Asia Needs $1 Trillion Annually in Energy Investment to Avoid Next Shock, McKinsey Says

Asian nations may need to invest $1 trillion annually in energy over the next 15 years to ensure regional energy security, according to a McKinsey report published Thursday. The estimate comes as the firm raised its forecast for Asia's energy demand to 370 million terajoules by 2040, a 15 percent increase from last year's projection. The report follows the months-long closure of the Strait of Hormuz, which began in February after a U.S. and Israeli military offensive against Iran. Before the closure, roughly 20 million barrels of oil and oil products passed through the waterway daily, with about 80 percent of that oil and 90 percent of natural gas destined for Asian markets. The Philippines declared a national energy emergency in March, and governments across the region imposed energy rationing and work-from-home mandates. McKinsey projects about $300 billion will be invested annually in solar and wind through 2040, though coal is expected to remain in Asia's energy mix longer than previously anticipated, with regional demand broadly flat over the next decade as declining Chinese consumption is offset by growth in India and Southeast Asia. Data centers powering artificial intelligence and industrial activity are cited as major sources of demand growth.