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In this report, we focus on ASEAN’s renewable energy (RE) development amidst elevated cost pressure and the potential of rising carbon pricing initiatives. As near-term priorities are on curbing inflation without jeopardising economic growth, more effort is needed to achieve climate change targets. Featured ideas: Tenaga Nasional (TNB), Yinson (YNS), Solarvest (SOLAR) and Samaiden (Malaysia), Sembcorp Industries (SCI) (Singapore), as well as Global Power Synergy (GPSC) (Thailand) for their growing RE exposure and potential battery energy storage system (BESS) application opportunities.
Not ruling out fossil fuel yet. While developed countries move away from fossil fuel dependence to RE, ASEAN leaders acknowledged that ASEAN will still need to consider fossil fuel in the short to medium term to meet its fast growing electricity demand. Moreover, fossil fuel remains abundant in this region. Unabated fossil fuel accounted for three-quarters of total generation, of which coal contributed to >40% of the region’s energy related emissions. Even with pledges not to have new coal plants, the region still has c.90GW of existing coal plants with an average operating lifetime of 10 years coupled with another 18GW under construction.
Greater effort needed. The Russia-Ukraine crisis has increased the urgency even in developed countries, to ramp up RE capacity and safeguard energy security from fossil fuel supply disruptions. Closer to us, eight South-East Asian countries have announced carbon neutrality and net zero emissions targets. Still, we have yet to see ASEAN governments translating these targets into detailed policies for future implementations. We believe ASEAN countries will not achieve their respective targets unless greater effort is put in place to accelerate the progress. According to the International Energy Agency (IEA), average energy investment pa in South East Asia has to be hiked up to USD190bn pa till 2030 from the 2016-2020 average of USD70bn pa to meet current announced climate aspirations.
Another global record for RE addition in 2022. Global annual RE capacity addition is estimated by IEA to increase by 8% to 320GW in 2022 and to remain stable in 2023. This is largely driven by the continuous growth in China and acceleration of RE expansion in Europe despite the continuation of supply chain disruption and construction delay as well as escalated raw material cost. The recent retracement of commodity prices in response to the weaker economic outlook could provide a breather to overall project costing.
Elevated fuel subsidies challenge climate change goals. Elevated fuel prices have led to higher subsidies, casting additional fiscal burden to ASEAN countries. With the key priorities being keeping inflation at bay, we are seeing a delay in fossil fuel subsidy reform to protect the economies and the cascading effect is a relatively lower allocation of economic resources to lower emission industry.
Rising carbon pricing initiatives. Singapore is the first to implement carbon tax back in 2019 and to progressively increase over the years. We are seeing more carbon pricing initiatives (either carbon tax or emission trading) being scheduled for implementation or under considerations within the ASEAN region. Indonesia, Malaysia, and Thailand have announced plans to implement carbon emissions trading. However, the timeline for these implementations may be pushed back due to the uncertain economic outlook amidst high inflationary environment, as evident by the Indonesian Government’s recent postponement of carbon tax implementation.
This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....