The 10 countries of the Southeast Asian economic bloc need to spend the equivalent of $1.7 trillion to extend and update their energy infrastructure by 2035, when their demand for power will have nearly doubled, says a new International Energy Agency (IEA) report.
At the same time, the IEA sees a significant shift in the sources of power used by the countries of the Association of Southeast Asian Nations (ASEAN) as they attempt to meet the demands of population growth, industrialization and urbanization.
The huge appetite for energy among a population expected to grow to about 600 million by 2035 will increase daily oil demand to 6.8 million barrels from 4.4 million barrels now. This will cost about $240 billion a year; almost 4% of the ASEAN members’ gross domestic product.
ASEAN will become the fourth largest oil importer after China, India and the European Union.
But because of vulnerability to supply uncertainties and price instability in the oil market, ASEAN governments are likely to turn to cheaper and readily available coal, said the IEA report.
Coal produces about 31% of the region’s energy now, but that is expected to rise to 49% by 2035. In the same period gas will drop to 28% from 44%.
“Coal is emerging as the fuel of choice because of its relative abundance and affordability in the region,” IEA executive director Maria Van der Hoeven said at a press conference in Bangkok.
The report predicts that Indonesia, the world’s leading exporter of thermal coal, will double production by 2035.
But the report warned that because of the increasing reliance on coal, carbon dioxide emissions in the region will also double to nearly 2.3 billion tonnes a year.
Coal emits about twice as much carbon as natural gas but is the fuel for about 75% of the power-generating capacity being built by ASEAN members.
ASEAN members include Indonesia, Singapore, Malaysia, Thailand, Philippines, Brunei, Vietnam, Cambodia, Laos and Burma.
The 11th Southeast Asian country, East Timor, is preparing to join the group.
Coal-fired generation plants in ASEAN are only about 35% efficient, said the IEA report, saying there is an urgent need to upgrade the technology. If ASEAN members adopted Japanese coal-fired plant technology, the report said they could cut fuel use by 20% and C02 emissions by the same proportion.
The IEA blamed the $51 billion in fuel subsidies handed out annually by ASEAN countries for limiting the investment in more efficient or renewable energy sources.
At the same time these artificially low prices have encouraged smuggling, especially of oil, to places where prices are higher.
According to the report, the subsidies “have resulted in serious market distortions while failing to meet their intended objectives.”
Some ASEAN governments have begun to address the politically sensitive issue of fuel subsidies as the programs become increasingly unaffordable.
Indonesia raised gasoline and diesel prices in June for the first time since 2008 as it faced the prospect that the fuel subsidies would soon cost as much as the spending on health and education.
Malaysia has also raised fuel prices for the first time since 2010.
Strains on the budget caused by the subsidies were beginning to undermine investor confidence.
Throughout the region, about 134 million people do not have access to electricity, but there is huge disparity between the most and least developed ASEAN members.
Almost everyone in Singapore, Thailand, Malaysia and Brunei has electricity in their homes.
But nearly two-thirds of Cambodians, half of Burma’s people and about a quarter of Indonesia’s nearly 250 million people have no electricity. •
