2017 Southeast Asia Energy Outlook World Energy Outlook Special ReportINTERNATIONAL ENERGY AGENCY The International Energy Agency IEA, an autonomous agency, was established in November 1974. Its primary mandate was – and is – two-fold to promote energy security amongst its member countries through collective response to physical disruptions in oil supply, and provide authoritative research and analysis on ways to ensure reliable, affordable and clean energy for its 29 member countries and beyond. The IEA carries out a comprehensive programme of energy co-operation among its member countries, each of which is obliged to hold oil stocks equivalent to 90 days of its net imports. The Agency’s aims include the following objectives n Secure member countries’ access to reliable and ample supplies of all s of energy; in particular, through maintaining effective emergency response capabilities in case of oil supply disruptions. n Promote sustainable energy policies that spur economic growth and environmental protection in a global context – particularly in terms of reducing greenhouse-gas emissions that contribute to climate change. n Improve transparency of international markets through collection and analysis of energy data. n Support global collaboration on energy technology to secure future energy supplies and mitigate their environmental impact, including through improved energy efficiency and development and deployment of low-carbon technologies. n Find solutions to global energy challenges through engagement and dialogue with non-member countries, industry, international organisations and other stakeholders. IEA member countriesAustraliaAustria BelgiumCanada Czech Republic Denmark Estonia Finland France Germany Greece Hungary Ireland Italy Japan Korea Luxembourg Netherlands New Zealand Norway Poland Portugal Slovak Republic Spain Sweden Switzerland Turkey United Kingdom United States The European Commission also participates in the work of the IEA. OECD/IEA, 2017 International Energy Agency Website www.iea.org Please note that this publication is subject to specific restrictions that limit its use and distribution. The terms and conditions are available online at www.iea.org/t strong economic and population growth, allied to structural trends such as urbanisation, point towards a rapid expansion in demand for energy. The agenda facing Southeast Asia’s governments is not a simple one constraining growth in consumption through policies on the demand side; encouraging adequate investment in new energy supply infrastructure and mitigating concerns over security of supply; improving air quality and curbing growth in emissions; and expanding access to modern energy services for the millions of people that remain without. Policy-makers across Southeast Asia are making strenuous efforts to address these issues, but tackling multiple challenges simultaneously is never easy and potential solutions differ among countries, depending on their national circumstances. The International Energy Agency, with a long history and experience of in-depth analysis in the global energy field, stands ready to support Southeast Asia in its endeavours. I trust that this report – the third edition of the Southeast Asia Energy Outlook since 2013 – will provide useful insights to policy-makers, industries, energy experts and other stakeholders and provide a framework that will enrich discussions on the future of energy in this critically important part of the world. Enhancing engagement with Southeast Asia is a high strategic priority for the Agency, and an issue to which I attach great importance as cutive Director. With the support and goodwill of the countries in the region, I am delighted at the steps that we have been able to take. The IEA and Southeast Asia now have a strong and wide-ranging programme of activities, and three countries in the region – Indonesia, Singapore and Thailand – have become Association countries of the IEA. I look forward to deepening our co-operation in the future. I take this opportunity to extend my sincere appreciation to all those who provided support throughout the preparation of this report. Dr. Fatih Birol cutive Director International Energy Agency OECD/IEA, 2017 OECD/IEA, 2017 Acknowledgements 5 Acknowledgements This report was prepared by the World Energy Outlook WEO team in the Directorate of Sustainability, Technology and Outlooks STO of the International Energy Agency IEA, in co-operation with other directorates and offices of the Agency. The study was designed and directed by Tim Gould, Head of the WEO Energy Supply Outlook Division. Ali Al-Saffar and Toshiyuki Shirai co-ordinated and co-led work across the chapters. Principal contributors to the report were Ian Cronshaw, Tae-Yoon Kim, Gee Yong Law, Melanie Slade, Cecilia Tam, Johannes Trueby, Brent Wanner, Matthew Wittenstein and Aang Darmawan seconded to the IEA from the Ministry of Energy and Mines, Indonesia. Other contributors were Zakia Adam, Elie Bellevrat, Stphanie Bouckaert, Olivia Chen, Laura Cozzi, Hannah Daly, Davide DAmbrosio, Mei Han, Kazuki Hao, Paul Hugues, Caroline Lee, Hwayun Lee, Christophe McGlade, Luis Munuera, Pawe ł Olejarnik, Claudia Pavarini, Molly A. Walton, Kira West and Tristan Stanley. Teresa Coon and Eleni Tsoukala provided essential support. Debra Justus carried editorial responsibility. The study benefited from numerous s, comments and feedback from senior IEA management and IEA experts, in particular Paul Simons, Keisuke Sadamori, Rebecca Gaghen, Laszlo Varro, Michael Waldron, Duarte Figueira, Kieran Clarke, Pierpaolo Cazzola, Maki Yamaguchi, Sacha Scheffer, Louise Vickery, Jacob Teter and Marine Gorner. Thanks go to the IEA’s Communication and Ination Office for their help in producing the final report, particularly Astrid Dumond for production and to Bertrand Sadin for graphics. We would like to thank the Ministry of Economy, Trade and Industry of Japan, the Ministry of Foreign Affairs and Trade of New Zealand and the Asian Development Bank for their support of this work. Experts from the Royal Institute of Technology, KTH-dESA, particularly Mark Howells, Dimitrios Mentis, Francesco Fuso Nerini, Alexandros Korkovelos and Nandi Moksnes were key contributors to the report. Many high-level government representatives and experts have contributed to the process, from consultations and contributions to the workshop, to reviewing the draft at a later stage; their insights and comments were of great value. They include Tuan Ab Rashid bin Tuan Abdullah Universiti Tenaga Nasional UNITEN, Malaysia Saleh Abdurrahman Ministry of Energy and Mineral Resources, Indonesia Syawaluddin Akbar Semen Indonesia Venkatachalam Anbumozhi Economic Research Institute for ASEAN and East Asia ERIA Chrisnawan Anditya Ministry of Energy and Mineral Resources, Indonesia Mohamad Azam bin Toiman Ministry of Energy, Green Technology and Water KeTTHA, Malaysia OECD/IEA, 20176 World Energy Outlook 2017 | Special Report Christopher Beaton Global Subsidies Initiative David Buckrell Ministry of Business, Innovation Employment, New Zealand Katrina Baris-Borja Asian Development Bank Consultant Miguel Chanco Economist Intelligence Unit Weerawat Chantanakome Ministry of Energy, Thailand Kathleen Dematera Contreras Clean Air Asia Anthony D.Owen National University of Singapore David Elzinga Asian Development Bank Bert Fabian United Nations Environment Programme Faith Gan Energy Market Authority, Singapore Philip Gass Global Subsidies Initiative Masaomi Koyama Ministry of Economy, Trade and Industry, Japan Kira Lamont United Nations Economic and Social Commission for Asia and the Pacific Hanh Le Global Green Growth Institute Hirono Masazumi Tokyo Gas Maura Lillis Asian Development Bank Consultant Sompop Pattanariyankool Ministry of Energy, Thailand Rachel Ross Allotrope Partners Phanny Sras Asian Development Bank Consultant Shigeru Suehiro Institute of Energy and Economics, Japan Albertus Susetyo Edi Prabowo PUSDATIN , Indonesia Kunihiro Takemata J Power Jesus Tamang Energy Policy and Planning Bureau, Philippines Gigih Udi Atmo Asia Pacific Energy Research Centre APERC Weerin Wanggjiraniran Economic Research Institute for ASEAN and East Asia ERIA Adam Ward Global Green Growth Institute Yongping Zhai Asian Development Bank The individuals and organisations that contributed to this study are not responsible for any opinions or judgments it contains. All errors and omissions are solely the responsibility of the IEA. OECD/IEA, 2017Acknowledgements 7 Comments and questions are welcome and should be addressed to Tim Gould Head of World Energy Outlook, Energy Supply Division Directorate of Sustainability, Technology and Outlooks International Energy Agency 31-35, rue de la Fdration 75739 Paris Cedex 15 France Email weoiea.org More ination about the World Energy Outlook is available at www.iea.org/weo. OECD/IEA, 2017 OECD/IEA, 2017Table of Contents 9 Table of Contents Foreword 3 Acknowledgements 5 cutive summary 11 Energy in Southeast Asia 17 1.1 Introduction 18 1.2 Key energy trends in Southeast Asia 19 1.2.1 Energy demand 19 1.2.2 Electricity 22 1.2.3 Production and trade 28 1.3 Factors affecting’s energy development in Southeast Asia 34 1.3.1 Economy and demographics 34 1.3.2 Energy pricing and fossil-fuel subsidies 36 1.3.3 Access to modern energy 40 1.3.4 Social and environmental aspects 42 1.3.5 Investment 45 1.4 Projecting future developments 46 1.4.1 Defining the scenarios 46 1.4.2 Key assumptions 47 Southeast Asia’s energy prospects to 2040 53 2.1 Overview of scenario outcomes 54 2.2 A closer look at the New Policies Scenario 57 2.2.1 Outlook for the power sector 57 2.2.2 End-use sectors 62 2.3 Outlook by fuel in the New Policies Scenario 73 2.3.1 Oil 74 2.3.2 Coal 80 2.3.3 Natural gas 83 2.3.4 Renewables 88 Addressing Southeast Asia’s energy priorities 93 3.1 Electricity access the case of small islands and rural communities 94 3.1.1 Indonesia 95 3.1.2 The Philippines 101 3.1.3 Cambodia 104 1 2 3 OECD/IEA, 201710 World Energy Outlook 2017 | Special Report 109 111 3.1.4 Myanmar 112 3.2.1 Implications for energy security 112 3.2.2 Environmental implications 114 3.2.3 Investing for a more secure energy system 116 3.2.4 Investment needs for a more sustainable energy path 122 3.2.5 Energy systems interconnection to bolster energy security 126 ANNS 133 133 139 Annex A. Southeast Asia projections Annex B. Units and conversion factors Annex C. References 141 3.2 Implications of Southeast Asia’s energy development 3.1.5 The evolution of costs for espaces OECD/IEA, 2017 cutive Summary 11 cutive Summary The ten countries of the Association of Southeast Asian Nations ASEAN represent one of the most dynamic parts of the global energy system, with their energy demand growing by 60 in the past 15 years. ASEAN countries are at various stages of economic development and have different energy resource endowments and consumption patterns. But they also share a common challenge to meet rising demand in a secure, affordable and sustainable manner. Ensuring sufficient investment in energy supply and energy efficiency is central to this task. These countries have made major efforts in recent years to upgrade policy frameworks, re fossil-fuel consumption subsidies, increase regional co-operation and encourage greater investment in the region’s considerable renewable energy potential. While there are many encouraging signs, much more remains to be done. Access to modern energy is incomplete. With a total population of nearly 640 million, an estimated 65 million people remain without electricity and 250 million are reliant on solid biomass as a cooking fuel. Investment in upstream oil and gas has been hit by lower prices since 2014 and the region faces a dwindling position as a gas exporter, and a rising dependency on imported oil. At the same time, energy-related air pollution, both indoor and outdoor, also presents major risks to public health, while rising carbon-dioxide CO 2 emissions are contrary to the objectives of the Paris Climate Change Agreement, which has been ratified by all the countries in the region. Our analysis in this World Energy Outlook WEO Special Report confirms that Southeast Asian countries are looking towards a future in which energy demand is set to grow strongly. Our aim in this analysis is to provide a framework for understanding the region’s energy choices, examining the pitfalls and opportunities that lie ahead and what different pathways might imply for future energy security, the environment and economic development. A new heavyweight in global energy In our main scenario, Southeast Asia’s energy demand grows by almost two-thirds in the period to 2040. This represents one-tenth of the rise in global demand, as the region’s economy triples in size, the total population grows by a fifth with the urban population alone growing by over 150 million people. This scenario reflects the impact of existing energy policies in Southeast Asia as well as an assessment of the results likely to stem from the implementation of announced policy intentions, such as the country pledges made as part of the Paris Agreement. There is strong growth in low-carbon energy, but increased energy needs lead to rising consumption of all fuels. Coal alone accounts for almost 40 of the growth, and overtakes gas in the electricity mix. Oil demand expands from 4.7 million barrels per day mb/d today to around 6.6 mb/d in 2040, as rising demand for mobility means the number of road vehicles increases by two-thirds to around 62 million. Demand for natural gas also grows strongly, by around 60 to 2040, due to rising consumption in power generation and industry. The share of renewables, excluding solid biomass but OECD/IEA, 201712 World Energy Outlook 2017 | Special Report including hydro, solar photovoltaic PV and wind power, almost doubles as their deployment helps to meet rising electricity demand and to extend energy access. Electricity accounts for the largest share of the increase in final consumption, as rising incomes in the region translate into higher ownership of appliances and increasing demand for cooling. Two-thirds of the increase in Southeast Asia’s electricity demand comes from the residential and services sectors, largely due to a rising urban middle class. Industrial electricity demand more than doubles, pushed higher by the lighter industrial branches that are a mainstay of the region’s economic activity. One area where electrification makes less progress is the transport sector. In the absence, for the moment, of supportive policies, electric mobility does not gain much of a foothold in our projections. Instead, energy use in the transport sector remains dominated by oil products, with policy efforts to diversify the mix focusing on biofuels. Biofuels can bring e