Renewable power is rapidly gaining ground across Asia as governments across the region recognise the potential of alternative energy sources as a way to stimulate economic growth, drive technological innovation and cut pollution, which in some countries has become a major health and social problem.
“Energy sustainability is now heading closer to being mainstream for some countries in Asia,” explains Erwin Maspolim, head of utilities, power and renewables, Asia Pacific at ING. “When you hear about developers working on coal power projects, these are usually protracted projects which are taking time to close for various reasons.”
The renewables charge is being led by China, which invested more than $44 billion in clean energy projects in 2017, up from $32 billion in 2016. That put the country ahead of the US and Germany in Ernst & Young ’s global index for Renewable Energy Attractiveness (RECAI). India, ranked fourth in the survey, added more energy capacity from renewables than coal for the first time last year.
According to Maspolim, there has been a significant shift in opinion – primarily on environmental, health and safety, and technological grounds – in favour of renewables. “Governments, companies and the public now generally accept that carbon emissions need to be reduced,” he says. “And post-Fukushima, there is a new acceptance of nuclear power’s potential risks. Meanwhile, renewables have become more efficient, which has lowered investment costs and accelerated uptake.”
Many countries in Asia have enjoyed sustained economic growth in recent decades, prompted by socio-economic development and urbanisation. This has dramatically increased energy consumption. For example, in Southeast Asia, it nearly doubled between 1995 and 2015, growing at an average pace of 3.4%, according to a report by the International Renewable Energy Agency (IRENA). The agency estimates that demand will grow by an average of 4.7% a year to 2035.
For much of the past two decades, growing demand has been met by fossil fuels, with the commissioning of numerous coal-fired power plants since 2000 (although more lately natural gas has contributed the largest share of power generation in many markets). However, renewables have begun to gain ground and ambitious targets have been set: southeast Asia is aiming for 23% by 2025, according to IRENA. In addition to the environmental benefits of renewables, energy security concerns are also increasingly motivating countries to adopt renewables.
The renewables mix varies in each country across the region, with many making use of location-specific advantages. For example, Indonesia is pushing forward with geothermal power development while Vietnam’s provinces with high solar energy yield such as Binh Thuan and Ninh Thuan are attracting developers keen to explore the opportunities for solar farming. Solar PV remains the most frequently installed technology, followed by wind.
New technologies are also making an impact. “Offshore wind has recently become a hot topic in Taiwan, with the country awarding grid allocation to wind farm sites with a potential generating capacity of over 3GW to international and local power developers,” says Maspolim. ING acted as a mandated lead arranger and financial modeling bank to Formosa 1, an offshore wind project in Taiwan, the first in Asia Pacific. ING is well positioned to support projects given its experience in the European offshore wind sector and its relationship with international developers.
As the example of offshore wind demonstrates, some aspects of the renewables market in Asia are currently less mature than in Europe. Nevertheless, Maspolim says that in some markets emerging technologies and concepts such as floating solar PV, floating offshore wind farm and distributed energy are being implemented or considered. Elsewhere, there is also a growing end-user preference for renewable energy: “Corporate electricity buyers are increasingly requesting green energy,” he says. “In addition, electricity retailers are also teaming up with mobile service providers and telecom operators to market green energy.”