A splash of Asian flair

Minh Khoi Le (Norway), Jun Yee Chew (Singapore), Dian Yu (Norway), Pratheeksha R (India), and Ramit Ittan (India), Rystad

Energy, investigate the range of renewables in Asia Pacific, and outline their hugely promising future in the region.

The global energy transition effort has greatly accelerated since 2020 with more countries setting carbon-neutral targets. In Asia Pacific (APAC), China and Japan – two of the world’s top three economies – agreed to 2060 and 2050 targets, respectively. Renewables in both countries have experienced dramatic growth over the last decade, spearheading technology developments and driving cost reductions. The growth of renewable energy has also been significant in other APAC countries including South Korea, Taiwan, Vietnam, and Thailand, where gigawatts of solar, wind, and storage have been installed in recent years. As of mid-2021, Asia (excluding the Indian subcontinent) accounts for 40% of the global installed utility scale renewable capacity. The region continues to witness strong economic growth and hence, rising power demand. Amid a fossil-fuels-dominated power mix, there are plenty of untapped opportunities for renewable energy in APAC.

As things stand, APAC and central Asia can expect 40% growth in installed capacity, to approximately 780 GW, by 2025. However, with

growth come challenges. Policies and market mechanisms will need to adapt to create balance for investors, buyers, and consumers, while maintaining the support level for renewable energy. The feed-in tariff (FiT) for renewable plants has been very successful in many countries, but a move to auctions or certificates can ensure a systematic approach that would increase the competitiveness of renewable energy. While solar photovoltaic (PV) and onshore wind technologies are well-developed in APAC, countries in the region will also need to explore and build capabilities in floating offshore wind, batteries, and green hydrogen.

Southeast Asia

Most of Southeast Asia’s renewable energy installed capacity to date has been in Thailand and the Philippines. More recently, Vietnam displayed some record-breaking installations, adding more than 8 GW of large scale solar PV in two years. With other countries in the region looking to start-up and boost their renewable energy sectors, Rystad Energy estimates at least 18.9 GW of solar PV will be installed between 2022 and 2025. The growth will be most noticeable in the Philippines and Malaysia, but Indonesia could also be a key regional player once a good domestic policy supporting renewables is confirmed.

Onshore and offshore wind projects are expected to see strong growth in 2021 after many years of muted development. Vietnam will be driving this growth with close to 5 GW, including 1 GW of intertidal offshore projects, due to be online by the end of the country’s FiT incentive in November 2021. The ongoing COVID-19 pandemic has created some delays for the construction of many Vietnamese wind projects. As such, the Global Wind Energy Council – an international trade association for the wind power industry – together with project owners, developers, and equipment suppliers, have asked the Vietnamese government to postpone the FiT expiry date. This, in turn, triggered the federal government to get in touch with local governments to consider a FiT extension.

Rystad Energy expects approximately 16.5 GW of onshore wind to be added between 2021 and 2025 in Vietnam, Laos, Thailand, and the Philippines, and 6 GW of offshore wind is estimated to come online in the next five years. To achieve this solar and wind project pipeline, Rystad Energy estimates investments of approximately US$73 billion will be required in the period to 2025. The two largest markets, Vietnam and the Philippines, will account for over 77% of this total. The largest investment, estimated at US$2 billion, is expected to be the Duriangkang Reservoir floating solar farm in Batam, Indonesia, from Singaporebased Sunseap Group – if the development gets the green light. The plant is to be one of the world’s largest floating solar farms with a planned capacity of 2.2 GW.

There are a few gigawatt scale offshore wind projects currently being planned in Vietnam and the Philippines, but development will likely start after 2025. In addition, while storage in Southeast Asia has been lagging, battery installations in the Philippines in 2021 as well as planned pumped storage projects in Vietnam are seeing some growth. Rystad Energy estimates another 4.4 GW of storage capacity, coming from both pumped storage and batteries, will be added between 2021 and 2025.

Northeast Asia

Japan and South Korea aim to achieve carbon neutrality by 2050 and are eyeing solar PV and offshore wind. By the end of 1H21, South Korea installed 15 GW of solar PV (including rooftop), 4.4 GW of onshore wind, and 110 MW of offshore wind projects. To support its carbon-neutrality plan, South Korea plans to install over 30 GW of solar PV (including rooftop) and 12 GW of offshore wind by 2030. While large scale projects are the only possible solution to achieve its target, most of the capacity installed in South Korea is down to small scale assets of 3 MW or less. Land constraints as well as environmental permits and connection issues are currently plaguing the development of larger assets. To drive the sector forward, South Korea awarded 2 GW of solar projects in July’s auction, with another 2 GW planned to be auctioned in October 2021. In the July auction, the country awarded – for the first time – 204 MW of projects with a capacity of 20 MW and above. Within the first half of 2021, South Korea also announced plans to develop the world’s largest (8.2 GW) offshore wind complex Figure 1. Renewable energy growth and required investments in Southeast Asia to 2025. off the coast of Sinan, and a

Figure 2. Japan and South Korea energy mix and utility renewables build-up for 2021 - 2025.

China

6 GW floating offshore wind farm in Ulsan with a total investment of US$74.5 billion. Both projects are expected to be completed by 2030.

Renewables currently account for 22% of Japan’s total electricity generation. The country’s draft policy, released in August 2021, aims to increase the share of power generation from renewables from 24% to 36% - 38% by 2030. Japan’s cumulative installed solar PV capacity reached approximately 71 GW (mostly rooftop and small scale assets) and 4.4 GW of onshore wind at the end of June 2021. While some of the mega scale onshore wind projects in Japan include the 100 MW Sumita Tono wind project and the 80 MW Kawanan wind development – expected to start commercial operation in 2021 and 2022, respectively – most of the growth to meet the 2030 target will be from solar PV and offshore wind. To this end, in addition to the eight solar PV auctions already awarded, the Ministry of Economy, Trade, and Industry (METI) conducted its first offshore wind auction and awarded

Toda Corporation a 16.8 MW floating wind project offshore Goto City, in the Nagasaki Prefecture. Japan awarded over 208 MW in its eighth solar auction in June, with a ninth pending. Japan’s energy transition will be supported by a solar feed-in premium policy expected to be implemented in 2022, which will allow PV developers to receive an additional premium on top of the spot reference price. The hydrogen market is also expected to bloom in Japan as the country’s green growth strategy calls up for 3 million t of hydrogen production capacity to be introduced in 2030. Recently, Hokkaido Electric Power, Green Power Investment, Nippon Steel Engineering, and Air Water announced plans to build a green hydrogen project powered by a 110 MW offshore wind project on the northern island of Hokkaido. The project will produce up to 550 tpy of hydrogen and start operation in 2024. In 2021, China’s 14th five-year plan placed renewable energy in a prominent position. Running until 2025, the strategy features targets for regional economic growth and objectives such as making the country greener and more innovative. But for the goals to be met, wind and solar PV projects will need to see a significant boost in installations. China will need 483 GW of wind and 479 GW of solar PV installed by 2025 to meet its goals. However, FiT subsidies for Figure 3. China’s total utility solar and wind installations vs 14th five-year plan target. wind power and PV are due to gradually cease from 2021, creating some additional challenges for the sector. At the beginning of September 2021, China launched a pilot programme called Green Power Trading. According to the National Development and Reform Commission (NDRC), users that have demands for green power will directly trade with wind and PV power generating companies under the pilot scheme – effectively meaning that China’s renewable sector has entered the Power Purchase Agreements (PPAs) era. The Green Power Trading programme covers both power grids operated by State Grid Corporation of China (SGCC) and China Southern Power Grid. SGCC manages most provinces except Guangdong, Guangxi, Yunnan, Guizhou, and Hainan, which are managed by China Southern Power Grid. A total of 7.93 TWh of mid- and longterm green power contracts have been signed, with 87% of this total volume traded within the SGCC’s network. This transaction is expected to reduce the burning of standard coal by 2.43 million t and carbon dioxide emissions by more than 6 million t. The transaction price of the first batch of green electricity is a premium of 30 - 50 ¥/MWh

compared with the local mid- and long-term thermal power transaction price.

A total of 259 market entities from 17 provinces participated in the first batch of transactions. Liaoning ranks first in the country with 2.78 TWh traded, averaging 364.45 ¥/MWh, which is a 9% reduction from the previous lowest-FiT for solar at 400 ¥/MWh. Anhui province came in second place with 1.1 TWh and an average price of 404.4 ¥/MWh. China General Nuclear Power Group (CGN) sold the most power in this trading with 1.97 TWh, accounting for 25% of the total traded volume. Its buyers included BASF and Shell.

Central Asia

Central Asia, led by Uzbekistan and Kazakhstan, is on its way to boost installed solar and wind capacity to 8.6 GW by 2025. Most of this capacity will be down to the tenders and auctions across the region, which have seen keen interest and the participation of numerous international renewable energy developers from the Middle East, China, and Europe. Uzbekistan has amassed a renewable energy pipeline of 4.65 GW, planned for installation between 2021 and 2025. The country commissioned its first utility scale solar plant, the 100 MW Nur Navoi solar project, last month. Amid its successful tenders, Uzbekistan’s Energy Ministry also plans to increase the country’s 2030 renewables targets. If this comes into effect, solar PV capacity could reach up to 7 GW and wind power up to 5 GW by the end of the decade.

Kazakhstan, meanwhile, has 1.3 GW of installed utility scale solar and wind power capacity. Based on its current project pipeline, Rystad Energy expects the country to reach a net installed solar PV and wind capacity of 2.77 GW by 2025. Kazakhstan aims to increase the share of energy produced from renewables from 3% in 2020 to 10% by 2030, and 50% by 2050. Outside of conventional solar and wind development, Kazakhstan is starting to emerge in the global green hydrogen hype. German developer Svevind Energy is eyeing the production of green hydrogen in Kazakhstan and signed a Memorandum of Understanding (MoU) with Kazakh Invest National Company to develop a vast 45 GW wind and 30 GW solar PV electrolysers, which would produce approximately 3 million tpy of green hydrogen. This is currently one of the largest planned green hydrogen projects in the world.

In addition, based on announcements made in the period to 2020, Afghanistan could reach an installed utility scale solar PV and wind energy capacity of 3 GW by the end of the decade. This would set the country on track to meet its 5 GW renewable energy target by 2032. However, due to the current political instability, major delays in the installations of projects and further cancellations are expected.

Other countries in the region such as Turkmenistan, Kyrgyzstan, and Tajikistan, have yet to install any utility solar PV or wind projects and have not set any targets or support policies for renewable energy.

Figure 4. Central Asia’s renewable energy project pipeline by energy sources and assets.