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In the third quarter of 2021, 22 new insight papers have been
published in the IHS Markit Asia Pacific Integrated service, apart
from the regular updated reports. This research highlight
summarizes the key impact papers and provides an overview the
market signposts in Q3. A link to a select set of reports is
provided below.
The graphic of the quarter is selected from the "Low-carbon
initiatives in the Asia Pacific power sector," showing the progress
of initiatives in each market.
Low-carbon initiatives in the Asia Pacific power
sector
The Asia Pacific region is the largest emitter globally,
accounting for nearly half of the world's carbon dioxide equivalent
(CO2e) emissions in 2019, and the electric power sector has been
among the largest emitters of greenhouse gases.
In this paper, we describe the emission history from the power
sector in various markets in Asia Pacific and discuss the
low-carbon initiatives by focusing on policies and measures that
will lower emissions. We also provide recommendations in response
to the challenges and significant barriers.
IHS Markit will continue to track the region's decarbonization
progress, analyze the emission trend, and provide a carbon emission
forecast in our next report.
Highlighting challenges with grid reliability under the
energy transition for power markets in Asia Pacific
More frequent grid reliability events have been reported in Asia
Pacific markets, and the trend will continue. Recently, most Asia
Pacific power markets experienced certain grid events, such as
renewable curtailments, frequency violation, high spot prices, load
shedding, or even blackouts. The energy transition is accelerating
progress and amplifying these impacts on grids. Power market
regulators and operators need to rethink the power system
operations, planning criteria, and market structures as countries
make headway in the energy transition. If left unchecked, the
frequency of grid events would increase in the future.
The challenges for power systems in Asia Pacific are
significant. There are a few unique factors that make energy
transition challenges on power grids even more significant for Asia
Pacific countries: robust demand growth, a lack of generation and
demand flexibility, developing infrastructure, and the lesser
maturity of the power market structure.
Bangladesh's central and southern regions will shape
the future gas story, but pipeline access remains a
bottleneck
Bangladesh has 10 GW of under-construction gas-fired power
plants that are expected to come online by 2030. However, limited
existing pipeline connectivity in the south of the country is a
bottleneck that will need to be resolved to realize this growth
outlook.
Bangladesh's existing gas demand is mostly localized around the
central and eastern parts of the country. The central and southern
regions are expected to be the new demand centers based on
Bangladesh's power sector plan and the IHS Markit power
outlook.
However, trunk pipeline connectivity will be a constraint as the
southwestern region is still underdeveloped. Should infrastructure
fail to be developed on time, there is a risk that the gas-fired
power plants that are being built will be stranded.
China's national carbon market officially opened
trading
On 16 July 2021, trading at China's national carbon market
officially began. The trading inauguration of the world's largest
carbon market with over 4 billion metric tons of carbon emissions
each year in its first phase marks an important milestone of a
market-based tool to address the carbon emissions issue.
The future price trajectory will depend on emissions allowances
compared with the allowance benchmarks and market participants'
willingness to trade. Although the carbon price provides a
market-based signal to help China curb carbon emissions, the
government views high additional carbon costs on industries as
undesirable in the short term.
Southeast Asia initial steps in hydrogen
development
Development to encourage hydrogen use has just started in
Southeast Asia. A clean energy transition is underway that focuses
on shifting coal dominant regions toward low-carbon fuels.
Developed countries like Singapore and resource-rich Malaysia are
the front-runners in laying out hydrogen pathways, attracting
companies that are keen to embark on pilot projects. While IHS
Markit expects the short-to-medium term deployment of hydrogen to
be small, the initial steps taken have the potential to transform
into commercial leaps.
Singapore's push to become a chemical hub will increase hydrogen
production from unabated gas in the near-to-medium term. It is
exploring various hydrogen pathways to determine the suitability of
scaling up blue or green hydrogen use.
Singapore, Indonesia, Malaysia, and Thailand have started to
explore the use of hydrogen, setting targets for the long term.
However, emerging countries like the Philippines and Vietnam are
still grappling with the clean energy transition.
Sarawak, Malaysia, has attracted companies looking to
commercialize green hydrogen production with its rich hydropower
resource and represents the best chance for large-scale
deployment.
China kicked off national-level corporate renewable
procurement pilot
On 7 September 2021, China's grid companies kicked off a
national-level renewable transaction pilot with 7.935 TWh wind and
solar power traded across 17 provinces with a 30 to 50 yuan/MWh
premium to local mid-to-long term contract prices. The conducted
transactions were following the reported approval of the Green
Power Transaction Pilot Work Plan (the Work Plan) [绿色电力交易试点工作方案],
which officially enabled the renewable direct power purchase (DPP)
transaction between developers and end users nationally, although
document details are not yet released.
Local nonsubsidized solar and wind projects are the most favored
sellers in green power transactions. The Work Plan encourages
corporate buyers to trade with local nonsubsidized renewable
projects to help them gain extra revenue. The economic
attractiveness is undermined for subsidized renewables since they
may need to forgo the subsidy for the market-traded power.
The IHS Markit Climate and Sustainability team is pleased to
introduce the Australia hydrogen market tracker, in which we
provide key market developments, policy updates, major project
announcements, available funding, and a project pipeline. The
tracker covers the evolution of the hydrogen supply chain across
Australia including feasibility studies, research and development,
demonstration, and commercial-scale projects.
Key developments in the second-half 2021 edition include
Hydrogen eligibility has been included in over A$5 billion in
announced funding packages since 2018.
The federal government's support for a globally competitive
hydrogen industry gains momentum with announced progress toward
initiatives outlined in the November 2019 National Hydrogen
Strategy.
The Asia Renewable Energy Hub revised 26 GW project proposal
was rejected by the Minister for the Environment in June 2021.
China's 2021 natural gas development report: Natural
gas will be an important force to achieve carbon
ambitions
In August 2021, the China National Energy Administration (NEA)
issued the 2021 China Natural Gas Development Report (the Report).
The Report reviews the recent development in the global and Chinese
gas markets and highlights the central government's ambitions in
developing the industry in the coming years. Specific measures to
help realize these ambitions are expected to follow.
Natural gas will play a vital role to help China achieve the
dual goals of carbon peaking and net-zero carbon. While the 2020
report focused on the impact of COVID-19 on market development,
carbon ambitions have become the theme in the 2021 report. The
Report confirms the government's commitment to use natural gas to
displace higher carbon intensity energy sources in the short and
medium term and develop technologies to reduce emissions from
natural gas in the long term to achieve the net-zero emissions
goal.
The NEA will guide the industry to develop in an "orderly"
manner. The implied growth rates indicate a deceleration of growth
for the next 10 years, just about half of that seen in the previous
five years. Instead, the government is placing more importance on
quality over quantity in future gas market development centering
around supply security.
Role of nuclear power generation in the Asia Pacific
energy transition: Opportunities amid challenges
Nuclear power plays a significant role in the energy supply.
However, the industry has been struggling since the Fukushima
accident in 2011. Many Asia Pacific regions have adjusted their
strategies and adopted different nuclear power development policies
after weighing the affordability, safety risks, and the desired
contribution to the energy transition.
Mainland China and India are expected to lead Asia's nuclear
power development owing to robust power demand and prominent
environmental pressure.
Traditional nuclear power countries such as Japan and South
Korea are unlikely to approve new reactors given strong public
opposition and political reasons.
The nascent small modular reactors (SMRs) might provide a
solution for the industry, although they are not commercially
mature yet.
South Korea's new gas plan raises long-term LNG
expectations
On 27th April 2021, South Korea's Ministry of Trade, Industry
and Energy (MOTIE) released the 14th Long-Term Natural Gas Supply
and Demand Plan (2021-34) ("the Plan"). This document is the main
planning tool for South Korea's natural gas sector. Several aspects
of the Plan have significant implications for Korea's LNG
market.
Higher expectations for long-term LNG demand.
Intention to introduce more flexibility in Korea's long-term
contract portfolio.
Change in minimum LNG storage requirements.
Additional Insights and Strategic Reports published in third
quarter 2021
What does China's red-hot summer LNG market mean for imports in
the 2021/22 winter? --
View public article
China's 2021/22 winter supply preparation: Improved but still
at risk of a supply shortage in a colder-than-average winter --
View public article
New renewable trading rules released in China: How to procure
renewables in Guangdong and Zhejiang --
View public article
How far is China's offshore wind from reaching grid parity? --
View public article
China drafts new midstream regulations: Standardizing pipeline
operation and maintaining supply security
India's gas market renaissance led by KG Basin production
The Erawan dispute further boosts Thailand's LNG imports in
2022-23
China's new time-of-use power pricing: A transitional measure
to secure peak hour supply
Market-based cross-border electricity trade in South Asia: A
step toward an integrated regional power market
How the power sector emissions in South Asia will define its
global contribution to climate change
New ambitious target: How far is Taiwan from the offshore wind
capacity goal?
The future of Afghan-Central Asian energy trade and relations:
An initial assessment
Logan Reese is an associate director on the Asia Pacific
Regionally Integrated team at IHS Markit, focusing on Australia
power and gas markets.
Ankita Chauhan is a senior renewable analyst on the
Climate and Sustainability team at IHS Markit, covering research
and analysis for Indian and South Asian markets.
