The Power Grid of the 21st Century: East Asia’s Rise



Asian countries have developed an incredibly diverse power supply system that is perfectly suited for connection to other energy hubs around the world.

One could use the electricity system that connects these different regions to advance the integration of the Eurasian continent.



The 21st century Asian electric power system might evolve to become a key contributor to a global energy network, which may provide us with the electricity we need for the construction of industrial megastructures and cities and to keep the lights on.

We could be build a fully-integrated transnational electricity system, which would mean that we connect the world across multiple sites, node points and form new grid connections from Europe to East Asia and into North America. Dreamy? Indeed, this would be mighty undertaking. Would it be worth it? What do we get out of it? 


1. Background:


In terms of its scale, it would not just be a formidable undertaking. A project of this magnitude would link energy-rich regions of the world with global trade. From Europe to East Asia, and from Russia to Central Asia and beyond. If you like to read more about Russian energy production, please read on Russia’s energy growth potential in this decade (2020 – 2030). Assuming this is possible, we could connect to Siberia and East Asia could potentially connect to North America and form a tightly-nit energy system, connecting the world’s energy producers with the world’s energy consumers. The transnational electricity grid forms a physical medium of exchange between these diverse places. This has been completely unimaginable in the past, but remains a visionary project in many circles. But with the advent of the East Asian century, it has become somewhat more fathomable and deserves some speculation what this might entail.

What seemed like science fiction could turn into reality in no time. That is because infrastructure investments have been lacking for decades. Infrastructure investments in Western Europe for water, electricity networks, heat networks, the telecommunication sector taken as a whole have peaked in and around 1970 to 1980’s, to give a very rough estimate.

Why so? Because investments in infrastructure projects have not kept up pace with investments in the internet and communication industry. Every bug we spend in one field reduces infrastructure investments in another field. The electricity grid forms the backbone of our economy, and gives our digital economy a physical address in the real world. Without a fully-functioning electricity grid, it would be hard to imagine how we could maintain the digital infrastructure that we have build in the previous 100 – 130 years or so, since we have made advances in transmitting electricity going back to the early inventors of the modern electricity grid like Nikola Tesla and George Westinghouse.

Why is it important that we invest and maintain our electric power system? Some would argue we should invest more aggressively in the digital infrastructure building up digital assets. This requires a more elaborate explanation. First of all, it is important to remind ourselves that we have replaced many areas of the production process, and many areas of our daily administrative and organizational management and sort of outsourced these processes to the digital realm. This has suited us in a period where the Western world experienced a youth bulge. I have written a book review on a related subject matter from an energy perspective in a previous article on Samuel Huntington’s excellent book “The Clash of Civilizations and the Remaking of World Order”.

To transcend realities of demography, it appears we have unconsciously chosen modern delivery systems of information. This includes a complex logistics chain that requires energy. What I mean by that is we adapt modern IT infrastructure due to a lack of skilled workers, cheaply available to do more basic work. This is true for many Western countries. This has led to immense growth of the IT sector, created staggering wealth. This has shifted investments away from the physical realm and into building up more capacity and more capabilities in the digital world.

The problem is that all the digital infrastructure, software solutions, apps and data management solutions, rest on a giant pyramid and on the lower end of the entire system the electricity grid forms the foundation for our entire modern economy. On the top end we have credit card payment systems, but these solutions rely on a physical grid.

To summarize, we did see a significant increase of investments and a shift to the digital world. And as the pendulum swings back, we could see a reversal back to investments in the physical grid. Eventually. In the meantime, investments will flow into smart grids and smart metering systems. That is generally the approach taken by many Western countries, but not exclusively Western countries. The idea behind that is that if we can successfully implement smart metering, we can reduce our energy consumption because we become aware of our energy footprint.

The second idea behind it is that we can easily monitor the electricity inflows and outflows of / into the power grid. We imagine this will help to overcome fluctuations in the grid network. The reasoning behind this is that transformers can get damaged if the electricity load varies too much. Renewable energy can send high voltage into the grid system, which could potentially damage transformers. Transformers are very expensive items to buy, and replacing them is quite costly. Another reason behind this is that power plants, such as coal-fired power plants, cannot just be switched on and off as one wishes.

Why is that important? Because power plant operators have to be notified in advance that such steps are being taken, and in most cases it is better that coal-fired power plants continue producing electricity that is fed into national electricity grid. Turning energy production back requires huge amounts of energy, which defeats its purpose. Coal-fired power plants for example don’t work as intended by visionaries, they cannot just produce electricity at cut-rate prices when the wind doesn’t blow and the sun doesn’t shine. In fact, outside of Europe there are plans to either increase coal production as is the case in Russia, to consume more coal as is the case in India, or to gradually replace coal production from a very high level which is more the case in China.

One way to resolve this dilemma is to exercise more caution when it comes to building up more digital assets. There is a strong likelihood these assets will become overinflated as they rely on a concentration of wealth created on the basis of an electricity grid which has experienced under-investments for years. This has made the electricity grid susceptible to failure. This doesn’t mean we will see frequent blackouts in the near future in European countries, it merely entails an analysis of the situation we are in and that investments in physical assets have to be made or we erode the economic situation of digital assets which rely on physical assets. In turn, this means if we do not invest in physical assets such as electricity grids, we will see even more of a concentration process in the digital economy, and we will see further erosion of the economic position of digital assets when the digital infrastructure becomes more susceptible.


2. The Long-Term Solution: Integrating Europe’s Power Grid with East Asia’s Power Grid


Many Western countries have decided to incentivize renewable energy production over fossil fuels production. Over the past 20 or 30 years, many Western governments have provided incentives to develop these technologies further. An exception to this is biofuels production which is incentivized in many Western countries, including the UK energy market – if you want to read more on the UK’s energy policy I have added a link below. (We should also keep in mind that renewable energy makes up a very small percentage of overall primary energy consumption in the Western world. The amount of fossil fuel consumption for the whole world continues to grow, if measured as a share of total primary energy consumption). This means we feed in more renewable energy into the electricity grid, and we have problems to balance power inflows into the grid system. Some countries in Eastern Europe actually have a different approach how they meet their energy requirements.

One way to resolve this dilemma is to integrate the European energy grid to balance inflows and outfflows. But we can go further than that. Our target is to cut energy consumption and to balance grid inflows and outflows. We try everything in our disposal, including smart metering and smart grid solutions. That is still not enough.

Basically, we have to reformulate the problem: The biggest cost contributor is not to monitor electricity consumption at the household level (I believe there is very little to be gained from this). So what is the solution? The big idea is to balance the electricity inflows and outflows on the Euro-Asian continent.

Most of the energy flows in the world are concentrated in and around the Eurasian landmass. These points of interconnection also encompass the Arabian peninsula, which includes oil-rich nations such as Saudi Arabia, Qatar, Iran, Bahrain the UAE. Saudi Arabia’s energy policy in globally-oriented, mainly because Saudi Arabia exports to East Asian countries. Only a small share of Saudi oil supplies are heading to the U.S. Qatar’s energy policy differs to some extend because its main energy export is natural gas, most of it is going to East Asia. Their strategy is more versatile, as they have a strong interest to export natural gas to Europe. As far as Iran’s energy policy is concerned, more and more oil is send to China which is the number one buyer of Iranian crude oil. That percentage is likely to increase in the medium term to long-term. So we can already see that there is a shift happening in the Middle East. Oil and gas reserves are increasingly centered on East Asia, as the most important export market.

In close proximity to the Middle East and Oman there is another nation with a huge population – which is India. Please read on for an analysis on India’s energy policy and geopolitical orientation in energy matters which differs significantly from its neighbors.

If we go further east still, we have more regions with strong economic growth. Here we are taking of East Asia and Southeast Asia. East Asia is by any measure the internode of the 21st century energy world, connecting the east to the west in terms of energy inflows and outflows. It is strategically situated – and – through the Baring Strait – located between the European peninsula and North America. This allows East Asian nations to interact with the hubs of global commerce, Europe and America. In the west, East Asia is connected to Europe by land. As we will see, that makes all the difference. In the east, East Asia is connected to America by the Pacific Ocean. The western part is well-suited for transcontinental rail (but trains do require an electricity network to operate on) and in the east cargo vessels cross the Pacific Ocean to deliver valuable goods to the Americas.

So we have two differing strategies on how to manage global trade in the northern hemisphere: One strategy is to connect the supercontinent by rail and in order to grow networks of prosperity and wealth across this huge land area. This will be of great importance to Western China (which may become an important point of communication, transmission of ideas, goods and services like in the past). Another strategy is to move cargo across the Pacific Ocean. The western strategic orientation allows high-end consumer goods to be transported between Europe and East Asia, which may justify the overall costs of electrification of this huge land area so as to urbanize entire regions along the Silk Road, through rail transport and for energy consumption across the plains. The sea routes across the Pacific Ocean are well-suited to deliver bulk commodities from and to the U.S., and for high-end products and manufacture. Both strategies will form a cohesive whole and in my estimation are the corner stone which will place East Asia and China at the center of the energy world.

Based on this analysis, we can see that two major trends are underway. Let us go back in history. Dry bulk commodities have been carried across the Pacific and Indian Ocean for a long time. Ships might get even bigger, but there is a limit how big they can get. There is also a limit on their maneuverability when they are entering harbor and once goods have been delivered, on how to redistribute them effectively. If we assume all of that is the case, then rail networks should become much more interesting for logistics and transport companies in Western Europe for the delivery of high-end commodities and of high-value, high-end products such as automobile components which can be build in Eastern Europe and then be reassembled in East Asia. Railway networks should become more enticing for logistics providers in Central and Eastern European countries.

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Why? Because the advantages and disadvantages of shipping vs. rail for high-end products cancel each other out. In Eastern Europe, shipping and rail for high-end products are sort of on an equal footing, assuming the rail networks (right now China is the main contributor in this field) will actually be build to completion in Central Asia. Trucks have an easy time driving along the newly-build roads in Western China, after they have reached Khorgos, there is a distinctive lack of infrastructure development. All of that also allows Eastern Europe some flexibility to handle their deliveries. Eastern Europe is also the region within the European peninsula where we should expect the highest economic growth rates in Europe.

In the south and southeast of the Eurasian landmass (Southeast Asia), bulk load is carried on from the Middle East to East Asia, intersecting Singapore. In the far north, we have Russia taking full advantage of all these new investments. Russia is a major producer of energy commodities the world desperately needs. Through an elaborate grid network Russia delivers oil and gas to Europe and East Asia. The Power of Siberia is an excellent example of the growing interlinkages between Russia and East Asia. The Northern Sea Route which circumvents Russia along its northern periphery may become open for cargo transport for most of the year, partly due to climate change. This leads to a real circular economy, in every sense of the word. Goods and services always find their path.

Integrating the European power system is a major step forward. But it will be the start of a much larger transformation process in the global energy landscape. As China continues to build railway networks into Central Asia and Southeast Asia, crossing the central landmass of the supercontinent, once disparate places will become connected to the global energy supply chain. Railway lines use electricity to conduct their affairs, and with the railway network an entire electricity network will be build radiating outward from China and from there into Eurasia.

At the same time, Europe has a lot of incentives to support the development of the electricity grid in Eastern Europe. This has the clear advantage to support the economic development in East Europe and create new markets that eventually become the central nodes which connect to East Asian economies. As I have elaborated above, these investments are urgently needed. Some of theses investments will surely come from East Asian countries, to varying degrees some of these investments might come from China if these regions are of strategic importance. Assuming that is the case and these regions are of strategic importance, their geopolitical interests may align with the New Silk Road Initiative. This would imply they become part of an integrated supply chain moving energy commodities back and forth, which means more investment will be made in the local infrastructure, and Central Asia will become an intermediary of electricity transmission.


3. The Final Goal: Connecting East Asia’s Power Grid to North America’s Power Grid


The final goal would be the construction of a power grid connecting East Asia and possibly Russia to North America through the Bering Strait. Several plans have outlined the huge potential of such a project. And it appears China’s attention is mostly focused on the New Silk Road. On this point, I will comment in the future.


Many thanks for the shared interest in the energy world!



Disclaimer:


This article is just meant to inform the reader of recent developments in the energy industry at large and to share knowledge and insights with a wider audience. The author does not put forth investment recommendations. This article should not be taken as investment advice and the author cannot be held to account for investments made. For more information, please refer to the Legal Disclosure and Privacy Policy, which you can click on or find at the top of this page in the menu bar. 


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