Asia is turning to coal in the Iran crisis, but nuclear power will be the real endgame
· Fortune
The closed Strait of Hormuz has triggered a sharp energy shock across Asia. Last year, nearly 90% of the oil and gas transported through the strait was destined for the region. But with the waterway shut for nearly two months, Asian policymakers now have to urgently rethink their energy strategies.
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The answer, for many countries, is coal. The Philippines, Japan, Thailand and South Korea, among others, have turned to coal as a stopgap measure to stabilize their power supply amid volatility in oil and natural gas markets. Coal exporters like Indonesia are also ramping up their stockpiles as the Middle East conflict triggers a price surge.
This looks like backsliding for a region that was already struggling to meet its emissions targets. But while coal gets today’s headlines, Asia’s energy future lies in nuclear power, the only fuel able to provide regular electricity.
The shift to coal is a short-term response to concerns about energy security. Asia is still deeply tied to fossil fuels, with power generation, transmission and financing built around coal, oil and gas. Any pivot from these fuels is going to be constrained by investment cycles and the time it takes to build alternatives.
But a spike in coal usage is unlikely to persist in the long-term. Governments know that any reliance on fossil fuels is a strategic vulnerability. Coal may be a readily available buffer for now, but the Iran war won’t derail the transition to cleaner energy. Over the long-term, the Iran war will reinforce, not reverse, the region’s shift to a more diversified energy mix. The conflict is underscoring the true reason governments want fewer fossil fuels: Not to reduce emissions, but to reduce exposure to a volatile energy market.
Nuclear, not (just) renewables
Renewable energy, like solar and wind, will continue to be popular options in Asia. But these energy sources, on their own, won’t be able to replace baseload fossil fuel generation.
Nuclear energy can. Energy policymakers and planners increasingly recognize that nuclear power offers a reliable, low-carbon, and domestically controlled energy source, at least compared to imported fossil fuels.
The closed Strait of Hormuz strengthens the case for nuclear as a hedge against a fossil fuel supply shock, reducing Asia’s exposure to an unstable Middle East.
That said, accelerating the use of clean energy, including nuclear, is not straightforward for governments, particularly in developing countries with limited institutional capacity, financing, and technical expertise. Clean energy is expensive (at least upfront), takes time to build, and poses regulatory and safety concerns—and so governments will need to have sustained political will to carry out their plans.
Governments must follow a multi-pronged strategy to carry out their clean energy plans. They must to strengthen cooperation with other governments, invest in modernizing their electrical grids, and create a stable policy framework that can attract long-term investment.
What will this look like in Southeast Asia? Expanding cross-border power trade through initiatives like the ASEAN Power Grid can allow nuclear and renewable energy stations to supply more than one country. Better financing mechanisms can also help lower the risk of large-scale energy projects.
When it comes to nuclear energy specifically, governments will need to establish an independent and well-resourced nuclear regulatory regime with the power to license, inspect, and enforce compliance in line with international standards. They also need to invest in training, working with countries with more experience with nuclear power.
This is key, as the region remains wary of nuclear power’s safety record. Public buy-in is essential for any government choosing to embrace nuclear power; officials must convince their citizens that nuclear power is a safe and necessary option for energy security, or risk losing public support and ending up with a policy reversal down the line (as happened in Germany).
While the Iran conflict has prompted a short-term reversion to fossil fuels, especially coal, it is unlikely to derail East Asia’s long-term clean energy transition. Instead, it underscores the urgency of building a more diversified and resilient energy mix, where nuclear power will end up playing a far more central role.
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