The Economic Importance of Energy Diversification for Emerging Markets

by: Jan Willem Zwarteveen, Managing Director Siemens Gamesa Renewable Energy Philippines

A recently published meta-analysis identified 259 factors influencing wind energy diffusion (https://doi.org/10.1016/j.jclepro.2020.125636). Environmental reasons played an important role in wind adoption in advanced economies. Economic factors were, however, found to be the major drivers for emerging markets. With lowering levelised costs of electricity, projected to reach USD 0.093/kWh in 2025 for the ASEAN region (https://agep.aseanenergy.org/levelised-costs-of-electricity-for-renewable-energy-technologies-in-asean-member-states-ii/), wind energy currently competes with most traditional energy sources. Extrapolating the trend, soon it might not only compete but form simply one of the cheapest forms of energy. Wind energy not only results in cost savings, but avoids the import of coal or oil – the main source of energy for many ASEAN countries. Reducing import frees up money to invest in the local economy which creates new local jobs. As stated in the 6th ASEAN Energy Outlook (AEO6), the increased installation of wind power in the APAEC Target Scenario would add about 61,000 jobs in 2025 and about 83,000 jobs in 2040 to the region. A stable long-term plan would additionally enable creating a Renewable Energy (RE) industry, where technology and knowledge can be localised. The challenge for the governments is to manage the localization of RE industry, including secondary and tertiary effects to create the millions of jobs needed as part of the post-COVID recovery.

Taking the Philippines as an example, currently, it imports roughly 2-3 billion USD of coal per annum. Even in the clean energy scenario of the Department of Energy, the coal import is expected to double over the next decades. The reliance on fossil fuel imports also creates a severe challenge to national energy security. Investing in RE locally would result in an increase of jobs, which are of crucial importance to combat the high unemployment rates.

The intermittency of wind and solar is often mentioned as the main barrier. Given the current low shares of wind in most ASEAN countries, a higher penetration is possible without significant technical problems. Connecting grids and balancing with gas power or pumped hydro would enable a significantly higher uptake of local renewables.

It is clear that wind energy brings environmental benefits. But the economic advantages will most likely form the final argument for ASEAN countries to take strategic action for long-term energy diversification, which will contribute to reaching the regional target of 23% RE share in ASEAN’s total primary energy supply by 2025.

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