Despite policies aimed at scaling up the deployment of renewable resources the IEA’s World Energy Outlook Special Report on Southeast Asia says the share of fossil fuels in the region’s energy mix increases to around 80% by 2040, in stark contrast to the declining trend seen in many parts of the world.
As rising imports sharpen the focus on the economic and security aspects of energy use, the EIA believes that by 2040 the region’s net oil imports more than double to 6.7 million barrels per day, a level equivalent to the current oil imports of China.
The EIA also presents a scenario where Southeast Asia’s oil import bill surges to over $US300 billion per year by 2040, compared with around $120 billion last year, with increases in spending in almost all countries in the region.
Indonesia is a key cog in supporting a continued expansion of Southeast Asia’s gas and coal output, while production is increasingly consumed within the region.
“As domestic natural gas demand outpaces indigenous production, intra-regional and intra-country trade increases, and Southeast Asia turns into a net gas importer of around 10 billion cubic metres by 2040, compared with net exports of 54Bcm in 2013,” the EIA said.
The IEA foresees the power sector shaping the energy outlook for Southeast Asia, as electricity demand almost triples by 2040, an increase greater than the current power output of Japan.
“The sector continues its shift towards coal due to its abundance and relative affordability,” the EIA said in its forecast scenario.
“Although the average efficiency of Southeast Asia’s coal-fired power plant fleet increases by 5 percentage points throughout the projection period, less-efficient subcritical technologies account for 50% of the region’s coal power fleet in 2040”
This, the EIA said, highlighted the need to accelerate the deployment of more efficient technologies in the region to reduce local pollution and slow the rise in CO2 emissions.
The WEO Special Report, prepared in collaboration with the Economic Research Institute for ASEAN and East Asia, analyses four key issues that will shape the future of Southeast Asia’s energy system: energy investment, power grid interconnection, energy access and fossil-fuel subsidies.
“The reliability and sustainability of Southeast Asia’s energy system depends on investment,” IEA director of energy markets and security Keisuke Sadamori said at the release of the report in Kuala Lumpur during the ASEAN Ministers on Energy Meeting.
“To secure its energy needs, the region requires $2.5 trillion of investment in energy-supply infrastructure in the period to 2040, but for this to materialise we need to see more progress with reforms to domestic energy markets and the establishment of improved policy frameworks.”
The report notes that greater integration of the region’s energy markets could help trigger development of energy resources, facilitate more efficient use of the region’s resources and enhance energy security.
The IEA also highlights the significant progress achieved by the region in expanding energy access but urges increased action as 120 million people remain without access to electricity while almost 280 million lack clean cooking facilities.
However, industry may not be so happy about the EIA’s report calling for more efforts to reduce subsidies to fossil fuels, noting that the region spent $36 billion on fossil-fuel subsidies in 2014 despite reforms in Indonesia, Malaysia, Thailand and Myanmar.
The IEA forecast Malaysia’s energy demand to nearly double by 2040 with fossil fuels continuing to meet over 90% of demand throughout the period, with coal overtaking oil and gas to become the primary fuel in Malaysia’s energy mix.
Renewables, aided by government policies and incentives, will also grow, especially in the power sector where their share of generation reaches 16% by 2040. Thus the EIA says Malaysia’s role in international markets will shift as it becomes increasingly dependent on imports.