As global leaders descend on Bangkok for the World Economic Forum on East Asia, the focus will be squarely on “Shaping the Region’s Future through Connectivity”. With Asean countries gearing up for the formation of an Economic Community in 2015, an important part of this agenda will be driving greater energy integration.
Asean nations must tackle energy challenges at the regional level but building energy supply infrastructure, such as the gas exploration rig pictured above, will come at an environmental cost.
The Asean Plan of Action for Energy Cooperation (APAEC) 2010-15 covers the energy component of the Economic Community Blueprint 2015. At its heart is creating a solution for the energy “trilemma” _ delivering on energy security, and economic growth and development, in an environmentally sustainable way.
This will not be a straightforward task. By 2020 Asean will be the world’s eighth-largest economy and have the world’s third-largest population, next only to China and India. This will bring with it bumper energy demand, and create a fundamental challenge in securing supplies. According to the Institute of Energy Economics Japan, Asean’s final energy consumption will grow at a 4.4% average annual rate from 375 million tonnes of oil equivalent (MTOE) to 1,018 MTOE.
This near tripling of demand will require huge investments to expand the region’s energy infrastructure _ everything from power generation, to pipelines and grids. The International Energy Agency estimates this investment will need to reach US$1.1 trillion by 2030.
This expansion of energy supply infrastructure will not only come at an economic cost, but an environmental one. If current trends continue by 2030 Asean’s share of global energy-related, carbon-dioxide emissions reaches 5%, up from 3.5% today. Without drastic reductions in global CO2 emissions, the earth’s temperature could rise by as much as six degrees Celsius by the end of the century. While Copenhagen recognised the case for keeping global temperature rises below 2 degrees, it failed to produce a binding agreement. This means that solutions to tackling climate change will need to come at the regional level, highlighting the importance for Asean countries to pursue a more sustainable path.
By tackling energy challenges at a regional level, as opposed to unilaterally, the Asean countries will be able to draw on one another’s strengths, in order to overcome their own indigenous weaknesses. The planned components of the APAEC will therefore play an important role in tackling the energy “trilemma” and the challenges highlighted above.
The Trans-Asean Gas Pipeline will boost prospects for gas exploration and production, improving market access for otherwise stranded resources. By linking suppliers and customers in long-term relationships it will reduce political risks, contributing to a more consistent supply. In the oil sector, it is assumed that moves to reduce legal and regulatory uncertainties and to improve the tax environment will boost prospects for investment. For additional sources, negotiating with international oil and gas suppliers from the Middle East and elsewhere, on a regional basis, will also put in the region in a position of strength.
The formation of an Asean Power Grid will offer a variety of geographic predisposition, and therefore a diverse area of high potential for renewable sources _ while Laos and Myanmar can provide sustainable sources of hydro, the Philippines, which has high levels of solar radiation, can provide renewable fuels for the power generation sector. Combining regional demand curves in electricity markets will help reduce volatility. This will facilitate peak demand shaving, reducing requirements for base-load power generation, and therefore enabling a more efficient and economic power generation sector. Equally, nations with a large agricultural base, such as Thailand, can supply the region with low-carbon, second-generation biofuels for the transportation sector.
The pace of implementation will hinge on the willingness of individual nations to reform and liberalise their energy sectors. This involves action on cost-reflective fossil fuel pricing, and opening energy-supply industries to greater market competition. A multi-country market will require harmonised standards, common policies and pricing regulation. To facilitate this requires collaborative partnerships to be built across the region. This applies to both the public and private sectors, and between the two.
The World Economic Forum, through its work with the Ministry of Energy, is helping to build these multi-stakeholder partnerships, bringing together industry, government and civil society to help shape a New Energy Architecture for the Asean region. It is our hope that by building a united Asean, we can create a more secure, affordable and sustainable Asean energy supply.
Busba Wongnapapisan is associate director and head of renewables industries for the World Economic Forum. Michael Moore is WEF project manager for New Energy Architecture.