Capturing Southeast Asia’s renewable energy opportunity

Southeast Asia is home to one of the world’s most vibrant and dynamic digital ecosystems, with the World Economic Forum estimating that the region’s digital economy will grow to be worth US$1 trillion (S$1.37 trillion) by 2030.

Alongside that, rapid digitalisation across the region as well as a young, innovative, and entrepreneurial population have meant that Southeast Asian countries are poised to make an outsized impact on the development of emerging technologies such as artificial intelligence.

Underlying the region’s potential as a powerhouse of digital innovation, however, is a growing appetite for energy – especially clean energy – as economies across the region make important strides towards honouring their commitments to hit net zero emissions.

As an alliance of some of the region’s most active purchasers of renewable energy, the Asia Clean Energy Coalition (ACEC) is very aware of the role that the private sector can play in accelerating this transition to a clean energy future.
 

At the same time, while private-sector entities are increasingly focused on clean energy procurement – with this representing a US$1.3 trillion opportunity according to energy analytics firm Wood Mackenzie – whether this demand can be met while realising the full potential of corporate investments depends strongly on whether diversified and cost-effective procurement options are available and supported by enabling policies.

For example, Bloomberg New Energy Finance finds that in countries where corporate power purchase agreements (PPAs) are available, such deals have become the fastest-growing source of investment in new renewable energy projects. Similarly, places where utility-provided options such as utility green tariffs (UGTs) are offered have also seen increased uptake of clean energy across the board.
 

Letting the private sector do its part

Several countries across Southeast Asia have made notable strides in paving the way for greater speed and scale of private-sector investment in clean energy by enabling varied and cost-competitive procurement mechanisms, such as PPAs, allowing corporate consumers to contract directly with developers to offtake power from new projects.

For example, in July 2024, Vietnam passed a landmark piece of legislation seven years in the making, also known as the direct power purchase agreement (DPPA) decree, which establishes a robust framework for both virtual and private-wire PPAs.

The DPPA decree is significantly increasing the private sector’s access to renewable energy projects in Vietnam and is likely to spur significant investments in that area over the next few years. While Vietnam’s Ministry of Industry and Trade works on additional steps for implementing and optimising the legislation, the DPPA decree provides a strong foundation that should serve as an example for other Southeast Asian countries.
 

In Malaysia, as well, the Corporate Green Power Programme (CGPP) was an important first step towards providing private buyers with access to virtual PPAs. While CGPP was launched only as a pilot programme, making this a fully unrestricted and permanent means of corporate renewable energy procurement going forward would unlock vast amounts of new private-sector investment in Malaysia.

Separately, Malaysia’s Corporate Renewable Energy Supply Scheme (Cress) is shaping up to allow off-site physical PPAs. Initial information based on Cress industry hearings suggests a need for greater transparency, predictability and alignment, and more clarity on the definition of “firm” solutions. However, the fact that this is happening with industry consultations is a positive step forward for Malaysia’s clean energy ambitions.

In line with advocating diversified and cost-effective procurement options, it is encouraging to see Cress complement, rather than replace, existing programmes such as the CGPP and Green Electricity Tariff (GET). The goal is to ensure that all these options remain available, thus providing companies with a range of choices to best fit their specific needs.

By maintaining a diverse set of procurement mechanisms – whether through virtual PPAs, physical PPAs, or utility-based tariffs such as GET – corporates can pursue clean energy in ways that align with their operational goals, cost considerations, and sustainability strategies. This approach not only encourages greater private-sector participation, but also contributes to the long-term success of Malaysia’s clean energy transition.

Together, these moves by Vietnam and Malaysia to promote PPAs are steps in the right direction that will help to scale up investments in renewable energy by ACEC members and other private-sector players, creating a “win-win-win” for consumers, developers, and regional grids.

This means that corporate consumers can meet their growing energy needs with clean energy, developers have a clear path to the guarantees and incentives they need to build more capacity, and regional grids benefit from additional renewable capacity without taxpayers needing to bear additional cost burdens.
 

Taking one step at a time

In other countries, while efforts to pave the way for PPAs may still be under discussion, other mechanisms are being introduced that may still allow for greater private-sector participation in accelerating the green transition.

In Thailand, the Energy Regulatory Commission has proposed the UGT programme, which (especially the UGT2 option) provides a portfolio of new renewable power projects to choose from, making it a means of renewable energy procurement that will meet most ACEC members’ criteria for additionality, traceability and cost-effectiveness.

Considering utility-provided approaches such as UGT2 may be something that other Southeast Asian countries could also look to pursue in parallel with exploring other means of direct renewable energy procurement such as PPAs. The focus, however, should remain on meeting stringent criteria around additionality, affordability, and transparency as Thailand has ensured UGT2 does.
 

Harnessing ASEAN’s potential for regional integration

Even as countries implement measures that attract private-sector investments in their renewable energy industries, the uneven distribution of energy resources and demand across Southeast Asian nations remains a factor for policymakers across the region to consider.

For ASEAN countries to take full advantage of the region’s rich capacity for renewables – whether that be Indonesia’s solar capacity, Vietnam’s wind power, or the immense hydropower of Lao PDR – efforts must be made to enable corporate investments in cross-border renewable power projects.

The biggest benefit of cross-border trade is the lower overall cost of renewables development, by locating power generation where the cost of generation is most competitive and connecting this to where demand for renewable power is greatest across the region.

But there are also significant further benefits that can be unlocked through a large electricity grid network, including reduced reserve margins and energy-storage investment needs, and greater system reliability, flexibility, and security.

For corporate investments in renewables to scale up via greater regional grid interconnection, in addition to ensuring greater cross-border flow of renewable power, ASEAN’s system operators and energy regulators also need to ensure that the environmental attributes from these projects (usually issued in the form of renewable energy certificates, or RECs) flow across borders as well, as these are the most important component for corporate PPA investments.

This means, for example, enabling renewable power – bundled with RECs – from Indonesia or Malaysia to be put towards operational needs in Singapore, where demand for renewables far outstrips available supply.

This is a factor recognised most recently by Singapore’s Minister for Manpower Tan See Leng during his opening address at the Asia Clean Energy Summit, where he highlighted the critical need for recognising cross-border clean energy transfers.

The ACEC and all our members stand ready to work alongside the Singapore government and other ecosystem partners to advance greater recognition of cross-border clean energy trading across Southeast Asia.

More interconnected grids and markets would help to scale up corporate investments in renewable power projects across ASEAN to meet demand where it is most concentrated.

Taken as a whole, Southeast Asia has one of the world’s greatest capacities for renewable energy development with over 220 gigawatts of documented prospective solar and wind capacity, and only 3 per cent of this is under construction.

Tremendous progress is being made; yet, more can be done by advocating diversified and cost-effective procurement options and learning from within the region as well as applying best practices that have helped to scale up private-sector investment in renewables in other parts of the world.
 

The writer is the programme director of the Asia Clean Energy Coalition.