Asia's Tangled Power Lines

Ensure Energy Security by Building a Smarter Grid

A worker fixes power lines in Paranaque, Philippines. Erik de Castro / Courtesy Reuters

With the economies European Union and United States flagging, emerging nations are now the primary drivers of incremental global economic growth. As they have started to boom, world energy demand has increased. In 2011, the International Energy Agency (IEA) estimated that demand would climb by an astounding one-third by 2035, with China, India, and other Asian countries accounting for two-thirds of the rise.

Asian demand (even if it starts to slow) is turning the world's old energy paradigm on its head. The IEA model, which was established as a reaction to the 1973-74 energy crisis, focused on getting sufficient petroleum supplies to developed economies. But that approach is no longer adequate. Whereas developed countries are seeking to reduce petroleum imports through increased domestic energy production and improved efficiency, Asian economies are importing more. In fact, by 2020, China will become the world's largest petroleum importer.

In the meantime, rising political instability in the Middle East and North Africa -- home to an estimated 60 percent of global extractable oil deposits -- is hampering exploration and production. Production could be further endangered if tensions with Iran lead to shipping disruptions in the Strait of Hormuz, through which nearly 20 percent of the world's oil travels. Discrete, random events could quickly shift the global balance of oil from surplus (with weak prices that discourage the development of additional capacity) to scarcity (with unanticipated price increases that constrain growth and upset global economic activity). The era of inexpensive, stable oil and petroleum supplies, fueling ever-increasing global prosperity, is at an end.

As the world's energy paradigm shifts, nations are increasingly looking toward electrification as a means to minimize oil dependency. Countries can generate electricity from natural gas, nuclear, coal, and renewable sources as well as from petroleum.

Analysts believe that natural gas in particular will be a game-changer in the shift toward electrification. Increasingly sophisticated drilling technologies are providing access to natural gas reserves that were previously economically infeasible to tap. On average, natural gas is also 40 percent less

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