Shock therapy: war forces oil-addicted Asia to finally go green

The age of cheap oil is over and Thailand’s rooftops are reflecting that fact. Across homes, garages and warehouses in the sun-drenched kingdom, the blue-black sheen of solar panels is spreading, as the Iran war has done what years of climate summits could not: turn solar power into a necessity. Demand for solar panels has swamped companies like Wayso, whose managing director is colouring in Thailand’s rooftops as fast as he can find technicians to do it. “We can’t hire quickly enough,” Suwat Cherdvut told This Week in Asia. “We’ve had to start outsourcing technicians just to keep up.” As electricity bills climb, Thais are seeking solace in solar, driven by a growing crisis that has ratcheted up oil prices, triggered fuel shortages and raised the spectre of blackouts that now stalks the region. Asia’s economies depend on imported oil and gas, exposing them to both the fallout of distant wars and the foreign policy whims of faraway governments. Major disruption in the Strait of Hormuz has hit the region hard. Around 80 per cent of the crude shipped through the strait was destined for Asia before its near-total closure amid the Iran war. That oil kept homes and hospitals lit and air-conditioned, factories humming, trucks on the road and passenger jets in the skies. Though prices have since moderated, international benchmark Brent crude neared US$120 a barrel last month – not far off the US$147.50 record set on the precipice of the global financial crisis in 2008. Burned by the oil shock, Asian governments that raided savings and borrowed heavily to contain inflation are now plotting alternative pathways to future-proof their economies. Renewables provide an obvious lifeline. Thousands of planned gigawatts of solar, wind and hydropower are being hastened into existence as green energy transforms from a climate goal into a matter of immediate survival. “Energy security is no longer optional, it is a strategic national priority,” Malaysia’s Deputy Prime Minister Fadillah Yusof said on Tuesday. Thai Finance Minister Ekniti Nitithanprapas has declared the age of cheap oil “over”, while Indonesian President Prabowo Subianto warned earlier this month that “we have no choice but to be self-sufficient” by accelerating the clean energy transition “if we still want to survive”. In Washington this week, Ekniti signalled that Thailand was ready to open up its national electricity system to solar, potentially allowing households to sell excess solar power they generate back to the grid. The Philippines, which imports virtually all of its oil from the Middle East, declared a national emergency on March 24 as fishers were forced to dock and jeepney drivers could no longer afford to fill their tanks. It has since slashed red tape on 22 renewable energy projects with a combined capacity of 1.47GW. Even Indian Prime Minister Narendra Modi – long an advocate of fossil fuel pragmatism – is accelerating his nation’s transition away from coal, with renewables now accounting for more than 50 per cent of total installed power generation capacity. For years, green energy advocates have warned that Asia’s dependence on fossil fuels is its economic Achilles’ heel. They blame big business, outdated grid infrastructure and insufficient investment for keeping the region hooked on burning carbon. But the current crisis “has opened a critical window of opportunity” to restructure energy systems, according to Anj Dacanay, lead campaigner at advocacy network Energy Shift Southeast Asia. “Despite the region’s vast renewable potential, a persistent bias towards coal and gas threatens to lock nations into high fuel costs and risk of stranded assets,” she said. “By transitioning away from fossil fuels, Southeast Asia can transform this period of volatility into a renewable-led recovery.” In tropical Thailand, where the sun shines virtually every day yet only about 10 per cent of grid power currently comes from renewables, the government last month introduced a 200,000 baht (US$6,240) tax deduction for residential users who switch to solar in a bid to nudge the public towards going green. That, and the war-driven energy crisis, has helped Wayso managing director Suwat double the amount of business he does almost overnight. “The demand is unlike anything we’ve seen before,” he said. “This isn’t a passing trend. We’re watching an entirely new industry take shape in real time.” A modest-sized 3,000-watt solar cell system that provides a Thai household with around 4,500 kilowatt hours of power annually can pay for itself in about 2½ years, according to Suwat. Lessons from history This is not the first time that Asia has faced an oil squeeze. Speculation, stagnant supply and surging demand sent prices soaring in the summer of 2008, with the price of crude again nearing all-time highs of about US$140 a barrel following Russia’s invasion of Ukraine in 2022. Some countries read the runes better than others. Vietnam leads Southeast Asia’s largest economies – Indonesia, Malaysia, Thailand, Singapore and the Philippines – in terms of its renewables mix, with 13 per cent of electricity its generated by solar and wind, according to energy think tank Ember. Its regional peers sit at around 5 per cent, locked into long-term dirty energy contracts often held by oligarchs who help steer government policy. “Southeast Asia’s second price shock in five years should be considered a clear warning,” said Yu Sun Chin, a senior researcher at data-driven advocacy group Zero Carbon Analytics. “Doubling down on domestic oil and gas will not shield the region from global price swings, as has been shown in the past.” Vietnam’s renewables lead has saved it hundreds of millions of dollars in gas and coal imports during the Iran crisis – an example, she says, of an economy insulated to a degree by its policy planning. Meanwhile, the country’s dominant conglomerate Vingroup has reportedly asked the government to approve a pivot from building its largest liquefied natural gas plant to an unspecified renewable project, signalling flexibility towards market conditions rather than an addiction to fossil fuels. For those working at the frontier of green energy, whether this proves to be an inflection point for Southeast Asia – or another opportunity passed up – depends on government ambition and investment. Professor Warawut Chulalaksananukul, a microbiologist at Chulalongkorn University in Bangkok, has pioneered the use of yeast as a biofuel for aircraft – offering a potential alternative to high-purity jet fuel that costs around twice the price of crude. “Fossil fuel-based jet fuel creates unavoidable energy security risks,” he told This Week in Asia, adding that the aim of his biofuel research was “to build domestic energy independence” by developing alternative fuel sources from local resources. Soaring oil prices amid the Iran war have forced airlines across the region to raise fares and even suspend routes in some cases. The aviation industry is also a large and growing contributor to carbon emissions, but Warawut’s innovation, like other sustainable aviation fuels made from non-petroleum feedstocks such as waste oils, agricultural residues and municipal waste, could significantly reduce that impact. Unfortunately, such alternatives currently account “for less than 1 per cent of global aviation fuel use, due to feedstock limitations and high production costs”, he said. Warawut’s research seeks to convert agricultural waste – rice and sugar cane straw that farmers would otherwise burn – into yeast, then into energy-producing biomass. It is not yet at the commercial stage, but its potential is compelling for a country investing heavily in its airports and aviation sector. “For agricultural countries like Thailand, this turns a domestic waste problem – burning crop residue – into an energy asset,” he said. Advocates of biojet fuel want it to account for 8 per cent of all jet fuel within the next decades, but substantial government support will be needed to reach that target. “If the government commits seriously to research, development and scaling biofuel production to industrial levels, it can meaningfully reduce dependence on imported fossil fuels,” Warawut said. “Without that investment, Thailand will remain in the same position it is today – largely dependent on foreign energy producers – regardless of how many crises occur.” In a coal hole A major obstacle to renewables adoption is coal, still the primary source of power generation in both South and Southeast Asia. India, the world’s second-largest coal consumer after China, accounts for around 10 per cent of global demand and is expected to burn through 1.4 billion tonnes annually by 2027, rising to 1.5 billion by 2030 as electricity use surges, according to the International Energy Agency. Indonesia and the Philippines are the heaviest coal users in Southeast Asia, followed by Vietnam. Despite being the dirtiest and most polluting fossil fuel, coal does not appear to be going anywhere fast. New coal-fired power stations are still being built, others have been brought back online amid the current crisis and hundreds of billions of dollars in subsidies are lavished on the sector each year. Those subsidies “are a major sticking point with regards to reducing coal-fired generation in Southeast Asian economies” – artificially sustaining a sector that delivers diminishing value to the public, said Amy Kong, an energy transition researcher at Zero Carbon Analytics. “For seven out of 10 Asean economies, solar is already cheaper than coal,” she said. “Meaning that even though these subsidies skew the economics in coal’s favour, solar is still winning from a cost perspective in many countries.” Long-term fuel and power contracts effectively lock in fossil fuel dependence Sam Reynolds, energy finance analyst Fossil fuel lobbyists, monopolies and a lack of policy vision have bound regional governments to dirty energy. But the Iran war may have sharpened focus on the need to adopt renewable alternatives, which are not only cheaper but typically two to five years faster to bring online. “Long-term fuel and power contracts effectively lock in fossil fuel dependence for decades, slowing the transition to clean energy,” said Sam Reynolds, research lead for LNG and gas in Asia at the Institute for Energy Economics and Financial Analysis. If South and Southeast Asia want to keep the lights on for a growing population consuming ever greater amounts of electricity, the energy transition is inevitable, he argues. “Countries will need to rapidly scale up renewables and storage to meet projected demand growth,” he said, calling for policy tools, including retirement road maps, carbon pricing and market reforms “to nudge fossil-based capacity into smaller and smaller roles”.

Shock therapy: war forces oil-addicted Asia to finally go green

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}Burned by soaring energy prices, Southeast Asian nations are racing to future-proof themselves against the volatility of war

Burned by soaring energy prices, Southeast Asian nations are racing to future-proof themselves against the volatility of war