Policymakers, investors, and industry leaders must ride the wave of opportunity to invest, innovate, and integrate energy systems for a more resilient energy future.
Global energy systems in the coming years will see continued, fundamental transformations – the kind of transformations that require innovative thinking and approaches. It is appropriate then that this year’s Singapore International Energy Week will address the theme, “Transforming Energy: Invest, Innovate, Integrate”.
Without a proactive, forward-looking approach, the energy systems of the world will not be able to ride the wave of opportunities in this rapidly transforming landscape. These include the key sustainability goals of the modern era: how to reduce greenhouse gas emissions while keeping our economies strong; how to provide universal access to energy; and how to combat energy-related air pollution, which currently results in 5.5 million premature deaths each year.
Thankfully, we are already seeing countries making efforts to reach these objectives. For example, while ASEAN members will rely heavily on conventional sources of energy for years to come, the IEA estimates that renewable energy will make up close to half of Southeast Asia’s power supply by 2040.
This shift to renewables will go hand-in-hand with the electrification of energy demand, driven by the ever-greater proliferation of appliances, the electrification of transport, and electricity in heating and cooling. In Southeast Asia, electricity is set to account for the largest share of the rise in energy consumption, as rising incomes translate into higher ownership of appliances and increasing demand for cooling.
This trend towards electrification and renewable power generation has significant implications for the way that energy systems operate and function. Policymakers and regulators are being forced to find new ways to manage the variability of renewable technologies, such as enhanced system flexibility. Digital technologies will be a key tool to tackle this challenge, in both demand and supply, in turn making energy systems more connected, intelligent, efficient, reliable, and sustainable – but also increasingly complex.
This connectedness and complexity defines the ongoing transformations in the energy system. As unit prices and costs of generation fall sharply for renewable energy technologies, the challenge for policymakers is no longer how to make these technologies cost-competitive. Rather, the challenge is how to effectively integrate modern technologies into traditional energy systems.
International experience in countries that have successfully integrated large shares of renewable energy suggests that this process is achievable, and even at low cost. Solutions are already available and can be adopted by countries contemplating large renewables scale-up, such as those in Southeast Asia.
Regional integration of energy systems can play a role by delivering electricity security and increasing utilisation of the region’s renewable resources while minimising costs. This is something that ASEAN has been actively pursuing for some time through the ASEAN Power Grid, including recent successes such as the Laos-Thailand-Malaysia power-trading agreement.
Underpinning all of these efforts is the need for innovation. Innovation is the engine that drives digitalisation, electrification, and the development of cost-effective renewable energy technologies. It is of critical importance that technological innovation is promoted by policymakers, but we should also not neglect policy innovation. To respond to the various challenges, uncertainties, and fast-moving changes of the modern energy system, policymakers need to formulate new approaches and innovative solutions that reflect the ‘new normal’ in energy.
Finally, but most importantly, timely investment is critical to seize these transformational opportunities. This is especially pertinent to Southeast Asia, a region that will continue to experience rapidly growing energy demand for the foreseeable future. The IEA estimates that Southeast Asia’s cumulative energy investment requirement in the lead up to 2040 will be $2.7 trillion, or about $120 billion per year.
This will require an immense mobilisation of capital, clear and coherent policy, and significant participation from the private sector and international financial institutions. Singapore, as a major regional hub of finance and investment, has a critical role to play in this regard.
As always, the IEA stands ready to work with all members of the IEA Family and beyond, tackling the policy innovation challenge with our world-leading technical capacity, data, and analysis. We look forward to an ever-closer working relationship with our critical country partners in Singapore, and across Southeast Asia.
Dr Fatih Birol is Executive Director of the International Energy Agency (IEA).
He delivered a keynote address at the Singapore International Energy Week (SIEW) 2018 on 30 October, where he noted that there are important steps needed to achieve ASEAN’s energy targets.
The IEA also co-hosting the 2nd Singapore-IEA Forum at SIEW on 31 October, where discussions were held on how digital solutions will transform the energy system and how the world must get ready for the challenges of a digital energy sector.
This was originally published in TODAY on 29 October 2018.
By IEA