IEEJ：July 2019○ｃIEEJ 2019
Special Bulletin
A Japanese Perspective on the International Energy Landscape (435)

July 5, 2019

Energy Talks with Students in Malaysia
Ken Koyama, PhD
Chief Economist, Managing Director
The Institute of Energy Economics, JapanOn July 5, I had an opportunity to deliver a lecture on global energy and environmental
issues before 60 to 70 students in the energy economics course at the University of Tenaga Nasional
in Malaysia and discuss these issues with the students. I have served as international adviser to theEnergy Commission of the university since December 2015. In the energy talks with the Malaysian
students, I first made a presentation on global energy and environmental issues and exchanged
opinions with the students based on the presentation. In the following, I would like to introduce key
points of the energy talks.
I made the following points: Energy is an indispensable good to support civic life,
economic activities and national governance. Energy demand has been increasing in line withpopulation growth, economic development, income growth and energy consumption appliancediffusion. The most fundamental energy issue is how to meet growing demand for indispensableenergy in a stable, affordable and environmentally friendly manner. This represents the so-called 3E
challenges – energy security, environment protection and economic efficiency. The simultaneous
resolution of the three challenges is the ultimate energy policy goal. However, the three challenges
frequently trade off with each other, leading to an energy trilemma.
Based on this, I explained current issues or challenges facing the world, including thepossibility of crude oil prices’ remarkable destabilization, the progress and implications of the U.S.
shale revolution, the international energy market gravity center’s shift to Asia, the deterioration ofgeopolitical risks as indicated in the Middle East, emerging environmental issues like climate change
and air pollution and the importance of relevant countermeasures, the development and diffusion ofadvanced or innovative technologies expected to resolve these issues, their future courses, andconflicts between policies for resolving issues and market functions.
Various factors exist behind the destabilization of crude oil prices, including growing
Middle East tensions over Iran and the future presence or absence and details of a possible military
clash. Depending on future developments, crude oil prices could spike on a tightening internationaloil supply-demand balance, exerting serious impacts on the global economy including Asia. As thegravity center of the global energy market shifts to Asia, the region faces serious challenges
regarding energy security, environment protection and market efficiency. The abovementionedMiddle Eastern turmoil and possible crude oil price spikes would be urgent energy security issues forAsia. As Asia’s heavy dependence on coal is a key factor behind the deterioration of environmental
problems, the region is required to seriously pursue cleaner energy use. Many Asian countries areliberalizing or deregulating energy markets at various speeds and to various degrees. A focus ofattention is how Asian countries would harmonize the achievement of energy security andenvironment protection with ongoing market reform.
In a scenario in which energy security will be enhanced with powerful policies and1

IEEJ：July 2019○ｃIEEJ 2019advanced technologies diffused to conserve the environment, global energy supply and demand will
make a major structural transition. Non-fossil energies such as renewable energy and nuclear will
expand their energy mix shares while coal demand declines, with oil demand peaking. Even in 2050,
however, the world would still be consuming massive fossil fuels, with fossil fuel market
stabilization remaining as a key challenge.
Massive energy investment will be required for the structural transition of energy supply
and demand through advanced technologies. The Institute of Energy Economics, Japan, estimatessuch global investment at 90 trillion yen in cumulative term up to 2050. Such huge investment
would be a big challenge for energy stakeholders in the world. However, it may provide a bigbusiness chance as well. The world has experienced some energy transitions and is now amid a newtransition. It is very hard to foresee winners or losers in the transition at this moment. In the absenceof any “perfect energy source or option”, the most important point is to pursue the best energy mix to
combine all available options in a balanced manner while overcoming their respective weaknesses.
Even in the uncertain world, society’s electrification is making progress. Market reform
will exert great influence on the harmonized pursuit of stable supply and environmental friendlinessof growingly important electricity. Competition promoted through liberalization or deregulation
brings about numerous benefits such as rationalization, lower costs and higher efficiency. However,declines in electricity wholesale prices make it difficult to recover fixed costs or secure necessaryinvestment. If market forces are left to determine everything, the achievement of a politicallydesirable energy mix may fail to be secured. Policy responses and initiatives will be required toresolve these problems. The best mix of market mechanisms and policies will become indispensable.
The abovementioned challenges or problems are global or common. However, the degreesof their seriousness and relevant countermeasures differ from country to country. Japan and Malaysia
have their respective unique problems. Based on the uniqueness or exclusiveness, and relevant
conditions, the two countries are required to take their respective measures to resolve their commonproblems regarding the 3E challenges. The above represents my message to students in the lecture.
Students asked how they should view hydro power generation that is frequently described
as a green energy but occasionally criticized as environmentally hostile because of environmental
destruction near dam or plant sites. As for nuclear power generation conceived as a CO2-free option
to stably provide electricity, they questioned how they should view safety challenges and what new
nuclear technologies there are. In response, I noted that these questions symbolize the absence ofperfect energy sources and that technological and policy initiatives to overcome challenges should
be enhanced along with their public acceptance through talks among stakeholders. As a new nuclear
technology, I cited the small modular reactor (SMR) technology that are attracting attention.
Asked what energy policies Middle Eastern and other oil-producing countries should takeif demand for fossil fuels slackens or slows down, I explained that these countries are trying to
upgrade or diversify their economies in preparation for such future developments by planning topromote energy efficiency, renewable energy and nuclear in the energy sector and by implementing
initiatives to combine their most important oil and gas sector with carbon capture and storage
technology to produce CO2-free hydrogen. Students also questioned how the international energy
market would be affected by global economic deceleration as a result of the U.S.-China trade war
and if U.S. President Donald Trump’s energy and environment policies are contributing to making
the international situation unstable and uncertain. Numerous hot and timely questions including theabove ones made my energy talks with the Malaysian students very meaningful and significant.
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IEEJ：July 2019○ｃIEEJ 2019

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