical infrastructure projects. This will also potentially provide more sophisticated services to the local grid.”
There is a clear commitment to increasing the deployment of energy storage at the very top of the country’s political system with the country’s president Ferdinand Marcos Jr saying earlier this year that it is vital that we “incorporate energy storage systems in our overall energy infrastructure”. Meanwhile, the Philippines government has outlined proposed changes to rules and regulations that aim to make it simpler to integrate energy storage into power markets. The country’s first ever solar-plus-storage hybrid project – the 40MW pilot battery storage system plus 120MW solar PV power plant at Alaminos Solar site in the municipality of Alaminos, Laguna, about 80km south of the country’s capital Manila – came into operation last year. Elsewhere, the province of Bataan, 127 km from Manila, hosts the Philippines’ first and largest battery energy storage system, which is owned and operated by San Miguel Corporation’s Global Power Holdings Corp. In addition, Prime Infrastructure Holdings, Inc., the critical infrastructure business belonging to billionaire Enrique K. Razon, Jr., has announced plans to develop the world’s largest solar power facility with a capacity of 2,500-3,500MW combined with a 4,000-4,500MWh battery energy storage system, in the Philippines. The project will be undertaken by Terra Solar Philippines, a unit of Terra Renewables Holdings, Inc., which is a renewable power subsidiary under Prime Infra’s control.
Malaysia and Indonesia
Last year Malaysia-based Reservoir Link signed a memorandum of understanding (MOU) with an unnamed US-based “iron flow long duration energy storage provider”. RL ADS Power Sdn Bhd, a 51%-owned subsidiary of oil and gas services company Reservoir Link, will partner with the unnamed company to deploy 200MW of energy storage solutions in Malaysia, Indonesia and Singapore during the period 2023-2027.
Though progress is clearly being made in a number of the ASEAN region’s leading economies, a number of barriers need to be overcome to fully realise energy storage’s potential in the bloc. A study by Imperial College London has highlighted how the development of the region’s renewables sector is lagging behind that in the rest of the world due to “inadequate policy and investment frameworks”. It added that, as a result, attracting low-cost financing remains a “major hurdle for development”.
What needs to be done to address these issues? Among the measures Imperial College London has called for are:
· Better data and transparency regarding project-level financial performance
· Stronger regulatory frameworks concerning remuneration for renewables projects
· More robust financial market frameworks for renewables and transition investments
· An enhanced role for development finance institutions (DFIs) and blended finance
· Greater access to risk hedging tools to address credit and currency risks for private investors
· Improved power system connectivity across the region
South East Asia offers huge potential for the energy storage industry with the region keen to improve its energy security by both reducing reliance on fossil fuel imports and expanding its renewables sector to the extent that it takes on the bulk of the electricity producing burden. International investment will be vital, and should be forthcoming given the region’s heavy reliance on fossil fuels in the context of global efforts to combat climate change. However, the region still has much to do if it is to be successful in convincing many sceptical private investors to commit their capital to the region’s clean tech revolution.
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