BAKU, Azerbaijan, May 17. Southeast Asia faces the twin challenges of increasing total investment in the energy sector while increasing the share of this investment going to clean energy technologies, Trend reports with reference to the International Energy Agency (IEA).
IEA report reveals that there has been progress on policy and regulation in many parts of Southeast Asia, including more ambitious climate targets announced by Indonesia, Malaysia, Thailand and Viet Nam, updated expansion plans for renewables, and changes in power purchasing agreements (PPAs).
“However, uncertainties remain in many countries over remuneration mechanisms and tariff levels for renewable output, which affect risk perceptions and the cost of capital for clean energy projects. Commitments and policies to phase out unabated coal plants and deploy low-carbon fuels would send important long-term signals to investors. Cross-cutting issues such as unpredictable regulatory frameworks, restrictions on foreign direct investment and currency risks all hamper investment flows,” says the agency.
IEA analysts note that many countries have shallow financial and capital markets, and domestic banks have limited experience in financing clean energy assets.
“Long-term, low-cost debt is often not available and access to international private capital can be a challenge. Sustainable debt issuance by countries in Southeast Asia comprises around 3 percent of the global total, less than half the region’s share of global GDP (more than 80 percent of sustainable debt is issued in advanced economies). International development finance has a key role to play in catalyzing private funds, especially for projects at early stages of development, new technologies (e.g. CCUS, or carbon capture, utilization and storage), and technologies with specific risks (e.g. exploration risk in geothermal). Improving access to finance would enhance investment by households and small-and-medium enterprises (e.g. establishing credit ratings for end-users and bundling small transactions),” the report reads.
Follow the author on Twitter: @Lyaman_Zeyn