Private sector to play central role in Asia-Pacific energy

Compact fluorescent lamps being tested at the Lighting and Appliance Testing Laboratory in the Philippines. Energy demand in the Asia-Pacific region is projected to rise by 2.1 percent annually until 2035. Photo by: Asian Development Bank

For energy supply to be fully sufficient in Asia-Pacific in the next two decades, the private sector will have to shore up its investments and expertise to assist governments and multilateral organizations.

Energy demand in the world’s most populous region is projected to rise by 2.1 percent annually until 2035, significantly higher than the world’s average at 1.5 percent, and is expected to require a $11.7 trillion investment figure. Such a price tag will be a huge burden for national governments, even with the help of multilateral organizations to finance, running the risk of a huge gap in the region’s energy supply. But hopefully the private sector can fill the void on this one, according to the Asian Development Bank.

“Both the private sector and development institutions have large roles to play to ensure that energy supply in Asia and the Pacific will be sufficient to meet projected growth,” ABD senior energy specialist Aiming Zhou told Devex. “The burden of financing energy projects is too big for governments and multilateral organizations alone to bear. This necessitates the involvement of the private sector.”

Oil and coal are again expected to be the two major sources of energy supply in the region, with demand increasing by 60 percent and 53 percent, respectively, noted ADB’s recent report on the region’s energy outlook. Renewable energy sources, despite getting prominence in the past couple of years, still take the back seat.

Asia-Pacific, home to the majority of the world’s current economic stars, will need enough energy if it wants to sustain its growth projection, and this is a crucial component to jump-starting the goal of achieving sustainable development for all.

Pan-Asia energy market

A cross-border power exchanging scheme between countries is being mulled to solve the disparity between demand and supply, not only in energy but also in technologies and best practices. Since countries don’t have the same mature technologies to produce enough energy to supply their demand, a shared grid can patch the holes, making generation and consumption more efficient.

Zhou said that despite the differences in economic growth and maturity in the countries in the region, “each [member country] still has room to adopt supply and demand-side measures that could help ease down the energy burden in the [region].” Cooperation, in this sense, is crucial.

“Regional cooperation, which will allow the members share their relative energy ‘strengths’ would also be mutually beneficial,” he said. “Cooperation may take such forms as grid interconnections, fossil fuel joint development and trade agreements.”

According to the ADB report, almost 70 percent of electricity generation will come from the region’s two biggest nations in terms of population, China and India, by 2035. Such capability — in case of surplus — will, for example, allow the two nations to lend a hand to supply the growing needs of other countries who have gaps.

Looking ahead

The issue of energy, however, does not stop in supply alone. With growing concerns on the effects of climate change, energy discussions also include talks on social and environmental repercussions.

The ADB report says over 22 billion tons of carbon emission are expected to be in the atmosphere by 2035 given the prominence of oil and coal despite the rise of renewable energy sources. This dependence on imported oil and coal — with dependency ratio expected to rise to 90 percent by 2050 — will make Asia-Pacific economically and socially vulnerable.

To minimize this, source diversification and policies that encourage efficiency and use of renewable energy sources are top-of-mind solutions, according to Zhou.

“If governments seek to make themselves energy secure, they must diversify their energy sources, seek sustainable, low-carbon energy and become more energy efficient,” he noted. “Developing renewable energy as a priority and increased energy efficiency are key to energy security.”

Asia-Pacific has a long way to go in achieving sustainable and environmental energy solutions, with challenges up ahead. Zhou said the region faces two main challenges: ensuring continued economic growth while making energy generation environmental and sustainable, and making energy investments more accessible to private sector to make the growth truly inclusive.

“Asia can only do this by embracing the three ‘I’s — to become more innovative, inclusive and integrated.”

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About the author

  • Lean Alfred Santos

    Lean Alfred Santos is a former Devex development reporter focusing on the development community in Asia-Pacific, including major players such as the Asian Development Bank and the Asian Infrastructure Investment Bank. He previously covered Philippine and international business and economic news, sports and politics.