The Association of Southeast Asian Nations, better known as ASEAN, is set for remarkable growth and opportunity. With its recently initiated AEC, its 10 member nations represent a market of more than 600 million consumers and a combined GDP of nearly US$3 trillion. These figures are rising day by day as the region’s prosperity and stability grows. But there’s also many problems in ASEAN which need to be overcome.

One of these problems relates to the region’s energy sector. As ASEAN grows, a reliable, accessible, and sustainable supply of energy will be essential. With expectations that Southeast Asia’s energy consumption will more than double over the next two decades, it will be a challenge to secure the energy required to meet this demand.

Experts have analyzed and outlined three key problems in ASEAN which will need to overcome if it is to meet its regional energy demand.


1. Limited Access to Electricity

Despite Southeast Asia’s many prosperous cities, there are still a great deal of rural areas that are still left without even basic access to electricity.

Recent statistics show that as much as 20% of its population – 134 million people – do not have access to electricity. Even though the population of less developed countries such as Myanmar, Laos, and Cambodia accounts for the majority of them, there are still a number of people from more developed Asian countries such as Indonesia and Philippines who are in this group of people. This is due to the remoteness of certain islands in these Asia Pacific countries.

Bringing electricity to the people is not a very difficult task. Governments in these countries are being pressured to do what they should have already done – to make sure the electrical supply to rural areas by providing support such as subsidies to power distribution companies.

As the cost of energy production decreases, another option is to set up local energy production facilities to ease the distribution in those areas.


2. Higher Reliance on Coal

One way to get the energy required in the future is through coal power plants. Because coal is one of the cheapest energy sources and there are abundant coal mines throughout ASEAN, the region is looking to be more reliant on coal than it has ever been – just like China where 80% of electricity comes from coal.

That is not to say that ASEAN does not rely on coal now – about a third of all energy consumed in the region comes from coal. However, coal is expected to create half of all energy consumed in ASEAN by 2035.

Some of the downsides of having more reliance on coal would be an increase in greenhouse gases emitted, the increased carbon footprint, and the resistance of local communities to production facilities. Production of coal is notoriously dirty and many local communities are not happy with it. One example is a recent incident in Mon state, Myanmar.


3. Lack of Sufficient Financing

There is a clear need for more energy,  and more energy can only be secured through one of two means – import or locally produced. Clearly, the latter option would be the more cost-effective in the long run. This holds true even more in today’s ASEAN where half of its member nations are net energy importers.

However, to build an energy production facility is easier said than done. The main obstacle in energy projects is financing.

Receiving loans from international financial institutions is out of the question as these companies are unwilling to render their services for polluting energy projects, and the returns from a renewable energy project are not up to their required minimum.

Therefore, the only way out for those looking to finance their energy projects are the local banks, especially those owned by each region’s governing authority. The local governments will play a major role in the development of energy production facilities in ASEAN.

With the advent of the AEC along with ASEAN’s growing presence in the global economy, meeting the energy requirements of the region will require each country in the region to consider the challenges above.

About Reid Kirchenbauer

Reid Kirchenbauer is the Founder of InvestAsian. He's experienced with trading stocks and buying property in Thailand, Cambodia, and elsewhere. He's been featured in publications such as Forbes, Nomad Capitalist, Property Report, and Seeking Alpha. Download his free investment guide by clicking here.

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