Rethinking energy infrastructure and markets
Changes in energy infrastructure and market design are forcing players to rethink their approach. Roland Berger can guide you through the strategic labyrinth.
Accelerating the energy transition in Asia Pacific
The foundations for sustainable change are solid, but the region still has much to do
The second annual Asia Pacific Energy Week revealed a major gap between perceptions and reality when it comes to carbon emissions. Systemic changes are urgently required to speed up the region's energy transition, with new policies and extra funding high on the agenda.
Developing and implementing effective solutions to climate change requires collaboration. This notion is at the heart of the Energy Week conferences – a series of regional events hosted by Siemens Energy, in partnership with Roland Berger, that bring together industry leaders to tackle increasingly serious environmental challenges.
Few regions are as exposed to the effects of climate change as Asia Pacific. Home to some of the world's fastest-growing economies, maintaining prosperity in the region while accelerating the energy transition will not be easy. On March 28-29, 2022, the Asia Pacific Energy Week brought together key figures from energy, technology, finance, business and government to discuss the many challenges – and some potential solutions.
"To meet carbon reduction targets, businesses in the Asia Pacific region will need to reduce their reliance on coal as an energy source and increasingly turn to renewables."
Asia Pacific: Higher emissions than expected
Worryingly, perception and reality regarding the climate situation in Asia Pacific differ widely. Between 2005 and 2020, regional carbon emissions grew by around 50 percent, yet during a survey conducted at the event, participants believed they fell by almost one-third. The reality is, decarbonization is successfully underway in several areas and more than 40 percent of global investment in the energy transition is being made in Asia Pacific. However, high demand for energy due to strong economic growth is counteracting this progress, leading to a net increase in overall emissions.
Participants' vision of the future is also extremely optimistic: They anticipate emission levels in 2030 will be 40 percent lower than in 2005. Ultimately, maintaining economic growth and prosperity while simultaneously reducing emissions in the medium and long term will be extremely challenging.
Assessing the energy priorities
Participants were asked to assess the importance of eleven energy priorities, as identified by Roland Berger, and the progress they have made in each one. These range from the adoption of renewables to digitizing the grid and designing emission markets. Successfully addressing these priorities on a global level will result in significant decarbonization and is likely to lead to net zero emissions.
When it comes to ranking the eleven energy priorities, participants agreed that the expansion of renewables was most important, followed by the decarbonization of industry. At the lower end of the priority list were power-to-X solutions such as hydrogen, and carbon capture and storage (CCS). This is surprising as power-to-X could offer effective long-term energy storage solutions, while CCS would allow longer use of coal for power generation.
A long road to sustainability
Progress on each of the eleven priorities broadly matches its perceived level of importance. Thus, power generation shows the most progress, with more than 80 percent of participants saying the acceleration of renewables is at least in the planning phase, and around one-third saying it is already at implementation stage. Almost two-thirds of respondents report a similar level of progress for coal exit strategies. By contrast, little headway has been made on technological abatement, such as power-to-X solutions and CCS, with very few participants having moved beyond the planning stage.
What needs to change?
Crucially, many of the developments required for the energy transition in Asia Pacific are still in their infancy.
To accelerate the transition, systemic changes are urgently required. Participants see government policy as the most important factor in almost every priority. Technological advancement is also important, particularly in nascent areas like CCS and energy storage . Funding, too, is a major requirement for progress in most priorities. State subsidies will be required in order to make business models profitable, at least in the short term.
Overall, Asia Pacific sits at 25 percent in terms of its energy-transition readiness. This is a solid foundation, but there is still a very long way still to go – especially as the region is the biggest contributor to carbon emissions in the world. Asia Pacific thus needs to take all its energy priorities seriously, while global climate efforts must involve the region more in the future.
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