Since the beginning of the millennium, most ASEAN member states (AMS) have experienced significant gross domestic product (GDP) growth. Thanks to its growing economy and youthful demographic, ASEAN is currently the world’s fifth-largest economy and is projected to rise to the fourth-largest by 2030 (Vakulchuk et al., 2023). On this upward trajectory, AMS is concerned with providing reliable energy sources to support their economic growth. Most AMS still rely on relatively reliable and affordable fossil fuels. In fact, as of 2020, approximately 80% of the region’s total primary energy supply (TPES) comes from fossil fuels, whereas renewable energy (RE) accounts for only 14.2% (ACE, 2022a). The region has set an ‘aspirational’ target of achieving a 23% RE share in its TPES by 2025, necessitating an annual investment of USD 27 billion in RE until that time (Vakulchuk et al., 2023). In reality, between 2015 – 2021, ASEAN countries only managed to attract USD 8 billion in RE investment each year. At the current rate and without significant policy changes, the 7th ASEAN Energy Outlook (AEO7) projected that the region would miss the 23% target on schedule (ACE, 2022b).
For AMS, transitioning to cleaner energy is not only a matter of achieving targets but also of survivability, as evidence of climate change such as choking haze linked to forest fires, droughts, and floods is becoming more and more apparent in the region. The impacts of climate change and weather-related events represent the second most significant challenge faced by AMS in 2023 (Statista, 2023). In a race against time, more attention needs to be directed towards securing RE investments, especially given the current political economy constraints in the AMS, where only a fraction of the generated fiscal space of each AMS is currently allocated to RE (Abdullah et al., 2023). Therefore, AMS must find alternative funding to finance RE development.
As the 2023 ASEAN Chairman, Indonesia could leverage its influence and expertise to aid fellow AMS in securing financing for renewable energy (RE). Last year, Indonesia clinched two historical partnerships on RE investment and fossil fuel phase-out, in the form of the Just Energy Transition Partnership (JETP) and the Asian Development Bank’s (ADB) Energy Transition Mechanism (ETM). As other member states are still searching for similar funding schemes, Indonesia could offer assistance to other member states in accessing various funding opportunities. As previously announced, developed nations will mobilize USD 100 billion per year for climate mitigation and adaptation in developing countries starting in 2023 (UNFCCC, 2022). Indonesia could take an accommodating role in facilitating AMS to prepare an investment-ready environment for clean energy development. One key factor in creating an investment-ready environment is the ability to present projects. However, several AMS are having issues bringing projects going forward through to financial close and actual investment, in other words, presenting bankable projects (Nassiry et al., 2018).
This specific challenge could be attributed to varying levels of human resources and organizational capacity among AMS when it comes to project preparation, such as pre-feasibility studies, etc. (Abdullah, 2023). Therefore, enhancing the capacity of AMS could be the key to securing alternative funding for RE development, contributing to the achievement of the 23% target. Indonesia’s chairmanship could serve as the catalyst for establishing a formal network or agency focused on building clean energy capacity (potentially under a different name or legal status) (Zaman et al., 2023). This is in line with the theme that Indonesia brings during its chairmanship, “ASEAN Matters” in which Ministry of Foreign Affairs Retno Marsudi emphasizes the importance of strengthening ASEAN’s capacity. The upcoming 43rd ASEAN Summit in Jakarta later this year provides the impetus for AMS to consolidate and strategize promptly ahead of COP-28.
