Asean’s Burgeoning Thirst for Energy

By Asia Sentinal 7 October 2013

Energy demand in Southeast Asia has expanded by two and a half times since 1990—and is still only about half the global average as the global energy epicenter shifts to Asia, according to a new report released last week by the International Energy Agency.

Particularly troubling for the environment, energy-related emissions of carbon dioxide by the 10 members of the Association of Southeast Asian Nations (Asean) is expected to nearly double, reaching 2.3 gigatons—2.3 billion tons. That bleak assessment comes just a few days after the UN’s Intergovernmental Panel on Climate Change warned that global warming, caused by greenhouse gases, is likely to accelerate and called climate change “the greatest challenge of our time.”

Energy demand within Asean is expected to increase by another 80 percent by 2035, according to the 138-page report by the IEA, titled Southeast Asia Energy Outlook. The agency is composed of 28 member countries, most of them rich ones. In particular, the report says, the 10 Asean members are expected to triple their use of coal, accounting for nearly 30 percent of global growth. Natural gas demand is expected to increase by 80 percent. The share of renewables in the primary energy mix is expected to fall as rapidly increasing use of modern renewables—such as geothermal, hydro and wind—is offset by reduced use of traditional biomass for cooking.

IEA Director Maria van der Hoeven warned in a Bangkok press conference that countries in the region must take serious action to increase energy efficiency in a bid to slow the emissions of greenhouse gases.

Removing barriers to energy efficiency deployment would deliver major energy savings. With the proper policies, it would be possible to cut energy demand by almost 15 percent in 2035, an amount that exceeds Thailand’s current energy demand. Lower electricity demand and the use of more efficient power plants could reduce coal demand by 25 percent. More efficient industrial equipment, stringent vehicle fuel-economy standards and the quicker phasing out of fossil-fuel subsidies could drive demand reductions in oil (10 percent) and gas (11 percent).

The average efficiency of coal-fired plants in the region is only 34 percent today because of the inefficient use of technology, according to the report. Getting coal-fired plants up to the level of Japanese efficiency today would cut fuel use by 20 percent and substantially reduce CO2 emissions and local air pollution.

Fossil-fuel subsidies totaled US$51 billion in Southeast Asia in 2012 with subsidies remaining a significant factor in distorting energy markets, encouraging wasteful energy use, squeezing government budgets and deterring investment in energy infrastructure and efficient technologies.

One of the big factors is that more than 130 million people in the region still don’t have access to electricity and intensive efforts will be made to bring power to them over the next 20 years. Although Brunei, Malaysia, Thailand and Singapore do have access to electricity, levels are below 75 percent in Cambodia, Burma, the Philippines and Indonesia. In addition, almost half of the region’s population still rely on traditional use of biomass for cooking, posing serious risk of premature deaths from indoor air pollution.

The decline in mature oilfields and the limited chance of new finds mean that crude production is expected to fall by almost a third over the period, likely making Southeast Asia the world’s fourth-largest oil importer, behind China, India and the European Union. Its oil import dependency is expected to nearly double to 75 percent, as net imports rise from 1.9 million bbl/day to just over 5 million bbl/day. Spending on net oil imports is expected to triple to almost $240 billion in today’s dollars in 2035, equivalent to almost 4 percent of GDP. Thailand’s and Indonesia’s spending on net oil imports are expected to triple to nearly $70 billion each.

Some $1.7 trillion of cumulative investment in energy-supply infrastructure to 2035 will be required, with almost 60 percent of the total in the power sector.

“Mobilizing this will be challenging unless existing barriers are overcome: subsidized energy prices; under-developed energy transport networks; and the need for greater stability and consistency in the application of energy-related policies. Implementation of long-standing projects to interconnect markets, namely the Asean Power Grid and the Trans-Asean Gas Pipeline, can underpin more efficient exploitation of the region’s energy resources, while enhancing its collective energy security.”

Southeast Asia’s governments will have to take significant action over the period in key priority areas including fuel-economy standards, more stringent building codes and energy performance standards for a wider range of products, the report continues. Improving capacity and energy data collection are pre-requisites to effective energy efficiency policies and implementation. Realistic and measurable efficiency targets are needed, along with effective approaches to achieve them, including mechanisms to monitor progress and make adjustments as needed. The affordability of energy efficiency also needs to be improved by eliminating market distortions, such as energy subsidies, and by increasing the availability of financing and incentives.