ASIAN STRATEGIC REVIEW 2017 Energy Security in Times of Uncertainty

ASIAN STRATEGIC REVIEW 2017 Energy Security in Times of Uncertainty ASIAN STRATEGIC REVIEW 2017 Energy Security in Times of Uncertainty Editors Jayant Prasad Shebonti Ray Dadwal PENTAGON PRESS Asian Strategic Review 2017: Energy Security in Times of Uncertainty Editors: Jayant Prasad and Shebonti Ray Dadwal First Published in 2018 Copyright © Institute for Defence Studies and Analyses, New Delhi. ISBN 978-93-86618-28-3 All rights reserved. No part of this publication may be reproduced, stored in a re- trieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without first obtaining written permission of the copyright owner. Disclaimer: The views expressed in this book are those of the authors and do not necessarily reflect those of the Institute for Defence Studies and Analyses, or the Gov- ernment of India. Published by PENTAGON PRESS 206, Peacock Lane, Shahpur Jat New Delhi-110049 Phones: 011-64706243, 26491568 Telefax: 011-26490600 email: [email protected] website: www.pentagonpress.in In association with Institute for Defence Studies and Analyses No. 1, Development Enclave, New Delhi-110010 Phone: +91-11-26717983 Website: www.idsa.in Printed at Avantika Printers Private Limited. Contents Foreword vii Contributors xi 1. Hydrocarbon Markets in Asia: Adapting to Changing Narratives 1 Lydia Powell 2. Continuity through Change: China’s Energy Security in a New Era 15 Cui Shoujun 3. A Relook on Energy Security After Fukushima 37 Masakazu Toyoda 4. Ensuring South Korea’s Energy Security? Priorities, Problems and Prospects 51 Se Hyun Ahn 5. Russia’s Asian Energy Pivot: A Prodigious Realignment 69 Rajeev Lala 6. Disruption in the Global Energy Order: Geopolitical Ramifications for West Asia 87 Girijesh Pant 7. Energy Connectivity in Asia: The India-ASEAN Case 102 Nitya Nanda 8. The Asian Nuclear Power Landscape: A Contemporary Examination 118 Manpreet Sethi vi Asian Strategic Review 2017 9. Renewable Energy and Critical Minerals: Access to Resources in Asia’s Energy Paradigm 137 Swati Ganeshan 10. Ensuring Asia’s Energy Security: Role of Energy Storage Technology 154 Bhupendra Kumar Singh 11. Asia’s Energy Security: An Uncertain Outlook 172 Shebonti Ray Dadwal Index 185 Foreword Energy security has been defined as “the uninterrupted availability of energy sources at an affordable price” by the International Energy Agency (IEA). Until the 1980s, the steady and unfettered supply of inexpensive oil, without the uncertainty of embargoes and cost manipulation, were the key concerns. Today’s challenges, however, go beyond stable oil supplies. They include an array of issues, such as securing maritime space and mitigating climate change. Energy security is conditioned by geological availability, geopolitical accessibility, economic affordability, and environmental sustainability. Energy security is critical for national security. Security studies in the 1980s had already expanded beyond the politico-military domain to include several non-traditional aspects of security, including energy. The importance of energy security for growth – from a national, regional and indeed, a global perspective – is self-evident. Martin Wolf points out, in a recent Financial Times piece, that among the risks that threaten global growth, disruption of energy supplies is among the most important. In our remarkable contemporary times, he writes, the global economy has grown uninterruptedly every year since the early 1950s – at an average of over 3 per cent, measured in purchasing power parity. Only four times, Wolf notes, global output growth dipped under 2 per cent – in 1975, 1981, 1982, and 2009. Except for the last instance, when the dip was caused by the 2008 financial crisis, the others were the consequence of oil price shocks, triggered by conflicts in West Asia. Energy occupies a central role in the survival and prosperity of individual States, and shapes both geo-economics and geopolitics within the international system. While nations with rich energy resources enjoy economic and political leverage, lack of resources creates an existential threat for others, since sustainable economic development is preconditioned on stable energy supplies. This imperative contextualises the importance viii Asian Strategic Review 2017 of energy security for the fastest growing major consumers of energy, such as China, Japan, South Korea, India, and other key countries of the Association of Southeast Asian States (ASEAN), which must sustain their growth in the face of formidable economic headwinds. These States should learn how to harmonise growth with environmental protection. Energy security assumes significance, given the challenges in the energy market, such as inadequate supply, high demand and energy dependency, escalating prices, and political flux in energy-producing regions. Moreover, the problems related to the energy issue go beyond scientific or technological aspects and extend to predictable regulatory mechanisms, financing, and energy infrastructure management. Today, climate change, environmental degradation, and a relative scarcity of natural resources, aided by disruptive technologies, including information technology, have all combined to present new threats – either individually, or even as subsets of hybrid warfare. Equally, new opportunities have also emerged to deal with these challenges in a more sustainable manner. The study of these subjects has therefore become imperative for analysts and practitioners of national security. The goal of national authorities is to gain access to sustainable energy supplies, effect improvements in energy efficiency, and develop new sustainable energy sources, which in turn will require technological innovation, capital funding, and knowledge in handling issues arising across the energy demand-supply chain. These are challenges for both policymakers and market managers for application in issues like market forecasting, risk management, pricing, and policy development. For Asian countries, the challenges are arguably more critical. The traditional energy market, which was dominated by developed countries, is now giving way to emerging economies, most of which are in Asia. According to the IEA, around 95 per cent of the projected growth in energy demand is in developing countries, particularly in Asia, with energy consumption growing at 2.3 per cent annually between 2012 and 2035. Energy consumption in developed nations, by contrast, is growing at just 0.2 per cent per annum over this period and is projected to fall from 2030 onwards. As a result, rapid and sustained economic development has placed the Asian countries at the centre of growth in global energy demand, thereby altering the geopolitics of global energy and, in turn, throwing up critical new energy policy and security challenges for their governments. Conversely, the choices and policies that are, and will be, adopted by Asian countries will have far-reaching implications that extend way beyond their borders. Foreword ix Yet another contemporary challenge is that of dealing with global warming, climate change and pollution, which are a result of more than a century of dependence on fossil fuels. In their attempt to respond to the threat of climate change by stemming the rise in carbon emissions and limiting a global temperature rise in this century to well below 2 degrees Celsius above pre-industrial levels through the Paris Agreement, the global community has taken up the challenge of increasing the share of cleaner and more sustainable energy resources in their national energy mix. In fact, the IEA has gone as far as to predict that renewable energy resources will become the largest source of electricity supply before 2030, accounting for 27 per cent of the primary energy mix in 2040, up from 8 per cent in 2016. Whether this will be so for Asian developing countries like India and China needs to be carefully watched. While this may address the issue of arresting, and even reversing the rise in global temperatures, it may give rise to competition to control the primary resources required for renewable energy appliances. Moreover, the changes that will be required to shift to more sustainable forms of energy will entail an overhaul of current energy sectors, which in turn will necessitate access to huge investments, be it for large-scale energy infrastructure or energy technology. For example, power grids that encompass, and eventually transcend national and geographical boundaries, face the twin challenges of economic viability and practicality. Given that Asian nations, more than others, are particularly vulnerable to the vicissitudes of the energy markets as well as to the effects of climate change, the 2017 edition of the Asian Strategic Review has taken up the issue of energy security with the aim of outlining and understanding the challenges that lie ahead for some of these nations. It outlines the current and future dilemmas of the regional governments as they grapple with multiple challenges in delivering sustainable and affordable energy resources to their peoples, essential for their economic and social well- being. Jayant Prasad Director General Institute for Defence Studies and Analyses New Delhi, India Contributors Lydia Powell, Head, Centre for Resources Management, Observer Research Foundation (ORF), New Delhi, India. Cui Shoujun, Associate Professor and Assistant Dean of the School of International Studies, Renmin University of China, Beijing, China. Masakazu Toyoda,

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