Asia requires an annual investment of $1 trillion to maintain its energy security and prevent future crises. This figure has been derived from new forecasts, especially following the increase in energy demand in the region. According to recent reports, energy demand in Asia is expected to reach 370 million terawatt-hours by 2040, which is 15 percent higher than last year's forecasts.
Consequences of the Closure of the Strait of Hormuz
The closure of the Strait of Hormuz in February due to military operations by the United States and Israel had profound impacts on the global energy market. This strait, considered one of the most important transportation routes for oil and gas in the world, transported about 20 million barrels of oil and petroleum products daily before the outbreak of war. Of this amount, approximately 80 percent of the oil and 90 percent of the natural gas were allocated to Asian markets. This situation has led Asian countries to urgently seek to fill this supply gap.
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Infrastructure Challenges and Increasing Demand
The Southeast Asia region is in a vulnerable position due to its high dependence on energy imports and low capacity to absorb market fluctuations. This has led to the declaration of an energy emergency in the Philippines in March and the adoption of measures including energy rationing and a shift to remote work. Additionally, due to climate change and increasing cooling needs, energy demand in this region continues to rise.
In response to this crisis, many Southeast Asian countries have turned to the development of renewable energy and have witnessed significant growth in this area. However, the development of grid and energy transmission infrastructure has not progressed quickly enough, posing a threat to future energy security. Many renewable projects have been halted or canceled due to instability and insufficient grid capacity.
A recent Climate Home News report indicates that "lack of grid capacity and inadequate maintenance are the main factors in the failure of new clean energy projects in this region." There are also challenges such as lack of clarity in Power Purchase Agreement (PPA) structures, misalignment of energy policies with investor needs, and delays in permits and installations.
According to forecasts, Asia will need $300 billion in investment for solar and wind energy by 2040. However, forecasts for coal consumption have also expanded, and coal is expected to remain part of Asia's energy mix. Meanwhile, regional demand for coal is expected to remain stable in the coming decades due to reduced consumption in China and growth in India and Southeast Asia.
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