Australia-Asia Power Link: An Impetus for Energy Investments in Asean

The Australia-Asia Power Link which will deliver power generated from the world’s biggest solar farm in Australia to Singapore through overhead and undersea cables, is expected to become an impetus for energy investments in Asean.

The project, estimated to cost A$30 billion (US$22.4 billion), involves the development of a solar plant covering over 12,000 hectares in the town of Tennant Creek, approximately 990km from Darwin.

The harnessed renewable energy of 3GW is then transmitted to Darwin before being transferred to a 4,500km, 2.2GW undersea cable to Singapore via Indonesia. It is expected to supply its first batch of electricity to Darwin in 2026, and to Singapore in 2027, with full capacity in 2028. Additionally, a battery unit capable of storing between 36 and 42 GW hours will also be constructed on the solar panel field site to store excess energy.

Part of Sun Cable’s agreement with Indonesia is the promise of investments, employment, and sharing of crucial technologies. Sun Cable will invest a total of US$2.5 billion, of which US$1 billion will be used on procuring services and equipment, such as lithium and other battery components.

Once completed, the Australia-Asia Power Link is expected to supply 15 percent of Singapore’s energy requirements. Currently, about 95 percent of the country’s electricity is produced from natural gas, which it imports from mainly Malaysia and Indonesia.

Asean is fast becoming a heavyweight in global energy with demand growing at twice the pace as it is in China. By 2040, the region’s energy demand is set to grow by 60 percent.

The main driver of this growth is rising incomes, and rapid industrialization and urbanization. Countries in Asean saw huge migration from the countryside to urban areas over the last two decades as the regional shift from agriculture to industrialization began to take shape. As a result, 52 percent of the region’s population now lives in urban areas giving rise to new consumer spending on conveniences and technologies that have become an important part of modern society, such as automobile and air conditioner ownership.

Faced with these pressures, regional governments have intensified their efforts to remove obstacles to energy investments and ensure energy deficits are not a hindrance to businesses.

Also, by 2040, Asean will see a population increase of almost 120 million – to reach 770 million – contributing to a regional GDP of US$20 trillion. And the rapid growth of total energy supply will transform Asean from a net exporter into a net importer of fossil fuels. Oil demand will surpass nine million barrels per day from the current average of seven million barrels per day and natural gas consumption is expected to rise by 60 percent.

Furthermore, the region is one of the few regions in the world where coal-fired electricity generation has been expanding, with close to 20GW of new capacity under construction. These projects are mainly in Indonesia (a major producer), Vietnam, and the Philippines.

As such, with not enough indigenous fossil fuel resources, Asean’s net energy trade deficit could be more than US$300 billion per year and lead to important energy security implications.

To revive the pandemic hit economies as well as improve the renewable energy capacity, Asean has set a target of integrating 23 percent of renewable energy into its primary energy supply under the Asean Plan of Action for Energy Cooperation (APAEC) 2021-2025. Indonesia, Vietnam, the Philippines, Thailand, and Malaysia currently account for 84 percent of the installed renewable energy capacity in Asean and are expected to account for the largest renewable energy expansion.

Further, the volatility of fossil fuel prices due to the Covid-19 pandemic and the Russia-Ukraine war has significantly impacted Asean countries, resulting in increased fuel prices and inflation, therefore reinforcing the need for a more driven transition towards renewable energy consumption.