Antonio Della Pelle, of Enerdata Singapore provides an overview of three possible scenarios for Asia's future energy mix and how this could impact future storage requirements
The Conference of Parties (COP) 21 conference in Paris has posed a number of questions for market players in the energy industry. While there is no legal agreement, various countries have shown that energy policy discussions cannot neglect climate change. This will have huge implications on the energy mix of different countries.
There is a significant uncertainty for project developers and investors due to a lack of any commitment in the COP 21 discussions. Hence it is important to understand the forecasts for a variety of scenarios to assess the effect of uncertainty in policy implementations.
Enerdata has complied an energy mix forecast for Asia until 2040.
Three scenarios are presented – one scenario (Ener-Blue) provides an outlook of the energy system up to 2040 based on the central assumption that the different countries implement their stated commitments made during the COP21.
The other scenario (Ener-Green) explores the implications of more stringent energy and climate policies to limit the global temperature increase at around 2°C by the end of the century. The third scenario (Ener-Brown) describes a world without a global agreement which results in soaring CO2 emissions across the world, towards a +6 °C temperature increase by the end of the century.
The scenario analysis is based on the company's in-house POLES energy forecast model, which has been used for long-term energy forecasts purposes by several governments both in Europe and Asia, in addition to various industry players.
Asia Pacific energy demand
The final energy demand of the Asia Pacific region has increased by 4.2% a year over 2000-2014 period as compared to the global average of 2% a year for the same period. Rapid economic growth, urbanisation and better lifestyle are some of the factors behind the high growth in energy demand in the Asia Pacific region.
Energy demand in the EnerBlue scenario is expected to increase by 47% from 2015 to 2040. Demand will increase at the fastest rate from 2015 – 2020 and will progressively slow down as the Asian economies mature from the high growth stage. India and Vietnam will see the fastest growth in energy demand followed by China.
The structure of energy supply to meet the growing energy demand is also expected to change. Increases in electrification and fuel switch to electricity will increase the share of electricity in the energy supply. In 2015, electricity accounts for only 19% of the total supply and by 2040, share of electricity will increase to 27%.
Tighter climate policies will also affect the share of gas in power mix and the share of renewables will increase from 4% to 18% over 2015-2040 (EnerBlue scenario).
Currently, we have an LNG oversupply situation that has brought LNG at low price levels and supported an increase on spot trade thereby increasing the importance of storage. Asia alone, accounted for 57% of the spot and short term volumes in 2015. When looking at the current global regasification capacity we can see that it is more than twice the liquefaction capacity implying the possibility of low utilisation terminal factors and high competitiveness. In the near future regasification terminal operators, including LNG storage tank operators, need to be ahead of the competition with their business strategies.
Renewable implementation will require additional efforts to bring significant affordable energy storage technologies.
Today, the most used solution for energy storage is pumped hydro power, however it has its own limitations. Japan, the US and China account for more than 50% of the global energy storage with the US and Europe leading on emerging energy storage technologies.
This is a 'new' storage area that will grow in the near future to accommodate the evolution of the energy mix.
No matter which scenarios we prefer, we see two common themes emerging: the increase of gas and LNG as clean fuel and substantial development of renewable energy. Both of these energies will require additional storage solutions and further development of storage to capture the electricity generated by renewables.
Della Pelle will be looking at global energy demand for the next 25 years on the second day of the Tank Storage Asia conference in Singapore on September 28. For more information visit www.tankstorageasia.com.