Future shock: Asia is running out of gas
By Alan Boyd
SYDNEY - When crude oil surged past US$70 a barrel in mid-2006, Southeast Asian
governments were forced to confront an inconvenient truth that might almost
have come from the hand of former US vice president Al Gore: income levels
could not be sustained unless new energy sources were found, and quickly.
The World Bank has calculated that oil-import dependency trimmed as much as 1%
off the region's gross domestic product
last year, as higher production costs eroded export earnings, boosted freight
overheads and inflated food prices.
Add in the threat posed by climate change, as well as the rising tide of
diplomatic pressure for the Third World to meet emission targets under the
Kyoto Protocol, and Southeast Asia's future shock of energy depletion has
suddenly become all too real.
"Climate change clearly poses a major threat to the livelihoods and
environments of the ASEAN region," Hans Verolme, director of the World Wild
Fund for Nature's Global Climate Change Program, told the Association of
Southeast Asian Nations summit in Cebu, Philippines, last month.
"The most efficient and economic way to reduce oil dependence will be through a
stronger regionwide effort on energy efficiency."
But how to do it?
Of the 10 emerging and developing countries within the ASEAN bloc, only
Indonesia and Malaysia are relatively self-sufficient in crude oil - and that
comfort zone will evaporate within two decades, along with most natural-gas
supplies.
From the global perspective, the US Department of Energy has calculated that
oil demand will grow by 35% between 2004 and 2025 - from 82 million barrels per
day to 111 million - largely because of the voracious appetite of newly
industrializing countries such as China and India.
Output would need to rise by a similar amount. However, this assumes that the
major producers, including Saudi Arabia and Nigeria, will double or even triple
their production; few independent analysts now believe this will be possible. A
greater likelihood is that crude-oil supplies to Asia will begin to dry up
within two decades.
But while the world oil markets may be fickle and manipulative, the
alternatives are not so obvious, even when coupled with efficiency drives. Coal
is perceived in Asia as being too dirty, while local deposits are usually of
poor quality; there is grassroots opposition to costly and invasive
hydro-electric schemes, and solar generation lacks the economies of scale that
could create a viable market.
This hasn't stopped a promising spurt of innovation that could lay a basis for
renewable sources that can eventually supply a substantial portion of overall
energy output, ranging from wave and wind generation to a bewildering array of
biofuel applications.
According to the World Bank, which is spearheading an Asian alternative-energy
program, spending on renewable-energy and efficiency projects in Asia as a
whole has exceeded $1.5 billion in loans, credits and grants since the strategy
began in 1992 - when there was a single project valued at $2 million.
By 1999, lending for alternative-energy schemes had already exceeded 46% of all
spending in the power sector. Although this period coincided with a decreased
volume of financing for conventional projects, it is believed that renewable
projects still account for about half of all energy investment in Asia.
Nobody is sure what the investment returns will be for technologies that are
largely untried in this region. But investors are coming because of a
realization by policymakers that there will be no set formula for energy
sufficiency: the answer will be a mix of applications that offers plenty of
growth potential without breaking the bank.
"Over the past several years, as the dimensions of the energy and climate
crisis have unfolded, the press, the public and politicians have embraced
'silver bullet' solutions one after another according to the fad of the day.
One moment it's hydrogen, then ethanol, then nuclear power, then wind," said
prominent US environmentalist Kelpie Wilson.
"Today there is a growing recognition that no single energy technology can
replace fossil fuels, but there is still no recipe that tells us how to combine
energy technologies into a healthful brew that can save our planet and our
civilization."
A study coordinated by the American Solar Energy Association (ASEA) with input
from a range of alternative-energy industries found that the US was capable of
meeting its goal of 60-80% emissions reduction by the middle of the century if
it embraced renewable forms - without compromising economic growth. Energy
efficiency would account for 57% of the reductions and renewables the remaining
43%.
There have been no comparable studies for Southeast Asia, but the model of
community-based power generation envisaged by the ASEA is already evolving in
this region and fits neatly into rural lifestyles.
Most of the schemes being developed are so small that they wouldn't register on
a conventional power graph. The World Bank's projects collectively will
displace only about 1 gigawatt's worth of fossil fuel, a fraction of overall
capacity, and supply an estimated 530,000-630,000 rural households. Most are
consumers who have not previously had access to modern energy services.
The scale is limited by the classic energy conundrum of having to produce
sufficient electricity in the places where it can do most good. In the case of
wind power, which appears likely to be one of the success stories of the bank's
strategy, it has been difficult to find sites that are both windy and close
enough to population centers.
Studies by the bank in four target countries have found that an impressive 25%
of rural populations would benefit from low-scale wind plants but only Vietnam
offers a sustainable potential for larger output. While 8.6% of Vietnam has
winds of good to excellent strength, the proportion falls to 0.2% in Cambodia
and Thailand and 2.9% in Laos.
A $50 million plant opened by the Philippine government this month in Ilocos
Norte province that will produce 25 megawatts of power is believed to be the
first operational wind farm in Southeast Asia. It is is targeted at dispersed
rural consumers.
The search for more visible solutions, especially ones that can embrace urban
populations, has taken governments on two very different paths: nuclear
reactors and biofuels. Realistically, only the latter is likely to be a part of
immediate post-oil energy planning.
At least four countries have undertaken preliminary studies for nuclear plants,
encouraged by European and US evaluations that a reactor can be operated for as
little as 2 cents a kilowatt-hour, compared with 23 cents for solar and 10-12
cents for coal and gas.
These data do not include the higher development costs of nuclear plants, the
price tag for processing or disposing of radioactive waste, or the need to ship
in uranium, which would establish a whole new important dependency. Then there
is the problem of finding enough trained technicians to staff the facilities.
Biofuels are a more natural fit, offering all the virtues, on the surface at
least, of a model alternative energy form. They can be manufactured from just
about any feedstock, are cheap to produce, and are reputed to emit almost zero
emissions of potentially harmful gases.
Growth has been phenomenal in the past five years, with Malaysia, Thailand, the
Philippines and Indonesia all establishing biofuel task forces. Biomass for
co-generation plants is also on the list of alternative fuel options for
Vietnam, though it appears unlikely to offer short-term potential.
The raw material comes from rice, oil palm, corn, coconuts, peanuts, sugarcane,
soybeans and coffee, all plentiful in Southeast Asia. Once processed it can be
mixed with diesel to replace motor fuels, used to power small generators in
homes and factories, and bottled for export - fulfilling ASEAN's
regional-cooperation pledge.
Yet biofuels also have their skeptics, not least within the environmental and
scientific communities that were once so vocal in support. Still to be verified
is whether the industry is as eco-friendly as claimed and offers a viable
economic alternative to fossil fuels.
Studies in Australia and the US have concluded that ethanol, the biofuel blend
used for motor vehicles, pollutes groundwater by releasing high levels of
benzene. The US journal Science even reported that fuels containing ethanol
produced just as many greenhouse emissions as gasoline. Greenhouse gases in the
atmosphere trap the sun's heat, theoretically causing global warming that could
change the world's climate catastrophically.
Ethanol has also been found to damage cars manufactured before 1986, while
there can be wider ignition problems for fuels that contain 20% or more the
substance, also known as ethyl alcohol or grain alcohol.
From an economic viewpoint, the impact of biofuels varies sharply depending on
location and the available feedstock. While oil palm produces about 2,700
barrels of oil a year per square kilometer, the highest level of efficiency
recorded for any feedstock, corn produces only 76 barrels and coffee 147.5.
So much feedstock is consumed in the production process that 540% of all arable
farmland worldwide would have to be used to meet projected energy demand, or
54% of the Earth's entire land surface. Growing biofuel on all of the world's
farmland would still only provide about 20% of the energy produced each year
from crude oil.
There is new land, but most is found in forest reserves, pitting investors and
politicians against local communities. Indonesia's spreading oil-palm
plantations have created a regional problem of smoke emissions from clearing
activities that will test severely ASEAN's much-touted Cebu Declaration.
Economic returns from biofuels are also skewed by generous government subsidies
for output, including preferential tax treatment and direct grants, that have
shielded ethanol in particular from market forces.
Politicians cite the public interest for maintaining protective barriers: when
Thailand and Indonesia dismantled their subsidies for conventional fuels in
2005, growth rates plummeted in the fourth quarter as pump prices went up.
Biofuels, like other alternative forms of energy, will become competitive once
the petroleum begins to run out. But the ethanol mix isn't the only blend
economic planners will have to get right before that unnerving day dawns.
Head
Office: Unit B, 16/F, Li Dong Building, No. 9 Li Yuen Street East,
Central, Hong Kong Thailand Bureau:
11/13 Petchkasem Road, Hua Hin, Prachuab Kirikhan, Thailand 77110
