Renewable energy-based power systems backed by energy storage can help Southeast Asian countries reach net zero by 2050, according to a report from Wärtsilä.
The modeling used in the report, titled Rethinking Energy in Southeast Asia, uses simulations to reach net-zero emissions in Vietnam, the island of Sulawesi in Indonesia, and the island of Luzon in the Philippines. In addition to transitioning power systems, the report says the region can cut electricity costs by more than 20% when considering future carbon taxes.
The study shows that a combination of renewable energy sources plus flexible capacity resources for the grid provided by balancing engines and energy storage can meet increasing power demand in the countries. The report says investments should focus on adding renewable energy, short-duration energy storage, and developing clean fuels such as hydrogen. To reach net zero, fossil fuels should be phased out.
To deploy renewable energy at a rate of 85%, which aligns with international net-zero targets, the International Energy Agency says Southeast Asia needs to increase capacity to 1.1 terawatts over the next 30 years. Wärtsilä says reliance on fossil fuels in the region is holding back the increased implementation of renewable sources.
A report by Moody’s earlier in 2022 says that net-zero goals in emerging markets could lead to carbon transition risks, especially in heavy industries. The IEA says to reach net zero by 2050, more than $1 trillion in clean energy investments are needed in emerging markets.
Climate-related financing has seen potential in Asia, especially with increasing emissions reduction targets, according to Janus Henderson. Sustainability bonds have also remained strong in emerging markets this year.
Vietnam has a goal to reach net-zero emissions by 2050, and Indonesia by 2060. The Philippines does not have a specific target but plans to use 35% renewable energy sources by 2030 and 50% by 2040.
Wärtsilä’s modeling simulated the deployment of the energy technologies that cost the least to meet demand based on varying levels of emissions reductions. Those levels included a 50% reduction, an 80% reduction, and net-zero emissions. It also compared those results with scenarios that did not restrict emissions.
According to the report, Vietnam’s net-zero power system costs were 20% less by 2050 as compared to making no emissions changes. That would save nearly $28 billion in potential carbon taxes.
A net-zero system in Luzon would cut energy costs by 23% by 2040, avoiding $6 billion in carbon taxes. Going to net zero in Sulawesi would cut costs by 23% through 2060, avoiding $1 billion in carbon taxes.
The three emissions reduction models show grid flexibility by using balancing engines and energy storage, which help the grid reliability during times of uncertain wind and solar generation, and can help renewable energy become the primary source of power, Wärtsilä says.
The Vietnam model shows that in every scenario 7 gigawatts of grid balancing capacity is needed by 2030 to meet peak demand. To reach net zero by 2050, the country will need 87 GW of balancing capacity. For the Luzon grid to help the Philippines’ energy goals, 7.3 GW of flexible capacity is needed by 2030, and under a net-zero scenario in Sulawesi, 14.1 GW of flexible energy is needed by 2060.
The report finds for the countries to reach their emissions goals there needs to be increased policies and incentives to add renewable energy and storage. The region also should recognize that resisting energy transitions could increase fuel consumption and slow the growth of renewable energy use.
“Transitioning to net zero is a complex, multi-decade operation which requires deep power system planning and a rapid pace of implementation this decade,” says Frederic Carron, Wärtsilä Energy’s vice president for the Middle East and Asia. “By actively shaping markets to value flexibility, renewable energy can become the main source of energy.”