Freeing up energy markets in Asia could create trillions of dollars of opportunity. At present, Asia’s energy markets are hidebound within national borders.
Happily, a series of free-trade initiatives are underway.
All are aimed at boosting economic growth through removing impediments to increased trade in goods and services, as well as reducing harmful non-trade barriers and subsidies.
These initiatives are being pushed in different but largely supplementary ways by multilateral organizations such as the Energy Charter Treaty, ASEAN+, the Trans-Pacific Partnership and the Asia-Pacific Economic Cooperation Group.
At present, no industry is less reformed than energy. Fixing this is the biggest step the world can take in reducing destructive climate change.
At present, perverse subsidies distort local energy markets. Nationally-oriented networks hinder cross border trade. Competition is stifled, prices provide poor or incorrect investment signals. The waste is huge.
Freeing up energy markets could liberate huge amounts of economic energy through reducing subsidies, increasing trade and speeding up innovation.
Given this, Grenatec calls for a regional “Marshall Plan’ for networks that could have knock on effects across the region for a century or more.
This would include negotiating a 14-country series of interconnected, standards-based, open-access common-carrier infrastructure projects.
These in turn would enable electricity, natural gas, hydrogen, biofuels, compressed air and other energy to be created, transported, stored and sold through transparent markets governed by price, quality and distance between producer and consumer.
The above is just classic economics.
In China, it would improve air quality. In Australia, it would provide existing utilities a new business model as they lose residential customers to rooftop solar but could gain international customers through upstream generation and delivery of large scale geothermal, solar and wind energy.
In the ASEAN states, it would move investment toward tomorrow’s energy sources such as Mekong State load-balancing hydro, ocean thermal energy conversion off China’s Hainan Island and offshore wind from Japan.
The effects would be electrifying. At present, huge subsidies flow to all the wrong places in energy markets. This results in inefficient production and consumption of power The price mechanism is distorted or ignored. Second and third-rate energy solutions win out.
A more beneficial and comprehensive boost to regional economic growth is hard to imagine than restructuring, liberalizing and more deeply interconnecting the energy markets of Asia.