Towards a Sustainable Future

Towards a Sustainable Future

Energy Connectivity in Asia and the Pacific Region You do not have access to this content

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11 Mar 2016
9789210597265 (PDF)

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This report, aimed at policy makers from Asia and the Pacific, provides a historical perspective on regional energy connectivity and its implementation challenges, as well as outlining an action plan for accelerated regional energy integration to bring shared benefits to ESCAP’s member States. The report concludes that energy connectivity can increase the supply and reduce the cost of energy, while lowering its social and environmental costs and addressing the challenges of energy security. Regional cooperation in energy has been evolving mainly through five subregional clusters –– South-East Asia, Central Asia, South Asia, North-East Asia, and the Pacific. A great many resources have been spent on bringing the subregions together; however, overall results remain below the potential. One of the main reasons for the slow progress is the decision-making process for cross-border projects. Energy markets do not connect by themselves; in the next few decades, actions will be needed to build physical energy networks, institutional connectivity and, most importantly, trust between nations to meet the Region’s two most important challenges — overcoming energy poverty and mitigating climate change. Governments, policymakers, and experts must work together in partnership with the private sector to provide sustainable energy for all by 2050 by connecting Asian energy networks and building institutions of integration. ESCAP is in a unique position to lead such a transformative partnership for ensuring that regional energy connectivity creates incentive structures and institutions to deliver cost-effective energy for the entire Region. It is time to build energy connectivity for an interdependent Asia and the Pacific –– prosperous and connected –– thus ending Asian economic dependence on a single source or a single fuel.

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  • Foreword

    The energy choices we make today will shape the development of the Asia-Pacific region throughout the 21st century. The global community has recognized that energy is not only central to economic and social progress but also has a profound impact on the environment. This is why energy is critical to the successful implementation of the new universal and transformative 2030 Agenda for Sustainable Development. It is also why Sustainable Development Goal specifically emphasizes the need to ensure access to affordable, reliable, sustainable and modern energy for all, aiming to ensure access, double the share of renewable energy and double the rate of implementation of energy efficiency by 2030.

  • Acknowledgements

    Under the overall direction of Shamshad Akhtar, Under-Secretary-General of the United Nations and Executive Secretary of ESCAP, this report was prepared by Anil Terway and Rita Nangia with support from the following ESCAP staff: Hongpeng Liu, Kohji Iwakami and Michael Williamson; and consultants: Derek Atkinson and Sean Ratka.

  • Abbreviations and explanatory notes
  • Introduction and overview

    The global leadership at the United Nations adopted the 2030 Agenda for Sustainable Development in September 2015. Universal energy access is an important goal to transform the world of development and the Agenda is intended to stimulate action such that by 2030, affordable, reliable, modern energy service for all becomes a reality. The task at hand is extremely challenging: despite enormous economic success, the Asian-Pacific Region (“the Region”) is home to the majority of the world’s energy-poor population, with 455 million people lacking access to electricity. Nearly 1.8 billion people rely on traditional fuels for cooking and heating, which raises significant environmental concerns, health problems and gender inequality issues (ESCAP, 2015).

  • Regional energy connectivity
  • Mapping the existing energy connectivity

    Throughout human history, different phases of globalization and development are tied to innovations in infrastructure connectivity. Recent studies on the history of technology find that Europe’s integration began about a century earlier than the formal establishment of the European Community in 1951; infrastructure networks covering energy, transport and communications links have been the essence of European integration. Centuries ago, Asia, too, was well-connected, as the Silk Road created prosperous clusters of towns and trading posts. The Silk Route was a major channel for trade and the transfer of technology — it promoted knowledge-sharing on administrative practices such as standardized weights and measures, a system of numerical notation and identification, the labeling of commercial goods, and the opening of far-flung colonies

  • Lessons from ongoing initiatives

    Regional cooperation in energy has been evolving in Asia and the Pacific region mainly through five subregional clusters –– South-East Asia, Central Asia, South Asia, North-East Asia and the Pacific. The small island nations in the Pacific have a very different perspective on energy connectivity; while physical infrastructure is unviable, software for managing energy security risks can be better organized through close cooperation, and the countries also benefit by sharing information related to distributed electricity generation, mini-grids, renewable energy and energy access. The Pacific Power Association, which is a partner agency of the Secretariat of Pacific Community, promotes cooperation among 25 electric utilities.

  • Towards energy connectivity in the Asia-Pacific region

    The UN-ESCAP members combine both the largest producers and the largest consumers of energy. And although the Asia-Pacific Region is connected to the global economy and is the largest trading area of the world, accounting for per cent of world trade, energy trade remains much below its overall potential. This chapter articulates the vision for delivering the Ministerial mandate given to ESCAP at the first Asia Pacific Energy Forum in 2013 and outlines actions needed to realize energy connectivity for Asia and the Pacific Region.

  • Institutions for promoting energy connectivity

    Several estimates are available regarding the investment needed in the energy sector. The IEA has estimated that the required investment in Asia in the energy supply (including fuel production) and to improve energy efficiency under the New Policies Scenario will add up to about $15 trillion (2012). In another study, ADB has estimated that the investment needed in the energy sector (excluding fuel production) in the developing countries of Asia from 2010 to 2020 will be $4 trillion (2008). The study also estimated that the share of investment in regional projects would be about 4 per cent of the national investment, which is comparable to the case in Europe. Using these estimates, about $20 billion will be needed annually for energy connectivity infrastructure in Asia and the Pacific region. At the 2015 Paris Climate Conference, member countries committed to lower emissions, which will require more power generation using renewable energy, reduction in losses and use of new technologies to improve efficiency. The required annual investment will be higher as energy planning shifts towards cleaner energy.

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    • Subregional energy projects

      Central Asia inherited the Central Asia Power System from the Soviet period. It included a load dispatch centre in Tashkent, Uzbekistan, and a single-circuit 500 kV transmission line connection in the southern part of Kazakhstan, Kyrgyz Republic, Tajikistan, Turkmenistan and Uzbekistan.

    • Project CASA 1000 - High transaction costs

      In March 2014, the World Bank approved assistance of $526.5 million for the implementation of the Central Asia South Asia Electricity Transmission and Trade Project (CASA 1000). The project cost was estimated at $1,170 million; it included the implementation of 750 km of 500 kV high voltage direct current transmission line, three convertor stations (1,300 MW capacity in Tajikistan and Pakistan, and 300 MW capacity in Afghanistan), 475 km of high voltage alternate current transmission line and substations, and grid reinforcement in Tajikistan. Also included in the estimated project costs was $120 million for project implementation support, community support programmes and environmental and social costs. The Islamic Development Bank has provided $250 million, the four participating governments (Afghanistan, Kyrgyz Republic, Pakistan and Tajikistan) will provide $134.5 million, and bilateral donors, including Australia, United Kingdom and the United States, have committed to fill the financing gap.

    • International experience - Gas and electricity

      Energy connectivity involves cross-border wholesale gas and electricity transactions that may be market-based, reflecting demand-supply deficit or surplus, or through administrative processes based on cost of providing service. Gas and electricity cannot be seen but they can be metered and supply can be turned off, which makes it possible to trade them like other commodities. Furthermore, there are physical markets that require delivery and off-take of gas and electricity, and financial markets that exchange derivatives linked to the physical market. Trading energy derivatives brings in additional funds from investors for operations and long-term investment in the energy sector. More recently, carbon emission has been commoditized so it is becoming a policy instrument for lowering greenhouse gas emissions, and when large investors participate in carbon emission trade, there will be new capital for implementing zero-carbon energy capacity.

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