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ENERGY SECURITY, SUSTAINABILITY, AND AFFORDABILITY IN ASIA AND THE PACIFICNorberto Fueyo, Antonio Gómez, and César Dopazo

NO. 401

July 2014

ASIAN DEVELOPMENT BANK

ADBEconomicsWorkingPaperSeries

Energy Security, Sustainability, and Affordability in AsiaandthePacific

NorbertoFueyo,AntonioGómez,andCésarDopazo

No.401 2014

Norberto Fueyo is a Professor in Fluid Mechanics at theUniversityofZaragoza,AntonioGómezisaResearchFellowintheNumericalFluidDynamicsGroupattheUniversityofZaragoza,andCésarDopazoisaProfessorinFluidMechanicsattheUniversityofZaragoza.

ASIAN DEVELOPMENT BANK

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©2014byAsianDevelopmentBankJuly2014ISSN1655-5252PublicationStockNo.WPS146667

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CONTENTS

ABSTRACT

I. INTRODUCTION 1

II. INDICATORS 2 A. PrimaryEnergyIntensity B. CarbonDioxideIntensityofthePrimaryEnergyMix C. EnergySelf-Sufficiency D. PrimaryEnergyDiversification E. AffordabilityofElectricity

III. INDEXESFROM2010TO2035 5 A. EnergySustainability B. EnergySecurity C. Affordability

IV. THEBENEFITSOFINTEGRATION 29 A. Sustainability B. Security C. Affordability D. BenefitsofIntegration

V. INTERNATIONALBENCHMARKING 36 A. Sustainability B. Security C. Affordability

VI. ALTERNATIVESCENARIOS 42 A. ImpactonSustainability B. ImpactonSecurity C. ImpactonAffordability VII. CONCLUSIONSANDPOLICYRECOMMENDATIONS 51 A. Sustainability B. Security C. Affordability D. RegionalCooperation REFERENCES 53

ABSTRACT

Wecalculateprimaryenergyintensity(PEI),thecarbondioxideintensityoftheprimaryenergymix(CIX),energyself-sufficiency(ESS),affordabilityofelectricity(EOL),andprimaryenergydiversification(DIV)from2010to2035forindividualeconomiesandfortheAsiaandPacificregionasawholeunderbusiness-as-usualandalternativescenarios.ThePEIwilldecreaseinmosteconomiesusuallybymorethan20%whiletheCIXwillincrease.TheESSwilldecreaseexceptinJapanbecauseofrenewableswhiletheDIVwillincreaseslightly.By2035,energywillbemuchmoreaffordableinAsiabecauseofstrongeconomicgrowth.TheEOLwillbefourtimesthatofEuropeandNorthAmericaandtwicethatofLatinAmerica.Asregionalaggregates,thePEIwilldecreaseexceptinthePacific,buttheCIXwillgenerallyincrease.TheESSwilldecreasesubstantiallyfrom100%in2009to59.8%in2035;theDIVwillremainat2010levels.CentralAsiaoffersthe best benefits for regional integration. Regionally integrating the power grid wouldmakethesystemmoremanageableforlargersharesofrenewablesandwouldalleviatethe cost of importing fuel for economies without indigenous resources and for thosewhosefossilfuelreserveswillbedepletedby2035.

Keywords:energysecurity,energysustainability,energyaffordability,theAsiaandPacific

JEL:Q40,Q50,Q56

1EnergySecurity,Sustainability,andAffordabilityinAsiaandthePacific

I. INTRODUCTION

Energy security is a multifaceted concept that is often used as an umbrella term encompassing theinterconnectedaspectsofanenergypolicy.Sovacool(2012)definesitas,“…equitablyprovidingavailable,affordable, reliable, efficient, environmentally benign, proactively governed, and socially acceptableenergyservicestoendusers”andfurtherdefinesfour“interconnectedcriteriaordimensions”:availability,affordability, efficiency, and stewardship. Vivoda (2010) proposes an energy security assessmentinstrumentcomprising11dimensionsand44attributes.InconsultationwithdozensofexpertsinAsiaandelsewhere,Sovacool(2011)hasidentified20dimensions.Scheepersetal.(2006)notetheneedtodevelopsecuritysupplystandardsfortheEuropeanUnionanditsmembersandsuggestamodelthatincludes two quantitative indicators—the supply/demand index and the crisis capability index—andsomequalitativeconsiderations.Supply/demandincludesfinalenergydemand,production,transport,andprimaryenergysupply.Crisiscapabilitycombinestheriskofsupplyinterruptionswiththecapabilitytoovercomethem.Inbothcases,theindexesarequantitative,buttheycombineobjectiveinformation(such as energy balances or checklists) with subjective information (weighing factors, scoring rules).Theycanbecombinedviasimpleaddition(whetherweightedornot) intoasinglesecurityofsupplyindex.

In this paper, energy security means self-sufficiency and diversification, energy sustainabilitymeans energy efficiency and low carbon emissions, and energy (electricity) affordability is measuredastheratioofthecostofelectricitytopercapita income.SecuritythuscorrespondswithSovacool’savailability, and sustainability combines his dimensions of efficiency and stewardship (protecting thenaturalenvironment,communities,andfuturegenerations).Thisdefinitionofsecuritymayberegardedasnarrowasdiversificationisusedasaproxyforresilienceorresistancetoshocks,butitispurelyforthepurposeofquantification;widerdefinitionsarealsojustified.

We calculate energy security, sustainability, and affordability from 2010 to 2035 for AsianDevelopmentBank’s(ADB)AsiaandPacificmembersusingprojectionsfromtheADB(2013)business-as-usual (BAU) scenario for five indicators: primary energy intensity (PEI), carbon dioxide (CO2)intensityoftheprimaryenergymix(CIX),energyself-sufficiency(ESS),theaffordabilityofelectricity(EOL),andprimaryenergydiversification(DIV).Theseindicatorshaveanumberofkeyproperties:

• Theyarequantitativebecausequalitativeinformationisusuallynotobjective,increases uncertainty,andmaysacrificecredibility.

• Theyaresimplebecauseitiseasiertounderstandasimpleindicatorthantotrustacomplexone.• Theyareequallyapplicabletoeconomiesforwhichawealthofpublicdataontheirenergy

sectors(past,present,orfuture)existsandtothoseforwhichowingtotheirsizeorother circumstancespublicdataarescarce.

• Theyallowforcomparisonsamongeconomiesandovertime.• Theyareeasytoaggregateregionallytoshowtheeffectsofintegration.

ThecalculationsfortheindicatorsareinSectionII. Wethenassessthepotentialbenefitsofintegratingtheenergysystemsregionallyandcomparethe indicators for the Asia and Pacific with those for Africa, Europe, Latin America, the Middle East,NorthAmerica,andtheRussianFederation.OurfinalanalysiscomparestheBAUscenario,theAsianCenturyscenario(ACS)1–BAUscenario,andtheAsianCentury/alternativescenarioin2035.Weofferconclusionsandpolicyrecommendationsattheendofthepaper.

1 Kohli, Sharma, and Sood (2011).

2 ADBEconomicsWorkingPaperSeriesNo.401

II. INDICATORS A. Primary Energy Intensity ThePEIinyeart(PEIt)istheprimaryenergydemand(PED)inyeart(PEDt)dividedbythegrossdomesticproduct(GDP):

PEIt [toe/$1000] = PEDt /GDPt

wheretoeistonsofoilequivalent.ProjectionsforPEDandGDPfrom2010to2035arefromADB(2013).

B. Carbon Dioxide Intensity of the Primary Energy Mix TheCIXisameasureoftheenvironmental impactoftheenergysectorandiscalculatedastheCO2emissionsfromfossilfuels(CO2t)dividedbyPED(PEDt ):

CIXt [tCO2 /toe] = CO2t / PEDt

wheretCO2istonsofCO2.ProjectionsforCO2emissionsandPEDfrom2010to2035arefromADB(2013).NotethattheCO2emissionintensityofaneconomy(CEI)canbecalculatedastheproductofPEItandCIXt :

CEIt [tCO2 /$1000] = PEIt*CIXt

C. Energy Self-Sufficiency TheESSindicator(ESSt )gaugestheenergyindependenceofacountryorregion.Avalueof1meansitcanmeetallof itsPEDwith indigenous resourceswhilea0 indicatescomplete relianceonenergyimports. The index takes into account that the infrastructure to produce and transport energy takesmanyyearstoplananddevelop.

Theindexiscalculatedasfollows:

∑

∑

{

= 1

1 < =

= 0

where• istheshareofrenewableenergysourcesr(hydro,wind,andsolar)inprimaryenergy

consumptioninyeart;• istheshareofconventionalfuelf(coal,oil,gas,andnuclear)inprimaryenergyconsumption

inyeart;• isthenumberofrenewableresources,andNisthenumberofconventionalones;• arethenationalreservesoffuelfinyeart;• istheprimaryenergyconsumptionoffuelfinyeart;• isasecurityfactorthatdependsonthereservestoconsumptionratioforfuelfinyeart

(seebelow);• isthetypicaltimescale(inyears)requiredtochangetheenergyconsumptionstructureofan

economy.


Thefactor comparesthereservesforfuelf withannualconsumption;ifreserveswilllastlongerthanT years, their contribution to security is 1; between T years and 1 year, the factor is employed todecreasethecontributionto0ifreserveswilllastlessthan1year.ThetimescaleTistakenas10years.

Thenationalreservesoffuelfinyeart, ,arecalculatedas

where arethenationalreservesoffuelfinthebaseyear2010.

Reserves decrease using the consumption rate, not the production rate, and do not accountforexports.Thereareseveral reasons for this.Fromapractical standpoint,exportsare impossible toforecast accurately, and estimating export levels is feasible but controversial, particularly in the longterm.Fromaconceptualviewpoint,exportsoffersomecompensationinexchangeforthefuturelossofself-sufficiency.

Projectionsfortheshareofrenewableandconventionalfuelsources( , )andtheprimaryenergyconsumptionoffuelfinyeartwereobtainedfromADB(2013).Nationalreservesinthebaseyear2010arefromtheUnitedStatesEnergyInformationAdministrationEIA(2013).

D. Primary Energy Diversification

The DIV (DIVt ) indicator measures the degree of diversification of energy sources. When all primaryenergyisfromonesourcetheDIVis0;whenenergycomesequallyfromallprimarysourcesconsidered(coal,oil,gas,nuclear,hydro,andothers2) itis1.Itiscalculatedas

lnln

where• istheshareofenergysourceyinprimaryenergyconsumptioninyeart.• Nisthenumberofenergysourcesconsidered(coal,oil,gas,nuclear,hydro,andothers)

Thesameequationisusedtocalculatepower(electricity)sectordiversification.ProjectionsfortheshareofenergysourceywerecalculatedfromADB(2013).

E. Affordability of Electricity

TheaffordabilityindicatorforelectricityisthefractionofpercapitaGDPthatahouseholdmustspendtobuyafixedamountofelectricity(e.g.,1,000kilowatt-hourspercapitaperyear).ActualelectricityconsumptionisnotconstantacrosseconomiesbutishighlycorrelatedwithGDPpercapita.Thisispartlyindicativeofanaffordabilityconstraint:consumersbuytheelectricityortheequipmenttouseitthattheycanafford.Thisconstraintisrelaxedbyusingaconstantamountofelectricityacrosseconomiestoobtainametricthatrendersafaircomparisonofaffordability.

2 This is the “others” category in ADB which encompasses renewables.


Thecostofelectricityisassessedusingeithertariffsforhouseholdsorthe(estimated)levelizedelectricitycost(LEC).Theindicatorfortheaffordabilityofelectricitybasedontariffs(EOT)isdefinedas:

EOT [%] = Cost of 1,000 kilowatt-hours (kWh) at household prices/GDP per capita

where the household tariffs are those prevailing for electricity consumption under 100 kWh/month.Thesetariffswerecollectedfromseveralsources(Fueyo,Gomez,andDopazo2013).

Because tariffs cannot be forecast, the EOT indicator cannot be used for the future. TheexpectedelectricityoutlaybasedonLEC(EOL)isthereforecalculatedas:

EOLt [%] = 1,000 kilowatt-hours * LECt /GDP per capitat

whereLECtisthelevelizedelectricitycost[2010$/kWh]foraneconomy(orregion)inyeart.TheLECiscalculatedusingthefollowingequation:

8760+ +

0036

where:• istheshareoftechnologyi(coal,oil,naturalgas,nuclear,hydro,andrenewables)inthetotal

electricitygenerationofaneconomy/region.• istheamortizationfactoroftechnologyi,definedby ( ) where ristheinterest

rateandNiisthelifetimeofthetechnology[years].• isthecapitalorinvestmentcostfortechnologyi[2010$/kilowatt]• isthecapacityfactoroftechnologyi.• istheoperationandmaintenancecostoftechnologyi[2010$/kWh].• isthefuelpricefortechnologyi[2010$/gigajoule].Nationalfuelpricesareuseduntilthe

nationalfuelreservesfortechnologyiaredepleted,theninternationalfuelpricesareused.• istheefficiencyoftechnologyi.

TheGDPpercapitaforeacheconomyin2012isfromtheInternationalMonetaryFund(IMF2013).For2035,GDPiscalculatedas

| | ( )

whereGDPpercapitagrowth(%)istheannualaveragepercapitagrowthfrom2012to2035reportedinADB2013.Forregions,theGDPpercapitaiscalculatedbyaggregatingnationalGDPsanddividingbytheregionallyaggregatedpopulation.

Thedataforeachtechnologyi(investmentcosts,capacityfactors,operation,andmaintenancecosts)andonthetrendsinfuelprices(coal,oil,naturalgas)arefromseveralwell-establishedreferences.


III. INDEXES FROM 2010 TO 2035

We computed the indicators from 2010 to 2035 for ADB Asian members using the projections formacroeconomicandenergyparametersfromtheADB’s(2013)business-as-usual(BAU)scenario.

A. Energy Sustainability

The sustainability of a national energy system is measured using PEI which summarizes the energyefficiency of the economy as a whole, and CO2 intensity of CIX which indicates the environmentalperformance of the energy system. In general, the energy efficiency of an economy increases as itdevelops, thus the PEI in most will decrease usually by more than 20% from 2010 to 2035 (Figures1, 2, and 3). Those with the highest intensities in 2010 (Figure 1) will experience the most dramaticimprovements, e.g., Bhutan, the People’s Republic of China (PRC) Myanmar, Turkmenistan, andUzbekistan.NoteworthyexceptionstothisaretheKyrgyzRepublicandMongolia(Figure3).

Remarkably,theCIXwillincreaseinmosteconomiesfrom2010to2035(Figures4,5,and6)astheenvironmentalperformanceoftheirenergysystemsdeteriorates.Inless-developedcountries,fossilfuelswillincreasinglydisplacetraditional,carbon-neutralfuelssuchasbiomassandagriculturalresidueswhichofferscertainadvantages(dependabilityandbetterindoorenvironments)butincreasesnetCO2emissions.TheCIXdecreasesmoderatelyinthedevelopedgroup(Australia,Japan,andNewZealand)from2010to2035(Figure6).TheRepublicofKoreahasthelargestreductionat20%duetogreateruseofCO2-freesourcessuchasnuclearandrenewables,butitisneverthelesssmall;themaincontributiontotheoverallreductioninCO2emissionscomesfromimprovementsinPEI. Trends inboth indicatorsaregraphed inFigure7;thenamedendofeachcurve indicatesthelikelypositionin2035whiletheoppositeendmarksthesituationin2010.Economiesmovingtowardthelowerleft-handcornerofthegraphexhibitthesought-afterbehaviorofdecreasingboththeirPEIandCIX,butthetrajectoriesinFigure7reflectalargedecreaseinPEIandasignificantincreaseoronlyamoderatedecreaseinCIX.Forexample,UzbekistanwillsubstantiallyimproveitsenergyefficiencybydecreasingitsPEIfrom2.3tonsofoilequivalent(toe)/$millionin2010toabout0.6toe/$millionin2035;however,thecurveisnearlyvertical,indicatinglittlechangeintheCIX.InBangladesh,ontheotherhand,energyintensitydecreasesslightlywhiletheCIXincreasessubstantially.


Figure 1: Primary Energy Intensity in 2010(toe/$1,000)

LaoPDR=LaoPeople’sDemocraticRepublic.Source:Authors’calculationswithdatafromADB(2013).


Figure 2: Primary Energy Intensity in 2035(toe/$1,000)



Figure 3: Change in Primary Energy Intensity, 2010–2035

(%)



Figure 4: Carbon Dioxide Intensity of the Primary Energy Mix in 2010(tons of CO2 emissions/toe)

LaoPDR=LaoPeople’sDemocraticRepublic. Source:Authors’calculationswithdatafromADB(2013).


Figure 5: Carbon Dioxide Intensity of the Primary Energy Mix in 2035 (tons of CO2 emissions/toe)



Figure 6: Change in Carbon Dioxide Intensity of the Primary Energy Mix, 2010–2035 (%)



Figure 7: Primary Energy Intensity versus Carbon Dioxide Intensity of the Primary Energy Mix, 2010–2035

CentralAsia Developedgroup

EastAsia SouthAsia

SoutheastAsia ThePacific

LaoPDR=LaoPeople’sDemocraticRepublic,tCO2=tonofcarbondioxide,toe=tonofoilequivalent. Source:Authors’calculationswithdatafromADB(2013).

million

tCO2/toe

million

tCO2/toe

million

tCO2/toe

million

tCO2/toe

million

tCO2/toe

million

tCO2/toe


B. Energy SecurityESSwillnotablydecreaseinCentralAsiaintheBAUscenario(Figure8).In2010,theindicatorsinalmostallmembersweregreaterthan0.7(Figure9)butwillbelessthan0.5in2035forthemajority(Figure10).Thismeansthatin2035,domesticresourceswillmeetlessthan50%ofannualenergyneeds(basedon2010fuelreservesandnotaccountingforexports).EspeciallyrelevantisenergysecurityinUzbekistanwhichwilldeterioratebecauseofthedepletionofitsgasreserves. Incontrast,theDIVismaintainedatthe2010levelsinmosteconomies(Figures11and12).ADIVvaluelessthan0.5isalowlevelofdiversificationwiththeshareofasinglefuelresourceinthePEDgreaterthan70%.CentralAsiawillnotsignificantlychangethestructureofitsenergysystems.Thelowlevelofdiversificationinthepowersectorthereshouldbenoted,particularlyinthecaseoftheformerSovietUnion.

In the developed group (Australia, Japan, and New Zealand) the ESS will decrease except inJapan where the larger contribution of renewable energy (mainly wind and solar) will improve self-sufficiency.TheDIVhashighvaluesin2010andwillchangeonlyslightlyfrom2010to2035(Figure8).

InEastAsia,theESSwilldecreasesubstantiallyinthePRC(Figure8).InHongKong,China;theRepublicofKorea;Mongolia;andTaipei,China,theESSshowslittlechangefrom2010to2035.ExceptinthePRCandMongolia, theESShasvery lowvalues indicatingasignificantdependenceonenergyimports.TheDIVshowslittlechangeexceptinthePRCwhereitincreasesduetogreatercontributionsfromgas,nuclear,andrenewables(windandsolar).

PacificcountrieswillgenerallyfollowthetrendsobservedinAsia;theESSwilldecreasewhiletheDIVwillincreaseslightly.Timor-LestehasverylowESSandDIVvaluessinceitsenergysystemisbasedmainlyonoilimports.InotherPacificislands,theESSwillincreaseslightlybecauseofincreasesintheshareofrenewablesinPED.

InSoutheastAsia,theESSwilldecreasesubstantiallyfrom2010to2035.ThePEDwillincreasefivefoldwithcoal,oil,andnaturalgasgrowingthemost.WhileusingthesefuelswillimprovetheDIVinsome,itwillbeattheexpenseofESS.

In South Asia, the ESS in Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan,andSriLankawilldecrease,thoughinBhutanandNepal,itwillremainalmostunchangedsincehydroand biomass waste will still be the main contributors to their energy systems in 2035. Although coalreservesinIndiaandPakistanwillstillbesubstantialin2035,thedepletionofoilandnaturalgasreserves(especiallyinPakistan)willcauseadecreaseintheESS.InBangladesh,theESSwilldeterioratebecauseoftheprogressivereductionofcoalandnaturalgasreservesandthedecreaseintheshareoftraditionalfuels(biofuelandbiomasswaste)inPEDinfavorofgreaterconsumptionofgasandoil.AfghanistanandSriLankashowasimilartrendwithtraditionalfuelsreplacedbyoilandcoal(67%in2010to17%in2035inAfghanistanand51%to31%inSriLanka).TheenergysysteminMaldivesisbasedexclusivelyonoil;thisisthereasonforitslowESSandDIVvalues.


Figure 8: Energy Self-Sufficiency versus Primary Energy Diversification, 2010–2035 (named end = 2035)

CentralAsia Developedgroup

EastAsia SouthAsia

SoutheastAsia ThePacific

LaoPDR=LaoPeople’sDemocraticRepublic. Source:Authors’calculationswithdatafromADB(2013).


Figure 9: Energy Self-Sufficiency in 2010

0=completelydependentonimports,1=self-sufficient.LaoPDR=LaoPeople’sDemocraticRepublic.Source:Authors’calculationswithdatafromADB(2013).


Figure 10: Energy Self-Sufficiency in 2035

0=completelydependentonimports,1=self-sufficient.LaoPDR=LaoPeople’sDemocraticRepublic.Source:Authors’calculationswithdatafromADB(2013).


Figure 11: Primary Energy Diversification in 2010

0=allprimaryenergyisfromonesource,1=energycomesequallyfromallprimarysourcesconsidered.LaoPDR=LaoPeople’sDemocraticRepublic.Source:Authors’calculationswithdatafromADB(2013).


Figure 12: Primary Energy Diversification in 2035

0=allprimaryenergyisfromonesource,1=energycomesequallyfromallprimarysourcesconsidered.LaoPDR=LaoPeople’sDemocraticRepublic.Source:Authors’calculationswithdatafromADB(2013).


C. Affordability

EOLforhouseholdsisestimatedastheexpectedelectricityoutlay,i.e.,thefractionofpercapitaGDPspenttobuyacertainamountofelectricity.ThisiscomputedbasedonEOTandbasedonLEC.Theformercanbeusedonlyforthepresentorforthepastwhilethelattercanbecalculatedforthepast,present,orfuturesinceitusesthestructureofthepowersectorandfuelcosts. Figure13demonstratesthataffordabilityisdirectlyrelatedtoeconomicdevelopment;ingeneral,it will improve, as development improves (Figures 14–18). Some factors can decrease affordability,notablyintroducingnewandmoreexpensivepowergenerationtechnologies,ariseinfuelprices,andthedepletionoflocalreservesrequiringimports.

In Central Asia, Armenia, Azerbaijan, Georgia, and Kazakhstan will considerably improveaffordability (Figure 19) as they experience significant economic growth from 2010 to 2035 that willdecreasetheirEOL;however, theirelectricitysystemsarebasedondifferentresources.ArmeniaandGeorgia have negligible fossil-fuel reserves; power generation is based on hydro in Georgia and on acombination of hydro and nuclear energy in Armenia. Azerbaijan and Kazakhstan base their powergenerationonindigenousgasandcoal,respectively.IntheKyrgyzRepublic,Tajikistan,andUzbekistan,economicgrowthisnotsufficienttosubstantiallyimproveaffordability.

Inthedevelopedgroup,affordabilitywillremainnearlyconstantandevendecreaseslightlyinAustralia(Figure19).Japanwillincreaseitsshareofrenewables(windandsolar)inthepowersystemwhich translates into a higher overall LEC; however, this will be offset by economic growth and by areductioninfossilfuelimports.AustraliaandNewZealandwillincreasetheirsharesofnaturalgasandrenewables in power generation which will result in a higher LEC in 2035, but economic growth willreduce the impact on affordability. Australia, Japan, and New Zealand will have the highest share ofrenewables(windandsolar)inthepowersectorin2035at16.1%,27.6%,and27.4%respectively.

InEastAsia,affordabilitywillimproveconsiderablyeverywherebutespeciallyinMongoliaandthePRC(Figure19).Powergenerationinbothcountriesin2035willbebasedonlocalcoal,althoughinthePRC,thecontributionofcoalwillbereducedfrom78%in2010to58%in2035duetotheincreasedpenetrationofnaturalgas,nuclear,andrenewables.InHongKong,China;theRepublicofKorea;andTaipei,China, the power mix will change only moderately; coal will be reduced in favor of natural gasand nuclear in the Republic of Korea; natural gas and renewables in Taipei,China; and natural gas inHongKong,China.AlthoughtheoverallLECinEastAsiawillincreaseduetothegreatercontributionofnaturalgasandrenewables,substantialeconomicgrowthwilloffsetitbyalargemargin.

InthePacific,electricityaffordabilitywillimproveinPapuaNewGuineaandTimor-Leste(Figure20).InPapuaNewGuinea,oilgenerationcapacityin2010(54%ofthepowersystem)willbereplacedby localnaturalgas(53%in2035).Thiswill reducetheLECandtogetherwitheconomicgrowthwillleadtoasubstantialimprovementinaffordability(Figure18).InTimor-Leste,thepowermixisbasedonimportedoilandwillnotchangefrom2010to2035.AlthoughtheoverallLECwillincreaseduetorisesinoilprices,economicgrowthwillproduceamoderateimprovementinaffordability.InFiji,theaffordabilityindicatorwillchangeslightlybetween2010and2035(Figure18)asthesharesinthepowersectorofnaturalgasandrenewablesgrow,resultinginanLECincreasethatwillbeoffsetbyeconomicgrowth.InotherPacificislands,thepowermixwillstillbebasedonoilimportsby2035;economicgrowthwillnotbesufficienttocounterLECincreasesduetorisingoilprices.


InSoutheastAsia,affordabilitywillimprovesignificantlyinCambodia,Indonesia,theLaoPeople’sDemocraticRepublic(LaoPDR),andMyanmar(Figure20)duetoeconomicgrowthandtochangesintheirelectricitymixes.Powergenerationin2035willbehydroandlocalgasinMyanmar,hydroandlocalcoalinIndonesiaandtheLaoPDR,andhydroinCambodia.InMalaysia,thePhilippines,Thailand,andVietNam,affordabilitywillimprovemoderately.In2035,theirelectricitymixeswillbebasedonimportedcoalandnaturalgas,exceptinMalaysiawherelocalnaturalgaswillbeused.InThailand,themainsourceforelectricpowerwillbenaturalgas(59.3%)whichwillalsosupply44.2%ofpowerinMalaysia,whileinthePhilippinesandVietNam,itwillbecoal(70.1%and42.9%,respectively).ThedecreaseinEOLinVietNamwillbeduetoeconomicgrowth.InBruneiDarussalamandSingapore,thepowermixin2035willstillbebasedonnaturalgas(localinBruneiDarussalamandimportedinSingapore)asitwasin2010;however,theEOLwillimproveforSingaporeanddeteriorateforBruneiDarussalamduetoeconomicgrowth.SingaporewillhaveanannualaverageincreaseinGDPpercapitaof3.3%from2010to2035,whileBruneiDarussalamwillnearlystagnatewithanannualaverageincreaseinGDPpercapitaof0.4%.

InSouthAsia,therewillbesignificantimprovementsinaffordabilityforBhutan,India,Maldives,Nepal, Pakistan, and Sri Lanka (Figure 18 and Figure 20). In Bhutan, India, Maldives, and Nepal, theelectricity mix will change very slightly between 2010 and 2035. In Bhutan and Nepal, the powersystemwillbebasedalmostexclusivelyonhydroenergyin2035;inIndia,localcoal(64%)andhydroenergy(8%)willproducemorethan70%ofthetotalelectricitygenerated;inMaldives,electricitywillstillbegeneratedwithoil in2035(99%); improvements inaffordabilitywillbebroughtaboutmainlybyeconomicgrowth.InPakistanandSriLanka,botheconomicgrowthandchangesinthegeneratingstructurewillcontributetoadecreaseinEOL.InPakistan,oil-basedpowergenerationwillbereplacedbygas(from30%in2010to43%by2035)andhydro(from29%in2010to35%by2035).Althoughgaswillbeimported,itslowercostcomparedtooilwillcontributetoaloweroverallLEC.InSriLanka,theshareofoilintheelectricitymixwilldecreasefrom58%in2010to29.8%in2035inexchangeforcoalthatwillcontribute47.3%ofpowergenerationin2035(comparedwith0%in2010).AlthoughbothoilandcoalwillbeimportedinSriLanka,thecostofcoalislower,sotheoverallLECwillbereduced.InBangladesh, theelectricitymix in2010,basedon localnaturalgas(87.4%),willshift toamixwithsizablecontributionsfromlocalcoal(41.8%),importedoil(16.2%),andimportednaturalgas(32.0%).DependenceonfossilfuelimportsincreasestheLEC;therefore,theimprovementinaffordabilitywillnotbeassubstantialasinothercountries(Figure18).InAfghanistan,powergenerationwilldependonoilimportsin2035whichwillsignificantlyincreasethecostofelectricity.TheEOLwillthereforedecreasemoderatelyinspiteofeconomicgrowth.


Figure 13: Expected Electricity Outlays Based on Tariffs in 2012

AFG = Afghanistan; ARM = Armenia; AUS = Australia; AZE = Azerbaijan; BAN = Bangladesh; BHU = Bhutan;BRU = Brunei Darussalam; CAM = Cambodia; FIJ = Fiji Islands; GDP = gross domestic product; GEO = Georgia;HKG = Hong Kong, China; IND = India; INO = Indonesia; JPN = Japan; KAZ = Kazakhstan; KOR = Korea, Rep. of;KGZ = Kyrgyz Republic; LAO = Lao People’s Democratic Republic; MAL = Malaysia; MLD = Maldives; MON = Mongolia;MYA = Myanmar; NEP = Nepal; NZL = New Zealand; PAK = Pakistan; PNG = Papua New Guinea; PHI = Philippines;PRC=China,People’sRepublicof;SIN=Singapore;SRI=SriLanka;TAP=Taipei,China;TAJ=Tajikistan;THA=Thailand;TIM=Timor-Leste;TKM=Turkmenistan;UZB=Uzbekistan;VIE=VietNam.Source:Authors’calculationswithdatafromADB(2013),IMF(2013),andothersources(Fueyoetal.2013).


Figure 14: Expected Electricity Outlays Based on Tariffs in 2012 (%)

LaoPDR=LaoPeople’sDemocraticRepublic.Source:Authors’calculationswithdatafromADB(2013),IMF(2013),andothersources(Fueyoetal.2013).


Figure 15: Expected Electricity Outlays Based on Levelized Electricity Cost in 2012 and 2035

2012

2035

AFG=Afghanistan;ARM=Armenia;AUS=Australia;AZE=Azerbaijan;BAN=Bangladesh;BHU=Bhutan;BRU=BruneiDarussalam;CAM=Cambodia;FIJ=FijiIslands;GDP=grossdomesticproduct;GEO=Georgia;HKG=HongKong,China;IND=India; INO=Indonesia;JPN=Japan;KAZ=Kazakhstan;KOR=Korea,Rep.of;KGZ=KyrgyzRepublic;LAO=LaoPeople’sDemocraticRepublic;LEC=levelizedelectricitycost;MAL=Malaysia;MLD=Maldives;MON=Mongolia;MYA=Myanmar;NEP=Nepal;NZL=NewZealand;OPI=OtherPacificIslands;PAK=Pakistan;PNG=PapuaNewGuinea;PHI=Philippines;PRC=China,People’sRepublicof;SIN=Singapore;SRI=SriLanka;TAP=Taipei,China;TAJ=Tajikistan;THA=Thailand;TIM=Timor-Leste;TKM=Turkmenistan;UZB=Uzbekistan;VIE=VietNam.Source:Authors’calculationswithdatafromADB(2013)andIMF(2013).


Figure 16: Expected Electricity Outlays Based on Levelized Electricity Costs in 2012 (%)

LaoPDR=LaoPeople’sDemocraticRepublic.Source:Authors’calculationswithdatafromIIEJ(2013)andIMF(2013).


Figure 17: Expected Electricity Outlay Based on Levelized Electricity Cost in 2035 (%)

LaoPDR=LaoPeople’sDemocraticRepublic.Source:Authors’calculationswithdatafromADB(2013)andIMF(2013).


Figure 18: Change in Expected Electricity Outlays Based on Levelized Electricity Cost Between 2012 and 2035 (%)



Figure 19: Expected Electricity Outlays Based on Levelized Electricity Cost in Central Asia, the Developed group, and East Asia, 2012–2035

Central Asia 2012 Central Asia 2035

Developed group 2012 Developed group 2035

East Asia 2012 East Asia 2035

GDP=grossdomesticproduct,LEC=levelizedelectricitycost,PRC=People’sRepublicofChina. Source:Authors’calculationswithdatafromADB(2013)andIMF(2013).

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Figure 20: Expected Electricity Outlays Based on Levelized Electricity Cost in the Pacific,South Asia, and Southeast Asia, 2012–2035

The Pacific 2012 The Pacific 2035

South Asia 2012 South Asia 2035

Southeast Asia 2012 Southeast Asia 2035

AFG = Afghanistan; BAN = Bangladesh; BHU = Bhutan; BRU = Brunei Darussalam; CAM = Cambodia; FIJ = Fiji Islands;GDP = gross domestic product; IND = India; INO = Indonesia; LAO = Lao People’s Democratic Republic;LEC=levelizedelectricitycost;MAL=Malaysia;MLD=Maldives;MYA=Myanmar;NEP=Nepal;OPI=OtherPacificIslands;PAK = Pakistan; PNG = Papua New Guinea; PHI = Philippines; SIN = Singapore; SRI = Sri Lanka; THA = Thailand;TIM=Timor-Leste;VIE=VietNam.Source:Authors’calculationswithdatafromADB(2013)andIMF(2013).

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IV. THE BENEFITS OF INTEGRATION

We calculated aggregate indicators for each region in a similar manner to assess the implications onsustainability,security,andaffordabilityofregionalpolicies,andofregionallyintegratedenergysystems.

A. Sustainability

Whencomputedasaregionalaggregate,PEIwilldecreaseforallregions(Figure21)exceptforthePacific(Fiji,PapuaNewGuinea,Timor-Leste,andotherPacificislands).Thisdecreaseissubstantialinregionswithhighenergyintensitiesin2010,i.e.,CentralAsia,EastAsia,SouthAsia,andSoutheastAsia.Inthedevelopedgroup(Australia,NewZealand,andJapan),thereductioninPEIwillbequitemodest.

TheCIXwill,however,increaseingeneralfrom2010to2035(Figure21).ThisincreasewillbeconsiderableinSoutheastAsiaandSouthAsiawheretraditionalfuelswillbereplacedbyfossilfuels.InCentralAsiaandthePacific,thisindicatorwillchangeslightlysincetheCIXwillremainsimilartothatin2010.InEastAsia,theCIXisreducedsignificantlyduetotheincreaseintheshareofnaturalgasfrom4.6%to14.5%,ofnuclearfrom2.6%to6.4%,andthecorrespondingreductionincoalfrom62.5%to48.5%.Forthedevelopedgroup,theCIXimprovessincetheshareofcoalandoildecreaseswhilethesharesofgasandrenewables(windandsolar)willgrowfrom18.1%to24.5%forgasandfrom3.3%to14.6%forrenewables.

Figure 21: Regional Primary Energy Intensity versus Carbon Dioxide Intensity of the Primary Energy Mix, 2010–2035 (named end = 2035)

CO2=carbondioxide,tCO2=tonofCO2,toe=tonofoilequivalent.Source:Authors’calculationswithdatafromADB(2013).

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B. Security

ESS will deteriorate in all regions except for Central Asia (Figure 22 and Figure 23). The decrease isespeciallysignificantinEastAsiawhereESSisreducedfrom0.9to0.46andinSoutheastAsiawhereitdropsfrom0.88to0.20.ThismeansthatEastAsiawillmeetapproximately46%ofitsenergydemandwithlocalresourcesin2035,andthatSoutheastAsiawillmeetonly20%.Inthedevelopedgroup,SouthAsia,andthePacific,thedeteriorationinESSwillnotbeassevere.

TheoverallenergysecurityindicatorfordevelopingAsiawilldecreasefrom1.0in2010to0.59in2035,mainlyduetodependenceonexternaloil.Ifnonewreservesareaddedtothecurrentlyprovenones,importswillhavetomeetdemand.TheDIVwill,however,remainsubstantiallyat2010levelsforallregions(Figure22andFigure23).

Figure 22: Regional Energy Self-Sufficiency versus Primary Energy Diversification,

2010–2035 (named end = 2035)

Notes:ForESS,0=completelydependentonimports,1=self-sufficient.ForDIV,0=allprimaryenergyisfromonesource,1=energycomesequallyfromallprimarysourcesconsidered.Source:Authors’calculationswithdatafromADB(2013).

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Figure 23: Energy Self-Sufficiency versus Primary Energy Diversification by Region,

2010–2035 (named end = 2035)Central Asia Developed group

East Asia The Pacific

/Countries

South Asia Southeast Asia

LaoPDR=LaoPeople’sDemocraticRepublic,PRC=People’sRepublicofChina.Notes:ForESS,0=completelydependentonimports,1=self-sufficient.ForDIV,0=allprimaryenergyisfromonesource,1=energycomesequallyfromallprimarysourcesconsidered.Source:Authors’calculationswithdatafromADB(2013).


C. Affordability

Affordability usually increases with development; therefore, the lowest expected electricity outlaysbasedonEOLarefoundinthedevelopedgroup(Figure24).CentralAsia,SouthAsia,andthePacifichavethehighestEOL.

From2012to2035,affordabilitywillimproveinallregionsexceptinthedevelopedgroupwhereitdecreasesslightly(Figure25).EastAsiahasthehighestincreaseinaffordability;inCentralAsia,SouthAsia,andthePacific,theimprovementisalsosubstantial.

Figure 24: Regional Expected Electricity Outlays Based on Levelized Cost of Electricity, 2012–2035

2012 2035

GDP=grossdomesticproduct,LEC=levelizedelectricitycost.Source:Authors’calculationswithdatafromADB(2013)andIMF(2013).

Figure 25: Regional Change in Expected Electricity Outlays Based on Levelized Cost of Electricity, 2012–2035(%)

Source:Authors’calculationswithdatafromADB(2013)andIMF(2013).

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D. Benefits of Integration

Based on the foregoing analysis, this section summarizes the benefits afforded by integrating energysystemsregionallyintermsofbothsecurityandaffordability.

1. Security

FromtheanalysisofESS,CentralAsiaoffersthemostdistinctbenefitsforregionalintegration.Consideredseparately,theESSofmosteconomieswilldecreasesubstantiallyfrom2012to2035,buttheaggregateregionalsecurityindicatorwillremainhighduetothefossilfuelreservesinAzerbaijan,Kazakhstan,andTurkmenistan. InEastAsiaandSouthAsia,theaggregateESSindicator is largely influencedbythePRCandIndia,respectively.InEastAsia,regionalintegrationcanimprovethesecurityoftheRepublicofKoreaandofTaipei,Chinaespeciallyregardingcoal.LargecoalreservesinthePRCandMongoliacanhelpmeetdemandfortheshareofcoal intheirprimaryenergymixtobe16%and27%in2035,respectively.AparallelsituationisinSouthAsiawherelargecoalreservesinIndiacanhelpimprovetheenergysecurityofSriLankawhosecoalshareintheprimaryenergymixwillbe24%in2035.AfghanistanandPakistanwillimprovetheirenergysecuritywithbetterintegrationwithCentralAsiawhichhasimportantoilandgasreserves.DespitethesignificantfossilfuelreservesinIndonesiaandMalaysia,inSoutheastAsiaESSwilldeterioratesignificantlyfrom2012to2035evenasaregionalaggregate.

Inthedevelopedgroup,thelargecoalanduraniumreservesinAustraliacanimprovetheenergysecurityofJapanwhosecoalandnuclearshareintheprimaryenergymixin2035willbe24%and4.5%,respectively.InthePacific,thefossilfuelreservesofPapuaNewGuineawillimprovetheenergysecurityofFiji,Timor-Leste,andotherPacificislands.

Another noticeable benefit of regional integration would be an increase in the diversificationof the power systems (Figure 26). In most areas, the diversification of the power sector is largerregionally than nationally. In Central Asia and Southeast Asia, the improvement in diversification isquitenoteworthy.Someeconomiesbasepowergenerationlargelyonasinglesource(forinstancecoalin Kazakhstan, natural gas in Turkmenistan, or hydro in Tajikistan). Aggregating national systems notonlyincreasesdiversificationbutalsoresultsinabalancedpowersectorwithmostoftheconventionaltechnologiescontributingsignificantlytotheaggregate.

Integratingnationalpowersystemsintoregionalsystemscanhaveadvantagesinadditiontothatofincreaseddiversification.Thelarge-scaledeploymentofintermittentrenewableenergy(e.g.,windandsolar)posesadditionalchallengesformanagingpowersystems(suchasfollowingdemandorregulatingfrequencies). Regionally integrating the power grid renders the system more manageable for largersharesofrenewables(e.g.,morethan20%).Countrieswithalargeshareofrenewables(e.g.,Denmark)needhigh-capacity,internationalpowergridinterconnectionstomanagethesystem.InAsiancountrieswithalargefractionofhydropower(Bhutan,theKyrgyzRepublic,theLaoPDR,Myanmar,Nepal,andTajikistan), regional integration will help avoid the effect of dry years on the energy system and willassistwiththeharmonizationofcompetingusesforinlandwater(e.g.,powerinwinterandirrigationinsummer).


Figure 26: Change in the Power (Electricity) Sector Diversification Indicator, 2010–2035

Central Asia Developed group

East Asia The Pacific

Southeast Asia South Asia

AFG = Afghanistan; ARM = Armenia; AUS = Australia; AZE = Azerbaijan; BAN = Bangladesh; BHU = Bhutan;BRU = Brunei Darussalam; CEA = Central Asia; CAM = Cambodia; DEV = Developed Group; EAA = East Asia; FIJ = Fiji;GEO = Georgia; HKG = Hong Kong, China; IND = India; INO = Indonesia; JPN = Japan; KAZ = Kazakhstan;KOR = Republic of Korea; KGZ = Kyrgyz Republic; LAO = Lao People’s Democratic Republic; MAL = Malaysia;MLD = Maldives; MON = Mongolia; MYA = Myanmar; NEP = Nepal; NZL = New Zealand; OPI = Other Pacific Islands;PAC = The Pacific; PAK = Pakistan; PRC = People’s Republic of China; PHI = Philippines; PNG = Papua New Guinea;SEA = Southeast Asia; SIN = Singapore; SOA = South Asia; SRI = Sri Lanka; TAJ = Tajikistan; TAP = Taipei,China;THA=Thailand;TIM=Timor-Leste;TKM=Turkmenistan;UZB=Uzbekistan;VIE=VietNam.Source:Authors’calculationswithdatafromADB(2013).


2. AffordabilityRegional integration would alleviate the cost of importing fuels for island economies (Maldives; SriLanka;Taipei,China;andTimor-Leste)without indigenousfuelresources ,andforthosewhosefossilfuel reserves will be depleted by 2035 (Afghanistan, Bangladesh, Japan, the Republic of Korea, andPakistan).Inthoseeconomies,theregionallyaggregatedlevelizedelectricitycost(LEC)islowerthanthenationalLEC(Figure27).Economieswithfossilfuelreserves(Australia,Azerbaijan,BruneiDarussalam,Indonesia, and Mongolia) or those with hydropower systems (Bhutan, the Lao PDR, Myanmar, andNepal)willnotimproveaffordabilitythroughregionalintegration.

Figure 27: Ratio of Regional Levelized Electricity Cost to National Levelized Electricity Cost in 2035



V. INTERNATIONAL BENCHMARKING

Inthissection,wecomparetheenergyindicatorscalculatedforAsiawiththoseinAfrica,LatinAmerica,theMiddleEast,NorthAmerica,OrganisationforEconomicCo-operationandDevelopment(OECD)Europe,andtheRussianFederation,usingtheforecastsforthenewpoliciesscenariosinThe World Energy Outlook 2010(IEA2010).ThisisconsideredasaBAU scenario,butittakesintoaccountthelatestpolicycommitmentsongreenhousegasemissionsandrenewabletargets.

A. Sustainability

ThecurrentCO2emissionsintensity(CEI)ofAsiaisoneofthehighestintheworldsurpassedonlybythoseoftheRussianFederationandtheMiddleEast(Figure28).ItisapproximatelyfourtimesashighastheCEIinEuropeorNorthAmerica,threetimesashighasLatinAmerica,andtwicethatofAfrica.Itvaries fromthePacificwithaCEIsimilar to thatofLatinAmericatoCentralAsiawhichhasaCEIclosertotheRussianFederation’s.TheCEI inAsiawillbereducedby50%in2035from2010levels,butasasimilarreductionisexpectedintherestoftheworld,therelativedifferencewillremainlargelyunchanged.ThesignificantreductionintheCEIinEastAsiaisnoteworthy,buttheCEIwillincreaseinthePacific.

Asstatedpreviously,PEIisstronglycorrelatedwitheconomicgrowth(Figure29).In2010,thePEIofAsiawasfourtimesashighasthatofEuropeorNorthAmerica,twicethatofLatinAmerica,andsimilartoAfrica’s.PEIalsovariessubstantiallyindevelopingAsia.ThePacifichadaPEIof0.49toeper$1,000in2010whileforCentralAsiaitwas1.43.By2035,thePEIwilldecreasetoagreaterextentinAsiathaninotherpartsoftheworldduetogreatereconomicgrowth.Itwillbe25%lowerthanAfrica’s,anditwillbeclosertothatinLatinAmericabutnearlythreetimesthatofthedevelopedworld.EastAsiawillhavethegreatestreduction.

ThissignificantreductioninPEIinAsiawillnot,however,bematchedbyasimilarreductioninCO2intensityoftheprimaryenergymix(CEI)duetothefactthattheCIXwillremainhighcomparedwiththeotherregionsoftheworld(Figure30).ThehighCIXistheresultofsubstitutingtraditionalfuelswithfossilfuels,ahighrelianceoncoal,andthelowpenetrationofrenewableenergysources(asforecastinthescenarios).


Figure 28: Carbon Dioxide Emission Intensity in Asia and the Rest of the World in 2010 and 2035

2010

2035

CO2=carbondioxide,GDP=grossdomesticproduct,kg=kilogram,OECD=OrganisationforEconomicCo-operationandDevelopment.Source:Authors’calculationswithdatafromADB(2013),IEA(2010),andIMF(2013).

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Figure 29: Primary Energy Intensity in Asia and the Rest of the World in 2010 and 2035

20102010

20352035

GDP=grossdomesticproduct,OECD=OrganisationforEconomicCo-operationandDevelopment,toe=tonofoilequivalent.Source:Authors’calculationswithdatafromADB(2013),IEA(2010),andIMF(2013).

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Figure 30: Primary Energy Intensity and Carbon Dioxide Intensity of the Primary Energy Mix in Asia and the Rest of the World in 2010 and 2035

20102010

20352035

OECD=OrganisationforEconomicCo-operationandDevelopment,tCO2=tonofcarbondioxide,toe=tonofoilequivalent.Source:Authors’calculationswithdatafromADB(2013)andIEA(2010).

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B. Security

Overall,ESSinAsiadeterioratesconsiderablybetween2010and2035(Figure31).Althoughtheregionwasnearlyenergyindependentin2010,theindicatorwillfallto0.59by2035;onlyabout60%oftheenergydemandwillbemetwithlocalresources.ThisissubstantiallymorethaninEuropeandsimilarto North America. In contrast, Africa, Central Asia, Latin America, the Middle East, and the RussianFederationwillmaintaintheirhighESSvalues.DIVwill,however,increaseinAsiaandwillonlybeslightlylessthanindevelopedcountries.

Figure 31: Energy Self-Sufficiency and Primary Energy Diversification in Asiaand the Rest of the World in 2010 and 2035

20102010

2035

OECD:OrganisationforEconomicCo-operationandDevelopment.Source:Authors’calculationswithdatafromADB(2013)andIEA(2010).

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C. Affordability

Energyaffordabilityistightlycoupledtoeconomicgrowth.In2010,theEOLinAsiawas16timesthatofNorthAmerica,eighttimesthatofEurope,andthreetimesthatofLatinAmerica(Figure32).Incontrast,itwasnearlyhalfthatofAfrica.

By2035,energywillbemuchmoreaffordableinAsiabecauseofstrongeconomicgrowth.TheEOLwillbefourtimesthatofEuropeandNorthAmericaandtwicethatofLatinAmerica,butitwillvarysubstantially.InEastAsiaitwillbe0.31%whichislowerthanthatinLatinAmericaandtheMiddleEast,andinSouthAsiaitwillbe2.15%,similartoAfrica.

Figure 32: Expected Electricity Outlay in Asia and the Rest of the World in 2010 and 2035

2010

2035

GDP=grossdomesticproduct,LEC=levelizedelectricitycost,OECD=OrganisationforEconomicCo-operationandDevelopment.Source:Authors’calculationswithdatafromADB(2013),IEA(2010),andIMF(2013).

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VI. ALTERNATIVE SCENARIOS

In this section, we compare the security, affordability, and sustainability indicators for the followingscenarios.3

• Businessasusual(BAU)—thebaseline.• AsianCenturyscenario(ACS)–BAU.Energydemandisderivedfromthemacroeconomic

parametersfortheAsianCenturywithnationalenergysectorsfollowingaBAUtrend.• ACS–Alternative(ALT).Themacroeconomicparametersarethesame,butthereisanincreased

emphasisonrenewableandnuclearenergy,andonadditionalenergyefficiencymeasures.

Allfiguresinthissectionarefor2035.

A. Impact on Sustainability

Asageneraltrend,thePEIforAsiaandthePacificin2035islessinACS–BAUthanintheBAUscenario(Figure33)becauseGDPgrowth isusually fasterundertheACS–BAUhypothesesandPEIgenerallydecreaseswithdevelopment.ThePEI is,however,greater inACS–BAUthan inBAU inpartsofEastAsia(thePRC;HongKong,China;RepublicofKorea;andTaipei,China);andinCentralAsia(Armenia,Kazakhstan, Tajikistan, Turkmenistan, and Uzbekistan). Except for the PRC, this is because growth isfasterintheBAUscenariothaninACS–BAU.InthePRC,economicgrowthisslightlyfasterinACS-BAUthaninBAU,butsoistheincreaseinenergyconsumption.Asaconsequence,thePEIinthePRCis3.9%higherinACS–BAUcomparedwithBAU.TheoverallPEIinAsiain2035doesnotchangesignificantlybetweenACS–BAU(276toeper$1,000)andBAU(278toe/$1,000).

Inmosteconomies,thePEI isslightly lowerinACS–ALTthaninACS–BAUduetoadditionalenergy efficiency measures; however, the differences are very small (Figure 34). The main exceptionis Cambodia where the PEI in 2035 is higher under ACS–ALT. This is because economic growth inCambodiaisgreaterunderACS–BAU.

3 ADB (2013).


Figure 33: Primary Energy Intensity in Business-as-Usual Scenario versus Asian Century–Business-as-Usual Scenario

AFG = Afghanistan; ARM = Armenia; AUS = Australia; AZE = Azerbaijan; BAN = Bangladesh; BHU = Bhutan;BRU=BruneiDarussalam;CAM=Cambodia;FIJ=FijiIslands;GDP=grossdomesticproduct;GEO=Georgia;HKG=HongKong,China;IND=India;INO=Indonesia;JPN=Japan;KAZ=Kazakhstan;KOR=Korea,Rep.of;KGZ=KyrgyzRepublic;LAO=LaoPeople’sDemocraticRepublic;MAL=Malaysia;MLD=Maldives;MON=Mongolia;MYA=Myanmar;NEP=Nepal;NZL=NewZealand;OPI=OtherPacificIslands;PAK=Pakistan;PNG=PapuaNewGuinea;PHI=Philippines;PRC=China,People’sRepublicof;SIN=Singapore;SRI=SriLanka;TAP=Taipei,China;TAJ=Tajikistan;THA=Thailand;TIM=Timor-Leste;TKM=Turkmenistan;Toe=tonofoilequivalent;UZB=Uzbekistan;VIE=VietNam.Source:Authors’calculationswithdatafromADB(2013).

t

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Figure 34: Primary Energy Intensity in Asian Century–Alternative Scenario versus Asian Century–Business-as-Usual Scenario

Note:SeeFigure33fortheabbreviations. Source:Authors’calculationswithdatafromADB(2013).

ThereisnosingleregionaltrendinCO2intensity(CIX)whentheBAUscenarioandACS–BAUarecompared(Figure35).CO2 intensity increases inACS–BAUin less-developedeconomiesduetosubstitutingtraditionalcarbon-neutralfuelswithfossilfuels.Insomeofthemoredevelopedeconomies,theCIXincreasesduetothelargercontributionofcoal.TheCIXis lowerformosteconomiesunderACS–ALTthanACS–BAUduetotheincreasedcontributionofrenewablesandnuclear(Figure36).


Figure 35: Carbon Dioxide Intensity of the Primary Energy Mix in Business-as-Usual Scenario versus Asian Century–Business-as-Usual Scenario

AFG=Afghanistan;ARM=Armenia;AUS=Australia;AZE=Azerbaijan;BAN=Bangladesh;BHU=Bhutan;BRU=BruneiDarussalam;CAM=Cambodia;CO2=carbondioxide;FIJ=FijiIslands;GDP=grossdomesticproduct;GEO=Georgia;HKG=HongKong,China; IND=India; INO=Indonesia;JPN=Japan;KAZ=Kazakhstan;KOR=Korea,Rep.of;KGZ=KyrgyzRepublic;LAO=LaoPeople’sDemocraticRepublic;MAL=Malaysia;MLD=Maldives;MON=Mongolia;MYA=Myanmar;NEP=Nepal;NZL=NewZealand;OPI=OtherPacificIslands;PAK=Pakistan;PNG=PapuaNewGuinea;PHI=Philippines;PRC=China,People’sRepublicof;SIN=Singapore;SRI=SriLanka;TAP=Taipei,China;TAJ=Tajikistan;THA=Thailand;TIM=Timor-Leste;TKM=Turkmenistan;TCO2=tonofCO2;Toe=tonofoilequivalent;UZB=Uzbekistan;VIE=VietNam.Source:Authors’calculationswithdatafromADB(2013).

ThedifferenceinCEIbetweenACS–BAUandBAUissimilartothatforPEI.InEastAsiaandCentralAsia,theCEIisgenerallyhigherunderACS–BAUthanBAUwhilethetrendistheoppositeoneintherestofAsia(Figure37).Overall,theCEIindevelopingcountriesdoesnotchangesubstantiallyunderdifferentscenarios(ACS–BAU739tonsofCO2[tCO2]/$1,000versusBAU747tCO2/$1,000).

TheCEIislowerinnearlyalleconomiesunderACS–ALTascomparedtoACS–BAUduetothelowerCIXvalues(Figure38).CambodiadoesnotfollowthistrendduetothegreatervalueofitsPEIunderACS–ALT.Overall, theCEIunderACS–ALT(702tCO2/$1,000) is5.0%lowerthanACS–BAU(739tCO2/$1,000).


Figure 36: Carbon Dioxide Intensity of the Primary Energy Mix in Asian Century-Alternative Scenario versus Asian Century-Business-as-Usual Scenario

Note:SeeFigure35fortheabbreviations.Source:Authors’calculationswithdatafromADB(2013).

Figure 37: Carbon Dioxide Emission Intensity in Business-as-Usual Scenario versus Asian Century–Business-as-Usual Scenario

AFG=Afghanistan;ARM=Armenia;AUS=Australia;AZE=Azerbaijan;BAN=Bangladesh;BHU=Bhutan;BRU=BruneiDarussalam;CAM=Cambodia;CO2=carbondioxide;FIJ=FijiIslands;GDP=grossdomesticproduct;GEO=Georgia;HKG=HongKong,China;IND=India;INO=Indonesia;JPN=Japan;KAZ=Kazakhstan;kg=kilogram;KOR=Korea,Rep.of;KGZ=KyrgyzRepublic;LAO=LaoPeople’sDemocraticRepublic;MAL=Malaysia;MLD=Maldives;MON=Mongolia;MYA=Myanmar;NEP=Nepal;NZL=NewZealand;OPI=OtherPacificIslands;PAK=Pakistan;PNG=PapuaNewGuinea;PHI=Philippines;PRC=China,People’sRepublicof;SIN=Singapore;SRI=SriLanka;TAP=Taipei,China;TAJ=Tajikistan;THA=Thailand;TIM=Timor-Leste;TKM=Turkmenistan;UZB=Uzbekistan;VIE=VietNam.Source:Authors’calculationswithdatafromADB(2013).


Figure 38: Carbon Dioxide Emission Intensity in Asian Century-Alternative Scenario versusAsian Century-Business-as-Usual Scenario


B. Impact on Security

There isnosingletrendforchanges inESSbetweenBAUandACS–BAU(Figure39).Generally,ESSdeteriorateswhereACS–BAUassumessignificantlyhighergrowthratesthanBAU(e.g.,India,theLaoPDR,SriLanka)sinceanincreaseinprimaryenergydemanddepletesindigenousfuelsatafasterpace.ThereverseisalsotrueforeconomiesthatgrowfasterunderBAUthanACS–BAU.ESSlogicallyremainsthesamethroughouttheregionforACS–ALTcomparedwithACS–BAU(Figure40).

TheaggregatedESSindexfortheregionissubstantiallysimilarforallscenarios:0.598forBAU,0.594forACS–BAU,and0.60forACS–ALT.PrimaryenergyconsumptionishigherforACS–BAUthanforBAU,buttheincreaseissuppliedbycoal,thefossilresourcewiththelargestreservesinAsia.TheintroductionofrenewablesandnuclearintheACS–ALTscenarioimprovesESSwithrespecttoACS–BAU,butnotsignificantly.


Figure 39: Energy Self-Sufficiency in Business-as-Usual Scenario versus

Asian Century–Business-as-Usual Scenario

AFG=Afghanistan;ARM=Armenia;AUS=Australia;AZE=Azerbaijan;BAN=Bangladesh;BHU=Bhutan;BRU=BruneiDarussalam;CAM=Cambodia;FIJ=FijiIslands;GDP=grossdomesticproduct;GEO=Georgia;HKG=HongKong,China;IND=India; INO=Indonesia;JPN=Japan;KAZ=Kazakhstan;KOR=Korea,Rep.of;KGZ=KyrgyzRepublic;LAO=LaoPeople’sDemocraticRepublic;MAL=Malaysia;MLD=Maldives;MON=Mongolia;MYA=Myanmar;NEP=Nepal;NZL=NewZealand;OPI=OtherPacificIslands;PAK=Pakistan;PNG=PapuaNewGuinea;PHI=Philippines;PRC=China,People’sRepublicof;SIN=Singapore;SRI=SriLanka;TAP=Taipei,China;TAJ=Tajikistan;THA=Thailand;TIM=Timor-Leste;TKM=Turkmenistan;UZB=Uzbekistan;VIE=VietNam.Source:Authors’calculationswithdatafromADB(2013).

Figure 40: Energy Self-Sufficiency in Asian Century–Alternative Scenario versus Asian Century–Business-as-Usual Scenario



DIV in 2035 does not change significantly between BAU and ACS–BAU (Figure 41) given that theybotharebusiness-as-usualfortheenergysector.InACS-ALT,theDIVin2035increasesslightly(Figure42) due to the increased contribution of renewables and nuclear at the expense of fossil fuels. ForMongoliaandTimor-Leste,theDIVincreasessubstantiallyunderACS-ALTthroughtheintroductionofrenewablesintheirenergymixesthatarecurrentlydominatedbycoalandoil,respectively.

Figure 41: Primary Energy Diversification in Business-as-Usual Scenario versus Asian Century–Business-as-Usual Scenario

AFG=Afghanistan;ARM=Armenia;AUS=Australia;AZE=Azerbaijan;BAN=Bangladesh;BHU=Bhutan;BRU=BruneiDarussalam;CAM=Cambodia;FIJ=FijiIslands;GDP=grossdomesticproduct;GEO=Georgia;HKG=HongKong,China;IND=India; INO=Indonesia;JPN=Japan;KAZ=Kazakhstan;KOR=Korea,Rep.of;KGZ=KyrgyzRepublic;LAO=LaoPeople’sDemocraticRepublic;MAL=Malaysia;MLD=Maldives;MON=Mongolia;MYA=Myanmar;NEP=Nepal;NZL=NewZealand;OPI=OtherPacificIslands;PAK=Pakistan;PNG=PapuaNewGuinea;PHI=Philippines;PRC=China,People’sRepublic of; SIN = Singapore; SRI = Sri Lanka; TAP = Taipei,China; TAJ = Tajikistan; THA = Thailand; TIM = Timor-Leste;TKM=Turkmenistan;UZB=Uzbekistan;VIE=VietNam.Source:Authors’calculationswithdatafromADB(2013).

Figure 42: Primary Energy Diversification in Asian Century–Alternative Scenario versus Asian Century–Business-as-Usual Scenario



C. Impact on Affordability

TheEOLin2035isgenerallylowerunderACS–BAUthanBAU(Figure43)sincethepowermixissimilarinbothcases,butGDPpercapitaislargerunderACS–BAU.ThetrendisreversedwheregrowthishigherunderBAU(Armenia,Kazakhstan,Turkmenistan,andUzbekistan).TheEOLissimilar forACS–BAUand for ACS–ALT since the amount of (expensive) renewable power introduced is moderate and soisitsimpactoncost(Figure44).ForCambodiaandMongolia,growthishigherforACS–BAUthanforACS–ALTwhichreflectsontheEOL.ForTimor-Leste,theintroductionofadditionalhydroelectricityinACS–ALTreducesoilimportsandtheLEC(andhenceEOL).

Figure 43: Expected Electricity Outlay in Business-as-Usual Scenario versus Asian Century–Business-as-Usual Scenario

AFG=Afghanistan;ARM=Armenia;AUS=Australia;AZE=Azerbaijan;BAN=Bangladesh;BHU=Bhutan;BRU=BruneiDarussalam;CAM=Cambodia;FIJ=FijiIslands;GDP=grossdomesticproduct;GEO=Georgia;HKG=HongKong,China;IND=India; INO=Indonesia;JPN=Japan;KAZ=Kazakhstan;KOR=Korea,Rep.of;KGZ=KyrgyzRepublic;LAO=LaoPeople’sDemocraticRepublic;LEC=levelizedelectricitycost;MAL=Malaysia;MLD=Maldives;MON=Mongolia;MYA=Myanmar;NEP=Nepal;NZL=NewZealand;OPI=OtherPacificIslands;PAK=Pakistan;PNG=PapuaNewGuinea;PHI=Philippines;PRC=China,People’sRepublicof;SIN=Singapore;SRI=SriLanka;TAP=Taipei,China;TAJ=Tajikistan;THA=Thailand;TIM=Timor-Leste;TKM=Turkmenistan;UZB=Uzbekistan;VIE=VietNam.Source:Authors’calculationswithdatafromADB(2013)andIMF(2013).


Figure 44: Expected Electricity Otlay in Asian Century–Alternative Scenario versus Asian Century–Business-as-Usual Scenario

Note:SeeFigure43fortheabbreviations.Source:Authors’calculationswithdatafromADB(2013)andIMF(2013).

VII. CONCLUSIONS AND POLICY RECOMMENDATIONS

A. Sustainability

ThePEIwilldecreaseaseconomiesdevelopinlinewithuniversaltrends;additionaltargetedpoliciesmayaffordadditionalimprovements.TheCO2intensityoftheCIXwill,however,decreaseonlyinEastAsiaandthedevelopedgroup.InotherADBmembersitwillincreaselargelyduetothecontinuingdisplacementofcarbon-neutralfuels(suchasbiomass)withmoreconvenientfossilfuels.Additionalpolicieswillberequiredtodecreasethecontributionofoilandcoalinfavorofgas,nuclear,andrenewables.

CoalisthefossilfuelwiththelargestreservesintheregionandthereforeisthemaincontributortoCO2intensity.IntheBAUscenario,thecoalcontributiontotheprimaryenergymixwilldecreaseonlyslightlyfrom46.4%in2009to40.2%in2035;andtheoilcontributionwillremainvirtuallyunchangedat24.6%in2009and24.1%in2035.ThesemoderatereductionsarethereasonforthepoorperformanceoftheCIXindicator.

Shalegascancontributetothe improvementof theCIX,butsocanrenewablesandnuclearenergyintheelectricitysector.Thelattershouldbecombinedwithanincreasedshareofelectricityinthefinalenergymixaselectrificationisacommondevelopmenttrend.


B. Security

TheESSintheregionwilldecreasesubstantiallyfrom100%in2009to59.8%in2035.Currentoilreserveswillbedepleted(evenwithoutexportsoutsidetheregion)by2019,andgaswillnearlybedepletedby2035.Japan,however,willmorethantripleitsESSindicatorfrom0.05currentlyto0.17in2035duetoincreasedrelianceonrenewablesources(windandsolar).

Oilandshalegasmaythereforeplayan importantrole inmaintainingenergyself-sufficiency.Additionally,theregionpossessessubstantialuraniumreserves(Australia,thePRC,India,Kazakhstan,Mongolia,andUzbekistan)thatarenotbeingutilized.

TheDIV—oneofthemaincontributorstotheresilienceoftheenergysystems—willnotchangesignificantlyfrom2010to2035astheintroductionofrenewablesornuclearisratherlimitedintheBAUscenario.

C. Affordability

ElectricityaffordabilitywillimprovesubstantiallyastheeconomiesinAsiagrow.By2035,itwillincreasebymorethan20%inmostandby50%ormoreinArmenia;Bhutan;Cambodia;thePRC;Georgia;India;Indonesia;Kazakhstan;theLaoPDR;Maldives;Mongolia;Myanmar;PapuaNewGuinea;Singapore;SriLanka;Taipei,China;Tajikistan;Turkmenistan;andVietNam.

Economies with few fossil fuel reserves will have more affordability issues in 2035 as theywill need to resort to more capital-intensive power generation technologies (such as renewables) orto importing fuel forconventionalgeneration.SouthAsia,CentralAsia,andSoutheastAsiahavetheworstaffordabilityandmayneedadditionaltariffsupport(forinstancethroughlifelinetariffs)toensureinclusiveness.AffordabilityinEastAsia,however,willimprovesubstantially.In2035,therewillstillbeagapinaffordabilitybetweendevelopedanddevelopingAsia;butitwilldiminishwithrespectto2010.TheBAUscenarioassumesasmallpenetrationofrenewables;furtherincreasesintherenewablesharearelikelytoworsenaffordability.

D. Regional Cooperation

Regionalcooperationcangenerally increaseenergysecurity(self-sufficiencyanddiversification)andaffordability.Thekeytosuccessful integrationmaybeseekingwin–winsituationswherebyanenergysuppliercollectsbenefitsinadditiontomonetarycompensation.Someexamplesaretheexchangeofenergyforenergyexpertise(e.g.,inrenewablesorcleancoalinthecaseofKazakhstan);ofenergyfordiversity(andhenceresilience);ortheenergy–waterexchangeinCentralAsia.

Forpowersystems,thebestopportunitiesfor integrationareinCentralAsiawherearegionalpower system would be more diversified than any single national system because their individuallydominantpowergenerationtechnologiesarecomplementary.InSoutheastAsia,Cambodia,Indonesia,the Lao PDR, Myanmar, Singapore, and Viet Nam could increase the diversification of their powersystemsthroughregionalintegration.BhutanandNepalwouldgreatlybenefitfromintegrationinSouthAsia.

53Reference

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Energy Security, Sustainability, and Affordability in Asia and the Pacific

Thispapercalculatesenergysecurity,sustainability,andaffordabilityfrom2010to2035fortheAsiaandPacificregionusingthefollowingindicators:primaryenergyintensity,carbondioxideintensityoftheprimaryenergymix,energyself-sufficiency,affordabilityofelectricity,andprimaryenergydiversification.Itthenassessesthepotentialbenefitsofintegratingenergysystemswithintheregion.

About the Asian Development Bank

ADB’svisionisanAsiaandPacificregionfreeofpoverty.Itsmissionistohelpitsdevelopingmembercountriesreducepovertyandimprovethequalityoflifeoftheirpeople.Despite theregion’smanysuccesses,itremainshometoapproximatelytwo-thirdsoftheworld’spoor:1.6billionpeoplewholiveonlessthan$2aday,with733millionstrugglingonlessthan$1.25aday.ADBiscommittedtoreducingpovertythroughinclusiveeconomicgrowth,environmentallysustainablegrowth,andregionalintegration.

BasedinManila,ADBisownedby67members,including48fromtheregion.Itsmaininstrumentsforhelpingitsdevelopingmembercountriesarepolicydialogue,loans,equityinvestments,guarantees,grants,andtechnicalassistance.

ASIAN DEVELOPMENT BANK6ADBAvenue,MandaluyongCity1550MetroManila,Philippineswww.adb.org

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