Asia's Energy Challenge

How can the region reverse its reliance on fossil fuels to drive growth while delivering clean, affordable power for all?

Date: 17 April 2013

Transcript

Sean Crowley: Hi, I'm Sean Crowley from ADB's Department of External Relations. I'll be moderating this chat over the next two hours.

Our topic today is Asia's Energy Challenge and I'm delighted to be joined by Minsoo Lee, from ADB's Economics and Research Department. Minsoo is lead author of the Asian Development Outlook special chapter on energy, published last week.

Minsoo Lee: Hello, welcome to ADB chat live. My name is Minsoo Lee from Economics and Research Department at ADB.

Sean Crowley: We're happy to kick off with your questions.

Sean Crowley: With energy being a challenge for Asia, do you think the Philippine government is doing enough to help address this issue? If not, what measures does the government need to implement to help mitigate any crisis in the future? Thanks! - Joann Santiago-Villanueva, Manila

Minsoo Lee: In the Philippines, the contribution of renewable will shrink from 43% in 2010 to 14% in 2035, by which time proven indigenous gas coal reserves will be depleted. I think the Philippine government should put much effort into maintaining the contribution of renewables. Especially, solar power becomes cost competitive for remote communities and islands in the Philippines.

Jose: Jose here from Bangkok. We here in the city of angels almost had to suffer through rolling blackouts during the Songkran holiday due to maintenance to the line that pipes in gas Myanmar. How energy interdependent are ASEAN countries with each other?

Minsoo Lee: Myanmar, the Lao PDR, and Bhutan export hydropower to Thailand, which is a good example for regional cooperation and integration. We can increase the efficiency of energy markets through regional cooperation and integration, which is one of the most important policy recommendations.

Bert: What are the prospects of CNG use for electricity and transport in Asia as compared to liquid-fuels and coal?

Minsoo Lee: CNG is commonly used for the public transportation in Korea. CNG produces less CO2 emissions compared to coal, of course.

Jennee: In last week's report, the ADB had a table which showed that Brunei was the third biggest provider of fuel subsidies in Asia. Is this sustainable for the sultanate, and what measures can it put in place to lessen the burden of the subsidies on the national coffers?

Minsoo Lee: Among non-oil exporting countries in developing Asia, Bangladesh and Pakistan have the largest fuel subsidies, around 4-5% of GDP. India and Viet Nam have about 2% of GDP.

Sean Crowley: Hello, my question: The report argues regional energy cooperation is the way forward for Asia. But take Central Asia, where many of the leaders squabble with each other over water and energy resources, how can such cooperation be mainstreamed where there is political division? - Tobias Murdoch, Michigan

Minsoo Lee: Political and regulatory barriers inhibit market integration. Technical requirements demand that participants be confident, open and equitable about sharing benefits. To seal multilateral grid agreements and bring plans to fruiting, neighboring countries must share information and allay one another’s concerns about the reliability of supply.

Giovanni: What are the prospects for nuclear power in Asia? Do you think we can expect many nuclear newcomer countries in the region over the next 20 years?

Minsoo Lee: At the current levels of technology development and costs of electricity from different sources, nuclear power stations that are built and operated to modern global safety standards are definitely one part of the solution to mitigate global warming. But along with the nuclear option, there needs to be other parts to the solution that also need to be developed. However, nuclear power development faces a number of barriers, such as public concerns related to nuclear proliferation, waste management, safety issues, etc.

Sean Crowley: Poverty alleviation comes from development. Development comes from growth. Growth is driven by energy. Energy has to come from a clean source. At the moment all we have that is viably clean is nuclear, so how can a development organization like ADB not accept a nuclear future for Asia?

Minsoo Lee: Nuclear power development has a number of barriers, such as public concerns related to nuclear proliferation, waste management, safety issues; therefore, ADB will maintain its current policy of non-involvement in the financing of nuclear power generation.

Kanat: Your report mentions the lack of political will for regional cooperation and integration in Asia. Do you see any existing multilateral instruments or platforms to foster energy cooperation in the region?

Minsoo Lee: Connecting electricity grids and gas pipelines can create economies of scale that improve efficiency. Integrating power transmission in the Greater Mekong Subregion (GMS), for example, would save $14 billion over 20 years by 2020 and reduce CO2 emissions by 14 million tons per year by 2020. GMS has established a good platform from which to form a pan-Asian energy market.

Sean Crowley: Without reliable, cheap, widespread renewable energy in the form of solar, wind and hydro, does Asia not now have to stand up and embrace nuclear power as the only viable alternative if it is not to continue polluting to unsustainable levels? - Magenta Tripinto, Kuala Lumpur

Minsoo Lee: Without nuclear power plants, there are alternative ways to produce clean energy. It is each country's decision to build new or more nuclear power plants. As our report says: demand management, tapping new technologies, exploring relatively clean unconventional gas, like shale gas, along with regional cooperation and integration could drive Asia's sustainable growth without causing environmental damage.

leecm: PRC has the largest deposit of shale gas in the world. How long and how much resources will it take before it becomes a commercially viable source of energy? Till then, how do you see the energy mix in Asia, particularly PRC changing?

Minsoo Lee: Technology for unconventional gas like shale gas has been developed in North America. It is uncertain how soon PRC can make its shale commercially available at a competitive price. Technical uncertainties like methane leakage and water contamination makes extraction difficult. Especially, in PRC development on densely populated land could also be challenging. Until shale gas is commercially available, the current energy mix in developing Asia will likely remain similar unless there will be dramatic price changes in oil or other energy sources.

Fitri Shahminan: Asia will remain heavily dependent on energy imports, particularly oil, in the foreseeable future and securing adequate and reliable energy supply will persist to be a challenge across the region, the report adds.

Minsoo Lee: Developing Asia's insufficient energy endowment has many implications. The most significant implication is its oil imports will triple by 2035. In 2010, Asia imported nearly half of all crude oil traded on international markets. Control of Asia's oil supply has steadily shifted toward Middle East suppliers. In 1990, 33% of dev Asia's oil imports came from the Middle East and in 2010 the figure has risen to 48%. As this trend is likely to continue, Asia's high growing dependence on a single region poses a risk for adequate and reliable energy supply.

Fitri Shahminan: In the same report, ADB said Brunei will be among the top three countries in Developing Asia to remain self sufficient in 2035. Would you be able to comment if Brunei would still be able to produce enough for the export market?

Minsoo Lee: Yes, Brunei will be energy self-sufficient with two other countries in Asia by 2035. We don't have an accurate estimate whether it would still be an exporter by 2035.

Mei: Will joint exploration of the South China Sea help address Asia's energy challenges and how feasible is this at this time?

Minsoo Lee: It will surely help address Asia's energy challenge and an importance of regional cooperation and integration will come in to play in this case. Political and regulatory barriers are the biggest hurdle to go over.

Sean Crowley: How can Asia continue to develop, at around 6% per annum, but not destroy the environment at the same time? This is the central problem that the ADO report tries to address. So what is the way forward as I was not clear about the report's conclusion on this? - Betty Santero, Mexico City

Minsoo Lee: Energy security in developing Asia is resting on 3 pillars: adequacy and reliability of physical energy supply, environmental sustainability, and affordable access for inclusive growth. Addressing the energy challenges, dev Asia required policy actions on demand management to contain burgeoning energy demand, supply clean and affordable energy as well as regional cooperation and integration.

Sean Crowley: Hello, why is it that renewable sources of energy, like solar and wind cannot supply Asia with the energy that it needs? Isn’t Asia hot and windy enough? - Justin

Minsoo Lee: While renewable energy sources have great potential, they are not yet cost competitive. Current generation costs for wind and solar cost much higher than traditional energy sources. In addition, Solar and wind can not provide power 24 hours a day; therefore, they can not be basic sources of power generation.

Ji Peijuan, People’s Daily in Bangkok: With energy being a challenge for Asia, do you think the government of PRC is doing enough to help address this issue? If not, what measures does the government need to implement to help mitigate any crisis in the future? What is the most impressive effort the government is making in this regard? Thanks!

Minsoo Lee: The government of PRC recently has been putting much effort into mitigating GHG emissions. Many companies in the PRC, with help from the government, have become among the world leaders in manufacturing solar panels.

Fitri Shahminan: You said that political and regulatory barriers are the biggest hurdle to overcome in conducting joint exploration of the South China Sea. However, with ASEAN ready to integrate by 2015, can these issues be rectified and facilitate joint explorations within South China Sea?

Minsoo Lee: Yes, they can be rectified and can facilitate joint explorations. But political and regulatory barriers inhibit market integration. It requires political commitment for cooperation and to build the necessary infrastructure.

Leela: Can Asia fund its own green infrastructural development/growth? If so, do you recommend a potential collective cooperation amongst the three largest emitters (India, PRC and Indonesia) and what fruits would this cooperation bear apart from the regional integration of energy markets as suggested in the report maybe a common research centre? Technology fund? Renewable energy standard?

Minsoo Lee: The fund can come from those countries. Alternatively, the fund can be collected based on the amount of GHG emissions that each country produces, a similar idea to a carbon tax. The fund can be used to develop new technology and develop renewable energy sources.

Sean Crowley: What developments in technology need to happen to make renewable sources of energy, like solar and wind, more viable contributors to Asia’s future energy mix? - Perky

Minsoo Lee: Current generation costs for wind and solar are much higher than traditional energy sources. Forecasts indicate that the cost of wind power generation could fall by 20-30% from current level by 2030. Similarly, it is expected that continued solar development can at least halve costs by 2030. The other technology development for solar and wind we need to consider is a smart grid system.

Minsoo Lee: Smart grids integrate renewables into the electricity network and it will play a bigger role in regional cooperation and integration. The fundamental reason is that renewable energy endowments are often remote from demand centers with lots of people and economic activity.

Ji Peijuan: What role is PRC playing in promoting regional energy integration, specifically, in connecting electricity and gas grids in this region?

Sean Crowley: We've less than thirty minutes to go on the chat, so if you would like to pitch a question to Minsoo, better do it soon as we have quite a few lined up already!

Minsoo Lee: The Greater Mekong Subregion (GMS) has enormous energy resource endowments. Hydropower potential is in abundance in Yunnan and Guangxi province in PRC. This excess hydropower can be exported to Thailand.

Sean Crowley: Does Myanmar have potential as an energy producer? If so what would its most viable energy export be?

Minsoo Lee: Myanmar has huge potential in hydro power relative to its populations and expected electricity needs. Myanmar also has abundant natural gas.

Sean Crowley: Coal is going to remain central to Asia's energy mix for at least the first half of this century. Are you optimistic that the technology exists to ensure coal is no longer a major contributor to rocketing CO2 levels? - John G

Minsoo Lee: Significant reductions in GHG emissions could be obtained by technologies that remove CO2 from the emissions of coal-fired power plants. Super-critical coal technology is commonly available and cost competitive. GHG-benign coal requires carbon capture and storage (CCS) technology, which is at an early stage of development for power plants and thus very expensive.

Ji Peijuan: How can less developed countries in Southeast Asia, like Lao PDR, balance between the economic benefits of hydropower with the ecological/environmental costs? What suggestions will you give to these countries?

Minsoo Lee: The government should have a well-designed policy plan to get a good balance between the environmental costs and the economic benefits.

Sean Crowley: Well we've run out of time. So a huge thanks to Minsoo for taking part, and to all of you for your stimulating questions!

We'll produce a transcript of today's chat and post it online as soon as we can.

Fitri Shahminan: Thanks for hosting the chat.

Minsoo Lee: Thanks so much for your participation. If you have further questions please send them to Sean.

Ji Peijuan: May I request to have the telephone number of Mr. Minsoo Lee for the potential interview in the future?

Sean Crowley: Yes Ji, I'll send you his contact details.

Minsoo Lee
Minsoo Lee is a Senior Economist in the Macroeconomics and Finance Research Division of the Economics and Research Department at Asian Development Bank. He has over 15 years of professional experience as a researcher and professor of economics and has published widely in various international and regional journals.
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