Asia may need to invest up to $1 trillion annually in energy over the next 15 years to strengthen energy security, Reuters reported.
The McKinsey report comes after the Iran war disrupted oil and gas flows through the Strait of Hormuz, prompting countries to reassess their energy security.
McKinsey raised its forecast for Asia’s energy demand to just under 400 million terajoules, 15 per cent above its projection a year earlier.
The region is expected to account for about 70 per cent of global net energy demand growth through 2040.
Coal to Remain in Asia’s Energy Mix
Despite the expansion of renewables, coal is expected to remain part of Asia’s energy mix for longer than previously anticipated.
Regional coal demand is projected to remain broadly flat over the next decade, as declining consumption in China offsets rising demand in India and Southeast Asia.
Gas demand, however, is expected to slow over the next five to 10 years as countries prioritise coal and renewables for power generation.
Over the longer term, gas consumption could rebound, driven by industrial demand.
Solar and Wind Investment to Reach $300 Billion Annually
Renewable energy deployment is expected to accelerate, particularly in India and Southeast Asia.
McKinsey estimates that annual investment in solar and wind power could reach $300 billion through 2040.
Growing energy security concerns could also encourage government support for developing higher-cost upstream assets.
The report identifies China, the Philippines, Thailand, Vietnam and Turkmenistan among the countries where such developments could occur.
Biofuels Could Reduce Fuel Imports
Biofuels could replace between $90 billion and $100 billion worth of fuel imports in 2026, potentially reducing Asia’s dependence on imported fuels.
The report also identifies data centres, cooling requirements and industrial activities as emerging sources of energy demand across the region.