Governments in East Asia are considering the use of renewables to fuel projected demand growth to varying degrees. Japan has set a renewables target of 22%–24% by 2030, while Taiwan is aiming for 20% by 2025. Collectively, the Association of Southeast Asian Nations (ASEAN) set a target last year of securing 23% of its primary energy from renewables by 2025.
While fossil fuels still retain a grip on some markets, upcoming retirements will leave a gap that could be filled by renewables across much of the region. Japan, Taiwan and South Korea, for example, face projected thermal and nuclear capacity retirements totaling 89GW between 2020 and 2030, according to Wood Mackenzie.
Addressing climate change and managing risks arising from the climate crisis are also priorities for these markets, many of which are among the most vulnerable to climate change, according to the Global Climate Risk Index 2020. All have signaled an awareness of the need to tackle climate change, most via national or regional commitments in line with Paris Agreement goals.
The recent net-zero announcements by China, Japan and South Korea, as well as bans on the use or financing of coal by countries or regions including the Philippines, have marked a new direction for this part of the world. “The past 12 months have seen a period of profound change in Asia in terms of climate,” says Assaad Razzouk, Chief Executive Officer and co-founder of Singapore-headquartered Sindicatum Renewable Energy.
“Then there was a tremendous explosion of activity in Vietnam during this period, which shows what happens when a nation gets serious about renewables. We can’t ignore that these are the drivers that are going to increasingly play out [in this region] going forward,” Razzouk adds, referring to government actions in relation to low-carbon targets and strategies.
Northeast markets such as Japan, South Korea and Taiwan have already established a firm hold on renewable energy development. For most markets in Southeast Asia, however, the shift from a coal-based primary energy approach to renewables is less about climate change and more about economics. Certainly, renewable energy is becoming more competitive with non-renewable resources in markets around the world, points out Patrice Clausse, Chief Operating Officer of AC Energy International, the energy platform of Philippines-based conglomerate Ayala Corporation.
“I also mean competitive in a slightly broader sense,” Clausse adds. “Obviously, price per kilowatt hour matters, but there is also the ability to get finance and speed to construction and generation.”
The region certainly has a very robust pipeline of clean energy projects. EY research commissioned by the European Climate Foundation (ECF) last year identified more than 800 shovel-ready clean energy projects across Indonesia, Japan, Malaysia, the Philippines, South Korea, Taiwan, Thailand and Vietnam, with a total investment potential of US$316b.
Aside from this growing demand for low-carbon power, however, these markets are starkly different. From currency, to geography, to the domestic banking landscape and government attitudes toward power market policy and climate risk, each market is governed by very specific fundamentals.