“Energy Transition Readiness Assessment (ETRA) for Developing Asia and the Pacific” by Asian Development Bank says that in such a situation most developing countries require significant efforts to close the energy transition gaps. ETRA has made this significant observation in the backdrop of the region’s being the home to 52 per cent of world’s population, 35 per cent of GDP, 41 per cent of global energy consumption, and 46 per cent of the world’s greenhouse gas emissions.

Most developing Asian countries face challenges in balancing economic growth, energy security, sustainability, and socioeconomic equity.

Developing Asia’s energy transition hinges on a resilient energy system relying on two key pillars – reduced dependence on fossil fuels, and enhanced energy security. Its energy sector accounts for three-quarters of the region’s greenhouse gas emissions. Coal power generation accounted for 48% of the total energy supply and57% of the electricity generation in the region in 2022.

Nevertheless, phasing out coal power generation by a 2050–2060timeline is challenging for two reasons. First, coal-fired power plants (CFPPs) in the region are relatively young. The residual life of coal producing plants in 2022 shows 6.9 years in Uzbekistan, 26.2 years in India, and the highest 37.8 years in Bangladesh. Eleven countries have residual life of their coal plants between India’s and Bangladesh.

Second, many countries rely heavily on coal power generation as coal power continues to be a cheaper resource. The early retirement of CFPPs is possible but would require appropriate carbon pricing, frameworks for transition finance, and substantial amounts of concessional funding while ensuring a just transition for those adversely impacted by coal phase out.

While more needs to be done, developing Asia is making clear progress toward a massive renewable energy capacity build-out. Of the 26 assessed countries, in 2022, the share of new renewable energy capacity exceeded 75% in nine countries, including the PRC, India, and Kazakhstan.

Balancing economic development and sustainability is key to developing Asia’s energy transition aspiration. However, the region scores below the world and advanced economy medians for the energy economy linkages dimension, implying widespread challenges in separating economic growth from energy consumption and emissions. Many countries need to address inefficient energy production and consumption, high emissions per economic output, and slow adoption of energy-efficient technologies critical for a sustainable transition.

Energy trade in the low-carbon technology products from developing Asia has increased, with the PRC setting benchmarks for the rest of the region. However, the decarbonization of energy-intensive manufacturing must be prioritized by improving energy efficiency, directly and/or indirectly electrifying activities with renewable power, and shifting toward inherently less energy-consuming economic activity, ETRA says.

The quality of energy infrastructure still lags considerably compared to advanced economies due to overloaded power transmission and distribution lines and undersized transformers resulting from inadequate planning, unplanned expansion, and poor maintenance practices.

Developing Asia has achieved significant milestones in household access to electricity, with more than 1 billion people gaining electricity access in the region since 2010, primarily led by Bangladesh, India, and Indonesia. However, energy and energy services are a significant share of household expenditure for the lower-income population. As the energy transition gathers pace and renewable energy substitutes fossil-fuel power plants, there is potential for short-term shocks in energy prices. Developing Asian countries must design effective energy-related emergency mechanisms to support the affected population, ETRA recommends.

The technology and diffusion ecosystem dimension scores lowest across all dimensions of the ETRA analysis, with the PRC as an outlier leading in innovating and producing clean energy technologies and services. Beyond the PRC, nine developing Asian economies—including most Southeast Asian states and India—score above the world median for this dimension. Developing Asian countries still face substantial barriers to greater diffusion and production of clean energy products required for the energy transition, especially compared to advanced economies. Generally, low scores in research and development spending, the readiness of frontier technologies, and talent competitiveness suggest a lack of an enabling ecosystem necessary for scale-up.

Since 2013, clean energy investment in developing Asia has grown more than 900%, reaching $729.4 billion in 2023 and about 45% of global investment. Transition and climate finance are highly concentrated in the PRC, which accounted for nearly 90% of the region’s investment during 2013–2023.

Green, sustainability, and sustainability-linked bonds and transition loans are crucial for developing Asian economies. During 2020–2022, the annual issuance of these debt products in developing Asian economies increased from $70 billion to $295 billion, with 89% of the financing coming from the private sector in 2022.

In addition, developing Asian economies must strengthen local financial systems and capital markets. Domestic private investments are vital for financing climate-related projects in local currency reducing reliance on foreign capital. For example, domestic private investment has been a major driver of clean energy investment in larger economies like the PRC and India.

As for energy governance and enforcement of energy transition policies, regulatory quality scores are below the advanced economies and world median, indicating scope for improvement. (IPA Service)