8 charts on the private sector's growing backing of clean energy

21 April 2021 Consultancy.asia 6 min. read

While private sector backed investments in renewable energy are on a steep growth trajectory in Asia, there is potential for much more, according to a new report by consulting firm EY and the European Climate Foundation. 

The joint report looked into the investment scene for renewable energy projects in eight Asian markets (Southeast Asia, Japan, South Korea and Taiwan), uncovering that there currently are over 800 projects in the pipeline with an aggregated investment value in excess of US$300 billion. 

The report’s key message is clear: “Amid the focus on sustainability and as economies work toward recovery in a post-pandemic world, there are opportunities for a clean energy transition, which can help economies to “build back better” by supporting responsible investment and innovation and contributing to job creation,” said the authors. 

A walkthrough of the report’s key findings in eight charts: 

A total of US$306 billion of private capital has been committed to renewable energy projects. Not surprisingly, the largest economy of the eight countries assessed, Japan, leads the pack, followed by South Korea. 

Investment in renewable energy

In terms of investment size, Japan and South Korea lead as the investment for offshore wind projects are considerably higher when compared to other renewable energy subsectors. Philippines and Vietnam lead in terms of the number of projects in the pipeline. In general, solar energy dominates the pipeline in Southeast Asia. 

Investment share in renewable energy by geography + Investment share by renewable energy subsector

The total renewable energy capacity in the pipeline is 90GW and is mainly located in South Korea, Japan and the Philippines. Offshore wind has the largest capacity in the pipeline with an estimated capacity of 46GW under development, followed by solar PV at 29GW and onshore wind at 9GW. 

Renewable energy capacity: 90GW

The pipeline shows diversity in terms of investment size. Approximate 48% of projects identified are small and require investments less than US$50 million. The project sponsors consist of a mix of local developers, regional conglomerates and international developers and small and medium enterprises (SMEs).

Breakdown of projects by investment range

Wind versus Solar

In North Asia, offshore wind dominates the investment pipeline, gaining much more interest than for example solar energy. One reason for this can be found in challenges around land availability, as articulated by developers and stakeholders. The offshore wind pipeline of Japan, South Korea and Taiwan can significantly exceed the national offshore wind targets, indicating strong market interest in the sector.

Offshore wind dominates the pipeline in North Asia

In Southeast Asia, the pipeline is dominated by solar energy. In Indonesia, the solar pipeline can meet the (modest) 2025 targets of the Perusahaan Listrik Negara (PLN), a state-owned company tasked with supplying the electricity needs of the Indonesian people. In Malaysia, the renewable energy pipeline is closely linked to the LSS program.

Solar dominates in Southeast Asia’s pipelines

In Thailand, the pipeline has the capacity to exceed the country’s planned solar capacity additions until 2025 by a significant margin due to the high level of interest in the solar sector. In the Philippines, the current installed solar capacity in the country has already exceeded the 2030 national target. Lastly, in Vietnam, the solar pipeline has the potential to meet a significant portion of the country’s ambitions for renewable energy. 

The environmental win?

According to EY’s study, the renewable energy projects in the pipeline have the potential to save over 229 Mt of CO2e, assuming the entire pipeline is realised.

CO2 emissions avoided by geography

Jobs?

On top of the environmental benefit, over 800,000 new jobs could be created if the full pipeline is realised.

Potential jobs additions

The clean energy opportunity

Commenting on the report’s findings, Gilles Pascual, EY’s ASEAN Power & Utilities Leader said: “The environmental and economic benefits of green energy development can no longer be ignored. Governments around the world have acknowledged the role the green energy sector can play in economic recovery post the Covid-19 pandemic.”

“Our study finds that there is tremendous investor interest and surplus private capital ready to be deployed in the clean energy sector. However, the clean energy transition can be accelerated and amplified only when certain challenges are addressed by the authorities, which will make the sector attractive for private investment.”

“With greater collaboration between the public and private sector, economies can tap into the immense potential that clean energy projects can offer to drive better economic, environmental and social outcomes. The choices today will shape the economies of tomorrow.” 

In related news, according to a recent report from strategy consulting firm Bain & Company, a broader push for more sustainability heralds a $1 trillion opportunity for Southeast Asia.