Recharging Southeast Asia’s Energy Security Strategy
By Asia Society Australia Non-Resident Senior Policy Fellow, Dr. Muyi Yang
Ensuring energy security is becoming increasingly crucial in Southeast Asia as the region navigates its transition towards a clean energy future. This is not an easy task, particularly for fast-growing Southeast Asian economies with rising demand for energy. At the heart of this challenge lies growing concerns over gas import dependence.
Historically, gas has been a crucial component of Southeast Asia’s electricity supply. In 2023, it accounted for roughly 30 per cent of electricity generated, making it the second-largest source of electricity in the region after coal.
Led by Indonesia, Malaysia, the Philippines and Vietnam, the region is currently developing over 100 gigawatts (GW) of gas power capacity. This capacity is approximately equivalent to the United Kingdom’s total installed capacity in 2023.
Southeast Asia’s push for gas generation occurs against the backdrop of declining local gas production, mainly due to the gradual depletion of mature fields and the sparse discovery of commercially viable new reserves. Since the mid-2010s the region has seen a steady decline in gas production, with a significant 6.1 per cent reduction in 2022 compared to the previous year. Proven gas reserves also declined by 4.9 per cent in 2022 to 3.98 trillion cubic metres.
As local gas production diminishes, large energy-consuming countries in the region have started to bolster their liquefied natural gas (LNG) import capabilities. In 2023, Vietnam and the Philippines inaugurated their first LNG import terminals. In Thailand, LNG imports surged by 40 per cent in 2023 to 11.55 million tonnes despite efforts to diversify fuel sources and reduce reliance on LNG imports.
Across Southeast Asia, LNG facilities with a combined capacity of 47 million tonnes are currently under development. If completed, they will boost the region’s LNG import capacity by 80 per cent.
Malaysia, one of the world’s largest LNG exporters, is poised to consider redirecting LNG from its gas fields around Bintulu, Sarawak — currently exported to Asian neighbours — to meet fast-growing domestic demand. This move aligns with the country’s emphasis, articulated in the National Energy Transition Roadmap, on using gas as a vital ‘transitional fuel’ to uphold energy security and affordability while advancing its decarbonisation goals.
If the current trend continues, Southeast Asia is set to become a net gas importer as early as 2025. By 2045, its import dependence could reach 93 per cent, posing a major risk to energy security.
Battery storage can be a strategic hedge against future gas risks for Southeast Asia. By providing fast and responsive support to balance the grid when renewable generation fluctuates, either exceeding or falling short of electricity demand, battery storage can reduce the region’s dependence on imported gas for both baseload power and flexibility. This, in turn, could help mitigate exposure to global energy market fluctuations, improving energy independence and security.
The 1.5 degree-aligned transition pathways outlined by the International Renewable Energy Agency forecasts a need for over 600 GW of battery storage capacity in Southeast Asia by 2050. This capacity is essential to support the integration of variable renewable energy and reduce reliance on fossil fuel-based generation.
The declining costs of battery storage have made large-scale deployment increasingly economically viable. Over the past decade, the price of lithium-ion battery packs has witnessed a significant decrease, dropping by 14 per cent year-on-year to US$139 per kilowatt hour (kWh) in 2023, compared to US$780 per kWh in 2013.
Falling raw material prices, combined with reduced margins for producers amid fierce competition, drove battery prices down further in 2024. This led to a halving of cell prices in China, where over 70 per cent of the world’s batteries are made. Further technological innovation and manufacturing improvements are expected to drive battery prices even lower.
The attractiveness of battery storage is enhanced by the region’s abundant reserves of crucial battery minerals like nickel, cobalt and manganese. By leveraging these advantages, the deployment of battery storage could catalyse local manufacturing, contributing to the region’s aspiration of becoming a clean tech manufacturing hub.
But battery storage has yet to be fully integrated into current policy frameworks in Southeast Asia. Apart from sporadic installations of battery storage in conjunction with distributed solar farms, no significant efforts have been made to support the large-scale deployment of battery storage across the region.
In Vietnam — often hailed as a success story in renewable deployment within the region — most wind and solar projects are not paired with battery storage systems. Malaysia’s large-scale solar auctions have similarly not attracted any solar power projects incorporating battery storage, primarily because no specific incentives for battery storage apply to such projects.
Historical precedents highlight the profound impacts of international gas market volatility, spanning from soaring prices to supply disruptions. Such instability can significantly hinder economic growth and exacerbate deep-seated sociopolitical tensions and conflicts.
Southeast Asia needs a backup plan. Battery storage should be a crucial component of that plan, offering an effective hedge against future gas risks. This strategy would support the region in attaining its climate aspirations while ensuring a secure and affordable energy supply.
This article originally appeared in East Asia Forum.