fbpx 55124-001: Accelerating the Clean Energy Transition in Southeast Asia | Asian Development Bank

Regional: Accelerating the Clean Energy Transition in Southeast Asia

Sovereign (Public) Project | 55124-001 Status: Proposed

The knowledge and support technical assistance (TA) will support the countries of Southeast Asia (SEA) to transition to a cleaner energy future. While this transition is already underway in some countries, the pace of the transformation needs to be accelerated across the region to avert a development path inconsistent with the goals of the Paris Agreement. This transition needs to be just and inclusive, ensuring affordable, reliable, and equitable access to energy services. The proposed TA will assist SEA countries with a comprehensive package of solutions that will include: (i) the preparation of sectoral and country-specific assessments; (ii) the development of new business models, feasibility reports, and other technical studies; (iii) the conduct of workshops and policy dialogues; and (iv) the development of project investment pipelines to be financed by the Asian Development Bank (ADB) and other development partners.

Project Details

Project Officer
Tharakan, Pradeep J. Southeast Asia Department Request for information
Country
  • Regional
Sector
  • Energy
 
Project Name Accelerating the Clean Energy Transition in Southeast Asia
Project Number 55124-001
Country Regional
Cambodia
Indonesia
Lao People's Democratic Republic
Philippines
Thailand
Timor-Leste
Viet Nam
Project Status Proposed
Project Type / Modality of Assistance Technical Assistance
Source of Funding / Amount
TA: Accelerating the Clean Energy Transition in Southeast Asia
Technical Assistance Special Fund US$ 2.25 million
Technical Assistance Special Fund US$ 2.25 million
Technical Assistance Special Fund US$ 2.25 million
Technical Assistance Special Fund US$ 2.25 million
Technical Assistance Special Fund US$ 2.25 million
Technical Assistance Special Fund US$ 2.25 million
Technical Assistance Special Fund US$ 2.25 million
Technical Assistance Special Fund US$ 2.25 million
Technical Assistance Special Fund US$ 2.25 million
Strategic Agendas Environmentally sustainable growth
Inclusive economic growth
Regional integration
Drivers of Change Gender Equity and Mainstreaming
Governance and capacity development
Partnerships
Sector / Subsector

Energy / Energy sector development and institutional reform

Gender Equity and Mainstreaming Some gender elements
Description

The knowledge and support technical assistance (TA) will support the countries of Southeast Asia (SEA) to transition to a cleaner energy future. While this transition is already underway in some countries, the pace of the transformation needs to be accelerated across the region to avert a development path inconsistent with the goals of the Paris Agreement. This transition needs to be just and inclusive, ensuring affordable, reliable, and equitable access to energy services. The proposed TA will assist SEA countries with a comprehensive package of solutions that will include: (i) the preparation of sectoral and country-specific assessments; (ii) the development of new business models, feasibility reports, and other technical studies; (iii) the conduct of workshops and policy dialogues; and (iv) the development of project investment pipelines to be financed by the Asian Development Bank (ADB) and other development partners.

The proposed TA is well aligned with ADB's Strategy 2030 and will support several of its operational priorities. By assisting SEA countries to develop clean energy solutions in an affordable manner, the TA will contribute to a wider access to energy services, thereby reducing inequalities, including gender-based ones. A transition to cleaner forms of energy will also support SEA countries to tackle climate change by reducing their greenhouse gas (GHG) emissions. In addition, activities implemented under the TA will enhance energy sector governance and transparency, foster opportunities for power system integration within the Association of Southeast Asian Nations (ASEAN), and support South-South knowledge transfer. Overall, the TA will strongly support sustainable development goal (SDG)1 (poverty alleviation), SDG5 (gender equality and women empowerment), SDG7 (affordable and cleaner energy), SDG13 (climate action), and SDG16 (stronger institutions). The TA is included in the 2021 workplan for the Southeast Asia Department.

Project Rationale and Linkage to Country/Regional Strategy

Clean energy progress in Southeast Asia. Energy demand in SEA has been growing at a rapid pace, driven by robust economic growth, demographic expansion, and increased urbanization. While the ongoing coronavirus disease (COVID-19) pandemic has lowered energy demand, a rebound is expected in 2023 2025. Traditionally, SEA has been reliant on fossil fuels, with coal consumption more than doubling in the last decade. The rapidly increasing energy demand is also a challenge to the long-term ambition of keeping regional GHG emissions on a trajectory consistent with the goals of the Paris Agreement. To address these challenges, there is the need to accelerate the transition to cleaner forms of energy, which is a move towards lower carbon, less polluting, and less environmentally impactful models for energy generation, distribution, and utilization. This transition will be well aligned with the green recovery programs implemented by governments in an effort to rebound from the COVID-19 crisis, as the development of clean energy infrastructure has been shown to result in a larger proportion of local jobs and higher local economic benefits. Women would also be among the main beneficiaries of a just and equitable transition to a clean energy future.

Clean energy has begun to make inroads in SEA. In 2019, for the first time, more renewable energy projects than coal projects reached final investment decision in the region. More recently, deployment of new renewable capacity has accelerated in some countries at an unprecedented scale. In Viet Nam, utility-scale grid-connected solar photovoltaic capacity increased from only 260 megawatts (MW) in April 2019 to 5,053 MW in July 2020. Similarly, Cambodia launched its first open reverse auction for new solar photovoltaic capacity in 2019. The region is also quickly embracing new technologies, including offshore wind power (Viet Nam), floating solar (Indonesia), and utility-scale battery storage (Thailand).

Some countries in the region have also indicated tentative measures to either scale back their coal generation expansion plans, cancel projects, or retire old plants. Viet Nam is revising its power development plan to accommodate more renewable capacity in lieu of coal. In October 2020, the Philippines announced a moratorium on new coal power plants. The deployment of new technologies, with attendant disruptions, has also manifested itself in new business models, new entrants, and efforts by already-established players to re-invent themselves. When it comes to serving remote areas and small islands across the region, decentralized renewable energy systems in combination with storage may offer cost-effective solutions in the near-term.

Challenges to the cleaner energy transition. Notwithstanding these encouraging signs, more needs to be done to accelerate the transition towards cleaner energy in SEA. Several persistent challenges need to be addressed and at scale, including policy, regulatory, and institutional capacity constraints. In some countries, development is hampered by low tariffs, while in others they are stalled due to the perceived threat of new technologies to the traditional business models of power utilities and the high risks and uncertainties associated with certain emerging technologies. Another challenge is that power systems in the region have been developed based on a traditional centralized model, with limited regional interconnection of power grids, leaving them unable to accommodate variable renewable energy (VRE) at a large-scale.

Energy efficiency remains largely untapped in the region. Progress has been hampered by a lack of energy efficiency policies and regulations and energy performance standards seldom following global best practices. Further progress is hindered by a lack of awareness and local expertise on energy efficiency, which is reflected in the slow adoption of _energy as a service_ business models and the reluctance of national banks to finance energy efficiency projects. Countries in the region could also benefit from further cooperation at the regional level, for instance in the harmonization of minimum energy performance standards.

The power generation mix of most SEA countries is dominated by fossil fuels, namely coal and natural gas. Despite the scaling back of project development pipelines, coal-fired power generation still features prominently in the power development plans of some SEA countries. On its latest power development plan, Viet Nam is planning 17 gigawatts (GW) of new coal capacity by 2030, whereas in 2019 Cambodia signed agreements for importing up to 2.4 GW of power generated from coal in Lao People's Democratic Republic. Existing and planned coal-fired power projects have an adverse impact on the environment and health of populations and are major contributors to GHG emissions. On the other hand, coal-fired generation is generally perceived as a well-proven, reliable, and affordable technology. In addition, coal is widely available, and the industry is a significant contributor to the economy in some SEA countries. Therefore, the phasing out of coal needs to consider broader socioeconomic impacts within the context of a just transition in impacted countries.

For more than two decades, SEA countries have been exploring opportunities for enhancing regional power interconnections and power trading through various platforms, including the ASEAN Power Grid initiative and the Greater Mekong Subregion Regional Power Trade Coordination Committee (GMS-RPTCC). Notwithstanding these efforts, regional power trade still accounts for a marginal proportion of the total power consumed in the region and the multiple benefits of regional power trade and cooperation could be further leveraged.

Cross-cutting the issues above, the development of cost-effective energy infrastructure in several SEA countries has been hindered by inadequate sector governance and transparency. This is reflected in the limited public disclosure of the terms and conditions of power purchase agreements (PPAs), owing to the region's preference for negotiated bilateral agreements rather than reverse auctions. This has led to information asymmetry, conflicts of interest, high transaction costs, noncompetitive pricing, and often poor quality of service.

The long-term aim of reaching net-zero emissions requires a profound transformation in terms of how energy is produced and used. The power sector has been at the forefront of this transformation, benefiting from the significant drop in renewable energy costs, particularly wind and solar. Transport and heavy industry sectors where fossil fuels are more difficult to replace as cost effectively will take longer to decarbonize. In these sectors, the clean energy transition will hinge, firstly, on the increased electrification of transport and, in the mid- to long-term, on the use of alternative fuels such as hydrogen produced from renewable electricity (green hydrogen) in industrial processes. A cleaner power sector will thus be a key enabler of this transition.

Role of Asian Development Bank and value addition. ADB has been a key development partner supporting SEA countries in the transition to a cleaner energy future through a combination of TA, policy dialogue, transaction advisory services, and financing of first-mover projects and investments. For example, ADB has been financing the private sector across SEA to invest in the first set of renewables and renewables plus storage projects, electric vehicles, and battery charging infrastructure. In the public sector, ADB provided transaction advisory support for the first utility-scale reverse auction in Cambodia which led to the lowest power purchase tariff for a solar project in SEA and has spurred similar efforts across the region. ADB has also been a key proponent of regional power trade and interconnections, through its support of technical studies and policy dialogue, and financing for certain keystone projects under the auspices of the GMS-RPTCC. While ADB has supported improved governance in the sector as well as energy efficiency investments, these are two areas where more needs to be done.

ADB is well-positioned to continue driving the clean energy transition in the SEA, and this dovetails effectively with its ongoing effort to support its developing member countries (DMCs) to design and deliver green recovery programs in response to the COVID-19 pandemic. The TA will build on the outcomes of TA 9003-REG and other country-specific activities that have been piloting clean energy technologies and business models. Furthermore, it will complement efforts organized under ADB's ASSURE program. Opportunities for synergies under a one ADB umbrella will be keenly explored, especially with the ASEAN Catalytic Green Finance Facility, the Office of Public-Private Partnership, and a regional knowledge and support TA proposed by the Private Sector Operations Department. In addition, given the importance of improving access to knowledge and information to increase capacities of DMCs on clean energy, a plan will be prepared to disseminate to a wider audience all knowledge products completed under the proposed TA.

Impact Transition to cleaner forms of energy in Southeast Asia achieved
Outcome Enabling conditions for clean energy transition are created and enhanced
Outputs

Opportunities for public and private sector investments in new renewable energy capacity increased

Opportunities for energy efficiency improvements through public and private investments developed

Mechanism for accelerating the phase out of coal and other fossil fuel-based generation assets established

Energy sector governance and transparency in Southeast Asia enhanced

Regional power grid integration in Southeast Asia enhanced

Geographical Location Cambodia - Nation-wide; Indonesia - Nation-wide; Lao People's Democratic Republic - Nation-wide; Philippines - Nation-wide; Thailand - Nation-wide; Timor-Leste - Nation-wide; Viet Nam - Nation-wide
Summary of Environmental and Social Aspects
Environmental Aspects
Involuntary Resettlement
Indigenous Peoples
Stakeholder Communication, Participation, and Consultation
During Project Design
During Project Implementation
Business Opportunities
Consulting Services It is estimated that a total of 330 person-months (130 international and 200 national) of individual consultants' inputs is required. A consulting firm may also be recruited using quality- and cost-based selection (90:10). Resource persons will be engaged, as needed, to support TA activities and outputs.
Procurement ADB will engage the consultants and carry out procurement following the ADB Procurement Policy (2017, as amended from time to time) and its associated project administration instructions and/or staff instructions.
Responsible ADB Officer Tharakan, Pradeep J.
Responsible ADB Department Southeast Asia Department
Responsible ADB Division Energy Division, SERD
Executing Agencies
Asian Development Bank
6 ADB Avenue,
Mandaluyong City 1550, Philippines
Timetable
Concept Clearance 28 Apr 2021
Fact Finding 03 May 2021 to 07 May 2021
MRM -
Approval -
Last Review Mission -
Last PDS Update 03 May 2021

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Related Publications

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Tenders

Tender Title Type Status Posting Date Deadline
Feasibility Study for Energy Transition Mechanism Firm - Consulting Closed 10 May 2021 06 Jun 2021

Contracts Awarded

No contracts awarded for this project were found

Procurement Plan

None currently available.