Renewable energy investments in Australia increased by 9.8% year-on-year

ENERGY FINANCING

The deployment of carbon capture projects will serve as a “key catalyst” for the development of the blue hydrogen sector, particularly for markets that have sufficient natural gas reserves and expertise.

In a report, Fitch Solution said that implementing carbon pricing schemes will also improve the economic viability of carbon capture projects, supporting blue hydrogen development.

Globally, the Asia Pacific region is the second leading in the carbon capture market, accounting for 14.6% of the total share.

It is behind North America which holds the lion’s share of 59.6% of the total carbon capture market as of November 2022. The share of Latin America in the market is at 11.6%, the Middle East and North Africa (MENA) at 9.5%, and Europe at 4.7%

The US and Canada hold the majority of expertise in carbon capture projects, whilst Europe is expected to see the largest growth in carbon capture capacity supported by the announced large cluster projects funded by consortia of oil and gas, power and manufacturing firms.

If all projects in Europe become operational, it could catch up with North America and become the second-largest carbon capture market.

China leads in APAC

Meanwhile, China is the leading market in the Asia Pacific region, ranking third in Fitch Solutions’ Blue Hydrogen Sustainability Index with a score of 80.17. China is behind the leading markets US and Canada with an index of 90.22 and 80.79, respectively.

The North America and Western Europe region is at the top region of the index, followed by MENA, and Asia.

“The latest Fitch Solutions Blue Hydrogen Index remains largely unchanged, with the US and Canada holding the top spots, but the overall growth in projects has stalled since our last report as concerns mount over blue hydrogen’s competitiveness in cost of production,” it said.

“The incumbent advantages of a welldeveloped natural gas industry continue to support the adoption of blue hydrogen. The market leaders also hold distinct advantages in both supportive policies and investment in renewables, while having an existing base of hydrogen demand that would form a ready market for any form of low carbon hydrogen,” it added.

The index is based on the following criteria: blue risks, renewable country risks, project risk index, hydrogen industry rewards, and blue rewards.

Other countries from the Asia Pacific that were in the top 20 markets were Australia, Malaysia, Kazakhstan, India, Indonesia, Japan, and Vietnam. Markets in the Middle East were the United Arab Emirates, Qatar, Saudi Arabia, Iran, and Kuwait.

Renewable energy investments in Australia increased by 9.8% yearon-year (YoY) as of 2022 to reach around US$4.5b (A$6.73b), but more would be needed to ramp up the capital for the country’s renewables capacity. Of the amount, around US$4.4b (A$6.56b) worth of projects started construction during the year and around US$1.7b (A$2.53) worth of projects reached the final commissioned phase. For the whole year, New South Wales has the highest financially committed projects with its five generation projects with a total capacity of 1,559 MW, and 5,700 MWh storage spread across six projects. Meanwhile, Victoria and Queensland contributed five projects each, whilst Australia had three projects. Investments in the fourth quarter reached around US$2.9b (A$4.29b), which is the highest quarterly investment since the third quarter of 2018 with the financial commitments for large-scale generation and storage project, according to the Clean Energy Council. The country saw six generation and storage projects with installed capacities of 1,923 megawatts (MW), and 800 MW-hour, respectively, reach financial close during the fourth quarter.

Chief Executive Kane Thornton said adding that the result shows the investors are responding to a “more positive political and policy environment.” Despite the encouraging uptick, however, he said

Vast Solar’s VS1 gets $45.2m funding

Investors are responding to a more positive political and policy environment

JERA completes Formosa 2 project

that one quarter does not indicate a trend. “Australia is deploying new large-scale generation – wind and solar farms – more slowly than needed to reach the 82 per cent target for renewable energy on the National Electricity Market,” Thornton siad.

“The fact remains that the rolling quarterly average investment over 12 months has not risen above $2 billion since the second quarter of 2019,” he said, adding that the country needs to do more as significant shifts in capital overseas were implemented such as the US’ Inflation Reduction Act.

The council also said that the need to increase effort for renewable projects is in line with Australian Energy Market Operator, which noted that all mainland states in the National Electricity Market are seen to breach the reliability standard from 2027 if there are no new significant investments amidst the retirement of coal-fired stations.

TotalEnergies’ 4th solar plant is online

The Australian Government has granted US$45.2m (AU$65m) in funding for the construction of Vast Solar’s VS1 project, a 30-megawatt (MW)/288MWhour concentrated solar power (CSP) project located in Port Augusta in South Australia.

The funding is conditional upon the reaching of financial close which is expected by late 2023, according to the Australian Renewable Energy Agency. The project is seen to start commercial operations by late 2025. The project aims to showcase the CSP technology at the utility scale to attract more investments.

JERA announced it has completed the installation of 47 wind turbine generators at the Formosa 2 offshore wind project off the coast of Miaoli County in Taiwan.

The wind farm has a total installed capacity of 376 megawatts. It is about to begin full-scale generation to the grid. The project which started construction in October 2019 is expected to start commercial operations later this year. JERA owns around 49% of Formosa 2, whilst Macquarie’s Green Investment Group and SYnera Renewable Energy hold 26% and 25%, respectively.

France-based TotalEnergies has started the commercial operations of its fourth solar power plant in Tsu, Mie Prefecture in Japan with a capacity of 51 megawatts (MW) after two years of construction. The Haze power plant will provide electricity to Chubu Electric Power Miraiz Co., Inc., through an over 17-year period power purchase agreement. It can provide power to around 20,000 households. The plant is situated on a nearly 77-hectare surface and uses almost 100,000 highefficiency solar panels.

Coal remains the cheapest newbuild generation option for APAC

The cheapest new-build power generation option for Asia Pacific will still be coal until 2024, despite the high fuel price environment, as costs of renewables in the last year, according to a report by Wood Mackenzie.

In an analysis, Wood Mackenzie said the rise in equipment and construction costs, and interest rates pushed the levelised costs of electricity (LCOE) for utility solar by 16% since 2020, with the average cost rising to $91 per megawatt-hour (MWh) in 2022 from$78 per MWh in 2020. Onshore wind also rose to $104 per MWh from $93 MWh during the same period.

The capital expenditure (capex) for solar and onshore wind rose to 12% and

6%, respectively, since 2020, whilst fossil fuel increased by 5% to 8%. The interest rate for power projects recorded a 30% from 5.8% in 2021 to 7.5% in 2022 across the energy sectors.

“Higher renewables costs mean that Asia Pacific’s average solar LCOE is at a 7% premium to coal power in 2022. This is despite higher fuel costs driving up the LCOE for new coal projects by 16% and gas by 11% in the last two years,” the report read.

New low-carbon technologies remain expensive with power costs for hybrid renewables and battery storage 41% to 72% higher than LCOE for gas in 2022.

Green hydrogen and ammonia blended

China has been insulated from cost inflation trends, gaining competitiveness against other markets power costs are more than twice the costs of coal and gas today, adding that they will have a 60% premium by 2060. Even if the costs of green ammonia and hydrogen are expected to decline by 49% and 53%, respectively, by 2050, it will still be at least double the fuel cost of gas or coal.

However, Wood Mackenzie said that the cost of a “firmed” mix of renewables, gas turbine backup, and storage is seen to reduce to $90 per megawatt-hour (MWh) in 2030, from $130MWh in 2022, making it competitive against gas and nuclear.

Lowest-cost in China

China has the lowest-cost renewable power in the Asia Pacific in 2022, with a 4% decline in the average utility-scale solar LCOE to $44 per MWh.

China replaced India as the market with the lowest-cost renewable in the region, as India’s average LCOE for utility-scale solar by rose by over a third to $56 per MWh.

Along with India and Australia, these were the only markets in the region where renewable costs are competitive against new coal power projects.

“China has been insulated from cost inflation trends, gaining competitiveness against other markets due to massive scale, depth of local supply chain, and increasing technology dominance,” Alex Whitworth, Research Director at Wood Mackenzie, said.

“Offshore wind in China is now competitive with gas and coal power in coastal regions, and a further drop in costs of nearly a quarter by 2025 will allow the technology to undercut coal power nationally,” Whitworth added.

The cost of offshore wind in China dropped 22% to $72 per MWh in 2022, less than half the APAC average of $171 per MWh, whilst its solar and onshore wind costs remained low.

SOUTHEAST ASIA NEEDS AT LEAST US$200B IN ENERGY SECTOR INVESTMENT BY 2030

Southeast

Asia will need at least US$200b worth of investment in the energy sector by 2030 to speed up their clean energy transition, the International Energy Agency (IEA) reported.

In line with this, the IEA noted that more than three-quarters of the total amount should be earmarked for clean energy.

“However, investment momentum for renewables has been inconsistent, with insufficient policy signals to support the development of robust project pipelines,” IEA said.

“With only three years left to reach regional interim renewables targets, which envision renewables to account for 35% of power capacity by 2025, accelerating investments in renewable power and enabling infrastructure, such as electricity networks and battery storage, is critical.”

The IEA added that emerging and developing economies (EMDE) will need to turn to private capital to finance renewable energy and deviate from public finance which these economies have been reliant on, traditionally. At present, public financing accounts for nearly 60% of clean energy investments.

Private capital will need to account for 60% of investments, which is still lower than the level seen across advanced economies at almost 90%.

“This is partly due to the elevated role of EMDE stateowned utilities as investors in electricity grids,” the IEA noted. “To facilitate this shift, regulatory and financing frameworks must improve to reduce the costs, risks, and barriers around developing clean energy projects in EMDEs and the ASEAN region, in particular.”

In its March 2023 report, ASEAN Renewables: Opportunities and Challenges, the IEA and Imperial College London reported that the annual average energy investments in the region stood at US$70b between 2016 and 2020. Of this, clean energy only accounted for below US$30b annually.

More particularly, the average annual capital expenditures of US$10b went to solar PV and wind energy over the past five years.

Source: Southeast Asia Energy Outlook (2022), IEA

SEA’S ELECTRICITY DEMAND TO EXPAND BY 6% ANNUALLY UNTIL 2025

Southeast Asia posted a 5.5% year-on-year growth in electricity demand as the region’s economies recover amidst the reopening of borders for international tourism.

In a report, the International Energy Agency (IEA) said coal accounted for 43% of the region’s power generation, followed by gas at 29%, and renewables at 27%.

The IEA added that the demand in the region will expand by 4% to 6% annually until 2025, with fossil fuel catering to most of the additional demand, whilst renewables are expected to meet about a third of the growth.

Meanwhile, coal generation is also expected to increase by 4% on average annually by 2025 with Indonesia and Vietnam leading in capacity additions. Its expansion will also be supported by the lifetime extension of some coal-fired power plants, such as in Thailand, due to the high energy global prices and supply shortages.

“The share of renewables in the generation mix will rise slightly to below 28% in 2025,” the report read, adding that the region is targeting to increase its solar and wind capacity by 50 gigawatts (GW) by 2030, and over 250GW by 2050, with some countries setting their carbon neutral or net-zero targets.

The slight increase in renewables capacity is expected to lead to a decrease in the emission intensity of the region’s generation mix by over 1% in 2025 compared to 2022.

Emissions intensity will reach 585 grams of carbon dioxide per kilowatt-hour but will remain amongst the highest in the world, according to IEA.

APAC electricity demand

For the whole Asia Pacific, the estimated electricity demand rose by 3.3% in 2022, boosted by India which saw an 8.4% increase but was partially offset by the lower growth in China of 2.6% amidst the economic slowdown due to the zero-COVID policy.

The IEA said that these countries alone accounted for around 70% of the total electricity used in the region of 13,500 terawatt-hours, comprising almost half of the global consumption.

The report noted that over half of the demand growth in 2022 was met by renewables with almost 60% of the renewable output coming from China. Despite this, coal still dominated the generation mix in the region at 57%

“The convergence of weather events and record-breaking gas prices led to higher coal use in electricity generation for the Asia Pacific region in 2022 (+2.5% on 2021 levels), but going forward its share in the mix will decline,” the report read.

However, the share of coal is expected to decline to 52% in 2025 as the share of lowcarbon sources such as nuclear and renewables increases to 38%, on the back of the almost 12% annual growth in renewable generation

Gas-fired generation’s share, meanwhile, is seen to dip to 9% in 2025 from 10% in 2022.