Asia may need to invest as much as US$1 trillion a year in energy over the next 15 years, according to a McKinsey report released on Thursday. That adds up to roughly US$15 trillion through 2040. The account indicates the Iran war is a large part of the reason: it disrupted oil and gas flows through the Strait of Hormuz, and countries are now looking to cut their exposure to such shocks.
Demand keeps climbing
McKinsey raised its forecast for Asian energy demand to 370 million terajoules in 2040, 15 per cent above its estimate from a year earlier. Asia is expected to supply about 70 per cent of global net energy demand growth through 2040. Data centres are a new source of demand, and cooling and industrial activity are adding to it.
Coal and gas
Coal will stay in the mix longer than previously thought. McKinsey sees regional demand roughly flat over the next decade, with falling consumption in China offset by growth in India and Southeast Asia. Gas is different. Demand growth should slow over the next five to 10 years as countries lean on coal and renewables for power, though industrial users could bring it back later.
Renewables, upstream and biofuels
Renewables are speeding up, especially in India and Southeast Asia. McKinsey puts annual solar and wind investment across Asia at about US$300 billion through 2040. Delivery is another matter. A separate Bain and Standard Chartered report found that 50 per cent to 60 per cent of renewable projects in Vietnam, Thailand and Indonesia were cancelled or stalled between 2021 and 2025, with inadequate infrastructure and policy support among the obstacles.
A sharper focus on energy security could also make higher-cost upstream assets viable with government backing, McKinsey said, naming China, the Philippines, Thailand, Vietnam and Turkmenistan. Biofuels could replace US$90 billion to US$100 billion of fuel imports by 2040. Domestic oil and gas, transmission networks and alternative fuels will all compete with renewables for the same capital.
Sources
- Asia needs $1.2t investment annually for next 15 years to boost energy security, McKinsey says
- McKinsey: Asia needs US$1 trillion annually for energy security
- Asia Needs $1 Trillion a Year to Secure Energy Supplies | OilPrice.com
Photo: W.carter (CC BY-SA 4.0)
