Data has shown that Asia-Pacific’s power supply is secure despite Europe’s ongoing power crisis, largely because coal is still heavily used in the region.
Power generators in Asia now have limited access to LNG as a result of the region’s liquified natural gas supplies being diverted to Europe, and they are also forced to forego purchasing more expensive LNG due to Europe’s robust demand. Due to Russia’s reduction in supply, Europe is experiencing a gas shortage that is pushing many nations into an energy crisis as winter approaches. Blackouts may occur, according to a warning from the UK’s National Grid.
In presenting fresh steps to combat rising energy prices recently, the EU stayed away from a suggested ceiling on the price of Russian gas. Russia has already threatened to halt all fuel supplies to the EU if the bloc upholds these restrictions, which would drive up the cost of goods and lower Russian income.
While the European economic crisis and the conflict in Ukraine have driven up fuel prices globally, Asia’s power generation has not been adversely affected, claims Atul Aryal, chief energy strategist at S&P Global. According to Arya, countries in Asia are using coal instead of gas because coal is already here, coal is domestic, and coal is less expensive.
The disadvantage is that Asia’s gas demand has momentarily stopped rising.
In comparison to Europe, which depends on gas for energy, Asia is less dependent on gas. Head of Asia Pacific power & renewables research at Wood Mackenzie, Alex Whitworth, estimates that the amount of gas used in the nation only accounts for 11% of the total energy mix. The majority of the gas is derived from domestic sources.
Whitworth claims that despite its decline, coal continues to make up a larger portion of the blend. More than 60% of the power produced for markets in Asia and the Pacific, in his estimation, comes from coal.
Separately, due to high prices, Asia’s LNG imports have reduced. According to the most current gas data from the International Energy Agency, Asia’s imports of spot or short-term LNG declined 28% in the first 8 months of this year when compared to the same period last year. Overall, LNG imports decreased 7% compared to last year.
China is now the world’s largest LNG importer, and its imports decreased the most by 59%. The IEA reports a 17%, 73%, and 22% decline in LNG imports to Pakistan, India, and Japan, respectively.
The agency noted that in addition to high pricing, other factors discouraging Chinese consumers included the nation’s faltering economy, warmer winters, and a robust domestic coal and gas industry.
These factors have made it possible for Asia to use coal more frequently despite efforts to reduce the use of fossil fuels. As reported by the Institute for Energy Economics and Financial Analysis, Korea Electric Power Corporation has recently begun using more coal. According to IEEFA data, the corporation used less coal in July of this year than it did in 2017, despite using almost 26% more coal overall than it did the month before.
Data from KEPCO shows that since May, power generation from both coal as well as LNG has fallen due to rising prices year over year. However, coal power generation has unmistakably risen month over month, according to IEEFA energy finance specialist Ghee Peh. Korea, which uses more gas than every other Asian economy save Japan as a result, is now obligated to compete with Europe for gas, which is becoming increasingly scarce. Whitworth said that because domestic supplies are easily accessible, they are cleaner than Europe.
In other words, Asia’s dependence on coal and relative lack of reliance on gas imports contribute to its greater energy security. Warren Patterson, head of commodities strategy at ING Economics, claims that some countries will be forced to rely on comparably dirtier and more affordable fuels as a result of decreased LNG supplies and rising LNG costs in general.
Given that several of these economies are significant net energy importers, Patterson said, one would assume that the high fossil fuel price situation will speed up the green drive from governments across Asia.
However, it is obvious that the use of renewable energy takes time and won’t immediately reduce security issues. As a result, there will probably be an elevated effort to increase the availability of fossil fuels and reduce their dependency on them.