Emerging opportunities to accelerate the energy transition in Asia
At a glance
The impact of climate change is driving the urgency to move away from fossil fuels. In many ways, the world’s energy transition is dependent on Asia. The region is home to 60 percent of the global population, and by 2025, more than 50 percent of the planet’s emissions will be derived from the region. As the world’s number one disaster-hit geography, based on weather, climate, and water-related risks, the conversation on catalysing the energy transition in Asia is critical. Identifying new strategies to overcome geopolitical pressures, transmission limitations, and commercial restraints was front and centre at the Asian Development Bank’s Asia Clean Energy Forum 2024. Below, Richard Fechner, Executive General Manager at GHD Advisory, provides some insights from his participation on the CEO spotlight session panel.
Growing the business case for renewables
Economic growth in the region needs a stable base while balancing an ongoing, long-term switch to renewables. This move needs to support fossil fuel replacement and ensure clean fuels are accessible – for all. New efforts are being made to use alternative liquid fuels, with such demand set to grow by almost 30 percent between 2021 and 2026. This includes biofuels derived from biomass and hydrogen, ammonia and methanol-derived options. The abundance of bio-based feedstock for creating greener fuels is particularly promising for Asia. A more conventional biofuel sector is emerging with products from sugar, starches and oils. Creating policies and regulations in this space will help ensure efforts towards biofuels don’t come at the expense of exploiting other resources.
Both electrons and molecules play a role in the transition, with a focus on electrons to aid those industries that can be more easily electrified. For the hard to abate industries, such as long-distance transport, maritime and industrial, will still demand molecules, which may need to be imported.
Governments can play a more significant role in enabling renewable projects more effectively by facilitating routes to communities. They can also strengthen expectations and encourage the public and private sector by creating funding models to drive decarbonisation expenditure. Governments can be better positioned to apply what they have learned for investment return by utilising techno-economic modelling, dynamic simulation, and data analysis – and de-risk procurement and supply chains.
New energy models are capital-intensive. Like other regions, Asia faces the affordability challenge in lowering the cost of energy transition-related capital. Specifically for Asia, this involves addressing the perceived macroeconomic risk around material costs, supply chain and currency exchange risk. Material, capital and supply chain costs make it 16 percent more expensive than the same renewable project in Australia. Establishing a currency-rate guarantee program to attract private-sector funding will be critical to advance the money needed to finance renewable energy projects.
While there is no one-size-fits-all approach to the energy transition in Asia, there is a way each country could work together for the betterment of the entire region. For example, Singapore will primarily be an importer of renewable energy, though it is positioned to invest in future projects. Thailand is a stand-out on biomass for biofuels, and the Philippines is a pioneer in microgrids.
Tackling the energy transition trilemma
Sustainability, security and affordability, commonly known as the global energy transition trilemma, are the three conflicting objectives that demand tough trade-offs. There are nuances specific to Asia on this, such as land-use availability, new energy improvements that impact health and gender equity, reliable energy, water and food security simultaneously, and price inequalities, with coal currently cheaper and more secure.
Balancing the energy transition acceleration with the needs of the trilemma requires multiple parties coming to the table with the same vision and goals, including central and regional governments, development funders, private sector banks and investors, and industry. The breadth and depth of stakeholder involvement are so important to work through and overcome the competing demands.
The panel summarised how to accelerate the energy transition by focusing on four key areas:
- Financial support and risk mitigation for energy project stakeholders and participants. Establish more awareness of the topic, blended finance models, and access to debt funding. As well as lowering the cost of capital, as previously mentioned.
- Supply chain enhancements centred on ports infrastructure investments, foster local industry partnerships and skills development for the workforce.
- Alternate business models to make energy transition accessible for all.
Panelists from the CEO Talks on Emerging Areas
From left to right:
- Rafayil Abbasov, Senior Energy Specialist, ADB Sectors Group
- Teymoor Nabili, CEO and Publisher at Tech for Impact Asia
- Melody F. Ovenden, Senior Environment Specialist, ADB
- Richard Fechner, Executive General Manager, GHD Advisory
- Fiza Farhan, CEO, ORA Global Development Advisors and Member, UN Secretary-General’s High-Level Panel on Women’s Economic Empowerment, (WEE)
- Matthew S. Mendis, Managing Director at Chemonics International
- Lorraine H. Akiba, President/CEO of LHA Ventures