The task is complicated by the fact that for many nations, there is a need to increase access to energy even while decarbonizing the energy system. Achieving this dual imperative would be no mean feat.
Both parts throw up a particularly large challenge in Asia. The imperative of expanding the energy system is particularly pressing. Asia is “under-energized”—90% of the region’s population consumes less than the OECD’s per capita average of 170 gigajoules a year. In Asia, that figure is less than half, at around 70 gigajoules. Growing Asia’s energy system to meet the needs of its growing population is, in itself, a mammoth undertaking.
On the imperative of decarbonization, our new global research finds that this task, too, will not be trivial, and the hardest challenges are yet to be tackled. Our research focuses on the physical nature of the energy system and identifies 25 physical challenges that relate to the deployment of low-emissions technologies, and the supply chains and infrastructure needed for a successful transition. Twelve of those are particularly difficult to tackle—and abating 40 to 60% of the energy system depends on tackling this demanding dozen.
Every country will need to face these challenges head on, but the magnitude of the challenge varies across countries.
Take industry as an example. There are four very difficult challenges here—decarbonizing the manufacture of the four material pillars of modern society: steel, cement, plastics and ammonia. Doing so is hard, because the production of these materials generally relies on fossil fuels.
Shifting to low-emissions production would require new technologies and processes, and sweeping reconfigurations of existing industrial assets. These challenges weigh particularly heavily on Asia, because of the large share of industry in many economies. Across the region, industry accounts for over 40% of final energy consumption, about double the share of Europe and North America. A further complication is that Asia’s industrial assets are particularly young, and replacing them when they still have many useful years ahead is costly. For example, China’s blast furnaces are on average around 15 years old, but a typical lifespan of these assets could be 40 years or more. One option that could allow the continued use of young assets is retrofitting to add carbon capture, for example, but scaling carbon capture is itself a demanding physical challenge.
Decarbonizing the power system poses particular problems for Asia, too. While Asian economies have achieved rapid progress in the deployment of solar and wind, increasing their penetration poses a challenge of dealing with intermittency. The sun doesn’t always shine and the wind doesn’t always blow, and therefore the energy system needs much more flexibility to cope with such periods. This means more storage, more interconnections with other power systems and more backup forms of power, such as flexible power plants that can ramp their output up and down, running on gas or low-emissions fuels. This isn’t only about the right technologies being in place, but how they work together.
Achieving the required level of flexibility is particularly hard for less mature power systems in many Asian economies, because they have less inbuilt flexibility in the form of an existing asset base of gas plants to draw upon for back-up power, or extensive interconnections. On average, emerging power systems have less than one-third of the flexible capacity of more advanced power systems.
Despite such potentially uphill climbs, Asia can seize plenty of opportunities from the energy transition. A notable one is reducing its large current dependence on imported fossil fuels. The region is the world’s largest net importer of fossil fuels, with more than $1 trillion of net imports in 2022. And four of the world’s largest net importers of energy resources in the world —China, India, Japan, and South Korea—are in Asia.
At the same time, Asia is the world’s largest net exporter of new low-emissions technologies. China itself accounts for more than half (and sometimes 80 to 90%) of global production of technologies, such as solar modules, wind turbines, batteries for electric vehicles (EVs) and electrolyzers. But it is not only China that is a significant player. Japan and South Korea account for the majority of EV batteries outside China, and they are some of the largest investors in battery supply chains in Europe and the United States, too.
Asia is also the source of many crucial inputs, such as critical minerals—and accounts for the majority of refining of those minerals. China refines most the world’s critical minerals, including lithium, cobalt, graphite and rare earths. Again, other economies play a large role. Indonesia is a major player in the extraction and processing of nickel, and Malysia in the processing of rare earths.
Asia is also a major force in the adoption of many low-emissions technologies. For example, the region accounts for more than 60% of the global deployment of solar and wind over the past five years; 95% of sales of electric two-wheelers; and more than half of the nuclear capacity currently being built.
Addressing large physical challenges and making the most of such opportunities will be complex. Asian players could continue to double down on scaling tried and tested low-emissions technologies. The deployment of renewables and electric forms of transportation has been rapid, but there is a long way still to go—and further scaling will, of course, mean keeping a close eye on whether sufficient inputs, such as critical minerals, are available.
And for the demanding dozen challenges, Asian players can make a sizable contribution especially in areas where they are the forefront of innovation. They include, for instance, developing and scaling new battery technologies that will be vital to managing the variability of solar and wind power, and spreading electrification to long-haul heavy-duty trucking, where limitations in today’s batteries mean they aren’t fully able to mirror the performance of their diesel counterparts.
There is much to do if Asia is to broaden energy access to the millions of citizens who don’t have enough today—even while reducing CO2 emissions. Knowing where, how and when to act, and seizing the many opportunities on the table is complex, but the road ahead can be navigated so long as the physical realities and challenges of the energy transition are the starting point.
This article originally appeared in Bloomberg.