Asia is home to two of the world’s most developing countries – China and India. Also, Asia has 93% of most polluted cities worldwide and six out of ten countries at risk from climate change. The economies of many Asian countries are developing, and as a result, the region faces high energy demand. Fossil fuels are the main source for energy demand because it is the obvious cheap option for many Asian countries. In recent years, there has been an increase in efforts to support the transition process towards renewable resources.
Challenges
Asian developing countries are facing greater challenges in changing their energy mix from fossil fuels to renewable sources. Political and economic concerns, along with the impact of COVID, have emphasized these challenges. Recent geo-political events have complicated the need to develop robust resilient systems to ensure smooth transition to renewable sources.
Energy Mix
According to GlobalData’s recent report, thermal generation currently represents 70% of Asia’s energy mix, mainly from coal. Thermal generation is expected to drop to 55% of Asia’s energy mix by 2035. This will be a direct result of using more renewable sources. Asia’s overall generation will continue to see an increase in renewable sources. This increase is expected to be 63% in 2035 compared to 40% in 2022. Thermal generation is expected to decline by 2035, where oil will decline by 15% while gas will increase by 44%. This is because of the rising demand for lower-carbon fuels, favoring natural gas rather than oil. Coal has not dropped as much as expected due to the lack of clear coal-phase-out policies within Asian countries.
Transition
A lack of varied energy sources creates enormous risks and huge volatility to energy supply and prices. An important tradeoff needs further attention during the transition to renewable sources. Fossil fuels are currently the main source for a stable base load power, needed for economic growth. This base load power must be carefully balanced against the long-term need to switch to renewable sources. For a successful transition, Asian developing countries need to cooperate with their partners to address many challenges. These include geopolitical issues and technological and financial constraints, which will require:
Shifting the focus of oil companies
Oil companies are on the front lines of energy transition system, moving from traditional energy into alternative renewable sources. This resources include hydrogen, solar, wind and electric vehicle. They will need to advantage their base assets and operating know-how, while increasing investment in renewables. The energy transition is vital to save our planet from the adverse effects of climate change.
Changes to the economics of energy generation and integration
A major driver in the energy transition is economic viability. Solar and wind power are currently among the lowest-cost forms of electricity, with prices lower than new natural gas plants. Also, in many cases, existing coal facilities, making renewable sources more viable alternatives to fossil fuels. Even so, challenges remain in effective energy storage and grid integration of renewable sources.
Promoting electrification of transport
The Asia-Pacific’s share of global transportation carbon dioxide (CO2) emissions in 2020 is 33%. The approval of electric vehicles continues to increase as the battery cost drops. Recent advances have created a wide range of solutions for electrical transport. The public and private sector need to work in tandem to develop policies and infrastructure to support this transition.
Promoting wider use of environment, social and governance (ESG) scores
ESG scores have the potential to attract billions of dollars in private sector capital to address climate goals. Institutional investors now consider ESG scores as part of their portfolio decisions. ESG scores and sustainability have attracted record capital flows in 2020. Consequently, many industrial companies are escalating their transition towards an environmentally sustainable economy. This can be achieved by solving issues, including greenhouse gas (GHG) emissions, pollution, waste, and resources constraints.
A recent evaluation study found that a smooth energy transition is a key enabler of sustainable development and climate resilience. This requires united efforts on multiple fronts, including regulatory, policy, corporate governance, investors engagement, social focus, and technological advancement.
Read more:
Smoothing a Green and Just Energy Transition in Asia and the Pacific
Ranked: The Top 10 Countries by Energy Transition Investment
