Achieving Energy Security in Asia

The following sections are included:

• INTRODUCTION
• ACKNOWLEDGMENTS
• ABOUT THE EDITORS
• LIST OF CONTRIBUTORS
• CONTENTS

South Asia is at a crossroads with growing population, rising per capita income, expanding economies, and increasing energy demand. With growing industrial, commercial, and transport sectors along with rising urban and middle-income consumers, the energy use is increasing at unprecedented rates to meet the ambitious poverty-reduction targets. All countries of the region are facing critical scenarios ranging from depleting indigenous energy resources for developing long-term energy cooperation plans to ensuring energy security. South Asian countries are highly dependent on imported fuels, especially liquid hydrocarbon, for transport. For instance, India, Pakistan, and Bangladesh meet less of their energy demand with indigenous sources and thus face mounting energy import bills. Maldives depends on oil products to meet its energy needs. Nepal and Bhutan have huge hydroelectric potential. At the same time, there is a very wide variation in the energy consumption levels in South Asian countries. The high potential of hydropower in South Asia can reduce the reliance of the region on importing fossil fuel, increase the demand from indigenous resources, raise the energy security level, and reduce the emission levels. Therefore, energy security is vital for improved economic growth and to attain poverty reduction in the region, and thus calling for development and utilization of locally available renewable energy along with intraregional energy cooperation to help mitigate individual country energy security risks in the context of climate change is required.

Regulatory frameworks and policies are important facilitators for energy market integration and security in the Association of Southeast Asian Nations (ASEAN). However, the regulatory frameworks and policies can also be significant obstacles to energy market integration and security. ASEAN member countries have together planned development steps to assert regional energy integration and security. However, the regional plan is faced with some challenges and obstacles which stem from the ASEAN members’ energy regulation frameworks and policies. This chapter thus aims to present the obstacles and some suggestions to help the further development of ASEAN energy integration and security. It explores challenges on the regulation frameworks and policies which created barriers for energy market integration and security in ASEAN. The challenges include conflicts between the regulations and policies to support energy integration and the regulations and policies to promote the national interest of state enterprises in ASEAN energy sectors.

On March 26, 2018, the People’s Republic of China (PRC) launched Shanghai crude futures as part of its efforts to enhance the region’s energy security. The PRC’s crude futures performed far beyond the market’s expectation in terms of liquidity, volume, and price signal, and thus reignited interest in launching natural gas futures. Any futures of natural gas or liquefied natural gas will be heavily derivatized from efficient benchmark price indexes, which are assessed and reported at the regional market hubs. Instead of having a couple of centralized exchange centers or virtual trading hubs, the web of efficient multiple regional physical and marketing hubs strategically located across the nation would contribute to regional cooperation between the PRC, Japan, and the Republic of Korea; fundamentally change global gas market dynamics; enhance the PRC’s energy security; and support Asian pricing index development. It is the prime time to fast track the establishment of such market hubs in the PRC. We study market participants’ needs and functions of market hubs, identify key success factors of establishing such market hubs, recommend what would make commercially viable and efficient hubs in the PRC in a 14-stage blueprint, and evaluate major policy implications for the PRC, and broadly Asia.

The Central Asian and Caspian (CAC) region’s energy wealth and unique geographic location offers multiple advantages for promising economic growth and development. Besides, even though the CAC region’s energy mix is historically dominated by fossil fuels, renewables are also considered as an option where problems related to energy security, overreliance of a single resource/supplier, climate change, and environmental challenges are on the rise. In that regard, cooperation and integration within the region, particularly on energy, could be a core solution as intraregional relations remain relatively weak. Cooperation, in that sense, would offer an increased level of supply security, promoting investments and enabling the transfer of know-how. Nevertheless, many cooperation initiatives on energy were challenged due to political issues as well as economic limitations. Still, cooperating particularly on renewables could bring a new prospect for regional energy cooperation so that it is possible to establish proper regional models based on the best practices. Thus, by relying on a SWOT analysis, this chapter strongly recommends the region’s states to focus on relative gains and advantages that energy cooperation and interdependence bring, the rather than highlighting the historical issues of conflicts and disagreements. The study concludes that more energy cooperation in the CAC region will improve the energy security level in the region.

Electricity insecurity costs Nepal’s economy 6% of its GDP, annually, but efforts to invest $2 billion since the mid-1970s still had little impact on the problem. Specifically, the installed capacity of the grid has grown about 10% annually in that timespan, but this chapter finds that investment actually coincided with a detrimental impact on the country’s system losses, to the extent that they even fully negated any of the new generation investment to the grid. In Nepal’s case, this chapter shows that the growth in grid capacity and in the bureaucratic capacity to manage the new investment did not coincide with political support from the country’s leadership to provide more electricity. Consequently, Nepal’s political leaders undermined these new investments, deliberately or through corruption, reducing a large proportion of the country’s economic output in the process. By illuminating these constraints to electricity security, the model proposed in this chapter can help to better manage budgetary funds while increasing electricity access.

India is at a phase of critical juncture in terms of its energy transitions. While the country has witnessed commendable progresses in various dimensions of energy sustainability and security, there are challenges galore on multiple fronts. The chapter conducts a holistic empirical assessment of the sustainability of the electricity sector in India by employing a sustainable development framework. An indicator-based analysis is carried out for 12 Indian states over the time period of a decade. The assessment clearly reveals that the sector appears to be moving on a sustainable development trajectory, although disruptions are found when individual dimensions of sustainability are examined. The economic dimension of sustainability shows a nonlinear trend with multiple jerks, while the environmental and the social dimensions of sustainability exhibit a declining trend initially but rise thereafter.

This chapter attempts to explore the weak points in the energy system that prevent Viet Nam from achieving energy security. Fundamental impediments are the lack of energy inefficiency in major industries, especially in export-oriented manufacturing and transport. Moreover, the insecurity is also derived from the growing reliance on fossil fuel import for thermal power generation that threatens local environment, thus having an adverse impact on climate change process. Extreme reliance on fossil fuel import created a significant risk in the energy supply security for the country. In addition, with the phasing out of all nuclear power stations and still negligible contribution of renewables (except hydropower) in the electricity grid, primary energy supply is less diversified, and it is forecast that half of electricity generation will be derived from coal by 2030. The implication is that improving energy efficiency in energy-intensive sectors must be the top priority for achieving energy security in the country, in which transport leaves a huge room for energy-use enhancement. In addition, reducing the barriers in renewable energy financing to attract more private investment is essential to unlock the potential of renewables deployment that brings multiple benefits for securing national energy and reducing carbon emissions.

The chapter centers on the energy policies of two Central Asian member countries of CAREC — Kazakhstan and the Kyrgyz Republic. Such a focus enables comprehension of the pertinent issues in energy security for this entire region. The two nations have dissimilar energy profiles, and thus each serves a representative of a respective group. The first group is formed by the Central Asian countries who are amply endowed with hydrocarbon resources, but poor in hydropower resources (Kazakhstan, Turkmenistan, and Uzbekistan). The second group is made up of the Central Asian countries who are richly endowed with hydro resources but deprived of hydrocarbon resources (the Kyrgyz Republic and Tajikistan). Despite these two groups reveal complementary characteristic in terms of resource endowment, which suggests a case for synergy, reality differs from such a rational setting. The chapter analyzes the problems that the groups’ representatives, Kazakhstan and the Kyrgyz Republic, encounter in the realm of energy security. A comparative analysis of the respective nations’ uncoordinated energy policies is presented. It is argued that the national energy security of an individual Central Asian state is inseparable from energy security of the entire Central Asian region because it is embedded into a broader regional context of resource sharing and nexus thinking. The dimensions for regional and international cooperation toward enhanced energy security in Central Asia are discussed.

Following the collapse of the former Soviet Union, Western countries have signed several agreements on using hydrocarbon resources in the Caspian basin, aiming to diversify their energy suppliers. On the other hand, recession in the world economy and persistently low oil prices deeply affected economies of the Caspian states, whose gross domestic product and exports are dominated by oil and oil products. Strongly dependent on export revenues from oil and gas, the economic growth of the Caspian states slowed, beginning from 2014. Although limited energy resources mainly lead to focus on security of supply that is fundamentally understood as a continuity and a low risk of interruption of energy import flows, low oil prices have reminded one of the challenge of security of demand that energy-producing economies may face in terms of stable energy export revenues. However, geopolitical developments in the world, especially local armed conflicts, show the importance of secure routes as they present a threat for energy transportation. Using the indicator-based approach and country-level data over the period 2000–2017, this chapter assesses the security of demand for oil and gas of three countries from the Caspian region, Azerbaijan, Kazakhstan, and Turkmenistan, over a 16-year period, capturing the geopolitical situation and contributing to broadening the understanding of the impact of geopolitical situation in energy-transporting countries on energy transportation to the EU.

The results demonstrate that risk of energy security of demand is greater when political risk in energy-transporting countries is included in a measure of energy security of demand, i.e. risky external energy demand. The sharp decline of political stability and absence of violence/terrorism index in Ukraine and Turkey increased the risk of security of energy demand in Azerbaijan, Kazakhstan, and Turkmenistan. The results highlight the necessity for cooperation not only between the EU and the Caspian region, but also with energy-transporting countries, e.g. Ukraine, Georgia, and Turkey, or finding alternative routes bypassing countries with low political stability, e.g. through the Trans-Caspian pipeline.

The Association of Southeast Asian Nations (ASEAN) countries share the common challenge of energy security, which consists of meeting rising demand for energy in a secure, affordable, and sustainable manner. This chapter extends the gravity model to estimate the effects of economic integration, renewable energy supply, and energy efficiency on energy security. By extending the gravity model, our model specifications introduce a series of key variables to capture deployment of renewable energy, energy efficiency, and level of regional economic integration. Four measures are crucial to this task — reinforcing regional energy trade, ensuring renewable energy supply, energy efficiency improvements, and stronger economic integration. Using bilateral trade data for most economies in the world over the period 1995–2016, we demonstrate the role of renewable energy supply, energy efficiency improvements, and economic integration in bilateral energy trade. Based on the findings, policy recommendations are provided to help ASEAN decision-makers prescribe future energy security policy.

The following section is included:

• Index