This article is transferred from the author | Chloe Farang
Asia's large number of proposed gas projects could lead to high emissions in the coming decades, but recent gas price volatility may force policymakers to think twice.
According to the Global Energy Monitor, there are currently plans to build more than 285 GW of gas-fired power plants in Asia, an expansion that would nearly double the region's gas-fired power generation capacity.
About half of these new installations are in Southeast Asian countries. These countries intend to use these installed capacities to cope with the surge in electricity demand that may be ushered in after the epidemic. But as their domestic natural gas production declines, they are chasing each other to expand LNG imports.
Abhishek Rohatgi, an Expert on Natural Gas Demand in Asia at Bloomberg New Energy Finance, told chinadialogue that the Philippines and Vietnam are expected to import their first LNG this year. Vietnam has two new LNG receiving stations to be put into service, the Philippines has one, and Thailand, Southeast Asia's largest natural gas consumer, also has one.
The IEA expects emerging Asian economies to be the second largest LNG demand growth market after China between 2021 and 2025. (In this analysis, China and India are not considered emerging economies.)
"This has led to a large number of multi-billion dollar projects," said Sam Reynolds of the Institute for Energy Economics and Financial Analysis (IEEFA). "Many developers see unprecedented opportunities."
The myth of "transitional fuel"
Oil majors and LNG exporters advertise natural gas as a "bridge fuel" for Asia's emerging economies. They call LNG a reliable and cleaner alternative than coal that can be used to compensate for the discontinuity of renewables and thus help decarbonize these countries without affecting economic growth.
But some analysts told chinadialogue that adding to the proposed project was a big gamble given that natural gas prices were at record highs. At the same time, as the cost of renewables and energy storage technologies continues to fall, it means that natural gas investments will only be able to reap the costs if climate change is out of control.
"Renewables with energy storage facilities are already, or will soon be, cheaper than natural gas across Asia, well before LNG contracts expire 20 years ago," said Robert Rozansky, an LNG research analyst at Global Energy Monitoring.
According to the Global Electricity Review of Ember, a British think tank, Vietnam's recent experience shows that the rapid and large-scale deployment of solar and wind energy can meet the growth in electricity demand and even reduce the share of fossil fuels in the power mix. Vietnam's solar power generation will increase by 337% in 2021, helping to reduce both coal and natural gas use in the country.
The International Renewable Energy Agency found that renewable energy projects built in emerging economies could save $156 billion over their entire life cycle in 2020. Rather than building and eventually phased out fossil fuel infrastructure, scaling up renewables now will provide a cheaper and faster path to decarbonizing power systems.
Tightening climate policy could "cause gas facilities to close before the end of life expectancy, hurting economies and workforces that have become dependent on them," Rozansky said.
But major gas producers trying to create new markets continue to advocate that developing natural gas is an effective climate and development strategy for low- and middle-income countries.
"In the medium term, coal-to-gas conversion will be an overwhelming theme in the Asian gas sector," Valery Chow, vice president of energy consultancy Wood Mackenzie, said at a june conference.
"Given that coal currently accounts for more than 50 percent of the energy supply mix, there are significant opportunities for consumption of natural gas as a means of helping to achieve decarbonisation goals."
Producers quickly identified business opportunities. Last year, Russia's energy ministry marketed natural gas as an "eco-friendly fuel," saying it could help Southeast Asian countries get rid of polluting coal and diesel. In 2020, Japan, an importer, encouraged other countries to consume natural gas, thereby stabilizing the volatile global LNG market.
In the United States, the Trump administration refers to LNG as "free gas," which provides its allies with "diverse and affordable clean energy" and creates export destinations for itself.
In a July 2021 memorandum, USAID encouraged the Philippines to import U.S. LNG as a cost-competitive and effective climate strategy to "complement and complement volatile renewable energy."
But a few months later, at the 26th United Nations Climate Change Conference in Glasgow, England, the United States and European countries pledged to end international financing of fossil fuels, including natural gas, by the end of 2022, prioritizing clean energy. It can be seen that these countries do not agree with the statement that the decarbonization of emerging countries is inseparable from natural gas.
Lock Asia into a high-emission path
Opponents argue that countries that use natural gas as a "transition fuel" to replace coal will be "locked in" into expensive and high-carbon infrastructure.
The idea that natural gas is cleaner than other fossil fuels, especially coal, is increasingly being called into question. The Natural Resources Defense Council found that the short-term climate impact of LNG in the U.S. is 67 to 74 percent of that of coal.
Therefore, in a carbon-neutral world, there should be no place for new natural gas capacity. The International Energy Agency noted last year that to align with the Paris Agreement's goal of limiting global warming to 1.5 degrees Celsius, new investments in fossil fuels such as natural gas must be halted by the end of 2021.
The Global Energy Monitoring analysis found that if Asia's currently planned LNG terminals and gas pipelines are built and operating at full capacity, the resulting imported gas consumption will consume a quarter of the remaining carbon budget of the world's 50% chance of achieving the 1.5 degree Celsius target.
While not every planned project will be built, the region's gas boom threatens its climate goals and could "make it harder for the world to avoid the worst effects of climate change," Rozansky said.
Gas-fired power plants also emit nitrogen oxides, which are involved in the formation of air pollutants such as PM2.5, nitrogen dioxide and ozone.
However, Lauri Myllyvirta of the Centre for Research on Energy and Clean Air told chinadialogue that under the influence of the perception that fossil gas is a clean energy source, "gas-fired power plants are built in densely populated areas that do not accept coal-fired power plants." ”
Excess projects, turbulent markets
Traditionally, Asian countries have planned their power supply around large, centralized baseload power. "Natural gas provides an opportunity for the power industry to continue this philosophy, but only in a fossil fuel." IEEFA's Reynolds explains. Emerging Asian economies need some LNG to compensate for the decline in domestic production, but there is a clear "mismatch" between investor expectations and actual demand, he warned.
An IEEFA detailed analysis of projects in seven emerging markets in Asia found that the scale of the proposed natural gas projects was "unrealistic".
The report concludes that 62 per cent of LNG reception capacity and 66 per cent of gas-fired power generation capacity in the proposed project are unlikely to be built. The Philippines' 66 percent planned LNG reception capacity and 73 percent gas-fired power generation capacity are neither feasible nor possible.
The current gas demand for the Philippine Archipelago comes mainly from five gas-fired power stations, which are supplied by the country's Malampaya gas fields, which are expected to dry up by 2030.
Officials estimate that the plants will need 5 million tons of LNG per year to maintain operations. But IEFA said the country is currently planning to import more than 20 million tons of LNG.
Gerry Arances, executive director of the Center for Energy, Ecology and Development in Quezon City, Philippines, said the Philippines had simply swapped its dependence on one fossil fuel for another, a repeat of the mistakes of the coal-ridden power sector, which raises concerns about energy security and affordability.
"Companies that once deepened the Philippines' reliance on coal are now planning a large number of LNG-related projects. One of the big myths we used to face was that coal was clean. Today's promotion of natural gas as a clean transitional fuel is another myth created for the benefit of the industry," he said.
With natural gas prices soaring to all-time highs in recent months and Europe scrambling to shed its dependence on gas imports from Russia, promises of "cheap fuel" are no longer credible.
The sharp volatility in the natural gas market has left price-sensitive emerging Asian economies with the choice of "paying for fuels that are not good for the economy or leaving households and businesses with energy and power shortages," said IEEFA's Reynolds. "It's a real dilemma."
In the Philippines and Thailand, where price increases are passed on to consumers, a surge in LNG imports could make high electricity prices even higher.
According to Bert Dalusung, an energy transition consultant at the Institute for Climate and Sustainable Cities in Manila, volatility in the natural gas market could help weaken its role in the energy transition.
"The role that this flexible energy source should play should not be to replace base-charged coal power," he said, but to provide a residual load that renewables cannot meet.
"Fuel price fluctuations that kill coal also end up killing fossil gas," thus avoiding locking us into highly polluting infrastructure, he said.
Hengky, a senior LNG analyst at Singapore-based Refinitiv, agrees that while natural gas may still be used as a transition fuel, market volatility bodes well for its demise. "LNG is considered well supplied and is a cheap fuel, but I think recent events have proven that this is not the case."