FEATURE: Southeast Asia becomes battleground for US-China renewables, hydrogen race

Southeast Asia has emerged as the new battleground for the US-China clean energy competition, with policymakers and companies from the two biggest economies signaling ambitious plans across renewables and hydrogen value chains, experts said Oct. 22-24 at the Singapore International Energy Week.

The move to expedite clean energy development in Southeast Asia can prove to be beneficial for the region. Besides growth in foreign investments and jobs, countries can accelerate their energy transition and renewables deployment, with supplies from local factories and support from Chinese and US companies.

Southeast Asia had previously served as an alternative manufacturing hub for solar PV products. Chinese companies built factories there to circumvent the US investigations and tariffs targeting made-in-China products.

Vietnam, Thailand and Malaysia have become the largest solar PV manufacturers after China, according to the International Energy Agency.

“China is willing to collaborate with Singapore and ASEAN partners in all segments of the energy sector, including investments, trades, engineering projects and services, and finance,” Zhang Jianhua, director of China’s National Energy Administration, said in his virtual keynote at the SIEW.

The US has also intended to leverage Southeast Asia as an alternative supplier of clean energy products. Experts said despite the strong incentives provided under the US Inflation Reduction Act to subsidize domestic manufacturers, labor and logistical costs are still much higher in the US compared with Southeast Asia.

In addition to solar photovoltaic products, Southeast Asia has a tremendous potential to help the US diversify its supply chains of battery cells, wind turbines and critical mineral processing, Geoffrey Pyatt, assistant secretary in the US Bureau of Energy Resources, said at the SIEW.

The US is expanding clean energy manufacturing capacities both locally and abroad to avoid “a dangerously high level of concentration of clean energy supply chains in one country,” Pyatt said.

Beyond a manufacturing hub

The US and China no longer view the region merely as a manufacturing hub. They have indicated plans to develop Southeast Asia into a renewables hub that can produce abundant clean power at affordable prices.

Pyatt shared a US-initiated program called the Clean Energy Demand Initiative.

He said the CEDI program consolidated demand signals from US-based international companies.

“And then we work with governments to highlight those demand signals and try to use that as a catalyst for the private sector in order to allow companies and developers to connect their resources with future demand.”

“The marginal cost today of clean power in the United States is 10 times smaller. The cost is 10x in Asia for the same electron,” he said, highlighting the current challenges.

Under CEDI, conversations and collaborations have been made between the US and Malaysia, Vietnam as well as Thailand regarding power purchase agreements, he said.

On the supply side, renewable project developers from China have ambitiously expanded their footprints in Southeast Asia, seeing strong demand signals from the US, as well as European and Chinese companies that have subsidiaries in the region and are eager for clean power sources.

Through successful projects in Southeast Asia, some developers hope to alter the public image of their companies as “the Chinese giants." The companies said they have become international participants capable of operating in multicultural environments, hiring employees and engaging customers of diverse backgrounds.

Green hydrogen as next step

Developing a green hydrogen industry in Southeast Asia is another strategic move by the US and China, especially for the next phase after scaling up renewables supplies and lowering the system costs of clean power.

Some Chinese companies have gained a foothold in the region’s green hydrogen market. There have been several projects started in Vietnam, Malaysia and Thailand, according to the companies at the SIEW.

These Chinese companies not only provide electrolyzers and technological support for green hydrogen production, but also advise local companies to create use cases and demand, such as using green hydrogen to decarbonize steel production or provide buffer supplies to cope with the intermittency of renewable power.

Meanwhile, the US government has been actively working with the government of Singapore, a regional hydrogen demand center, to study different hydrogen technologies and explore pathways to scale up the nascent supply chains, officials said at the SIEW.

For instance, Singapore has established a pathfinder project to build an end-to-end supply chain for ammonia, a derivative of hydrogen, testing the feasibility of using low-carbon ammonia for power generation and bunkering.