Asia needs an annual investment of $1 trillion to meet its growing energy demand and reduce its vulnerability. According to a recently published report, this investment requirement could reach $15 trillion by 2040. The Iran war highlights the region's vulnerability to disruptions in oil and gas transport through the Strait of Hormuz.
Increasing Energy Demand in Asia
The report predicts that Asia's energy demand will reach 370 million terawatt-hours by 2040, which is 15 percent higher than last year's forecast. This region will account for nearly 70 percent of the net growth in global energy demand by 2040. The demand growth is primarily driven by the increasing need for data centers, industrial development, and cooling requirements.
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Outlook for Coal and Natural Gas Consumption
The report also indicates that coal consumption in Asia will remain stable overall in the next decade, with declining demand in China offset by increasing consumption in India and Southeast Asia. Demand for natural gas is also expected to decline in the next five to ten years as countries place greater emphasis on coal-fired power generation and renewable energy.
However, industrial demand could help improve long-term prospects. Investment in solar and wind energy is projected to reach about $300 billion per year by 2040, particularly in India and Southeast Asia. But this trend is accompanied by additional challenges, as approximately 50 to 60 percent of renewable projects in Vietnam, Thailand, and Indonesia have been halted or canceled between 2021 and 2025 due to inadequate infrastructure and lack of policy support.
The report also identifies opportunities for governments to support domestic oil and gas development at higher costs in countries like China, the Philippines, Thailand, Vietnam, and Turkmenistan, as countries seek to reduce dependence on imports. Biofuels could help reduce fuel imports by $90 to $100 billion by 2040.
The need for investment goes beyond renewable energy production, as domestic oil and gas production, transmission infrastructure, and alternative fuels also compete to provide sufficient energy for Asia's growing industrial and electricity demand.
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