Boosting energy efficiency may be the hidden key to fast-tracking Asia’s energy transition. While it may seem like a no-brainer, not enough efforts go towards energy efficiency within the region, which is squandering near- and long-term emission reduction opportunities, says Karna Mohan, Siemens Energy’s vice president, Finance, Asia Pacific.
Often overlooked, energy efficiency and grid modernisation offer a solution where national grids can simultaneously optimise their power usage, reduce emissions and enhance national energy security.
Transitioning from a fossil fuels-based grid to one running on renewable energy brings its own challenges, from ensuring consistent supply and a grid infrastructure capable of handling the demands of a new power mix, to balancing supply and demand, and a lack of funding.
For example, overall energy demand in Asia has grown due to economic development and intense urbanisation. At present, fossil fuels dominate Asia’s primary energy supply, and the continent accounts for 80 per cent of the world’s coal power consumption.
The World Economic Forum (WEF) issued a report suggesting that the global energy transition had slowed due to factors such as economic volatility, geopolitical tensions and changes in technology, while the International Renewable Energy Agency (Irena) noted that renewables continued to increase their global share in 2022, growing by 7.2 per cent over 2021.
However, funding must significantly increase for regions like Asia-Pacific and Southeast Asia to hit their energy transition and net zero emissions goals.
Scenario analyses outlined in the World Energy Outlook 2024 report by the International Energy Agency suggest that developments in energy efficiency, electrification and renewables could temper future growth in energy demand, but are contingent upon properly enforced standards and policies.
In the meantime, there is other lower-hanging fruit that nations on their energy transition journey could opt for to improve their current energy output and help them further along this journey.
Around US$644 billion will be spent on new renewable capacity in 2024, according to forecasts by independent energy research firm Rystad Energy. However, Rystad also pointed out that outdated and inadequate power grids could hinder this progress.
Karna Mohan, Siemens Energy’s Vice President Finance for Asia Pacific. Image: Siemens Energy
If the planet aims to limit global warming to 1.5 degrees Celsius above pre-industrial levels under the Paris Agreement, the world will need about US$3.1 trillion of grid infrastructure investments before 2030.
Meanwhile, global grid infrastructure is projected to double by 2050 to meet rising power demand due to economic growth, electrified transportation and industrial use, according to independent risk management consultancy DNV.
Currently, Siemens Energy is working on multiple projects that support the region’s energy transition, including grid modernisation, energy efficiency, and renewable integration in Singapore, Malaysia, Japan, and Australia.
In this interview, Karna explains to Eco-Business why energy efficiency and grid improvements represent a “hidden” energy source and must accompany the expansion of renewables in a country’s energy mix.
Asia remains the planet’s largest emitter and contributes more than half of global carbon emissions each year. From the perspective of an energy technology company, where should the region focus in the near- and long-term regarding decarbonisation? What actions will lead to the most tangible emissions reductions?
With growing populations and economies largely across Asia, measures are already being taken for energy transition and decarbonisation, and energy efficiency will be key.
The International Energy Agency (IEA) once coined energy efficiency as a “hidden fuel” as it is a great lever in energy transition and decarbonisation.
Boosting efficiency requires a significantly lower investment but it has a faster turnaround – one gets the most out of their existing infrastructure or as they adopt renewable technologies.
[Energy efficiency] is also low-hanging fruit. For example, we worked with Pacific Light Power (PLP) in Singapore on an advanced turbine efficiency package. We were able to make PLP’s plant the most efficient power plant in Singapore with an efficiency higher than 60 per cent – the only plant in Singapore to reach this percentage.
This translates to removing 60,000 tonnes of carbon emissions annually. Imagine some 9,300 cars taken off Singapore’s roads each year just by improving efficiency.
Lever number two is investing in renewables and growing its share within the energy mix. This also depends on the country, but it can be solar, wind or a mix.
The third lever is investing in the grid infrastructure itself.
Investing in renewables and grid infrastructure must go together as the grid needs to be reliable and stable enough to handle the intermittency that comes with renewables, and the energy mix.
Historically, renewables have been able to work together with fossil fuels, so the grid must handle this difference in energy mix and be reliable and stable, which will require investment.
The Asean Power Grid (APG) has long been touted as a key solution to improving the region’s access to secure and affordable energy. How do you see those same technologies enhancing grid efficiency within Asia Pacific, and what long term challenges must be overcome?
Roughly US$3.3 trillion is forecast to be invested over the next 10 years in Asia Pacific’s power generation. Forty-nine per cent of this would come from wind and solar power, and another 12 per cent will go to storage.
As energy consumption goes up and the energy mix changes, investment in the grid and in renewable energy will be critical. Better collaboration between government and private sector is needed to incentivise the transition towards clean energy; technological advancements and their availability must also be reflected in regulations that support and advance their adoption.
This is because national and even subnational governments have different rules and regulations. When you move to a regional power grid, it’s important that regulations are harmonised across the different countries, and that everyone can support this investment into a regional power grid.
Take high voltage direct current (HVDC) for example – these highly efficient, long-distance energy transmission systems that can carry power from both on- and offshore grids are available now.
In Germany, we worked with our partners on a project in the North Sea, where we built seven grid connections supplying 5.6 gigawatts (GW) of power, providing electricity to seven million households. This is an example of the enormity of the project that needs to be worked out.
In Asean, you have several countries with different regulations, levels of technology and grids, and at different stages in their energy transition. This is why Asean member countries must come together for a regional grid to work.
At the same time, what key attributes does Asia have that will enable decarbonisation, so long as businesses and individuals take action?
Much of Asia is blessed with renewable energy sources that can be harnessed to drive decarbonisation. If you look at many Asia-Pacific countries, there’s solar, wind, geothermal, and hydro in abundance. All these are great levers if you want to drive renewable energy as the key ingredient is already there.
Energy efficiency will become more important then. We also worked with Sumitomo Chemicals in Japan to construct a high efficiency gas turbine power generator at their Chiba plant. Our aim was to reduce the carbon dioxide (CO2) emissions for the plant by 20 per cent, which translates roughly to 240,000 tonnes of carbon emission annually. Again, that’s a massive carbon footprint reduction you can achieve with energy efficiency.
Then there is funding – which the whole world is competing for – because it will be a multi-trillion dollar effort for the whole planet to transition to clean energy.
On that note, Siemens Energy supports various pilot projects in Asia, such as green hydrogen plants in China and Japan and grid initiatives in Southeast Asia. Why are sustainable pilot projects key to decarbonisation within the region and globally?
Green hydrogen pilot projects can draw greater confidence from investors and other stakeholders if they demonstrate their viability. Right now, we are collaborating with the National University of Singapore on a government grant to look into a low-carbon energy project utilising ammonia. Another example is Hydrogen Park South Australia, where we are supplying 700 customers with an up to 5 per cent (by volume) renewable gas blend, and was then expanded in March 2023 to supply a further 3,000 customers in Adelaide’s south in the suburbs of Mitchell Park, Clovelly Park and parts of Marion. This includes households, businesses and schools. In March 2024, the renewable gas blend was increased from up to 5 per cent to up to 10 per cent (by volume).
These initiatives provide us with valuable data to refine the technology. After refinement, we test them on a pilot project, then scale-up for wider deployment. Pilot projects aren’t just a great testing ground, they can lead to strategic partnerships, the sharing of best practices and bring diverse stakeholders together.
Then it comes down to the commercial aspects – looking at our pilot technology and calculating the rate of return if it was commercialised, and the value we’d be able to generate for our stakeholders and shareholders
We invest about US$1 billion a year in research and development (R&D) on many projects. Some succeed, and some don’t. While this is to be expected, R&D needs investment nevertheless. It’s not just for the company – it’s also our contribution to the whole energy transition effort. We continue to develop more energy-efficient, cleaner solutions our customers and partners can adopt.
Recently, Malaysia’s Deputy Prime Minister Fadillah Yusof, who also heads the Energy Transition and Water Transformation Ministry, announced plans to halve the country’s coal plants by 2035 and an earlier phase-out of all coal plants by 2044. Given that most of Malaysia’s power comes from fossil fuels, how do you see Siemens Energy’s smart grid and digitalisation technologies helping the nation to reach its energy targets, especially interim ones?
Solutions now exist that can integrate large amounts of renewable energy. Intermittency, reliability and stability, however, will remain as challenges.
As an example, in South Australia, we have a Siemens Energy flywheel at a substation for Electranet, their power provider, which has a fairly significant portion of renewables in their power mix. At times, this exceeds 50 per cent.
By stabilising the grid, you can continue the expansion of renewable energy projects and facilitate the move further away from fossil fuels. When people look at energy transition, they tend to focus on investments in renewables straight away. But a lot can be done with existing technology through digitalisation and increasing efficiency, which is often overlooked.
Digitalisation technologies are also vital in helping Malaysia transition to a more sustainable energy future, especially as it seeks to reduce reliance on fossil fuels. By leveraging data analytics, utilities can identify inefficiencies and optimise operations, meaning reduced costs and better service. Advanced modeling tools also help policymakers evaluate energy strategies and ensure they align with national targets.
Digital solutions also help integrate renewable energy sources into the grid and ensure a stable supply. These help decarbonisation efforts by optimising energy use and reducing emissions, from simulations to predict and mitigate potential issues and making them them more robust and flexible to handle the increased load from renewable sources.
Cybersecurity is also a priority for utilities, and Siemens Energy has a cybersecurity operations center in Cyberjaya to provide robust solutions and operational technology (OT) services to customers across the Asia Pacific.
As vice president of finance, would you say there is increased investor sentiment for climate technologies in the region, or do profits still take precedence?
If you look at Southeast and East Asia, they all have ambitious decarbonisation targets. Southeast Asia aims to be carbon neutral by 2050. Japan and South Korea have already written carbon neutrality into law. These two countries are also developing policies and roadmaps to enhance their investment into clean energy. Countries like Vietnam are also increasingly trending towards renewable energy.
What’s lacking is investment. Today, Southeast Asia’s “spend”, or contribution to clean energy investment is only two per cent of the global share. The lion’s share comes from the United States and Europe.
To give some context, if we are to move towards meeting some of these targets, the investment would need to rise from US$72 billion to over US$130 billion, which is a significant investment increase needed for Southeast Asia.
So we clearly see increased sentiment across the region and not just in Malaysia. Investors still seek profits, but as we move along in decarbonisation and our energy transition journeys, players will look to balance their long-term profitability together with their commitment towards sustainability. But both need to go hand in hand – it cannot be one or the other.
