FIRST Fast-growing emerging markets requires baseload generation capacity additions and coal is the immediate, easy option
Even in developed countries, coal accounts for a significant amount in their power consumption
“Coal inertia” will remain strong in Asia Pacific despite climate pressure
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ASIA PACIFIC
ew coal-powered projects in the pre-construction phase may have decreased by 6% compared to the previous quarter, but it still remains strong in absolute terms according to a report by IHS Markit. According to its report, the capacity of coal-fired power being developed remains large with 190GW under construction and 148GW in pre-construction planning. These projects, if all brought online, would increase the region’s coal-fired power fleet by over 20% and make ambitious climate goals much harder to reach. In the Philippines, India, and Vietnam, more than half of the power projects
currently under construction are coalfired. Even in developed economies like Japan and South Korea, coal accounts for 29% and 44% of all projects under construction, respectively. Singapore and Taiwan are the only two markets in the region that currently do not have coal projects being built or planned. “This reflects a difficult reality in the energy transition process: fast-growing emerging markets require baseload generation capacity additions and coal is the immediate, easy option; meanwhile, some mature economies still have coal projects in the pipeline from past planning. Together these create immense
“coal inertia,” akin to trying to turn a supertanker,” IHS Markit said. Despite coal still remaining strong in the market, renewables in Asia Pacific are accelerating. After the recently held virtual climate summit hosted by the US President Joe Biden, countries such as South Korea, China and Japan have pledged to lower their greenhouse gas emissions and reach the 2050 decarbonisation goal. By the end of March 2021, a total of 463GW of new power generation projects were under construction in the region’s 16 key power markets. This was up 5% from the previous quarter, indicating more projects moving into construction phase than those that were completed. The capacity mix of the underconstruction projects did not change significantly from the previous quarter, with coal’s share down by 2% while hydro up by 2% in terms of share in the mix. “With countries aiming to further reduce their carbon emissions, it is not surprising that the share of renewables in planned power projects increased in the last quarter,” said Xizhou Zhou, vice president of the climate and sustainability team at IHS Markit. A report by HSBC further reiterated that renewable energy is poised to double in ASEAN by 2025. It said that the key six countries in ASEAN – Vietnam, the Philippines, Thailand, Singapore, Malaysia and Indonesia – added around 24GW of renewable capacity over the last five years. “In 2025, we estimate the equity IRR for solar and wind in the region to range from 11.9-15.8% and 9.4-14.6% respectively. Overall, the returns range from low to mid double digits and look very close between countries. Assuming a more favourable tariff policy, renewables in Indonesia also look viable in terms of returns,” HSBC said.
THE CHARTIST: THAILAND JAPAN’S SOLAR TO MAINTAIN INDUSTRYRENEWABLES IS DIMMER WITH GROWTH, JUST 20GW OUTPERFORM PROJECTED IN SEA TO COME ONLINE Thailand Japan’s solar will sustain powergrowth sectorinwill itsexpand renewables at sector robustasrates well as through keep its toposition 2020 asas a one large of the outperformers backlog of projects in Southeast supported Asiaby in the feednext 10 in years, tariffsaccording come online. to a After new report 2020,from BMIFitch Solutions ResearchCountry said that Risk theand transition Industryto Research. a reverse The forecast auctions is backed systembywill theslow country’ growth, s as supportive, the Japanese regulatory government environment looks tofor regulate renewables, capacity additions which will inplay order a role to reduce in “diversifying subsidy the costs power andmix support away grid fromstability. a heavy reliance on natural “Wegas-fired expect Japan power” to as register Thailand robust wouldsolar become capacity a net growth importer through of liquefied to 2020natural as a result gas inofthe the following implementation years. of a substantial pipeline Supportive of projects policiesthat include benefit feed-in-tariffs, from a tax generous incentives, feed-in net metering tariff support schemes, scheme. bidding programmes, Our forecastand is that improved out offinancing a 50GW backlog access, the of such report projects, added. Moreover, only 20GW the will country’ actually s newest come online, Power as Development most will not Plant be (PDP) able towill pursue take advantage to source 35% of the ofFiT its subsidies energy mixamid from non-fossil stringentfuel government sources by requirements 2037. and delays “Under inthe development, new PDP, licence ” BMI granting Researchfrom added.
the Energy Regulatory Commission is set to open up for a total over 10 GW of solar power capacity over the next two decades,” the report said. “We forecast non-hydro renewables capacity to more than double over the coming decade to reach over 17.7 GW by 2030, accounting for 24.7% of the total power mix.” This will be propelled forward by the solar and biomass subsectors, with the latter presenting a more favourable outlook for the country. “We have made a slight upward revision to our biomass capacity and generation forecasts this quarter, as the sector grew more strongly than our initial expectations across 2019 and 2020,” Fitch commented. Concurrently, the Energy Ministry has approved a $216.8m budget from the Energy Conservation Fund for 2021, which would majorly be allocated to renewable projects for Source: BMI Research agriculture purposes.
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Source: Fitch Solutions Source: BMI Research
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