In the energy sector of Southeast Asia, fossil fuels still dominate, accounting for about 83% of the region’s energy mix and overshadowing the 14.2% contribution from renewables. Solar energy, in particular, is underutilized, with Vietnam leading the way at 20.5% and Indonesia lagging behind at less than 1%.
About 40% of Indonesia’s off-grid areas are located on islands outside of Java, making it challenging for the national grid to reach them. This highlights the broader challenge facing the region in effectively harnessing abundant renewable resources.
1 gigawatt of power can supply approximately 750,000 homes, with 1 terawatt containing 1,000 gigawatts. Currently, our global civilization relies on around 17.7 terawatts of power from various sources, including oil, coal, natural gas, solar, wind, and hydropower.
Helen Wong, a climate investor based in Southeast Asia and Managing Partner at AC Ventures, discussed the prospects of solar energy in Indonesia, a country that accounts for 40% of the region’s power consumption.
The transition away from coal
The potential for solar energy in Southeast Asia is significant, with a technical capacity of 17 terawatts, more than enough to meet the net-zero emissions target by 2050. However, the current renewable energy capacity is only at 99 gigawatts.
There are existing opportunities for investors in the region’s renewable energy sector, with initiatives like the Just Energy Transition Partnership (JETP) for Indonesia aiming to mobilize $20 billion to decarbonize the country’s energy sector. The goal is to achieve 19%-21% renewable energy by 2030, with a focus on phasing out coal plants and ramping up solar energy investments.
Investment in solar energy projects in emerging markets like Indonesia requires a careful evaluation of returns and payback periods. Wong emphasized the importance of financing and the need for the grid to accommodate more renewable energy sources like solar to accelerate the transition.
Supporting solar winners
Advancements in solar yield optimization technology, like trackers and IoT auditing, are essential to scaling solar projects. Wong highlighted the need for blended financing solutions, including support from development finance institutions, to facilitate the growth of the industry.
Improvements to the power grid and increased grid connections between Indonesia’s islands are crucial for accelerating solar implementation in the country. AC Ventures is eager to support the winners in the solar energy space and contribute to the energy transition in Southeast Asia.
Image credit: AC Ventures
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