A reliable grid and advanced power management and cooling solutions are essential to meet the region’s growing demand for electricity, writes Manish Bishnoi at Impax Asset Management.
Electricity demand is soaring in Asia’s fast-growing economies, placing the region at the vanguard of the global electrification trend. Key to enabling this is the expansion of a reliable grid through advanced grid hardware and software, and power management and cooling solutions, creating opportunities for Asian technological leaders.
Rising electricity demand
Asia is expected to consume 51% of the world’s electricity in 2025, up from 26% in 2000. This rise has been driven by China, which now accounts for 33% of global demand (10% in 2000) and consumes more electricity per person than the EU. Demand is now growing at comparable rates in India and the ASEAN economies of southeast Asia.1
Expanding industrial activity, improving living standards and technological trends are all pushing up regional electricity consumption. Three of the largest individual drivers are
- Space cooling
- Transport
- Data.
First, rising incomes and temperatures are fuelling a dramatic increase in sales of air conditioning (AC) units. On current trends, the IEA estimates that the number of AC units in southeast Asia alone could rise from 40 million in 2017 to 300 million by 2040, when space cooling could account for 30% of peak electricity demand.
Second is the rapid adoption of electric vehicles, especially in China, by far the world’s largest EV market. Already consuming 0.7% of Chinese electricity demand, EVs could account for 6.8% by 2035 based on current policies.
Third, the rise of artificial intelligence (AI) and datacentre demand are structurally changing power market dynamics. China’s State Grid Energy Research Institute expects demand from the country’s datacentres to double by 2030, versus 2020, and account for 3.7% of total electricity use.
Grid and storage solutions
An accelerated expansion of Asia’s power grid infrastructure is needed to accommodate forecast demand growth and ensure resilience of supply over the coming decades. Rystad Energy has projected that roughly USD 1.5 trillion of investment is needed between 2024 and 2030 in the region’s grids.
Accelerated capital expenditure is directed towards both grid hardware and software. The region’s grids not only have to get bigger, but also smarter to accommodate the rise of more decentralised, intermittent renewable generation and bi-directional electricity flows with ‘prosumers’ who both consume and produce electricity, typically rooftop solar.
This ramp-up in spending supports demand for leading manufacturers of critical hardware, including transformers and high voltage grid equipment such as Hitachi.* The company supplies grid management software which is needed to more accurately track flows of power and changes in supply and demand, and to anticipate system vulnerabilities and equipment failures.
As intermittent renewables play a growing role in power generation, energy storage is increasingly important to match supply and demand and helps ensure grid stability. Storage systems enable smart load management and increase power quality for electricity transmission and distribution by providing essential services such as frequency regulation, voltage support, and peak shaving.
Power management and cooling solutions
The high voltage loads required by datacentres, which require consistent power supplies and efficient cooling systems to maintain operational efficiency, place significant demands on local grids. Higher temperatures exacerbate this challenge in Asia, where power usage efficiency tends to be higher than in other regions.2
Innovative power management solutions can ensure reliable supplies and reduce electricity consumption in this context. Investments to support the expansion of the region’s digital infrastructure support demand for products by the likes of Delta Electronics.* The company supplies solutions to datacentres and other sectors to ensure stable and energy-efficient power supplies. It is also a supplier of cooling systems to the industry.
Given cooling accounts for about 40% of datacentre power consumption, there is a large and growing market for companies whose products improve cooling efficiency. Liquid cooling systems, which are being developed by the likes of Delta and Shenzhen Envicool*, are supplanting air-cooling systems in datacentres.
The global market for liquid cooling, which can reduce power needs and support higher server densities, is projected to expand from USD 0.3 billion in 2024 to USD 7.8 billion by 2027.3
Opportunities for enabling technologies
We believe the electrification of Asian economies presents significant opportunities for companies whose products and services improve grid resilience and enhance the operational efficiency of datacentres.
The pace of electricity demand growth in the region underscores how critical investments in these solutions will be for grid operators and major electricity consumers over the years ahead.
Also listen to the podcast with Manish Bishnoi: Talking Heads – Asia electrifies!
*References to specific securities are for illustrative purposes only and should not be considered as a recommendation to buy or sell, or investment advice. No investment decision should be made solely based on this information. Impax Asset Management or BNP Paribas Asset Management may or may not hold positions in the companies mentioned.
[1] Ember / Macquarie Research, 2024. The Association of Southeast Asian Nations (ASEAN) comprises 10 countries including Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam
[2] Jiao, Y. et al., 2017: Thermal Analysis for Underground Data Centres in the Tropics. Energy Procedia.
[3] Macquarie Equity Research, April 2024
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