This article is part of an ongoing series on the emerging energy price situation in Asia. Expect more insights ahead, including real-life examples of how Asian companies are mitigating energy cost increases through investable technologies.
For the second time in four years, Asian supply chains are risking exposure to energy and power price spikes driven by disruptions to the global oil and gas supply chain. This raises a key question for supply chain managers and manufacturers across Asia: to what extent will these price spikes impact industrial energy and power costs? Given the rise of supply chain decarbonization we now have more data that allows us to understand the extent to which decarbonization programs can insulate supply chains from oil and gas price volatility.
To sketch out an initial analysis, we’ve examined the 2022 oil and LNG price spike provoked by the Russian invasion of Ukraine, alongside RESET data on the extent to which decarbonization programs can reduce exposure to fuel and power costs.
Rather than looking at heavy industry, this analysis focuses on Asian manufacturing, which is dominated by light industrial facilities typically using electricity mixed with primary fuels such as gas and coal for production heat requirements.
The bottom line: in many markets, manufacturers that implement a comprehensive decarbonization program will have lower energy bills even at $100-120 per barrel than comparable manufacturers facing oil prices of $60-70 per barrel. In other words, decarbonization can – in many cases – offset the incremental cost of an oil price spike using technologies that have attractive payback periods or financing options that make them investable for mainstream business in key Asian exporting markets.
Global oil and Asian power prices: inextricably linked
Analysis of the 2022 oil price spike provide useful insights into how the oil and LNG price volatility passes through to manufacturers in Asian markets.
The Russian invasion of Ukraine in 2022 resulted in rapid increases in oil costs to over $100 per barrel[1] and LNG costs of over 50 MMbtu.[2]
The impact of these increases on manufacturers was complex and dependent on a country’s exposure to internationally traded oil and gas, particularly for power generation, as well as issues such as utility regulatory structures and specific Government interventions designed to shield consumers from the full price impacts.
Manufacturers experience the impacts through direct fuel cost increases and utility cost pass-throughs.
In terms of the cost pass-through to manufacturers, the table below summarizes the industrial power tariff increase for some major Asian economies. Although there is variance depending upon fuel mix, reserves and level of Government intervention (fuel subsidies spiked at an all-time high of $105b (USD) in 2022) many industrial power consumers took a significant hit.
| Country | What moved | % Δ vs 2021 by end‑2022 | % Δ vs 2021 by end‑2023 |
| South Korea | Industrial average (KRW/kWh) | +12.4% (118.66 vs 105.48) | +45.8% (153.71 vs 105.48) |
| China | Policy band for coal‑fired transactions vs benchmark | Up to +20% / ~+50% for selected individual consumers | Near +20% in many provinces |
| India | Fuel & Power Purchase Adjustment Surcharge (FPPAS) | Deployment of new FPPAS to facilitate rapid pass through of elevated fuel expenses by state distribution companies | |
| Viet Nam | Average retail (basis for industrial schedules) | — | +3.0% (May 2023) |
| Thailand | Ft (fuel adjustment) for non‑households | +103.8% Ft increase | Ft moderated; still above 2021 |
| Malaysia | Imbalance Cost Pass Through (ICPT) surcharge as share of published energy rates | +20 sen/kWh surcharge (~56–99%) | +17 sen/kWh (still elevated) |
| Indonesia | Published policy (Q3‑2022) | Tariff freeze but increase in Government fuel subsidies e.g. $160m Jan 21 vs. $710m Jan 22 | |
| Philippines | Case studies | Meralco + 4%; FLECO + 63% | FLECO +±19% |
| Bangladesh | Retail (applies to industry) | +10.25% cumulative | — |
| Taiwan | HV/EHV industrial list prices | +15% (Jul‑2022) | +34.6% cumulative |
If current oil and gas increases are sustained, a similar picture can be expected in 2026. Some markets, such as Vietnam and Bangladesh, could become even more exposed due to their increased dependence on imported LNG for power generation since 2023.
Decarbonization programs pay off: impacts across energy and cost savings
For manufacturers who have invested in decarbonization, however, these cost increases will be more muted. Below shows a table of typical onsite energy efficiency and renewable energy impacts on electricity and fuel procurement as a percentage of reduced energy demand, showing typical ranges of 15-40% depending upon facility type and the energy management maturity of the facility.
| Sector (China, SE Asia focus) | Energy efficiency % | Energy saving from Onsite Solar PV % | Total range % | Notes |
| Apparel | 10-15 | 5-15 | 15-30 | Inc. Tier 1 and Tier 2 |
| Electronics | 5-15 | 5-15 | 10-30 | Mainly T1 Assembly |
| Food & Beverage | 10-25 | 5-20 | 15-45 | |
| Hard Goods | 10-20 | 5-15 | 15-35 | |
| Commercial Real estate | 10-25 | 5-15 | 15-40 | Inc. office, retail, hotel, warehousing |
These numbers have been summarized from RESET facility onsite engineering assessments, supplemented with literature reviews most of which are also assessment-led. Such assessments tend to focus on investable options with a return on investment period within typical manufacturer appetites or a technology solution that can be supported with an attractive financing package, which is particularly the case for solar PV.
The impact of decarbonization investments: the haves vs. have-nots
The simplified table below shows how different decarbonization programs and tariff increases can combine to impact overall energy spend. The take-home message: decarbonization can shield industrial consumers from some, or in certain cases potentially all, of the costs of an energy price increase compared with companies that aren’t making these investments.
It is also worth noting that when decarbonization assessments are conducted, the financial analysis rarely, if ever, considers elevated energy price futures. Increases in energy prices will have the added benefit of dramatically improving the financial return on decarbonization investments, making periods of high energy prices an excellent time to start investing.
Securing a competitive advantage: how should companies respond to the situation?
Companies can begin by identifying which facilities carry the greatest price exposure and the strongest decarbonization potential, a prioritization that can be done through desktop portfolio screening or through detailed onsite engineering assessment. Both approaches are outlined below, though the right starting point depends on portfolio size and the urgency of the business case:
- Portfolio Decarbonization Risk Assessment
By combining Agentic Ai with engineering expertise and assessment databases, this approach evaluates current facility carbon maturity and overlays price risk to identify the highest risk facilities with the best investment opportunities. While less granular, this approach can be scaled rapidly across large facility populations and total company energy spend, making it ideal for quickly identifying priority facilities and likely technology opportunities available. - Facility Onsite Decarbonization Assessments
Onsite engineering assessments offer a deep dive into the different technology options available at a site, alongside corresponding financial analysis, to inform management’s action plans and investment decision-making.
Amid the current energy market uncertainty, RESET remains committed to supporting manufacturers in navigating energy price volatility and advancing their decarbonization strategies. If you are seeking support, get in touch via rc-info@lrqa.com.
References
[1] https://www.macrotrends.net/2483/brent-crude-oil-price-history
[2] https://www.investing.com/commodities/lng-japan-korea-marker-platts-futures