The Geopolitics of Energy Transition in ASEAN

ASEAN countries face the difficult task of addressing the financial, bureaucratic and socio-economic challenges of replacing fossil fuels with renewables while navigating the increasingly complex geopolitics of energy transition. 

Throughout history, energy has influenced and has been influenced by geopolitics. In the 19^th century, coal was the driving force of the Industrial Revolution and an important resource for colonial empires. This left a lasting legacy on the international system. In the 20^th century, the geopolitics of oil and gas saw its manifestation in strategic partnerships between Middle East countries and the West, the securitisation of vital shipping lanes, and increasing domestic instability in multiple resource-rich regions. Within this context, there has been increasing momentum towards transitioning to renewable energy resources. 

While the world still depends on fossil fuels for more than 80% of its energy supply, renewable generation capacity grew by 130% in the last decade, while non-renewables only grew by 24%. Energy transition is likely to have a significant impact on power, conflicts, and coalitions in the international system, but its impact on ASEAN has yet to be identified. 

One of the main debates in academic studies of energy transition is whether the zero-sum politics of fossil fuels will continue in an era of renewables or give way to a more peaceful, interdependent world. Policymakers have also recognised the geopolitical importance of transition. In 2020, the International Renewable Energy Agency (IRENA) formed the ‘Collaborative Framework on the Geopolitics of Energy Transformation (CF-GET)’ which engages policymakers on the geopolitical consequences of energy transition. In ASEAN, energy transition has mostly been discussed from the technical, financial and policy perspectives. This can be explained by the region’s heavy dependence on fossil fuels and plethora of socio-economic challenges.

Currently, more than 80% of ASEAN’s total primary energy supply comes from fossil fuels while renewable energy accounts for a little more than 14%. ASEAN’s energy-related greenhouse gas (GHG) emissions are projected to increase by 34-147% between 2017 and 2040. Despite significant challenges to transition, about 82% of ASEAN’s new capacity in 2020 was from renewable resources, driven by hydroelectric dams in Laos, solar power in Vietnam and wind power in the Philippines and Thailand. 

These developments in renewable energy generation have taken place in an increasingly conflictual geopolitical landscape. The invasion of Ukraine in February 2022 and Nancy Pelosi’s visit to Taiwan in August 2022 are flashpoints in a broader trend towards economic decoupling, entrenchment of securitised discourses on energy and embargoes on trade in technology between China, the US and Russia. 

According to an IRENA study, there are at least two major geopolitical trends relevant to ASEAN’s energy transition. First, the increasing demand for critical minerals. The production of renewable energy requires a number of metals and minerals, particularly lithium, nickel, cobalt, rare earth elements (REEs), copper and silicon. These raw materials are called “critical minerals” due to their significant supply constraints. Many studies on critical minerals argue that the control of the supply chains of critical minerals can be used as a geopolitical tool. Such perceptions stem from the fact that China controls the extraction and/ or processing of a majority of rare earths, cobalt and lithium. In recent years, there has been increasing discourse on using Southeast Asia’s deposit of critical minerals to diversify supply chains. Indonesia and the Philippines have large nickel resources, while Myanmar is a large producer of tin and rare earths. Indonesia, Myanmar and the Philippines are significant copper producers.

Developing the supply of ASEAN’s critical minerals can go a long way towards diversifying supply chains. However, the development of critical minerals is likely to be undertaken with multiple partners in the West as well as with China. Given the region’s close economic ties with China, any attempts by the West to use Southeast Asia’s critical minerals to ‘decouple’ from Beijing will most likely be unsuccessful. 

Given the growing solar panel, lithium battery and electric vehicle industries in ASEAN, the region’s countries would want to move from extraction to higher-value downstream activities such as refining and processing. The recent ban by Indonesia on the export of nickel ore led to an expansion in the country’s processing industries, which shows that Southeast Asian countries are ready to move up the supply chain of critical minerals. 

However, the extraction and processing of critical minerals will take a high level of expertise and significant investments, for which ASEAN is likely to collaborate with external partners. By being open to collaboration with all parties, ASEAN can also avoid being a part of binary and parochial initiatives on critical mineral supply chains. Given the significant environmental and social costs of mineral extraction, it is important that ASEAN continues the momentum towards developing regional frameworks on mining, which can also reduce the overtly geopolitical framing of the issue. 

Another possible issue faced by ASEAN is the disruption of cross-border energy trade. Energy transition will entail independence of energy supply and also facilitate interdependence with neighbouring states. While solar and wind farms will allow most countries to have some level of autonomy, transition will also encourage trade through cross-border grids, as this allows the use of multiple sources of energy, thereby addressing the intermittent nature of renewable energy sources. 

However, some analysts have suggested that given that energy transition entails the electrification of large segments of economies, countries that control cross-border or regional grids can exert undue geopolitical influence on their neighbours. In worst case scenarios, geopolitical conflicts can lead to deliberate disruptions of electricity supplies, causing significant socio-economic damage. Such predictions are not completely theoretical, as evidenced by the attacks on the Nord Stream pipeline in 2022. 

ASEAN has made important progress in the development of cross-border energy trade in recent years. In June 2022, the region’s first multilateral cross-border electricity trade initiative was commissioned by Laos, Thailand, Malaysia and Singapore. The project facilitates the import of up to 100 MW of electricity using existing interconnections. The ASEAN Power Grid (APG) has been making slow but steady progress, and 8 of 16 key power interconnection projects have been completed, increasing regional cross-border transmission capacity to 7,720 MW. Multiple new cross-border interconnections are being planned by bilateral pairs such as Cambodia and Singapore, Laos and Singapore, and Sarawak and Singapore.

Cross-border grids in ASEAN face a number of challenges. However, the region’s geopolitical realities do not support the theory of deliberate disruptions. There is increasing economic interdependence at the regional level, and despite some level of mistrust, countries are well accustomed to resolving differences through dialogue. In ASEAN, disruptions to energy is more likely to be caused by protectionism rather than conflicts. 

In 2021, Malaysia banned the export of renewable energy to Singapore, purportedly to prevent such trade from hampering the country’s climate goals. While the recent agreement on energy cooperation between Indonesia and Singapore is encouraging, it is not clear how such initiatives can be implemented given that Jakarta banned renewable energy exports last year. These domestic imperatives can result in disruptions to energy trade, which can discourage investment in cross-border grids. ASEAN needs to address this issue by developing institutional frameworks that facilitate dispute resolution and timely exchange of information. 

Geopolitics has undermined global efforts towards accelerating energy transition. However, ASEAN can leverage on its history of navigating tricky geopolitical landscapes to promote pragmatic and mutually beneficial policies on critical minerals and cross-border grids. This will require investment in the capacity building of existing domestic and regional institutions to facilitate a timely and peaceful transition to clean energy.

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Editor’s Note:
This is an adapted version of an article from ASEANFocus Issue 1/2023 published in March 2023. Download the full issue here.