Article Impact of renewables on the Asian energy mix

Impact of renewables on the Asian energy mix

Asia Pacific accounts for a whopping 60 percent of the global population and has the world’s fastest rising regional energy demand, according to the UN.

Most APAC countries are fossil fuel dependent but keen to transition to clean renewable sources. In fact, renewable energy in Asia Pacific has mostly outpaced that of Europe and the U.S. in recent years, largely due to a significant growth of projects in China, India and Australia.

Yet last year, modern renewables — such as wind and solar — accounted for only around 6.8 percent of the region’s total energy consumption, says the UN report. Fossil fuels were the dominant supplier.

Securing clean, affordable, and sustainable energy in this diverse region is integral to underpinning its economic and social growth. And although some APAC countries have seen slower investment and installation of clean energy than others, the area is set to become a leader in the deployment of renewables in the next decade, installing some 500 GW of non-hydro capacity, according to BMI Research.

Regional leaders

Due to ambitious clean energy programs, China and Australia emerge as leaders in APAC renewable installation.

In 2017, China said it would invest $360 billion in renewable energy by 2020. That same year, the country accounted for a record 45 percent of the sector’s global investment, up 10 percent from 2016, according to a Renewable Energy Policy Network of the 21st Century (REN21) report.

Recently, however, Beijing said it would cease issuing quotas for new solar projects, which is expected to slow down growth in the sector considerably, though overall renewable energy forecasts for the country remain strong.

In Australia, the Clean Energy Council said 700 MW of renewable projects were completed and began generation in 2017; large-scale wind and solar project activity pushed investment in Australia up 150 percent to a record $9b that year. The government has set a goal to source 23.5 percent of the country’s electricity from renewable sources by 2020 and is set to exceed this target.

However, an influx of renewables has created challenges balancing the grid, as coal-fired power stations have shut down, particularly in southern Australia. The state government has turned to battery storage to help manage the intermittency created by wind and solar.

Investment challenges

Across APAC, an estimated 420 million people still lack access to electricity, according to a UN Economic and Social Commission for Asia and the Pacific report. It states that the estimated yearly investment needed in Asia Pacific to meet the “UN Sustainable Energy for ALL” goal of doubling the share of renewables by 2030 is $298 billion, “but current investment levels fall short.”

The expansion of renewable energy in Asia Pacific developing nations has been hindered by inadequate grid systems and unsupportive policies and regulations. Additionally, government budgets are often insufficient to meet the high cost of building and maintaining infrastructure in geographically challenging areas.

However, this is changing. PwC reports that as of 2017, “the majority of Asia Pacific economies have moved to some form of competitive selection process for renewable energy technologies, especially for utility-scale solar and wind projects.”

Typically, hydropower has been the least costly technology, and hence the most popular. There has been a trend in recent years for decentralized, small hydropower projects to provide electricity to remote locations in countries such as China, Indonesia and Nepal. But the rapidly falling cost of solar PV and onshore wind will likely boost their viability in many countries.

For example, according to IRENA, between 2010 and 2016, the global weighted average cost of electricity from utility-scale solar PV plants commissioned in those years fell by 69 percent.

Future growth

Renewable energy in Asia Pacific is increasing and will take capacity share away from fossil fuels, which is still the dominant energy source. A PwC survey found that “renewable energy continues to be seen as a key growth area in the future globally and in key economies of Asia-Pacific, with 64 percent of respondents having a favorable outlook.”

Within the region, the key leaders will be Australia, China, India, Indonesia, Japan and the Republic of Korea, according to ESCAP. In particular, BMI Research states that China and India will be the chief drivers, adding 430 MW of new wind and solar through 2027. It also forecasts that India will add around 164 GW of non-hydro capacity over the decade, an increase of 165 percent on current installed capacity.

As part of its move away from nuclear power, Japan is also turning to wind and solar. The government is creating a new renewable certificate trading market in 2018 to promote its growth.

Perhaps most surprising is that Indonesia is also emerging as a regional leader. It wants to boost its share of renewables in the energy mix from around 12 percent currently to 23 percent by 2025. The government has made it easier to get power purchasing agreements and has capped the price for renewable electricity projects at 85 percent of the average electricity cost in that region.

Overall, the outlook for renewable energy in APAC is extremely positive. The potential and need in the region are significant, and with better government policy, plans and coordination to create a safer investment environment, renewables will continue to eat into incumbent fossil fuel’s share of the region’s energy mix.

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