Despite the global uncertainty brought about by recent events such as Brexit and policy direction of the incoming Trump administration, the outlook for energy and environment markets in 2017 is largely viewed to be balanced with a slight positive inclination. This follows a period of downward revisions to the economic growth forecasts and volatility in financial & commodities markets globally, impacted by the slowdown from China and oil prices slump over a two year period.
Conference of Parties (COP22) discussions in Marrakech were clouded by Trump’s threat to pull US out of the COP21 Paris climate change accord. While it may be difficult for the US to unilaterally scuttle the accord, since most of the world countries have affirmed their commitment to de-carbonization, the challenge lies in actually meeting the $100 billion/year financial commitments and also agreement on the transparency of future climate monitoring. However economics will drive the substantial investments in clean and green technologies, led by China and India.
The year 2017 is likely to be a transition year for long term changes, globally. With the rising protectionism across the world, issue of energy security will once again come to the fore in Asia Pacific. This will accelerate adoption of clean technologies which can be harnessed locally and those that are less impacted by global policy & price fluctuations
Key trends in Asia Pacific across the energy and environment sectors, including oil & gas, power, buildings and water are discussed in this article.
Oil industry will begin a slow recovery
With oil prices expected to average about $55 per barrel in 2017, the focus will be on operational excellence as industry players try to survive the tight upstream market. However, interest in downstream sector will continue to be strong with slew of refinery and petrochemical investments planned across the major developing Asia including China, India, Indonesia and Vietnam
Rise of LNG for power generation, even as coal will see decline in capacity addition during 2017
The global glut in LNG supply, aided by the possible large scale exports from the USA, has provided a huge opportunity for South and Southeast Asia increase its base load capacity using gas. Further, the push towards delinking natural gas price from crude oil price, could help development of Asian gas market, in the long run. There are signs of this already impacting the coal power plant industry, with 25% less coal capacity likely to be added in 2017 across China, India, Vietnam and Indonesia, than in 2016.
Distributed generation investments will be driven by local government initiatives
Despite the likely reduction of feed-in-tariff support in many countries including Australia, Japan, Philippines etc., Frost & Sullivan is forecasting a healthy growth for renewable technologies lead by solar PV at about 17.8% in 2017. Initiatives by the local governments to increase the access and quality of power supply, to both residences and industries, is aiding the growth of a range of distributed energy technologies like biomass, solar PV, microgrids and small temporary power plants. The total distributed energy market is likely to be US$18.36 billion in 2017 in Asia Pacific representing a 14.0% year-on-year growth.
Investment in distribution grid automation will increase, even while smart meter market slows down in Asia
With nearly US$137 billion likely to be invested, the transmission and distribution sector will present the largest opportunity for power equipment majors, in an otherwise lackluster conventional power industry. With China’s roll out of smart meters having peaked, the market will depend on the large Japanese implementation, still in progress. Countries like China, Japan, India and Thailand are also investing significantly in large distance ultra-high voltage transmission capacity to balance the grid, with increasing share of renewable energy.
China’s 13th five year plan offers major stimulus for energy storage adoption
Even though Asia Pacific region is the home base to largest number of battery manufacturers, their adoption for utility energy storage application has been lagging behind North America and Europe. However China’s ambitious drive for leveraging energy storage to effectively integrate its large intermittent renewable resources, as a part of its 13th five year plan, will offer major stimulus to the Asian market. Numerous demonstration projects in Australia, India and Japan will make 2017 a turning point with innovative applications and business models being explored.
Edge analytics and cloud adoption to drive the demand for critical power infrastructure
Critical power and cooling infrastructure for data centres will witness 8.2% growth in 2017. Security concerns, both cyber and physical, will further increase the spend in advanced infrastructure management. Increasing connectivity and growing adoption of mobile applications in banking, travel and social media will drive the demand for cloud and edge analytics, thus propelling the overall data centre critical infrastructure market.
Digital transformation of homes & buildings market
The biggest beneficiary of ongoing global trend of digital transformation will be the homes and buildings sector in Asia. Proliferation of competitive energy management technologies will be aided by the use of cloud and open platform building management solutions (BMS). Facility Management companies will push into new service frontiers by acquiring and engaging in partnership with niche information technology players. With the availability of cheap & user-friendly devices for home automation, smart home market is expected to show a strong growth in China, South Korea and Japan.
Reducing non-revenue water will remain key focus for the water industry
The issue of resource and revenue leakage continues to plague the water sector across most of Asia. This will remain a major investment opportunity, with adoption of digital technologies like sensors and smart meters, helping to solve the problem to some extent. Indonesia’s ambitious plans to restructure its water sector and attract US$25 billion in potential investments, would very much depend on the actual ground level implementation. Lack of financial prudence, political interference and policy flaws could potentially derail the plan, if these issues are not addressed.
Ravi Krishnaswamy is the Global Leader, Energy & Environment Practice at Frost & Sullivan. Ravi is based out of Singapore and can be reached at email@example.com | +65.6890.0245