The world is in a peculiar moment. In the news today are wars, natural disasters, food and energy crises, and a global recession. Amidst the backdrop of a post-lockdown world, where many nations are still trying to recover economically, a more sinister threat stands off to the side, biding its time. I’m talking about climate change.
It isn’t anything new, of course – plenty of scientists have been trying to warn everyone about its effects since the 1960s.
Unfortunately, the world now is not in a better state than it previously was. I made my money from coal yesterday, so it’s my responsibility to be clear today: global warming is real, and we have far surpassed the 1.5C global temperature increase limit needed to reverse its effects.
ASEAN’s digital conundrum
Compounding the effects of climate change is that a huge chunk of the world, Asia, is growing fast, namely Southeast Asia (ASEAN). The World Economic Forum predicts that the region is on track to become the world’s fourth-largest economy by 2030.
Also Read: Waste4Change grabs US$5M to shrink Indonesia’s landfills
Buoyed by the quick expansion of its middle class, trade development, and rapid digitalisation, ASEAN’s growth comes with a commensurate need for increased energy capacity.
Let’s take Indonesia as a baseline. It is the largest ASEAN country, spanning 1.86 million square kilometres, and is home to more than 270 million people.
On the back of a strong economic outlook boasting an average annual GDP growth of around five per cent (despite the pandemic), the nation has a relatively stable unemployment rate (four per cent) and a high Human Development Index of 0.71.
The pandemic hit the country hard, but a curious trend emerged – there was massive growth in the information and communications technology (ICT) sector. In fact, within these past couple of years, ICT has been the largest growth contributor to Indonesia’s GDP. Internet penetration jumped to 77 per cent during the pandemic (an increase of around 45 million people), with an 81 per cent usage rate from 2021 to 2022.
These, together with swift urbanisation and industrialisation, have led experts to predict that Indonesia’s energy demand will triple by 2039.
More internet means more data centres
If you’re familiar with the tech and ICT space, you’ll know that keeping up with a nation’s increased internet usage requires more data centres.
Data centres are indeed proliferating in ASEAN. The region is projected to be one of the fastest-growing data-centre markets in the world.
Indonesia is expected to lead Asia Pacific in IT spending by 2025, driven by a strong shift toward cloud services. A Gartner study predicts that by 2024, 52 per cent of the country’s total IT spending will be for public cloud services.
Its power demand for data centres alone will reach 2,031 megawatts (MW) by 2032. Of that amount, its multitenant data centre demand will account for 1,429 MW.
This massive demand is primarily driven by cloud service providers (CSPs) who supply cloud tech to power increasingly digitalised businesses and services. These CSPs include tech titans such as Google, Amazon, Microsoft, Facebook, and Alibaba, as well as smaller players.
Unfortunately, most of ASEAN’s energy needs, including Indonesia’s, are met with fossil fuels. In 2021, the share of fossil fuels in ASEAN was 81.2 per cent, with renewables comprising 18.2 per cent.
Interestingly, during the pandemic, the share of renewables in the region remained resilient, jumping from 17.4 per cent in 2019 to 18.2 per cent in 2020.
The ASEAN Centre for Energy expects the renewables sector to continue growing and become the main driver in various government stimulus packages across the region.
With great power demand comes great opportunity
Continued reliance on fossil fuels for energy will soon make it untenable to live in this world. As it stands, the increased rate of natural disasters and mercurial weather patterns are just the beginning of the world’s climate problems.
Around the globe, stakeholders are increasing pressure on businesses to reduce their carbon footprints and act on climate change.
Also Read: How Neliti aims to help improve accessibility to scientific knowledge in Indonesia
The message is clear: there is a drastic need for alternative energy sources, which lies in the increased provision and supply of renewables.
This is all the more obvious in the rapidly digitalising and growing Indonesia.
Fortunately, the country is blessed with abundant natural and renewable energy (NRE) resources, including geothermal, hydro, solar, wind, and ocean potential. In fact, the nation commands 40 per cent of the world’s geothermal reserves.
To date, the utilisation of NRE resources stands at only 0.3 per cent of its 3,638 GigaWatt potential (11.5GW), signalling a huge market opportunity for anyone who can harness the sector.
Truly, the potential for disruption and growth in Indonesia’s energy sector is nothing short of gargantuan, given its NRE promise and support by the government to grow the renewables sector.
Indonesia’s single biggest investment opportunity
These statistics should make tech stakeholders sit up and pay attention. As Indonesia continues on its rapid path to modernisation, demand for the internet will steadily increase, and so too will its energy needs.
The time is now for tech entrepreneurs in Indonesia to gain a foothold in this relatively untapped sector and figure out how to reduce, or at least equalise, the cost of renewables with coal.
I believe that anyone who can achieve this, with a roadmap to scale, of course, will have the next decacorn on their hands.
I know that our local cohort of tech investors tends to focus on B2C and pure internet plays, and anything involving hardware, climate tech, or data centres has never been sexy.
But local venture capitalists need to wake up and smell the energy demand on the horizon. They must start looking for real deals in the renewables space today because tomorrow is too late.
–
Editor’s note: e27 aims to foster thought leadership by publishing views from the community. Share your opinion by submitting an article, video, podcast, or infographic
Join our e27 Telegram group, FB community, or like the e27 Facebook page
Image credit: 123rf-icruci
The post How startups and VCs can propel Indonesia’s energy transition appeared first on e27.