Over the past two decades, the Asia-Pacific (APAC) region has relied heavily on coal to meet rapidly growing electricity demand. Conventional wisdom among analysts held that, over time, the region’s power systems would follow a familiar trajectory: move from coal to natural gas, and eventually to renewables.
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This expectation was grounded in the experience of advanced economies such as the United States, where large-scale coal-to-gas switching helped position natural gas as a “transition fuel”.
However, as APAC countries emerge from their second energy supply shock in four years, the role of gas as a reliable “transition fuel” is increasingly in doubt. APAC natural gas demand has long outpaced domestic production, and LNG has helped to fill this gap. LNG imports to APAC have more than doubled since 2010 and now constitute nearly 70 per cent of all LNG imports globally.
This dependence on LNG has exposed countries to external shocks. In 2022, Bangladesh and Pakistan were unable to secure LNG cargoes as they were outbid by European buyers in a scramble to replace Russian pipeline gas, contributing to blackouts in South Asia.
LNG price spikes from the current crisis have led to planned power cuts in Pakistan, increased electricity costs in Singapore, and heightened fiscal pressure on Thailand’s government as it seeks to maintain electricity subsidies.
Interest groups that benefit from the status quo in the energy sector argue that this uncertainty around natural gas supply justifies slowing the shift to low-carbon energy, but they’re wrong.
Natural gas has traditionally helped countries integrate more renewable energy, as gas-fired power plants can ramp output quickly to balance fluctuations in wind and solar generation. But natural gas is no longer the only option for bridging the gap between historically inflexible coal generation and variable renewable energy.
Advances in battery storage as well as technologies that enable more flexible electricity generation and consumption are reshaping how power systems operate. Storage can absorb surplus renewable output and discharge during peak demand, while flexible consumption — through mechanisms like demand response — can align electricity use with periods of abundant supply.
Together, these tools provide many of the balancing services traditionally delivered by gas. In markets such as Australia and parts of the United States, grid-scale batteries are already replacing new gas peaker plants. As battery costs have fallen by 90 per cent since 2010, solar-plus-storage systems are increasingly meeting peak demand at costs competitive with new gas-fired generation.
APAC governments should do four things to harness the benefits of energy storage and flexibility tools.
First, political leaders should take greater control of power system planning to ensure that they adopt least-cost pathways. In many APAC markets, large sector actors like incumbent utilities drive electricity system planning, and these actors may have incentives to maintain the status quo rather than adopt new technology.
But advances in storage and flexibility technologies mean that these tools can often meet electricity security, affordability, and emissions goals at a lower cost than older gas-fired power plants. By taking greater control of power system planning, leaders can shift their countries to the best-value, most modern approaches, rather than going back to coal.
Second, governments should reform procurement frameworks to reduce investor risk and ensure investments are delivered at least cost. Competitive auctions, standardised long-term contracts, and payment security mechanisms lower the cost of capital and reduce the overall cost for renewable energy and storage projects.
For example, auction-based procurement in India helped reduce solar tariffs from around $0.27/kWh in 2010 to approximately $0.03/kWh today, while scaling capacity from 2.8 GW in 2014 to over 140 GW by 2026. More recently, the country has extended this model to hybrid and storage-backed tenders, enabling firm renewable power to compete more effectively.
Third, existing coal-fired power plants (CFPPs) should be operated more flexibly to maximise the utilisation of low-cost renewable. Historically designed to run at constant output, many CFPPs can be retrofitted to operate at lower minimum loads and ramp more quickly.
Some CFPPs in China and Germany are already being adapted to be able to ramp down production when there is ample renewable electricity available, and ramp back up when other sources are scarce. This reduces curtailment and lowers system costs by prioritising lower cost generation.
To enable this shift, market structures must reward CFPPs for flexibility services, rather than only energy output and capacity.
Finally, demand-side flexibility and electrification should be scaled up to enable most efficient use of the power system. Tools like time-of-use rates and demand response can shift electricity demand to periods where it is cheaper to supply through either the availability of low-cost renewables or through avoiding the need to invest in generation and network infrastructure that will only be used during brief periods of peak demand.
Increased electrification, such as moving to electric vehicles and heat pumps, presents an expanded set of opportunities for such demand side flexibility. For example, there are companies that use dynamic tariffs and smart charging to manage around 3 GW of flexible demand by automatically aligning electricity use with periods of high renewable generation.
In turn this increased electrification will support APAC economies to minimise the imports of liquid fuels like gasoline and diesel, further enhancing their resilience to fossil fuel price shocks.
This crisis has the potential to reshape the trajectory of the energy transition in APAC by encouraging a shift toward battery storage and flexibility technologies as the key enablers of power grid resilience.
If governments act decisively, today’s supply disruptions could become a catalyst for accelerating renewable energy deployment and electrification, advancing both energy security and decarbonisation.
Gareth Walsh is the Director of Energy & Climate at the Tony Blair Institute for Global Change, where Jordan Lee is Energy & Climate Advisor for Asia Pacific.
