ACCEPT Input and Intervention at Review of ADB Energy Policy

Jakarta, 19 June 2020

On 19 June 2020, during the Asia Clean Energy Forum (ACEF) 2020, the Asian Development Bank (ADB) organized a Consultation Roundtable to Review the ADB’s Energy Policy. Its main objective was to bring together energy sector experts and officials in the energy sector in developed and developing member countries (DMCs), international organizations, and ADB sector experts to review the ADB’s current energy policies. The topics covered, among other things, climate change challenges, technological progress, the DMCs’ evolving needs and priorities for investment and assistance, and the key areas in which the ADB could offer targeted support during this significant period in the energy sector transition.

The ADB approved the current Energy Policy in 2009. It was aimed at “providing reliable, adequate, and affordable energy for inclusive growth in a socially and economically acceptable and environmentally sustainable manner”. This objective led to energy sector operations focused on three pillars: (i) energy efficiency and renewable energy; (ii) access to energy for all; and (iii) energy sector reforms, capacity building, and governance. These broad areas continue to be valid for the ADB’s energy sector operations. However, given the recent approval of the ADB’s Strategy for 2030: Achieving a Prosperous, Inclusive, Resilient, and Sustainable Asia and the Pacific, and in the context of the ongoing rapid transitions in the energy sector, it is important to analyse and make more focused operational recommendations for ADB energy sector assistance. These must be spelled out clearly in the revised ADB’s Energy Policy.

This Virtual Consultation Roundtable (VCR) at ACEF 2020 was expected to identify the best energy policy initiatives to strengthen the ADB’s integrated approach and to accelerating a clean energy transition in the Asia-Pacific region through, among other things, cross-sectoral innovations and increasing energy sector resilience to natural disasters such as the current COVID-19 pandemic. The desired outcome of this discussion was to strengthen the inputs to the energy policy review.

Experts across the region from governments, intergovernmental organizations, the private sector, academic and research institutions, and funding agencies across the Asia Pacific, were invited to participate and provide informative discussion, including Mr Beni Suryadi, representing the ASEAN Centre for Energy (ACE)’s ASEAN Climate Change and Energy Project (ACCEPT).

Response to the Guideline Questions

  1. What are the needs and priorities of developing countries in the Asia-Pacific that require more support and assistance from the ADB?

It would be helpful to demonstrate that renewable forms of energy are cheaper than what the governments of most of the Asia-Pacific countries believe, especially those of the ASEAN Member States. This can be done by explaining international experience to date and helping facilitate the large-scale, long-term auctions that have lowered the prices of renewables in the Middle East and elsewhere. The ADB can also help the ASEAN Member States accelerate the development of public transport, which is currently seriously lagging.

The following are the ADB’s “Strategy 2030 Seven Operational Priorities”:

  1. Addressing remaining poverty and reducing inequalities;
  2. Accelerating progress in gender equality;
  3. Tackling climate change, building climate and disaster resilience, and enhancing environmental sustainability;
  4. Making cities more liveable;
  5. Promoting rural development and food security;
  6. Strengthening governance and institutional capacity;
  7. Fostering regional cooperation and integration

We recommend the following priority actions (the numbers in brackets indicate the alignment with the ADB’s seven operational priorities):

Accelerate energy transition in achieving Nationally Determined Contributions (NDCs). Clean energy technologies are available and proven by deployment. Compared to fossil fuel-based technologies, the costs of renewable energy (RE) technologies are now comparable (or cheaper) without subsidies. The key challenges are policy implementation and regulation. Hence, sending a clear message to decision-makers that financial institutions are now shifting their interests from conventional fuels to climate solutions is crucial.  Policy coherence for achieving the NDCs is critical. It is also important to provide a clear definition of “clean energy” in order to enhance the transparency of the ADB’s energy policies. (3, 6)

Support green business ideals for start-ups and entrepreneurs. Build green business markets and create more green jobs. (3)

Eradicate poverty. Increase RE access and microgrids in remote areas or marginalized communities. (1, 5)

Energy management. Energy efficiency improvements in industries have great potential, not only in power generation but in all uses. Support industries for ISO 50001 and measures that reduce heat losses. (3)

Sustainable transportation. 1) Planning for electric vehicles (EVs) is crucial. Clean energy sources for battery charging are needed, as well as enough charging stations and sustainable business models. 2) Much investment is required to improve public transport systems. (3, 4)

“Energy and climate change” education and training. Knowledge is a powerful tool in changing perspectives. After the public became well informed about the risks of COVID-19, engagement was high and people’s informed efforts to “stay at home” made a big difference. It is the same with climate change. Only when society understands the climate risks, will it respond accordingly. The countries of Asia should share their expertise. Some developing countries lack climate experts. (3, 6, 7)

Science communications. Online platforms are effective tools for reaching a broad audience. However, they sometimes include incorrect information. Support should be given to the youth (future leaders) in science communications to help them develop critical thinking, innovations, and also become more resilient to cyber propaganda. It would also be useful to create a program that helps build communications between scientists and the policy communities. (3, 6, 7)

  1. What are the emerging new technologies and innovations in the next 5-10 years that may be game-changers for meeting the energy access targets and climate goals?

They may include, in no particular order: smart microgrids, new battery technologies, energy storage other than batteries, digitalization, blue hydrogen and fuel cells in the power sector (green may take longer than 10 years in Southeast Asia), EVs, and perovskite solar cells.

  1. What is the role of fossil fuels (coal and natural gas) in the energy mix of the Asia-Pacific?

Fossil fuels and build-operate-transfer (BOT) coal and natural gas are expected to continue to dominate the energy mix, especially in the power sector.

  1. What are the cross-sectoral issues (e.g. energy-water-transport nexus) that may be considered in the new policy directions?

The main cross-sectoral issue is energy and climate policy. At the moment these are not coordinated with each other in most of the region. The governments have signed the Paris Agreement, but their energy policies are not geared to meeting their agreed emission mitigation targets.

Other cross-sectoral issues include the energy-climate nexus in communicating NDCs (governance and institutional arrangements), the energy-transport nexus, educating the public about low-carbon living, and assisting the urban poor.

  1. What are the long-term impacts of COVID-19 in the energy sector and what should be our responses?

COVID-19 will reinforce existing trends: the decline of fossil fuels and the rise of renewables. It may also lead to lower overall energy consumption.

Perception of energy security. Sustainable supply is more important than concerns about the depletion of fossil fuels. Resiliency in terms of the reliability of the energy systems is also crucial.

Response: To reduce oil consumption, the shift to EVs or biofuel vehicles will continue.  The uptake of RE derived from indigenous resources will also continue, while microgrids that increase flexibility and energy storage will enhance reliability.

Fiscal policy measures. While the government provides financial aid to reduce residential electricity bills, it provides subsidies for fossil fuels. The pandemic has increased the burdens of governments and could seriously impact their long-term planning.

Responses: The subsidies given to power plants that use fossil fuels should be removed so that that the costs of RE are more comparable. With net-metering for RE, the lower the dependence on the grid, the cheaper the power bills, and hence smaller amounts of financial aid are required during a shock. The electricity market should have more than one utility company so that a more competitive market can be created that will benefit consumers. Peer-to-peer energy trading will also help eliminate inefficiencies.

Intervention on Regional Perspective

Energy as a basic resource is essential in any country’s quest towards modernity and wealth, including in the countries in Southeast Asia (the ASEAN region). The development of large and small energy infrastructure underpins the ASEAN Economic Community’s pursuit of an inclusive and dynamic regional economic integration towards 2025 and beyond. Energy development continues to be a fundamental input for attaining the goal of a well-connected, highly integrated, competitive, innovative, and global ASEAN.

In recent years, ASEAN’s economic performance has been among the most dynamic and fastest in the world. ASEAN is expected to continue this positive growth, but due to the devastating effects of the COVID-19 pandemic, this growth may be slower over the next 2-3 years. Though the energy sector has been badly affected by the pandemic, this sector will necessarily play a critical role in the global reconstruction and recovery efforts.

In the past, the region relied heavily on the use of fossil fuels. We have made significant progress towards reducing this dependence and have set high aspirational RE goals for 2025. With high potential to harness RE, there are huge opportunities to escalate the energy transition. Therefore, our first priority should be to bolster our efforts to attain our RE targets. This should not be the focus at only the national level: the establishment of cross-border interconnections will mean that electricity generated from renewables can be traded in the region, benefitting all of the countries involved.

When compiling our in-house ASEAN Energy Outlook, we learned that based on the existing policies and plans at the national level, fossil fuels will remain dominant in the region for the next two decades at least.  Many policy-makers regard them as the most affordable option Hence, the second priority is to equip the policy-makers with comprehensive knowledge about the relatively short and long-term costs of RE development. Building the institutional capacity is crucial and should be a continuous, but measured process.

Energy and climate change should be included in comprehensive policy planning, and not be considered as a separate issue but unfortunately, many countries in the Southeast Asia region do put energy and climate change in a separate category. Thus, the third priority is to improve the coherence between energy and climate policies and contribute more to climate-friendly development of the energy sector. This is what we are trying to do now through our ASEAN Climate Change and Energy Project (ACCEPT). The accountability in the climate change mitigation efforts must be share from the energy sector in national and regional levels. It requires the integration from energy and climate policy with breaking down the traditional silos and enhance the nexus between energy and climate policies that will increase coherence policy in a country

The fourth priority is fostering regional cooperation and integration and strengthening our collective work to achieve innovative, sustainable, and inclusive growth. We must encourage the ongoing initiative under the umbrella of the Sustainable Development Goals (SDG). For this, we stand ready to collaborate and enhance our partnership with the ADB, the UN Economic and Social Commission for Asia and the Pacific (ESCAP), Dialogue Partners, Development Banks, International Organisations, academic and research institutions, private sectors, etc.

Contact: [email protected]


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