Asia's Energy Security Shift Is Accelerating Faster Than Expected

[00:00:00] Speaker 1: Energy media has been arguing for some time that Europe and Asia are redefining what energy security means. It's no longer a secure supply of oil and gas at a reasonable price. Now it's all about producing energy domestically with renewables and batteries and so on. I'm going to talk to Akshat Rathi, who is a climate journalist at Bloomberg that just wrote a, or co-wrote, I guess, a story about this. So welcome to the interview, Akshat. Hey, it's nice to be here. Thanks for having me. Give me the overview of the argument that you and your colleagues made in that story. [00:00:38] Akshat Rathi: I thought it was well done. So almost the weekend after the war began, one of the things that we started discussing was what is going to be the long-term impact of this, because it was kind of a repeat of exactly four years ago when Russia attacked Ukraine. Europe at that time came up with this comprehensive plan to try and move away from Russian fossil fuels, and that took them in very interesting directions. So as a newsroom, we wanted to be prepared for the kinds of things that Asian economies, which would be the worst affected through this disruption, might be able to do. But unlike last time when there was a clear aggressor and there was a clear solution from a block of countries wanting to deal with that aggressor, this time things were more diffused. And so it took us a while for us to see governments actually take action and what types of actions they were taking to be able to look at. And the story now three months on basically shows you that Asian economies, when hit with an energy shock, when hit with shortages, are first looking towards clean energy and electrification as their means for long term solutions. Short term, they're just feeling the pain. [00:02:00] Speaker 1: Akshot, back in 2022, what the first thing that European countries did was look for new sources of supply. So electrification, more renewables, more energy efficiency, that was a medium to long term supply, solution. But in the short term, they had to look for new sources of supply. And here in Canada, we're taking our government and the oil and gas industry are taking the view that in fact, looking for new sources of supply is the only strategy that Asian countries are pursuing. What would be your take on that? [00:02:37] Akshat Rathi: I would be, first, I would dispute that that was short term response, because there was both short term and long term response from Europe on both fronts, in fact, because here's the thing. In the short term, if you are short on natural gas, you could go nowadays to the liquefied natural gas market, which by the way, even before the Canadians build anything new, is these days pretty well supplied. Even with where Qatar is right now and the Strait of Hormuz being closed, LNG hasn't really shot up to the levels that we had seen during the Russia-Ukraine crisis. So you go to the LNG market. But Europe also did try and make some longer term bets. So Germany, for example, did a big long term deal, 20 year deal with Qatar, which allowed them to invest in this extra expansion. But Europe also did the same thing on clean energy and electrification, because we know now that you can build a solar plant within months, you can put a battery plant within months, and you also have to have a turnover of your gas burning devices into electric, which takes longer term. So even on the clean energy stuff, you can now take both short term and long term steps. It is true that last time around, there was because of what happened in Europe, some amount of liquefied natural gas supply that came online, partly because of Germany underwriting it, partly because markets were betting on it. In Asia, though, they already aren't huge consumers of liquefied natural gas. They were expected to be growing consumers of natural gas. If you look at long term demand forecast for natural gas, Asia is supposed to be the place where natural gas starts to be incorporated into the energy mix. But countries like Pakistan and Bangladesh, even India are now rethinking whether they will be needing all that gas and rather turn to renewables or sometimes coal as well. One of the issues I understand is the [00:04:50] Speaker 1: need to pay from their foreign currency, which no country really wants to do. They would rather import solar panels and batteries and wind turbines than continue paying for fuel all the time. Is that a bigger issue for emerging economies in Asia than it might be for more mature economies in [00:05:15] Akshat Rathi: Europe? Yes, for most developing countries, that is certainly an issue that they do not have that much foreign currency to play with. India, for example, right now has had the rupee devalued so harshly because suddenly its same volume of oil and gas import is way more expensive and does more dollars are being spent to buy that. So 100% one of the ways in which during an energy shock, and not just one, this time we have a dual shock. Right. 2022 affected not just Europe, but it also affected Asia at the time. You know, Pakistan and Bangladesh had blackouts, some of the worst blackouts. And this is sort of similar to the 1970s, 1973 and 1979 oil shock that we saw. And both these shocks are very deep and will have much longer term consequences because we know what the 70s did to Western economies. And this is sort of the moment for Asia to take this shock and really rethink where its energy system is going. [00:06:24] Speaker 1: Akshat, how much of this shift in towards a new view of energy security is driven by the market and how much is going to be driven by government policy, do you think? [00:06:36] Akshat Rathi: It is going to be a mix. We know that for example, larger projects are going to require governments to approve them. So take the example of Philippines, which I report on pretty heavily for this story. One week after the war started, Philippines realized, oh, we're not going to get our LNG supplies from Qatar, which is where they got almost all of their LNG from. And so they said to their coal power plants, you can burn more coal if you like. One week after that, they realized, oh, this is going to last a bit longer than we thought it would. And so they started putting out these loan programs where consumers could buy rooftop solar at short notice and install them on their rooftops. And it was a loan program. So you would pay back that loan, but because your energy bills would fall, you'd be able to make those loan payments. You know, a few weeks after that, by the end of March, they had also come out with this plan of speeding up the renewables projects that had been approved, that some of them had been constructed, but had not been connected to the grid. So the kinds of problems that we face in the West where permitting is required and you need to be able to make sure that the grid is able to absorb all this clean energy, they sped that process up. And we saw something like 30 projects, 1.5 gigawatt worth of projects came online by the end of April. So these are places where governments will be involved because policy tends to allow for market certainty for operation. But at the end of the day, consumers also, unlike in the past, have a say now because they can go out and individually buy solar panels and batteries and electric cars and make a decision to move away from fossil fuels. I mean, one number just to throw because I saw it today and it was stunning. In the month of April, in China, the total amount of electricity consumed for charging electric cars went up 70% year on year. You know, consumers are seeing gas prices are going up. There's a shortage of oil in the world. And so they have these options to use electric cars and not just use them, but use them more because this is what you do when you're faced with a price shock. [00:08:56] Speaker 1: Akshat, we've heard stories like the ones out of Pakistan where consumers were buying balcony solar panels and rooftop solar panels and had a significant impact on the grid. Akshat, if we use that as a template, are other countries copying that model of development? [00:09:20] Akshat Rathi: Oh, very much so. I mean, and we should look at some developed country examples just so that it's clear in the context. So one of the most successful rollout of batteries right now is in Australia. It is, as of 2025, the third largest deployer of batteries at homes. And if you take it per capita, there is no competition. Australia only has 25 million people in its entire country. And why is that happening? Because before that, Australia was also the place where it had the greatest penetration of rooftop solar. So about 40% of all homes in Australia have a rooftop solar. And suddenly prices were going negative during the day because there's just too much sun. And so the government came out with this policy to provide 30% subsidy to build batteries, to buy batteries for homes. And the utilities combine these batteries into a virtual power plant. And so suddenly you are getting this boom in solar panels and in batteries, which is also helping keep the prices of electricity lower. And it is happening partly because of government incentive, but partly because consumers are choosing to make that choice. [00:10:37] Speaker 1: Akshat, here in Canada, the oil and gas industry and its advocates are arguing that what you're talking about is not a structural shift. It's a cyclical response to high market prices created by the energy [00:10:54] Akshat Rathi: shock. How would you respond to that? Well, we know that any new oil and gas project to be brought online is going to take many, many years. So any company looking to invest in oil and gas will have to project for the future price of oil and gas, not the current volatility that there is. And if you look at the future price for oil, you know, it is expected to go below $70 by 2028. If that is keeping you in the money, maybe you want to build a project which will come online five years from now and you're able to still get maybe $60 a barrel of oil. But it is worth noticing that the projections for where energy demand was supposed to go, because Asia was supposed to be the buyer of a lot of oil and gas, given where Western economies have been shrinking their consumption of oil and gas, those projections of future are much less certain now, given the energy shock. Because this is not any longer just a price question. It's a psychological, political and geopolitical question. That's what the 1970s did. The 1970s oil shock, by the way, the embargo that started in 1973 lasted only a total of five months. But we talk about it 50 years later. Why? Because it made the politics really difficult. It told Western countries that Middle East oil companies, all countries can decide to not send you oil. Just having that threat, the oil weapon, was enough to move the politics and the policies that followed. That is how Asian economies are now looking at what happened in the Strait of Hormuz. Something that they always thought would be open, something that they have made friendly relationships with many Middle Eastern countries for, is no longer on the table because of some warring factions around the world that are involved in this process. This is a political choice that they will have to make whether they want to depend more on imported oil and gas in the face of a political [00:13:15] Speaker 1: shift. Okshat, one of the things that I find curious that's coming out of this turmoil is that many in the oil and gas industry and the governments that support them are still clinging to the modeling assumptions and conclusions that come out of OPEC, for example, or come out of ExxonMobil and other sort of conservative think tanks. And they take the attitude that, well, this is only a short-term issue and then we'll go back to this rapid growth, you know, out to 2050 and everything will just be fine. How do we, I guess what I'm getting at here is what are the proof points that this is going to be a permanent shift as opposed to a short-term shift with a bounce back for fossil fuels? [00:14:14] Akshat Rathi: So in the story, what I did was, you know, look at the immediate short-term things that Asian countries have done and take a step back, look at the 1970s oil shocks and the policies that followed. We know, for example, that oil at the time was about 25% of the global power mix. And within 15 years, it was down to 10%. There was a huge shift away from oil because oil had suddenly become expensive. How did that shift come about? Because governments like France, like Japan invested in building lots of nuclear. So did Canada and the US, but Canada and the US also went back to burning coal at the time. So these two shifts allowed for oil to be really squeezed out of the power mix and it was driven by policy. And we could start to see those policies being put in place. So what happens in the 2020s? Well, we have the most recent shock from the Ukraine crisis to look at what kind of policy impact that has. We talked about some of the short-term things that they did with, you know, Europeans look for LNG supply from the US, from Qatar, but also some of the pipe gas that could come from North Africa and Mediterranean. But what they really did even more to actually cut down the demand for gas was to deploy renewables and batteries. And the proof point is in power prices as they have been over the last three months. They have gone maybe 50-70% higher for a little bit of time, but come back down. During the Ukraine crisis, they had gone up 300 and 400% at one point. So already governments are seeing that investments made in the 2020s technologies, which are clean energy electrification, are paying off within four years. So Asian economies, which haven't always done it, Pakistan was one economy that really did push forward solar after the 2022 crisis. Most Asian economies are still very raw when it comes to the amount of renewables that they've deployed. Indonesia, for example, has about two gigawatts of solar deployed so far. The president came out after the war and said, we will have 100 gigawatts by 2030. So suddenly these countries that have seen other countries pull off the use of solar and batteries to keep their costs lower and to not have imported fossil fuels are looking to replicate that success within their own economies. [00:16:44] Speaker 1: Akshat, this clearly is a positive for China. How has China responded to the increased energy and security and the demand for more of its clean energy technologies? [00:16:59] Akshat Rathi: Yeah, the Chinese policy for energy security has really paid off. It's a vindication of what they've been building over the last 20 years. And the numbers are stunning. In the month of April, we understand China reduced its oil consumption or oil import by 5 million barrels a day. That is a significant amount of oil taken off the global market and has been one of the reasons why oil prices haven't shot up beyond $120 a barrel. And the reason China could pull that off is because for the last 20 years, it's been building the plan for exactly this moment. If the Strait of Malacca, which is near Singapore or the Strait of Hormuz is closed, those are two choke points through which most of the oil and gas that China was consuming comes from. And what did China do? Well, it did a bunch of things. It built a bunch of oil storage. It has the world's largest oil storage capacity. It built a number of plants that can convert coal into fuels. Those plants are right now being used to make petrochemicals, but those plants can very quickly be made to use synthetic diesel and synthetic gasoline from coal. But they also made these big bets in renewables, in electric cars, in batteries that would take 20 years of manufacturing capacity to be built up where domestic needs would be met. But perhaps if you create this industry, you will also have an export revenue. And for the last few years, we've been talking about that export revenue because China has been increasing its exports of all these electrotech goods. Those same goods are now at a record level. So in the month of March and in the month of April, the amount of batteries and solar and electric cars sold by China have been $20 billion every month. So you're looking at an annualized figure of $240 billion of exports of all these electrotech goods. And last year, we know China had a trade surplus of about a trillion dollars. So a quarter of that is going to be electrotech goods from this year. But it's allowed China to be able to keep prices low, energy prices low, cut oil consumption as it needs. In April, we also know sometimes they had so much oil that they were willing to sell that higher price oil to the Europeans and make money from that process. And so it's really been a vindication for China for this energy security strategy. It is not something that other countries will be easily able to replicate because trying to compete with China and building solar panels, for example, is going to be really, really difficult. But many of the countries that we are talking about here, Asian economies, are small and medium countries. They're very happy importing both fossil fuels, which now they're less happy about given where the prices are, or importing electrotech goods from China because they have a reasonable relationship. They don't really worry about the security aspect of it. They are not really worried about creating their own domestic clean energy industry. They just want reliable, cheap energy. And right now, that is coming from China in the form of electrotech. [00:20:26] Speaker 1: Akshat, are there any issues here that we should have talked about that we didn't talk about? Anything that comes to mind? [00:20:32] Akshat Rathi: Well, we also should note that after the 1970s, there was a whole spree of oil exploration that happened. So the North Sea became a productive asset for the Europeans as a result of the oil shock. We are already seeing announcements, for example, in Australia, there's this massive oil field that was not being approved because nobody saw the price of oil being at the right price to allow for that oil field to be extracted from. But maybe that gets approved. We will see a rewiring of the energy market in a way that, you know, only a shock can produce. And some of that will mean new exploration. But because last time in the 1970s, there really was no option beyond looking for fossil fuels elsewhere, because where else could you have got your energy from? If it was not from the Middle East in the form of oil, then it was in the form of oil from the North Sea. This time, the world has more options. It can rely on clean energy, it can rely on the wind, it can rely on the sun, and it can store all that in batteries that are pretty affordable. And people tend to like that stuff a lot. I mean, I spoke to an Australian retired Navy veteran, who's an electrical engineer by trade. And when he retired, he thought, okay, you know, I would like to get an electric car because it's cool. And when he got an electric car, his energy bills fell. And so he thought, Oh, are there other ways in which I can save money? And he realized that he can actually, in Australia, get electricity at different prices in the day. And he thought, you know, I used to think of electricity like milk, just pay whatever the market asks me to, or pay the bill every month. Instead, I could actually charge my car at night, keep the price of actually charging my car lower, and save more energy. Five years on, he's become a home-based electricity trader. He has three Tesla power walls, two electric cars, a 12 kilowatt solar system, and a raspberry pie on which he's programmed the day ahead prices for electricity, which decide when the battery should be charged and when should it be discharged. And he said, sometimes at night, while I'm sleeping, I make hundreds of dollars. So these technologies are also making people really aware of what energy is, where it can come from, and perhaps something you can make money from, not just pay money to use? [00:23:07] Speaker 1: Akshat, I've been arguing for a while now that earlier this decade, you know, 2020, 2021, clean energy technologies, both on the supply side and the demand side, essentially became cost competitive with combustion technologies and fossil fuels. And then they've been nothing but getting more competitive and lower costs since then. In your opinion, are we finally seeing a point where the electrotech and the clean energy technologies are actually the low cost option and they're, you know, it's the market driving this level of adoption? [00:23:46] Akshat Rathi: Well, I don't have to rely on whether I think so. I mean, just look at the numbers, right? The peak in fossil fuel powered vehicle sales was in 2017. This was before any of the energy shocks that we are talking about. The world has been moving towards electric ever since then. And every energy shock is making that choice go faster for people, right? In India, which is one of the most price sensitive markets, my home country, I am seeing people make those choices purely for financial reasons. So as soon as the war started, liquefied petroleum gas, which is what most homes use for cooking, there was a fear that there would be a shortage because most of it came from the Strait of Hormuz. What did people do? They went out and bought electric stoves because those were available and people just hadn't chosen it because well gas was available at the time, but now there might be a risk. And suddenly there was a shortage of electric stoves. The government had to come out and encourage electric stove makers to increase the capacity for electric stove making. These kinds of stories are no longer just anecdotes happening in one country in a corner of the world. They're happening everywhere. So I do think, you know, just because there is now a choice that is beyond fossil fuels and that choice continues to become better and cheaper, it is very hard to see how the market ignores that unless, you know, like in America, you get the heavy subsidy in fossil fuels and you get a government that is really encouraging people to burn more fossil fuels, which beyond America, I don't know where else that's happening. [00:25:31] Speaker 1: Akshat, I always appreciate your insights. Thank you very much for this. It was fun talking. Thanks.