Capturing Southeast Asia’s Regional Renewable Energy Opportunity

Southeast Asia is home to one of the world’s most vibrant and dynamic digital ecosystems, with the World Economic Forum estimating that the region’s digital economy will soon grow to be worth US$1 Trillion by 2030. 

Alongside that, rapid digitalization across the region as well as a young, innovative, and entrepreneurial population have meant that Southeast Asian countries are poised to make an outsized impact on the development of emerging technologies like artificial intelligence. 

Underlying the region’s potential as a powerhouse of digital innovation, however, is a rising appetite for energy—and especially clean energy, as economies across the region make important strides towards honoring their commitments to hit net zero emissions. 

As an alliance of some of the region’s most active purchasers of renewable energy, the Asia Clean Energy Coalition (ACEC) is very aware of the role the private sector can play in accelerating this transition to a clean energy future. 

At the same time, while private sector entities are increasingly focused on clean energy procurement—with this representing a US$1.3 trillion opportunity according to energy analytics firm Wood Mackenzie—whether this demand can be met while realizing the full potential of corporate investments depends strongly on whether diversified and cost-effective procurement options are available and supported by enabling policies. 

For example, Bloomberg New Energy Finance finds that in countries where corporate Power Purchase Agreements (PPAs) are possible, such agreements have become the fastest-growing source of investment in new renewable energy projects. Similarly, where utility-provided options like Utility Green Tariffs (UGTs) are offered, these have also greatly increased uptake of clean energy across the board.

Letting the private sector do its part

Several countries across Southeast Asia have made notable strides in paving the way for greater speed and scale of private sector investment in clean energy by enabling varied and cost competitive procurement mechanisms, such as PPAs, allowing corporate consumers to contract directly with developers to offtake power from new projects. 

For example, in July of this year, Vietnam passed Decree No. 80/2024/ND-CP, a landmark piece of legislation seven years in the making, also known as the Direct Power Purchase Agreement (DPPA) Decree, which establishes a robust framework for both virtual and private-wire PPAs.

The DPPA Decree is significantly increasing the private sector’s access to renewable energy projects in Vietnam and is likely to spur significant investments in that area over the next few years. While Vietnam’s Ministry of Industrial and Trade (MoIT) works on additional steps for implementing and optimizing the Decree, the DPPA Decree provides a strong foundation that should serve as an example for other Southeast Asian countries.

In Malaysia as well, the Corporate Green Power Programme (CGPP) was an important first step towards providing private buyers with access to virtual PPAs. While CGPP was only launched as a pilot program, making this a fully unrestricted and permanent means of corporate renewable energy procurement going forward would unlock vast amounts of new private sector investment in Malaysia.

Separately, Malaysia's Corporate Renewable Energy Supply Scheme (CRESS) is shaping up to allow off-site physical PPAs. Initial information based on CRESS industry hearings suggests a need for greater transparency, predictability and alignment, and more clarity on the definition of “firm” solutions. However, the fact that this is happening with industry consultations is a positive step forward for Malaysia’s clean energy ambitions. 

In line with advocating for diversified and cost-effective procurement options, it is encouraging to see CRESS complement, rather than replace, existing programs such as the CGPP and Green Electricity Tariff (GET). The goal is to ensure that all these options remain available, providing companies with a range of choices to best fit their specific needs. 

By maintaining a diverse set of procurement mechanisms—whether through virtual PPAs, physical PPAs, or utility-based tariffs like GET—corporates can pursue clean energy in ways that align with their operational goals, cost considerations, and sustainability strategies. This approach not only encourages greater private sector participation but also contributes to the long-term success of Malaysia’s clean energy transition.

Together, these moves by Vietnam and Malaysia to promote PPAs are steps in the right direction that will help to scale investments in renewable energy by ACEC members and other private sector players, creating a win-win-win for consumers, developers, and regional grids. This means corporate consumers can meet their growing energy needs with clean energy, developers have a clear path to the guarantees and incentives they need to build more capacity, and regional grids benefit from additional renewable capacity without taxpayers needing to bear additional cost burdens.

Taking a step at a time

In other countries, while efforts to pave the way for PPAs may still be under discussion, other mechanisms are being introduced that may still allow for greater private sector participation in accelerating the green transition.

In Thailand, the Energy Regulatory Commission has proposed the Utility Green Tariff (UGT) program, which (especially the UGT2 option) provides a portfolio of new renewable power projects to choose from, making it a means of renewable energy procurement that will meet most ACEC members’ criteria for additionality, traceability and cost-effectiveness. 

Considering utility-provided approaches like UGT2 may be something that other Southeast Asian countries could also look to pursue in parallel with exploring other means of direct renewable energy procurement like PPAs. The focus, however, should remain on meeting stringent criteria around additionality, affordability, and transparency as Thailand has ensured UGT2 does. 

Harnessing ASEAN’s potential for regional integration 

Even as countries implement measures which attract private sector investments into their renewable energy industries, the uneven distribution of energy resources and demand across Southeast Asian nations remains a factor for policymakers across the region to consider. 

For ASEAN countries to take full advantage of the region’s rich capacity for renewables—whether that be Indonesia’s solar capacity, Vietnam’s wind power, or the immense hydropower of Lao PDR—efforts must be made to enable corporate investments in cross-border renewable power projects. 

The biggest benefit of cross-border trade is to lower the overall cost of renewables development by locating power generation where the cost of generation is most competitive and connecting this to where demand for renewable power is greatest across the region. 

But there are also significant further benefits that can be unlocked through a large electricity grid network, including reduced reserve margins and energy storage investment needs, and greater system reliability, flexibility, and security.

For corporate renewables investments to scale via greater regional grid interconnection, in addition to ensuring greater cross-border flow of renewable power, ASEAN’s system operators and energy regulators also need to ensure that the environmental attributes from these projects (usually issued in the form of Renewable Energy Certificates, RECs) flow across borders as well, as these are the most important component for corporate PPA investments. 

This means, for example, enabling renewable power—bundled with RECs—from Indonesia or Malaysia to be put towards operational needs in Singapore, where demand for renewables far outstrips available supply. This is a factor recognized most recently by Singapore’s Minister of Manpower Dr Tan See Leng during his opening address at the Asia Clean Energy Summit, where he highlighted the critical need for recognizing cross-border clean energy transfers.

The ACEC and all our members stand ready to work alongside the Singapore Government and other ecosystem partners to advance greater recognition of cross-border clean energy trading across Southeast Asia. More interconnected grids and markets would help to scale corporate investments in renewable power projects across ASEAN to meet demand where it is most concentrated.

Taken as a whole, Southeast Asia has one of the world’s greatest capacities for renewable energy development with over 220 gigawatts of documented prospective solar and wind capacity, and only 3% of this is under construction. There is tremendous progress being made, yet more can be done by advocating for diversified and cost-effective procurement options and learning from within the region and applying best practices that have helped to scale private sector investment in renewables in other parts of the world. 

By Suji Kang, Program Director of the Asia Clean Energy Coalition