Renewable energy investment in Asia-Pacific booms to $114.8 billion

24 April 2018 6 min. read
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Renewable energy investment is booming in Asia-Pacific, accounting for 47% of worldwide new investment in the sector. And the region could see up to $250 billion in new investment on utility scale renewables projects until 2025, according to a new report from PwC. With declining input costs and favourable government policy, renewables investment is predicted to continue growing locally.

Renewable energy projects and investments are increasing in volume and velocity as the price of solar and wind technology falls, at the same time that governments around the world are passing favourable renewable energy (RE) policy and regulations in a bid to cut carbon emissions. Indeed, in a 2015 PwC survey of utilities CEOs, 85% of respondents said that falling technology costs will result in renewable energy power generation becoming widespread and accessible.

In 2016, some of the largest transaction volumes ever were seen in the renewable energy sector, particularly in Asia-Pacific. The sector attracted $241.6 billion in new investments worldwide, resulting in capacity addition of 138.5GW. Of this, 47% of total investment – $114.8 billion – was in Asia-Pacific countries. A new report from PwC titled ‘Renewable Energy in Asia-Pacific: The next frontier for infrastructure investments’ posits that investment in renewable energy will continue to grow, driven by recovering oil prices and increased interest in the field by oil and gas firms. Indeed, PwC estimates that major Asia-Pacific countries could see up to $250 billion in new investments in utility-scale solar and wind projects until 2025.Types of completed RE infrastructure deals by private fundsWind and solar power have been driving private fund investment in renewables, with wind accounting for 45% and solar accounting for 32%. Together, wind and solar make up over three-quarters of the investment pie. Hydropower ranks third, at 11%, with ‘other’ and biomass/biofuel at fourth and fifth with 4% and 3% respectively. Clearly, wind, sun, and to a lesser degree, water, are the principal power sources for renewable energy’s growth.

Investors in the infrastructure sector currently view renewable energy as the most attractive industry with the sector, with 64% of respondents having a favourable outlook for the technology. In second place, with 21 less points, is non-renewable energy at 43%; transport comes in at third, with 34% of respondents saying it presents an attractive opportunity at present. Waste management, at 9%, is apparently a waste of time (and money) for investors. As such, we can see that wind and solar are the drivers of renewable energy infrastructure growth, and that investors are currently bullish on the still emerging field.2025 RE forecast (MW) for select countries in Asia-PacificMany governments in Asia are ramping up their renewable energy efforts, with some having especially high targets. For example, the Indian government has set an ambitious goal of 175 gigawatts (GW) of energy production from renewable sources by 2022 – a sizeable leap from its 2017 capacity of 57GW. PwC believes that improving technology will help. “We see a large potential for better technologies in RE - such as more efficient photovoltaic (PV) cells, larger wind turbines and improvements in biomass and waste management, thus, leading to bigger and more scalable projects.”

PwC’s research estimates that India will not quite hit its renewable energy targets, with the country predicted to only reach 146GW by 2025. India’s production will be driven by about equal contributions from wind and solar, with a smaller amount coming from biomass and other sources. Japan’s renewable energy will be mostly provided by solar power, with the country being a leading supplier of solar technology. Vietnam’s production meanwhile will remain almost non-existent, whereas Indonesia’s modest output will – in contrast to other APAC countries – be provided almost wholly by ‘other’ sources, such as biomass and geothermal. Country analysisAccording to the report, many governments in Asia-Pacific already have favourable regulatory/legal frameworks for the renewables industry. Favourable government policy is critical to attracting both foreign and domestic investment in capital-intensive renewables projects. The majority of countries have substantive policies and capacity targets, such as Japan’s goal to develop 100GW of solar and 40GW of wind by 2030, while the Philippines is set to introduce minimum thresholds from renewable sources as a percentage of total power generated by firms. The Philippines is also aiming for renewables to represent 50% of power generation in the country by 2030.

Meanwhile, Japan has the most attractive regulatory and legal framework for renewable energy investment, boasting clear policy and targets, few restrictions on foreign investments, low levels of corruption, and a suite of sector incentives. Japan’s framework is rated as ‘very good’ by PwC, with Australia, India, the Philippines, Taiwan, and South Korea holding a rating of ‘good’. Vietnam and Indonesia, in step with their low projected output by 2025, have regulatory/legal frameworks rated as ‘poor.’Comparison and evolution of Levelised Cost of ElectricityThe capital costs of solar and wind power technologies has been declining steadily, with solar photovoltaic (PV) modules declining in price by about 75% between 2010 and 2017. Solar PV panel costs account for about 35-50% of a solar plant’s capital costs, so the accelerating affordability of panels is making solar power generation much more competitive with other sources. Additionally, wind turbine prices have declined by 53% between 2009 and 2017, driven by increasing competition between manufacturers and lower commodity prices of key construction materials like steel and cement.

PwC’s report also states that in addition to cheaper equipment, improving supply chain efficiencies are also helping lower the Levelised Cost of Electricity (LCOE) – a metric that is taken as a proxy for the average price a power source must receive in order to break even over its lifetime. Solar PV levelised costs have fallen 58% between 2010 and 2015, and are expected to fall a further 51% by 2030. According to the research, solar will become a much cheaper power source than coal and natural gas in the future.

Although solar PV is currently the costliest energy producer out of coal, natural gas, onshore wind and solar PV, PwC expects it to be the cheapest by 2025, becoming an even more cost-efficient source by 2030. Onshore wind will make more modest gains in cost-efficiency, while natural gas and coal will become more expensive methods over the next 12 years.