*4.2. Adapting Green Energy Financing for Green Deployment*

Finance is the engine of development of renewable energy projects, and financing of investments that provide environmental benefits through new financial instruments such as green bonds, green banks, carbon market instruments, fiscal policy, green central banking, fintech, community-based green funds is necessary to achieve the SDGs [50]. The ASEAN and the Southeast Asia governments should adopt these targeted funding channels, also known as green energy financing, for the greater deployment of green technologies in the region. A geographical mismatch between resource endowments and demand centers provides incentive for regional integration of power grids in order to bridge the gap but requires capital-intensive investments in physical interconnectors. Therefore, the hindrance of renewable energy development does not only include technological capacity but also access to finance in the ASEAN [51]. It is difficult for policymakers in determining the ways to make the transition towards a green economy from the existing coal generation in the absence of financing access, when generally, financial institutions show more interest in fossil fuel projects rather than in green projects. The cross-sector policy framework can enable integrative financing and development of renewable energy fostering energy efficiency and replacement of fossil fuels.

The Southeast Asian region has played a significant role under the agenda of "one community for sustainable energy" with publicly financed initiatives such as ASEAN Power Grid (APG) interconnection, Trans-ASEAN Natural Gas Pipeline (TAGP), energy efficiency, renewables, and regional level policy and planning [15]. All these initiatives require costly investments in capital expenditures and are risky which the private sector is not willing to bear and therefore requires appropriate public financing as evidenced. The breakthroughs in technology in the renewable sector can provide a resilient model forward on a low-carbon energy system by easing access to finance and overcoming financial

barriers in the deployment of renewable energy. The stronger regional framework on green projects financing can serve as an extensive development plan and ensure a sustainable energy transition roadmap moving forward. Both regional coordination and cooperation with a strong political will from all the countries in the region will be vital for an integrated financial framework development in supporting infrastructure projects in the ASEAN.

The belt and road initiative introduced by China also has some major implications to the South East Asian economies such as promoting infrastructure projects through Chinese government financing in the region that relates with water resources and transboundary rivers. However, several positive and negative impacts may arise, creating political issues on the social and environmental front through these publicly financed projects [52]. Therefore, concerns can be raised while deploying green technology projects, especially when international collaborations take place. A regional governing institution focused on energy and use of market-based instruments can provide a platform for strengthening energy dialogues and facilitating the mobilization of green technologies to boost the energy infrastructure by attracting financing. Furthermore, the role of the private sector is also equally important and will not only ensure civic engagement but also support the leveraging of public funds. The policymakers around ASEAN have been increasingly trying hard to ensure reliable and affordable sustainable energy solutions. It is equally important to focus on efficiency while developing investment infrastructure for fuel and power supply.

Commitment for funding from both public and private sectors is crucial. For example, many public sources have played important roles in financing thermal power plant projects and large-scale renewables such as hydropower, while most wind and solar PV projects have relied on private finance supported by policy incentives. Civic engagement and initiatives from investors and companies also play an equally vital role. A finding of the South Korean government showed how government aid and other public finance is deployed. Figure 5 shows the amount of public and private investments in the ASEAN power generation by different sources. Public investments are dominant in the region, with significant involvement in electricity generation from coal and gas. The challenge for policymakers is to entice more private investments into the renewable power sector in the ASEAN.

Figure 5 above also indicates that more investments should be channeled towards sustainable energy, and the deployment of renewables should be scaled up although notable progress has been made towards disincentivizing the consumption of fossil fuel. Figure 6 below shows the share of financial instruments on total renewable energy investments in the ASEAN between 2009–2016. Loan and concessional loans remain the two most popular

financing instruments, which highlights the need to increase the access to credits for the development and deployment of green energy in the ASEAN.

**Figure 6.** Renewable energy investments Type. Source: Adapted from IRENA [53].
