Southeast Asia has the potential to leapfrog fossil fuel-based energy generation methods, but only if the renewable energy sector can attract investors.
“The remaining 55 per cent of projects currently in the market are unbankable without government or other mechanisms,” he said.
Bankability refers to the financial viability of a renewables project, and whether or not a bank will support it. For instance, Vietnam’s draft template for solar investments released earlier this year, has been criticised for being unbankable.
A second but no less pressing issue is regulation. Nooy said countries such as the Philippines still take a protectionist approach to foreign direct investment, limiting the amount of funds entering the renewable energy space.
The region has an abundance of natural energy resources, but lags developed economies when it comes to building clean energy generators. Southeast Asia’s energy demand has grown by 60 per cent in the last 15 years, according to the International Energy Agency—demand that countries such as Indonesia and Vietnam are meeting through the construction of new coal-fired power plants. Experts cite fossil fuel subsidies as one reason for this.
While speakers agreed that the falling cost of renewable energy would push Southeast Asia towards more sustainable means of electrification, financing it remained a stumbling block.
The development of microgrids, which generate electricity locally within a limited area independent of national energy, is one example. Calling microgrids “the future”, Holger Schenk, director of technology at Solar Philippines said the difficulty in rolling out microgrids was not in the hardware or software, but in making projects bankable.
Nooy commented that technological improvements have made microgrids commercially viable today, whereas they weren’t three years ago. The last mile of energy systems, where power is delivered to the users, tends to be the most expensive part of an electricity generation network, and microgrids are a solution to this problem.