Our South Asia Energy Analyst Mayank
Maheshwari discusses the main drivers behind a shifting
electric power landscape in his outlook for Asia energy.
----- Transcript -----
Welcome to Thoughts on the Market. I’m Mayank Maheshwari, Morgan
Stanley’s South Asia Energy Analyst.
There’s been an investment surge in renewable energy – to field
the world’s rising demands for energy and power. With a new White
House administration, however, there are questions about its
future. Today I want to dig into the profound shifts impacting
the production and consumption of power in Asia.
It’s Wednesday, November 20, at 9pm in Singapore.
The world consumed 25 trillion units of power last year and Asia
accounted for about half of that. Asia demand is booming like the
rest of the world, and power consumption is at a tipping point.
We forecast global power consumption will grow 26 per cent faster
through 2030 than in the last decade. Somewhat similar to the US,
we are actually seeing tightness in Asian power markets in coming
years as well. But even today countries like India, Singapore,
and increasingly Malaysia are seeing power demand grow at 1.5 to
2x faster than pre-COVID levels.
So, what’s driving this rapid growth? Outside of the residential
power demand, growth is driven by GenAI datacenters, re-shoring
of manufacturing facilities, there are new semi-conductor
investments that are coming through, and expanding new energy
supply chains itself are actually adding to the tightness.
Importantly though, regional differences in clean power costs and
demand are stark. In Asia, power prices have steadily risen.
Multiple regulators are acknowledging the tightness by extending
the life of coal plants, building new gas and coal facilities,
and even restarting nuclear power generation capacity – as clean
power alone cannot by itself handle this surge in demand.
Interestingly though, the cost to produce clean power has
declined pretty rapidly in 2024 to below-trend levels after a
period of significant inflation we saw post-COVID. On average,
solar panel prices in Asia declined 50 per cent, and the cost of
onshore wind declined 10 per cent – with energy storage costs
deflating by a third to levels not seen in the past five
years.
However, this cost deflation has been a lot more uneven across
regions, with the US and Europe seeing much smaller declines due
to tariffs and other supply bottlenecks. Asia is hence seeing
significant inflection in the economics for power generation
companies, especially in South Asia, which had lagged China
capacity adds over the last several years.
Part of the deflation in the clean power supply chain comes from
even the capacity overbuilds that we are seeing in geographies
that are looking to build their own clean power supply chains.
Regions such as India and Southeast Asia, where clean power
demand is growing very quickly, are adding to the glut in
capacity on clean power supply chains that we have already seen
in China.
Amid all the clean power developments in Asia, COP29 announced
a[n] updated climate goal. The UN climate conference being held
in Azerbaijan this year aims for a 59 per cent to 67 per cent
reduction in economy-wide greenhouse gas emissions by 2035.
That’s the clean energy update from Asia for now. Listen in
tomorrow, as my colleagues engage in a conversation about the
impact of the US election results on the sector.
Thank you for listening. If you enjoy Thoughts on the Market,
please leave us a review wherever you listen and share the
podcast with a friend or a colleague today.
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