How Alternative Fuels Could Power ASEAN's Green Energy Transition
Editor
2 June 2023 07:46 WIB
By: Trung Ghi, Partner, Head, Energy & Utilities Practice, Arthur D. Little Southeast Asia, and Somnath Kansabanik, Manager, Arthur D. Little Southeast Asia
As the European Union ratifies its ban on CO2-emitting cars by 2035 but exempts engines that run on synthetic fuels, the debate over the use of this carbon-neutral alternative is back on the table.
Alternative fuels, such as advanced biofuel and synthetic electro-fuel, can greatly reduce the carbon footprint over their life cycle compared to traditional oil-based fuels. Consequently, this could extend the lifespan of traditional Internal Combustion Engines (ICEs) while contributing to the fight against climate change.
For Southeast Asian countries, embracing alternate fuels such as biofuel and synthetic e-fuel could catalyze energy transitions, particularly in the hard-to-abate sectors. Biofuels can result in a reduced carbon footprint if produced using advanced bio-feedstock, such as agricultural waste, rather than traditional feedstock like corn or sugarcane. Similarly, synthetic fuels can be considered low carbon if produced using hydrogen derived from renewable energy sources, such as solar, wind, or hydropower, and by capturing CO2 from the atmosphere or industrial processes.
However, the problem is that green hydrogen requires green electricity, and power generation in ASEAN today is still heavily skewed toward traditional forms such as oil and coal. This is because renewable sources are not as abundant in all ASEAN countries. As such, there is a need to continue with traditional power sources until technology costs are drastically reduced to accommodate all nations. For a region rich in the raw materials required for clean energy products, fossil fuels still comprise almost 83% of its energy mix.
ASEAN is the world’s fourth-largest energy consumer after the United States, China, and the European Union. Between 2000 and 2019, the demand for energy in the region grew more than 80%, and by 2040, it is expected to increase by a further 60% – driven mainly by Indonesia, Thailand, Malaysia, and Vietnam. Accelerating the green energy transition in Southeast Asia remains, therefore, critical. As more countries commit to achieving net-zero emissions in the next 40 years or less, they must consider feasible actions to turn it into a practical reality.
In March 2023, the EU established binding targets for its member states, mandating a choice between a 14.5% reduction in greenhouse gas intensity or a 29% renewable energy share in the transport sector by 2030. Similarly, ASEAN governments should consider setting specific targets for the transport sector, focusing on diversifying energy sources with a lower carbon footprint, such as hydrogen, biofuel, and synthetic e-fuels. Alongside green energy solutions like battery-electric vehicles and biofuel, e-fuels could be a low-carbon alternative in the transport sector. In hard-to-abate sectors such as maritime, shipping, and heavy-duty transportation that account for a large share of ASEAN’s emissions, the switch to biofuel and synthetic e-fuels could accelerate the decarbonization of freight activity in the region.
What Is Being Done in ASEAN
In many countries, coal-fired power plants are gradually being phased out to accelerate the energy transition. In Indonesia, “Sustainable Energy Transition” was emphasized during its G20 presidency in 2022. With the goal now to produce up to 52GW of green hydrogen by 2060, the government issued a Presidential regulation for New and Renewable Energy (NRE) acceleration. However, Indonesia still allows for new Coal Fired Power Plants (CFPP) in industrial zones also signals confusion on where the policy is going and whether the government is serious about moving towards NRE.
Moreover, geothermal energy use is increasingly gaining traction, given that Indonesia has the largest geothermal potential in the world. State-owned energy giant Pertamina recently signed a joint study agreement with Singapore-based Keppel Infrastructure and global oil major Chevron to explore the development of a green hydrogen facility in Sumatera, with a production capacity of at least 40,000 tonnes per year, powered by geothermal energy.
