As evidenced by the performance of ASEAN countries within the EAPI, emission and energy intensity are two key challenges faced by the region. The projected increase in energy demand in the region is compounded by the urbanization trend which is bringing higher energy demand and more intensive consumption to urban areas.

Over the past two decades, the ASEAN region has experienced rapid and uncontrolled urbanization – with the five largest ASEAN economies – Indonesia, Thailand, Malaysia, Singapore and the Philippines – reaching an urbanization level of 46% in 2012 and expecting to see a further 25% growth by 2050.¹⁰⁶

Alongside increased urbanization and population growth, the region has seen a 2.5% increase in energy demand by since 1990. This trend is expected to continue, with the IEA projecting a further increase of 80% up to 2035.¹⁰⁷ Increases in urbanization can present a number of challenges across the energy system with higher, concentrated energy demand adding stress to the supply infrastructure, and emissions from increased vehicle ownership and traffic congestion. Motor vehicles in Bangkok, Thailand, increased from 600,000 in 1980 to 6.8 million in 2013,¹⁰⁸ largely due to inadequate public transport and under-regulated vehicle standards.

These challenges are putting pressure on ASEAN cities to address urban pollution and congestion, and to find new solutions to manage energy supply and demand. A number of technology and policy solutions are available to mitigate these challenges – four potential solutions are explored below.

1. Smart grid: Smart metering enables the transfer of information in two-way communication between consumers and the grid; implementing this type of technology can help energy providers understand demand patterns and become more efficient in balancing supply and demand, and can empower users to be more efficient with their energy consumption. A number of smart grid implementations are using variable pricing rates based on the load of the grid, offering consumers lower rates for energy used at times when there is more capacity in the grid. In 2009, the Singapore Energy Market Authority launched a smart metering pilot which provided users with information on variable electricity tariffs; in a previous Singapore pilot, this resulted in a 10% reduction in consumption at peak times, and an overall 2% reduction in energy consumption. ¹⁰⁹ 
   
   An interesting technology in smart metering is vehicle-to-grid (V2G) technology which allows the bi-directional transfer of power between plug-in electric vehicles and buildings. A fully electric car can draw or produce up to 19 kW, the average power need for 13 US houses.¹¹⁰ The technology was initially developed in the aftermath of the March 2011 tsunami in Japan which caused power shortages and rolling blackouts in the country. When combined to smart metering technology and varying electricity pricing based on load capacity of the grid, the technology has the broader application of helping consumers reduce energy costs. 
2. Maximize economies of scale: Urban environments can offer energy saving opportunities enabled by the higher population density and economies of scale. A clear example of this is that urban environments can take advantage of public transportation to replace personal vehicles. The development of effective public transport can support cities in reducing congestion by providing a common transportation mode – for this to be effective, public transport must extend to reach outer-city populations, as well as be exempt from congestion to offer a valid alternative to private transportation. Cities such as Bangkok have developed above-ground metro transportation. The City of Shanghai invested nearly 3% of its GDP between 1999-2009 to develop a transportation infrastructure; over 40% was dedicated to the development of the Shanghai Metro, which now carries 8 million passengers a day, spans 420 km and covers over 80% of the city’s built-up area.¹¹¹ As demonstrated by the Shanghai Metro, developing a transportation network which extends to provide service to the wider urban settlement can be capital intensive, and therefore challenging to implement.
3. Smart traffic control: Data from in-vehicle telematics or road sensors can help cities understand and manage the flow of traffic in real time, providing opportunities to reduce emissions and fuel consumption by redirecting traffic through less congested routes. Although a number of pilots using smart traffic technologies are underway, no widespread implementation of the technology exists to date. However, other measures to reduce congestion from private vehicles exist in the form of financial disincentives for vehicle ownership use and incentives for investment into cleaner transportation. For example, Singapore has established a congestion charge scheme which uses variable real time pricing to charge road users at peak congestion times. Additionally, Singapore has imposed quotas for new vehicles, and high vehicle registration rates to mitigate the rise in the number of vehicles on the road. Incentives and emission standards to promote new, more efficient vehicle technologies can also play a role in reducing urban pollution. In Sweden, fiscal and financial incentives for the purchase of flexible fuel vehicles, as well as regulation to impose the sale of biofuels for larger fuel retailers, have led to a 12% reduction in city pollution.¹¹²
4. Big data: Collecting relevant information on urban activity from, for example, mobile devices, smart grid infrastructure and in-vehicle telematics can support governments and service providers to better understand patterns of behaviour and consumption, including understanding the expansion of the urban environment and provide opportunities to make long-term informed plans for public services.

The development of ASEAN economies and the rapid urbanization trend witnessed over the past years have brought to head a number of energy challenges – especially increased, concentrated energy demand, road congestion and higher emissions. Urban environments have the potential to enhance their environmental and energy performance by adopting efficiency measures and emissions standards and by leveraging opportunities for economies of scale in sectors like public transportation. If supplemented by the right policy environment – especially with regards to the phase-out of fuel subsidies – these offer high opportunities for ASEAN cities in addressing energy demand and the environmental sustainability of their urban environments.