India, China and Southeast Asia are set to remain the three most important growth engines of power demand across the planet, says Alex Whitworth, Vice President, Head of Asia Pacific Power Research at Wood Mackenzie. The Asia Pacific region has seen its share of global power demand surpass the 50% mark in 2023, as per Wood Mackenzie’s ‘Asia Pacific Power & Renewables: Five things to watch in 2024’ report.
Whitworth notes the robust performance of Asia Pacific markets in 2023, marked by strong overall demand growth, substantial investments in the power sector, and the acceleration of key energy transition trends. Notably, these regions have some of the lowest end-user power tariffs globally, averaging less than US$100/MWh, making them attractive to investors.
Despite challenges faced by more developed markets such as Japan, South Korea and Taiwan, Asia Pacific continues to provide over two-thirds of global demand growth annually. However, concerns arise about potential clouds on the horizon for power demand growth in 2024.
China's focus on energy transition
China, while showing signs of a slowdown in its real estate sector and domestic demand, remains robust due to its emphasis on manufacturing and energy security. China's industrial sector still accounts for a significant portion of power demand, and the nation's focus on energy transition and technology security is driving growth.
One of the biggest conundrums facing power markets in 2024 revolves around China's massive expansion of the solar and renewables supply chain. China's PV module production capacity has surged, outstripping global demand. This overcapacity may lead to price wars and other challenges.
On the offshore wind front, despite short-term challenges, Asia Pacific is witnessing an upswing. China dominates the offshore wind market, driving down costs significantly. Furthermore, Chinese manufacturers and developers are targeting overseas markets, potentially reducing offshore wind costs in Australia, Southeast Asia and other Asian nations.
In conclusion, Asia Pacific's power demand continues to thrive, with India, China, and Southeast Asia playing pivotal roles. The region's energy landscape is evolving rapidly, and the challenges and opportunities ahead are poised to shape the global energy sector.