El Niño Threatens Power Supply Across Asia

The developing El Niño phenomenon is raising risks for the Asian economy, with threats extending beyond agriculture and food prices to the electricity systems of several countries. According to an update from the World Meteorological Organization (WMO), El Niño has begun to develop and could become one of the strongest events in the next nine to twelve months. A common pattern during such episodes is reduced rainfall in Southeast Asia and parts of South Asia, while other regions in East Asia may face heavy rain and flood risks. This directly threatens the capacity of hydroelectric power plants, which rely on reservoir levels and water flow.

Fitch Ratings highlights Vietnam as the country with the highest vulnerability among rated markets, as 30 to 40 per cent of its power generation and capacity still comes from hydropower. The agency noted that a power supply shortage in 2023 disrupted industrial zones and economic activity. In contrast, China’s main hydro plants are expected to remain stable because the network of dams along the Yangtze River can regulate water flow from interconnected reservoirs. India’s risk is more linked to a potential weakening of the monsoon, which could affect wind power generation, though its electricity system still has reserve capacity from thermal plants.

The risk extends far beyond these major economies. The International Hydropower Association (IHA) notes that at least 30 countries still use hydropower as the backbone of their national electricity supply. In South America, Paraguay obtains nearly all of its electricity from the Itaipu Dam, while Brazil generates over 70 per cent and Colombia more than two-thirds of their power from hydro sources. In Africa, Tajikistan produces around 95 per cent of its electricity from hydropower, with Ethiopia and Zambia close to 90 per cent. In Europe, Norway supplies about 90 per cent of its electricity needs from hydropower, while Switzerland and Canada are around 60 per cent.

In Asia, Laos is a prominent example, obtaining most of its electricity from hydropower and developing capacity to supply Thailand, Vietnam, and Cambodia, earning it the moniker ‘Battery of Southeast Asia’. This high dependence makes weather patterns a critical factor for energy security. When the rainy season is normal, dams supply low-cost electricity. Conversely, when El Niño develops and rainfall declines over a prolonged period, generation capacity shrinks, forcing countries to rely on alternative energy sources or increase electricity imports. Many nations are now pursuing diversification, with China expanding thermal, solar, and energy storage capacity, India accelerating solar and pumped storage projects, and Vietnam adding new generation sources.