New Asean energy transition

  • Rising oil prices, new gas finds and cuts in energy intensity re-shape energy demand
  • Accelerated demand for energy efficiency and renewable energy in most urban states

Asean countries, like countries in other major regional groupings, including the European Union (EU) and the west African ECOWAS (the Economic Community Of West African States) group, are moving rapidly towards achieving energy sector goals – that are themselves changing rapidly. The energy ministries in Asean countries, together with organisations and entities ranging from the Asean Secretariat to the Asian Development Bank (ADB), the UN ESCAP (economic commission for Asia-Pacific) to external entities like the World Economic Forum, are exploring how each country can create a new energy architecture that is secure, sustainable, affordable and has low environmental impact.

One immediate problem is that these goals are subject to technology, scientific, economic and even political change: the EU27’s “climate energy package” of energy sector goals and member state programmes (set in December 2008) for example, were developed on the basis of forward projections of oil and gas scarcity, with high energy prices being the rule for long-term future. Also, at the time Europe believed that global warming was a major near-term threat to economic and even social stability in Europe.

Since late 2008, much has changed. For example, there have been massive finds of “stranded” gas in emerging new gas producer regions including north-west Australia, east Africa, the west and east Atlantic ocean, the Caspian sea and Mediterranean sea, as well as major and continuing finds of shale gas reserves onshore in nearly all world regions. Shale oil production is also advancing, if slowly. The spectre of global warming catastrophe is now openly questioned by public opinion in many countries, and by increasing numbers of scientists. In addition, renewable or “green” energy has grown so fast, pushing prices always lower, that the question of “energy security” and “sustainable energy” are now very different, when compared with the outlook in 2008.

Energy economy
At this time, it is fair to say that energy policy goals set in the last five years are under heavy pressure for these and other reasons – these additional ones including very fast improvements of energy efficiency in the economy, measured by the quantity of energy needed per unit of GDP. In the Asean countries, this vector of change is especially strong. Thailand (one of the countries with the highest GDP per capita in Asean, along with Singapore and Malaysia) for instance, is planning a 25% cut in energy intensity by 2030 relative to business as usual or trends continued, according to the 3rd Asean Energy Outlook prepared in 2011 by Japan’s Institute of Energy Economics, the Asean Energy Centre and member state teams. This means there may be a lower total demand for energy at the basic “primary energy” level, comparing 2030 with 2005.

Urbanised Asean countries like Malaysia, Singapore and Thailand are strengthening their focus on urban-focus energy saving and energy substituting programmes. Above, a public sky walk connects Bangkok’s Sky Transit and bus systems at Sathorn-Narathiwas junction (photo credit: istockphoto)

It is not only the economy and factors like demographic change and lower population growth rates (Asean as a group is now at about 1% per year growth) that are central to achieving this, but also what the Asean Energy Centre calls “improved energy literacy”. As in Europe and the US, however, the general public and business decision-makers need to better understand that the true costs and challenges of securing energy supplies are rapidly changing. One key example of this comes from Japan itself: the energy economy of Japan made major strides only after March 2011, due to its nuclear catastrophe and what the Institute of Energy Economics calls “post-Fukushima energy efficiency gains”. These were driven and continue to be driven by a surprise change in the country’s energy system, which galvanised the population into action.

What first seemed an unmitigated catastrophe for Japan became a new energy efficiency-raising opportunity. In the US in particular, but also in Europe, the very rapid and massive growth in gas and oil energy reserve outlooks – which for certain green ecology political parties is something of a disaster because they preach energy scarcity and high prices – has created many new opportunities, but also many new problems for energy planners.

Oil prices
Unlike gas, which promises major reductions in prices by or before 2020, oil remains expensive. Asean countries, like the OECD group of countries including Japan and South Korea, are still responsive to oil price signals despite the role of oil in Asean economies (about 35% of primary energy in 2009 compared with 44% in 1995) continuing to decline. Oil prices as an energy policy setter remain important, as shown by this September 14th 2012 comment by International Energy Agency chief economist Fatih Birol, quoted by Reuters: “I see the (oil) prices today, in this economic context, as unbearable for consumers… High prices together with other factors could push the global economy back into recession,” he added, encouraging oil traders to trim prices on the rising outlook for the IEA releasing oil stocks if prices go on growing.

This hides the important longer-term role of energy saving and development of renewable energy, which is moving fast in Asean countries – and is accelerated by high oil prices and threats to oil import security. Several countries, including resource-rich Malaysia, now target a faster reduction of final energy consumption in the industrial, commercial and urban sectors. Especially concerning oil-based transport, Malaysia is targeting a large cut in energy consumption through 2011–2030 featuring electric rail transport, city public transport, and fuel switching from gasoline and petrodiesel to electric-fuelled and gas-fuelled vehicles.

Whenever oil prices move up, whenever supply sources and supply routes for oil imports are threatened, the economic advantage of oil saving and oil substitution rises.

All the Asean countries now include urban-focus energy saving and energy substituting programmes, particularly in the most urbanised member states, including Singapore and Thailand, but also including others such as the Philippines, Indonesia and Vietnam where high rates of economic growth have not deflected the government from pursuing Asean’s energy-saving and oil-substituting goals. Often set as CO2-reduction goals, the urban pollution impact of fossil fuel dependence is steadily growing as a factor favouring the accelerated development of “green energy” in member states: When this is joined by the high price of imported oil, the energy policy goals become clearer, and focus the reduction of oil in the national energy mix.

We can be certain this process will continue: the questions now concern the commercial and mass market uptake of alternate and renewable energy for electricity supply, gas-fuelled and electric-fuelled vehicles, and the management of energy transition in each Asean country.