The energy transition could create unexpected linkages in Asia

To focus only on China’s great-power contest with America risks missing other shifts that will prove every bit as important to Asian nations. The biggest has to do with the region’s energy transition. In 2024 burgeoning energy linkages across Asia could rewrite the way the region deals with itself, in ways that both reinforce and undermine a narrative of China’s dominance.

Take the fast-growing economies of South-East Asia. Their energy demand is expected to increase by a third by 2050. Yet the same nations have made promises to cut emissions to next to nothing. That will be a tall order, given that renewables account for a mere 15% of Asia’s power generation to date. In Indonesia, Malaysia and the Philippines, coal remains king.

The region has potential for renewables. The Mekong river already generates plenty of hydropower, in Laos above all—albeit, right now, at a significant environmental cost to the mighty river. The huge island of Borneo, divided between Indonesia and Malaysia, is also rich in hydropower potential. Yet such generation is a long way from the region’s key industrial and urban centres.

Hence the need for a network of long-distance cables and cross-border energy interconnections. Europe’s grid, with 400-plus interconnections, brings huge savings by matching demand with spare capacity. A better-connected South-East Asian grid, currently non-existent, could slash clean-energy prices, turbocharging the energy transition. In addition, rolling out a super-grid could foster wider habits of co-operation in a region marked by prickly nationalism and bureaucratic sloth.

For years you could not go wrong betting against Asian interconnections. Yet the mood is changing fast—in part because of higher hydrocarbon prices, in part because grid technology has come on in bounds. A series of interconnection agreements were signed in August at a regional summit in Bali. In a promising pilot project, Laos now sends electricity via Thailand and Malaysia to Singapore. That island country, with little space for its own renewables, is in talks with the Malaysian state of Sarawak regarding an undersea cable from Borneo. In 2024 it will look more closely at connecting similar cables to Cambodia and to planned solar farms on nearby Indonesian islands. All this could supply nearly a third of Singapore’s power needs in future.

Such projects can strengthen regional coherence, a boon in an era of great-power turbulence. Energy projects can also provide valuable counterweights to an often assertive China. Thanks to abundant sun and wind, Australia has potential for “green” hydrogen, made by splitting water using renewable energy. Ambitious plans are being touted in the Pilbara region of Western Australia for a huge renewable-energy hub. Japan and South Korea are interested in taking hydrogen and ammonia (a way to store hydrogen in a more portable form). The technology is untested at scale, but if it works, the geopolitical consequence will be to draw three natural democratic partners closer.

Something similar is at play in attempts by Australia and other pro-American countries to loosen China’s grip on the supply and processing of rare earths and critical minerals, several of which are indispensable for renewable technologies. Some in democratic Mongolia want to use its abundance of rare earths to move closer to Western powers as a counterbalance to its problem of being uncomfortably squeezed between its giant neighbours, China and Russia.

None of these efforts poses any immediate threat to China’s dominance in several fields critical to the energy transition. It remains the biggest solar-panel exporter, EV-battery supplier and critical-minerals processor. But the transition offers welcome new options to Asian countries in China’s shadow. In the coming year, they will grab them. ■

Dominic Ziegler, Banyan columnist, The Economist, Singapore