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ASIA NETWORK

The Asia regional network currently spans from New Zealand in the East, includes major economies such as Japan and China, and reaches India, Sri Lanka, and Pakistan in the South East. It is a large and diverse network in terms of its economic stages, culture, and language as well as energy issues it faces.

Key issues for the Asia region currently include accelerating the pace of transition to carbon neutrality, mitigating the risks associated with digitalisation and implementing new market design mechanisms. Recently, hydrogen has moved to the forefront of the discussion in many Asian countries as a potential way to decarbonise.

Regional action priorities that support the Council’s mission and humanising energy vision are agreed on an annual basis by national Member Committees in the framework of a Regional Action Plan. In 2021, Asian members joined forces to drive forward conversations on the future of hydrogen in the region.

Each month, the Asian regional network meets to discuss matters of mutual interest, drive collective activities, and keep each other updated on relevant developments and events. In addition, throughout the year regionally targeted workshops are being organised to advance discussions in the context of our global insights and innovation tools.

To drive action and achieve impact, members in the region work in partnerships with energy-related non-governmental agencies and other regional energy organisations including the Asian Development Bank (ADB), the Asian Infrastructure Investment Bank (AIIB), Asia Pacific Economic Cooperation (APEC), the Asia Pacific Energy Research Centre (APERC), the Institute of Energy Economics, Japan (IEEJ) and the Association of Southeast Asian Nations (ASEAN).

Conversations on hydrogen brought together stakeholders from the region and beyond.

A first webinar The Future for Hydrogen in the Asia Pacific was led by the Japanese Member Committee and explored the different drivers for hydrogen demand and emerging national hydrogen strategies, drawing on key findings from a recent Council survey.

A second webinar was co-hosted by the World Energy Council Hong Kong, WBCSD and ERM under the theme of The Emerging Hydrogen Economy in the Asia Pacific Region. The discussion built on the Council’s Innovation Insights Briefing Hydrogen on the Horizon: Ready, Almost Set, Go? and focused on different hydrogen strategies and action priorities in the Asia Pacific region and used.

Energy in Asia

asia, world energy issues monitor, critical uncertainties and action priorities

REGIONAL OVERVIEW & CONTEXT

Overall, the picture in Asia is one of high uncertainty. Climate adaptation and commodity prices are Asia’s most critical uncertainties, which is consistent with the picture in the 2022 World Energy Issues Monitor. A new critical uncertainty, stakeholder coordination and collaboration clearly stand out from the other issues as an area requiring leadership attention and action. In contrast to the global picture, transmission grids are not the most critical action priority, as it is eclipsed by demand management policy, infrastructure action planning and affordability. An unambiguous difference is bottlenecks associated with critical minerals and metals which although uncertain, the impact is thought to be considerably lower than the global average. Fossil subsidies are firmly in the action domain and indicate the continued uptake of lower carbon technologies seen in many parts of Asia. The cluster of game-changer technologies along the central line is in line with the levels of technology innovation and uptake in Asia.

ASIA REGIONAL DEEP DIVE

Major regional changes

Asia is a very diverse region in terms of energy demand, economic development, demographics and geographical opportunities. The trajectories of two powerhouses in the region, China and India, are starting to diverge. 2023 was expected to be a year of recovery for China after strict COVID-19 policies severely impacted its economic development. However, the recovery of the Chinese economy has been upended by a property crisis, youth unemployment and low foreign investment. On the other hand, India’s economy has been one of the fastest growing in the world, with Gross Domestic Product (GDP) expected to grow by 7% in Fiscal Year 2024. Similarly, while China’s population, currently the largest in the world, peaked in 2021 and is starting to decline, India’s population is expected to grow to 1.7 billion in 2050, claiming top spot.

Economic growth in the ASEAN block looks promising, driven by stronger domestic consumption, investment in infrastructure and growing foreign investments. As a result, India and Southeast Asian countries are expected to account for 44% of the growth in final global energy demand by 2050.

Despite various energy transition plans announced by governments in the region, it is unlikely that this additional demand will be met solely by clean energy sources. Coal is still expected to account for more than 40% of Asia’s primary energy consumption in 2030, contributing 50% and 64% of the power generation mix in China and India, respectively.

Accelerating regional trends over the last 5 years

Coal demand is accelerating but at a slower rate. Despite the transition plans announced by many Southeast Asian and South Asian countries, Asian coal consumption accounted for close to 75% of global coal demand in 2022. In 2023, coal demand rose by 8% in India and 5% in China due to rising electricity demand and low hydropower generation. The phase-out of coal is expected to take longer than anticipated, partly due to the relatively young age of coal-fired power plants in Asia. As renewable energy remains unreliable, coal is seen as the most promising option to meet increasing power demand in India.

Hydrogen development is accelerating but at a slower rate. Green hydrogen and ammonia production is experiencing a new boom in Asia. India is strategizing to excel in low-cost production for export and domestic consumption in the fertiliser and steel industry. Japan is testing ammonia and hydrogen for co-firing in thermal plants. In Australia, six green hydrogen projects have been shortlisted to receive US$1.35 billion under the Hydrogen Headstart scheme. However, uncompetitive prices of green hydrogen and the significant investment required to develop hydrogen infrastructure remain as important roadblocks.

With potential delays in energy transition plans, countries are actively searching for alternative, lower-cost options such as geothermal energy.

Nuclear power production is accelerating slowly. Japan has restarted 11 GW of nuclear power plants since the Fukushima incident. China is currently constructing 21 nuclear reactors, which can generate more than 21 GW of power. India has plans to add 14 GW of nuclear capacity by 2031. While countries in Southeast Asia recognise that nuclear power could potentially be part of future energy mix, public perception on safety remains a key concern. Indonesia signed a Memorandum of Agreement with the United States to study the viability of constructing a new nuclear plant and will also receive US$1 million for capacity building. Thailand and the Philippines are also partnering with the United States as they seek to add small modular reactors (SMRs) into the energy mix. Singapore will be investing in a new research facility to further develop knowledge in nuclear safety before committing to the development of nuclear power.

Partnerships, collaboration and new market players are accelerating. To mitigate the intermittencies of renewable energy and strengthen grid stability, developing an interconnected ASEAN grid would be a fundamental step. However, the lack of cross-border energy frameworks and technical constraints hamper the development of cross-border power interconnection. In Southeast Asia, bilateral agreements between governments and regulators are most common. There are some encouraging signs, such as the Lao PDR-Thailand-Malaysia-Singapore Power Integration Project, which supports the import of 100 MW of hydroelectric power from Lao PDR through Thailand and Malaysia into Singapore. However, establishing a regional grid would require greater stakeholder collaboration. Issues such as transmission frequencies, market structure and regulation would necessitate a concerted and coordinated solution.

Integrating people and communities in the energy transition

As countries embark on the energy transition, it is crucial for societies and communities to be on-board for this journey. Closely intertwined with climate mitigation and adaptation, strategies for adaptation and transition will be fundamentally dependent on the commitment and willingness of the communities involved. Balancing the World Energy Trilemma – energy security, energy equity and environmental sustainability – requires engagement and collaboration among all stakeholders. As part of the New Zealand’s Energy Strategy, the government actively engages with indigenous communities (known as Iwi) to ensure a just and inclusive energy transition. Key engagement points include affordability, energy efficiency, emissions reduction, and readiness for renewable electricity. By fostering collaboration and understanding, New Zealand aims to accelerate its path toward a sustainable and equitable energy future.

While Japan has recently started some nuclear power reactors, the government is cautious about the progress on nuclear power development given the mixed public support. Large numbers of educational events are being organised by the Japan Atomic Energy Agency to engage local communities on long-term benefits of having nuclear power in the energy mix. A key challenge to these objectives is the lack of a skilled workforce to operate the nuclear plants, consequence of the shutdown of most nuclear reactors after the Fukushima incident. To re-skill and rebuild a suitable workforce, Japan Atomic Power has set up a training centre with a simulator, where over 13,000 workers have attended trainings.

A SNAPSHOT OF 2024 RESULTS

Geopolitical uncertainties persist

Similar to 2022, commodity prices remain one of the top uncertainties in Asia. Although prices of oil and natural gas have dropped from highs in 2022, trigger events such as maritime trade disruption and conflicts in the Middle East could easily cause prices to increase. As a result, risks to peace and supply chain are key concerns among survey respondents.

Infrastructure action planning as a priority

As countries in Asia continued their push towards greener electricity supply, there has been a surge in the addition of renewable energy. Solar and wind capacity in ASEAN rose by 20% in 2023, while China added 216 GW of new solar capacity. However, grid infrastructure in most countries have not been designed to cope with the intermittency of renewable energy. In addition, grid infrastructure has also been damaged by adverse weather events. The need to upgrade infrastructure and systems has never been more pressing, however it requires massive investment and detailed planning. Besides upgrading the transmission grid, countries in Asia are also actively exploring the possibility of energy storage systems to mitigate the intermittencies of renewable energy. Data analytics is used to assess power consumption patterns and renewable energy generation to better balance energy supply and demand.

Demand for greater resilience

In 2023, many countries in Asia experienced extreme temperatures and suffered devastating and costly natural disasters such as typhoons, floods and bushfires. The rise in temperatures and the disruptions to daily lives have heightened awareness of climate change within societies. As governments and corporations strive to enhance climate resilience, it is crucial to engage local communities as partners and leverage their unique perspectives and knowledge in designing future-proof infrastructure. Despite growing emphasis on climate adaptation and mitigation efforts among governments and corporations, uncertainty regarding action towards greater resilience remains significant.

FINAL CONSIDERATIONS

As economies in Southeast Asia and South Asia continue to develop in the coming years, energy demand in Asia is expected to rise. High capital investment and collaboration among key stakeholders are critical to upgrade and update ageing grid infrastructure in most countries. Greater collaboration among governments and regulators in Asia is fundamental to facilitate cross-border power integration, which may address energy security and energy affordability issues. Importantly, the diverse economic progress and energy mix in this region will result in multiple pathways and varying speeds as countries strive towards net zero.

CONVERSATION STARTERS FROM THE WORLD ENERGY ISSUES MONITOR 2024

What are the specific challenges anticipated in the regional energy context in the year ahead, considering factors such as mega city development, security and gas crises, technology uncertainty and decoupling energy and economic growth?
What measures need to be taken to enhance the resilience of the energy sector in Asia to the impacts of climate change? What are the associated risks to capital costs and supply chains?
Are the changes in policy and regulation in the region effectively supporting the transition to a just energy system? What innovative approaches could be considered?
While affordability remains a significant issue, uncertainty is on the rise. What novel strategies are being explored in the region to address this uncertainty?
The uncertainty surrounding hydrogen and P2X has notably decreased. How does this trend align with related systemic issues such as infrastructure and workforce readiness? How can new forms of collaboration help scale up?
In what ways can artificial intelligence (AI) contribute to the energy transition, particularly when considered alongside other factors such as transmission grid upgrades, smart home technologies and the adoption of electric vehicles?