- 1 Definition / Scope
- 2 Market Overview
- 3 Key Metrics
- 4 Market Risks
- 5 Top Market Opportunities
- 6 Market Drivers
- 7 Industry Challenges
- 8 Technology Trends
- 9 Pricing Trends
- 10 Regulatory Trends
- 11 Other Key Market Trends
- 12 Market Size and Forecast
- 13 Key Market Players
- 14 Strategic Conclusion
- 15 Further Reading
- 16 Appendix
Definition / Scope
Renewable energy is energy produced from natural resources, such as; solar power, geothermal heat, windmills, hydroelectricity, biofuel etc. Renewable energy resources exist over wide geographical areas, in contrast to other energy sources, which are concentrated in a limited number of countries.
One of the most useful means of generating energy in Asia is renewable energy. Asia’s share of world energy consumption is predicted to rise as rapidly as 56% by 2035 from about a third in 2010. Which makes Asia the largest energy consumer in two decades. For solar power, South Asia has the ideal combination of both high isolation and a high density of potential customer.
By 2035, most Asian countries will produce less than half the energy they need from indigenous sources, most of the countries will be more dependent on energy imports, mainly oil. According to one ADB report, if Asia continues to expand energy access without fundamentally changing the way it consumes, this will have costly and devastating environmental impacts within 20 years.
According to 2017 report of ‘Renewable Energy Policy Network for 21st Century’, Renewable energy contributed 19.3% to global energy consumption. As of 2015, more than $286 billion is invested in renewable energy worldwide, and as of same year, more than half of all new electricity capacity installed was renewable.
Azerbaijan, Brunei Darussalam, and Kazakhstan are 3 developing Asian country that is energy self-sufficient because of their indigenous oil supplies. Three countries will account for two-thirds of global renewable expansion to 2022, two of them are Asian countries; India and China. China and India have increasingly been turning to renewables to power their economies. According to a landmark plan, India targets to install 275GW of renewable energy by 2027.
By 2022, India is expected to more than double its current renewable capacity. While China is the world’s leader in wind-generated energy and aims to triple solar capacity by 2020. China overtook the united states in 2017 as the world’s largest producer of bioelectricity.
Asia’s third largest producer of renewable energy in Japan, with the capacity of 82GW, rising 7GW last year. Asia and the Pacific together comprise a large, diverse and dynamic region to the globe, with 4.4 billion people living in 58 markets. Asia is a key factor in the world’s pursuit of a sustainable energy future.
|Base Year||2018||Researched through internet|
Like any other projects, renewable energy also enlists some market risks, such as; political risk, construction risk, cyber-attacks, power purchase agreement talks with no deal, currency fluctuation, interest rate rises, land ownership rows etc.
Massive renewable projects can present significant risks and these complex construction projects are hard to manage. For example, China’s three gorges dam forced around 1.4 million people to be relocated- more than initially hoped- after rising water levels caused unforeseen landslides.
According to the OECD Development Centre’s Report, China has suffered an economic slowdown and exports over the past five years also have slowed. Low-interest rates have also factored into slower economic growth and this has strained the region’s banking system.
According to a Moody’s report, in India, renewable energy projects face challenges related to the weak credit quality of off-takers, an evolving regulatory framework as well as financing and execution risks. Some of the developing Asian countries possess political risk for renewables project, risk includes; corruption, complex local and national approvals and planning procedures that can contradict each other, lack of energy policy etc.
With the rising uses of technologies in projects, cyber-attacks also threaten the renewable energy market, a power grid in Ukraine was hacked in 2015, is the example of the risk.
Top Market Opportunities
The transformation of the worlds power mix is one of the biggest and truly global investment opportunities in infrastructure for the coming years. Renewable energy in Asia has seen some very good opportunities. India, China, and Indonesia have received the largest inflows of money (about 60%) from Greenfield Foreign Direct Investment (FDI). Asia was the largest negotiable market for wind power for the ninth consecutive year.
- High Demand: Public from this region are increasingly concerned about the long-term damage to its health and environment, due to which demand of renewable energy has increased. Also, renewable project comparably takes short time to build and produce energy, from the investors perspective, a short construction period often reduces construction risks and can reduce the time to cash flow generation for an investment.
- Supportive Regulatory Framework: Most of the country in this region now have national or regional renewable targets, open and transparent tendering mechanisms, or feed-in tariffs for renewable energy. Some countries are also helping in the development by streamlining bureaucratic processes, investing in grid capacity and freeing up land for renewable development, all of which has helped raise investors’ confidence.
- Attractive Returns: Expected returns for renewable energy projects in Asia-pacific tend to be higher than for comparable projects in Europe and the U.S. particularly in the region’s emerging markets which currently offer between 14-15 percent in local currency for operating assets, and up to 20 percent in local currency for development assets according to Brink Asia.
- Policy Support: Governments in the region increasingly wish to decarbonize their power sectors and are putting in place renewable energy targets. Renewables also give nations a degree of energy self-sufficiency which is important to many Asian countries that have historically been heavily reliant on importing fossil fuels.
Some of the driving factors of the Renewable Energy Market in Asia are
- Industrialisation, combined with growing population
- Demand for more energy, especially electricity.
- Country’s interest in decarbonizing power sector
- A public concern about the long-term damage to its health and environment
- A commercial sector attracted by the stable, long-term cash flows available in improving projects
- Fast-improving science and technology
- Renewable energy can contribute to environment protection, technological leadership, economic growth and energy independence.
- The evolution of global carbon market and emissions trading becomes a driving force for investing in renewables.
Despite the potential and obvious attraction renewable energy market still has some challenges in front of it, at both national and regional level.
- Policy-wise challenges: Lack of incentives for private sector involvement and inconsistent policies, Absence of feed-in tariff structure, Fossil fuel subsidies, Weak environmental regulations are some of the policy wise challenges renewable energy industry is facing.
- Technical challenges: Lack of appropriate technology to design, install and operate renewables projects is the biggest technical challenge.
- Economic Challenges: Some of the economic challenges renewable energy industry is struggling with includes; lack of private sector investment, the limited number of operational projects available for investment, high initial capital costs and long payback periods, limited knowledge of market potential, high installation cost etc.
- Other Challenges: Difficulties with land acquisition, lack of sector planning, lack of quality information about renewables are some other challenges in the renewables energy industry.
Technology trends of renewable energy system are as follows:
Solar Energy: One of the most widely developed renewable energy sources is solar energy. Two technologies for solar energy are the solar photovoltaic (PV) and the concentrated solar power (CSP) technology, which is presented in the following sections.
- Solar Photovoltaic Technology: Solar photovoltaic technology (PV) is the most popular technology for capturing solar energy and converting it to electricity (the solar radiation is directly converted to electricity with the use of semiconductor materials). The basic element of PV is a solar cell.
- Concentrated Solar Power Technology: Solar thermal collectors are used to capture the solar radiation, convert it to heat and ﬁnally to electric energy with the use of a heat engine. Flat plate collectors are rarely used for electricity generation since their maximum operating temperature is usually lower than 120 Degree Celsius and the resulting efﬁciency is too low. The most common method for power production using solar thermal technology is the concentrated solar (thermal) power (CSP) technology.
Wind Energy: Another very common renewable energy source is wind. With the use of a wind turbine (most common is the horizontal axis turbine), the kinetic energy of the wind is converted to mechanical power and then to electricity. Usually, several wind turbines are installed together and constitute a wind farm. Their capacity ranges from some kilowatts up to some megawatts (the large wind farms can even reach a capacity of 100 MW), while they can be installed either on-shore (not only lower installation cost but also lower average wind speeds) or off-shore (higher costs, but much higher average wind speeds).
Bioelectricity Generation: Biomass is a renewable energy source and refers to waste and residues from agriculture (including vegetal and animal substances), forestry and related industries, energy crops, as well as the biodegradable fraction of industrial and municipal waste that can be used as fuel for different scale power production.
Geothermal Energy: The underground ﬂuid thermal energy, called geothermal energy, can be recovered and used for electricity generation with geothermal plants. These include drilling, in order to use the hot ﬂuids found some hundred meters below the surface of the earth. Geothermal plants can be installed in rather limited locations, and this is the main reason why their market penetration in the renewable energy pool is increasing very slowly.
Small Hydropower Plants: In this only the discussion is on small hydropower plants, which do not involve the construction of a dam to change the natural ﬂow of a river. Such plants usually have a capacity lower than 10 MW. There are various turbine types, which can convert the gravitational energy of water to mechanical power and then to electricity with the use of a generator.
Other RES Ready to Get Commercialized: Ocean energy plants take advantage of the energy of waves, currents, tides or even the sea water temperature difference at different depths (most common as ocean thermal energy) and convert it to electricity with various methods. These plants are very promising, but there is still a lot of research and development to be conducted, in order to decrease their costs and improve their reliability and efficiency.
Asia has competitive average costs across renewable energy technologies due to the mixture of excellent resource endowment and lower than average installed costs, notably for solar PV and onshore wind.
- Solar PV module in Asia decreased by approximately 75% from 2010 to 2017.
- Module price sourced from different countries are now covering within narrow price range.
- China and Japan together accounted for around 70% of global module production in both 2015 and 2016.
- Two most widely employed renewable energy technologies-solar and wind- saw their capital costs falling steadily in recent years, for example, there was a decline of solar PV module prices by around 75% between the end of 2010 and end of 2017. Solar PV panel costs account for around 35-50% of the total capital cost for solar plant
- For wind power projects the biggest capital cost component is for the turbine, including wind blades, tower and transformer, which is around 65% of the cost of such projects.
- Wind turbine price peaked in 2009 but have started to decline since then and were around $950-1240/MW in 2016.
- Japan’s first auction for contracts to provide solar electricity pushed prices down by nearly a quarter from a previous system.
- The lowest accepted price for solar projects was 17.2 yen/kWh in the November 2017, down from 24 yen/kWh in the year through March 2017 for projects approved under Japan’s Ministry of Economy, Trade and Industry’s FIT programme.
- Japan’s Ministry of Economy, Trade and Industry has set a target for solar tariffs to reach 14 yen/kWh by 2020 and 7 yen/kWh by 2030.
Most Asian countries have adopted policies and frameworks which strongly facilitates the development of renewable energy projects. The majority of countries in the region have policies for renewable energy projects, which clearly state capacity targets for different forms of renewable energy projects over a specific timeframe.
A renewable energy developer wouldn’t consider a project in a specific country if the energy policy was to generate power from 100% coal. Instead, they may opt for a country where certain financial incentives were provided for renewable energy projects developed them. The government will need to continue developing these renewable energy policies over the coming years in order to further facilitates renewable energy projects development and achieve their national target.
The initial projects for all renewable energy technologies in Asia were driven by governments through Feed-In-Tariffs (FIT) mechanisms, wherein the government buys the energy from renewable energy projects at a fixed price throughout the term of these projects to cover for the costs of installation, operating expenses (including interest costs) and a reasonable equity term. As of 2017 major Asian economies have moved to some form of the competitive selection process for renewable technologies.
Examples of government-led initiatives
- National renewable energy targets: Most of the countries now have a target for 25-50% share of renewables in the total energy mix. For example, Philippine Energy Plan 2009-2030 aims for renewables to represent 50% of the power generation mix by 2030.
- Governments fund to support renewable energy projects: Such support can be in form of viability funding, credit guarantee facility or technical assistance. For example, the Energy Service Company fund in Thailand and Sustainable Renewable Energy Fund in Vietnam
- Tax incentives: In Philippines, renewable energy developers have exemptions from income tax for seven years, followed by the discounted income-tax rate of only 10% (Compared with the standard rate of 35%.
- Land Availability: In India, the government provides land for solar parks, Vietnam provides an exemption in land use fee for renewable energy projects.
- Research & Development Support: Singapore government set-up Solar Energy Research Institute of Singapore to develop industry-oriented research & development for the solar energy sector locally and in the region.
Other Key Market Trends
Besides existing trends, there are some emerging trends in the renewable energy market
- Mini-grids or hybrids: Mini-grids are a set of electricity generators interconnected to a distribution network that supplies electricity to a localized group of customers.
- Stand-alone systems: Another form of off-grid electrification. Standalone systems may include rooftop solar systems or home lanterns employed for increasing electricity access.
- Utility-scale battery storage: The main objective is to enhance grid stability and remove intermittency or RE generation. Although the costs of such systems are high, they are expected to decrease with evolving technology and wider integration with existing grids.
- Building integration: Building efficiency is a key focus in global environmental sustainability. Adoption of energy efficient equipment, and the inclusion of RE technologies are two crucial components to achieve this.
- Artificial Intelligence (AI): The application of AI or machine learning can enhance the predictability of demand and supply for renewables, improve energy storage and load management, assist in the integration and reliability of renewables and enable dynamic pricing and trading.
Market Size and Forecast
There is a possibility of potential investment of up to $250billion new investment in utility-scale solar and wind projects till 2025 in major Asia-pacific countries and there continues to be a strong economic case for renewable energy investments in the medium to long-term.
According to a survey, 64% of infrastructure investors believe renewable energy assets present attractive investment opportunities. In 2016, renewable energy attracted $241.6 billion of new investments globally with a total capacity addition of 138.5GW. out of the total new investments around $114.8 billion or 47% were in Asia-pacific countries.
For Asia as a whole, renewable energy capacity has nearly doubled over the past five years, reaching 918GW in 2017. In 2017, Asia accounted for nearly two-thirds of the worldwide increase in renewable energy generating capacity, according to a report published in April by the International Renewable Energy Agency.
Key Market Players
Key market players in this industry include
- GE Power: GE Power is an American energy techniques company. GE Power is the largest energy techniques and selling energy company in the world.
- Tata Power Company: The Tata Power Company Limited is an Indian electric utility company based in Mumbai, India. With an installed electricity capacity of 10,577MW, it is India’s largest integrated power company. In February 2017, Tata Power became the first Indian company to ship over 1GW solar modules.
- IHI Corporation: IHI Corporation is a Japanese heavy equipment company which produces ships, aircraft, automobiles and power plant.
- Alstom: Alstom is a French multinational company, operating worldwide in the rail transport market and in the energy market. In 2014, Alstom and General Electric announced that a $17 billion bid for the company’s power and grid division had been made and provisionally accepted.
- Shenzhen Energy Company Limited: Shenzhen Energy is one of the main power generation companies in China. The company involves in developing all types of energies, researching and investing high new energy-related technologies.
- ABB Group: ABB is Swedish-Swiss multinational corporation, operating mainly in robotics, power, heavy electrical equipment and automation technology areas. It is ranked 286th in The World’s Most Admired companies in the Fortune 500 global list of 2016.
- Mitsubishi Heavy Industries: MHI is a Japanese multinational engineering, electrical equipment and electronics company. MHI’s product includes aerospace components, air conditioners, aircrafts, missiles, power generation equipment etc.
Most Asian countries cannot meet all their power requirements on their own, so the region must accelerate cross-border interconnection of power and gas grids to improve efficiency, cut costs and take advantage of surplus power.
The desire for greater self-sufficiency in Asia, in addition to higher demand, is certain to light up the renewable energy industry for years to come. However, fossil fuels will remain primary sources of energy unless greater policy and incentivizing measures are made. But governments need to get out in front of this transformation too. Setting targets and policies is not enough. Countries need to re-examine the governance structure.
- Feed-In Tariffs – A premium rate paid for electricity fed back into the electricity grid from a designated renewable energy generation source.
- Off-takers – The party who is buying a project’s future production/service, long before the production begins. Off-taking is common in the energy market.
- Decarbonize – Process of reducing the number of gaseous carbon compounds released in the environment.
- Carbon Market – A market that is created from the trading of carbon emission allowance to encourage or help countries or companies to limit their carbon oxide emission.