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THE RENEWABLE ENERGY MARKET IN ASIA

Finance (Basics), Autumn 2012

Prepared by Nunthanut Kewsuwan

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Contents Introduction………………………………………………………..4 Current Situation………………………………………………….5 Role of Government toward Renewable Energy……………7 Key Trends in Asia: Present and Future……………………..9 Conclusion………………………………………………………..16 References……………………………………………………….. I

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List of Figures and Tables Figures 1 TOP 10 New Installed Capacity (January –December 2011)………………4

2 Growth of Wind Power Capacity in Major Countries, 2000-2015…………5

3 Market Share of New Solar PV Installations by Region……………………6

4 Wind Capacity Installed by Major Leading Countries………………………9

5 Wind Energy Installed Capacity Trend in China……………………………10

6 Renewable Energy Capacity Installed in India……………………………..12

7 Target of Electricity produced from Renewables in Australia…………..13

8 Realizable Potential for Renewables of ASEAN -6 in 2030……………….15

Table 1 Estimated increasing rate of New Solar PV Installations…………………6

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Introduction The robust economic growth and improved standards of living will underpin a

massive surge in power consumption in Asia.

China and India account for the world’s largest projected increases in national

electric power demand over 2004-2030. In parallel, growing global concern about

climate change will lead to international pressure on high polluting countries like

India and China to curb their emissions. Cap and trade systems, once adopted by

the United States and Australia, will make the case of Renewable Energy more

attractive in Asia.

This pie chart demonstrates the Top 10 countries who installed the most new wind capacity

in 2011. We can see that China was the largest player in the world and India also took the

larger portion compared to other countries in Europe. This can show you that the Renewable

Energy in Asia Market is substantially growing and will become the major accounts of the

world’s total renewable energy in very soon future.

Figure 1: TOP 10 New Installed Capacity (January –December 2011)

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CURRENT SITUATION

Asia Region is strongly positioned for rapid growth in the Renewable Energy.

Industry driven by strong growth in countries like China, India, Japan and Australia,

the renewable energy sector in Asia is expected to grow rapidly in coming years. The

continued support of the national governments to the clean energy projects even in

this downturn promises a strong growth of the industry in future.

The wind power will account for the largest part of the renewable energy

development in the region. China, India, Japan and Australia will together add

approximately 57,400 MW of additional wind capacity during 2008-15. China and

India are expected to be the major drivers of this growth.

We can see that there is the increasing growth trend of wind power capacity annually in four major countries of Asia: Australia, China, India and Japan, by which, China and India play the major role of this growth.

Figure 2: Growth of Wind Power Capacity in Major Countries, 2000-2015

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Apart from wind, other renewable energy technologies like solar, geothermal, small

hydro and biomass are also expected to increase their share in the overall

renewable energy market of Asia.

China, Japan and India are seeing dramatic

growth. China produces more than half the

world's supply of solar modules, so it intends to

install a lot locally. Japan has been hard hit by

their nuclear disaster. Japan intends to phase out

nuclear and replace it with renewable sources. As

India becomes more modernized, it may be

easier to install solar locally rather than fossil fuel

plants with a lot of transmission lines. Solar prices

in India are already close to grid parity1.

1 Grid parity (or socket parity) occurs when an alternative energy source can generate electricity at a levelized cost that is less than or equal to the price of purchasing power from the electricity grid. (Source: http://en.wikipedia.org/wiki/Grid_parity)

Figure 3: Market Share of New Solar PV Installations by Region

Table 1: Estimated increasing rate of New Solar PV Installations

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ROLE OF GOVERNMENT TOWARD THE RENEWABLE ENERGY

• China and India

China uses both Renewable Portfolio Standards (RPS) 1F

2 and Feed in tariffs2F

3 to

promote renewables. In India there is no national level tariff or standards but the

different states in the country have Renewable Portfolio Standards targets and offer

fixed tariffs for renewable electricity.

• Australia and Japan

Australia and Japan have a national Renewable Portfolio Standards scheme and

different states in these countries also offer feed in tariffs. The Australian

Government’s extension of renewable energy targets from 9,500 GWh by 2010

under the old Act to 45,000 GWh by 20203F

4, as per the new law will give a major

boost to the renewable energy sector in the country.

2 Renewable Portfolio Standard (RPS) is a regulation that requires the increased production of energy from renewable energy sources, such as wind, solar, biomass, and geothermal. The RPS mechanism generally places an obligation on electricity supply companies to produce a specified fraction of their electricity from renewable energy sources. Those supporting the adoption of RPS mechanisms claim that market implementation will result in competition, efficiency and innovation that will deliver renewable energy at the lowest possible cost, allowing renewable energy to compete with cheaper fossil fuel energy sources. (Source: http://en.wikipedia.org/wiki/Renewable_portfolio_standard)

3 Feed-in tariff (FIT, standard offer contract advanced renewable tariff or renewable energy payments) is a policy mechanism designed to accelerate investment in renewable energy technologies. It achieves this by offering long-term contracts to renewable energy producers, typically based on the cost of generation of each technology (Source: http://en.wikipedia.org/wiki/Feed-in_tariff) 4 http://www.climatechange.gov.au/government/initiatives/renewable-target.aspx

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• South-East Asia: Thailand and Indonesia

Thailand offers additional fixed tariffs for small renewable energy projects. The

country has also enacted a National Renewable Portfolio Standards. The renewable

energy industry in the country is still in its early development stages. However,

Thailand’s renewable energy industry is expected to grow at a fast pace in future

with the government laying down the Renewable Energy Development Plan 2008-

225. With huge biomass resources, the government expects biomass to play a

leading role in this development. Indonesia still lacks a major policy framework for

renewable energy development.

• New Zealand

The New Zealand Government has set a set a target of 90% renewable electricity by

2025. Currently the renewables account for about 70% of the country’s total

electricity generation. This implies an increase of about 20% by 20256. However, the

government has still not come up with any specific policy measures to promote

renewables.

5 http://www.boifrankfurt.eu/2010/july/11.htm 6 http://en.wikipedia.org/wiki/Renewable_electricity_in_New_Zealand

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c

KEY TRENDS IN ASIA:

CURRENT AND FUTURE

• China leads the windy world

China will lead the growth of renewable energy in Asia. The country is expected to

continue its strong investments in the renewable energy industry especially in the

wind technology. The Chinese Government has established a target of generating

15% of country’s electricity through renewables by 20207.

The wind power industry in China has witnessed a rapid growth in past years and it

overtook America as the world leader in wind power in 2010, according to a new

annual report by the Global Wind Energy Council8. The chart below shows the five

countries that make the greatest use of wind energy.

Over the past decade,

China's installed wind

capacity has grown

exponentially accounts

for 22% of the world's

total wind power

capacity. In 2010, it

installed more turbines

than America9

7 http://en.wikipedia.org/wiki/Mandatory_renewable_energy_target 8

http://www.gwec.net/ 9

http://www.gwec.net/publications/global-wind-energy-outlook/

Figure 4: Wind Capacity Installed by Major Leading Countries

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This chart shows that China plans to increase the total capacity of Wind Energy installed

from 60,000 MW in 2011 to 130,000 MW in 2015, growing substantially approximately 117%

in the next 13 years10

China is also trying to establish itself as a major player in Solar PV. In March 2009,

the Chinese Government announced a new incentive of RMB 20 per watt for solar

PV projects with a capacity of 50-kilowatts and above11. The move is expected to

drive the demand for solar PV domestically.

The government has also initiated support measures for small hydro and biomass

facilities. The moves are expected to promote the renewable energy development in

the country and increase investments in the sector.

10

http://www.gwec.net/publications/country-reports/china_outlook/ 11

http://en.wikipedia.org/wiki/Renewable_energy_in_the_People's_Republic_of_China

Figure 5: Wind Energy Installed Capacity Trend in China

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• Growth of Wind and Solar Power in India

India comes a distant second to China among Asian renewables markets. Still, it

boasts abundant clean energy resources, and the government is looking to vastly

expand its renewable energy generation as part of the solution to acute nationwide

power shortages.

Solar power could be the country’s next boom market. India would produce 20 GW

of solar energy by 202012 as part of the country’s strategy to tackle climate change,

under a policy endorsed by a top government committee.

Adoption of the 2020 solar energy target follows the creation of the National Solar

Mission by the council in 2008 as one of eight missions in India’s National Action

Plan on Climate Change13. The National Action Plan’s solar mission calls for the

tapping of solar thermal power and solar PV to take advantage of India’s plentiful

sunshine, and notes that most parts of India experience clear, sunny weather 250-

300 days a year. Solar energy can provide both utility-scale power production and

decentralized, village-level generation, which would cut losses from long-distance

electricity transmission. It is expected to initially focus on deploying solar rooftop and

onsite solar PV arrays on government and public sector enterprise buildings, and

using vacant lands at power plants.

The country has at least 48.5 GW of wind energy potential14—and that through

repowering old wind turbines with new ones and making more land available for wind

farms, India could reach 100 GW of wind power . Wind power development in India

has been fostered by strong state government support measures, such as feed-in

tariffs and renewable portfolio standards

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http://en.wikipedia.org/wiki/Solar_power_in_India 13

http://en.wikipedia.org/wiki/Solar_power_in_India 14

http://www.eco-business.com/events/india-wind-energy-summit-2012/

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India's renewable energy installed capacity

has crossed 25,000 MW, according to the

latest figures released by the Ministry of

New & Renewable Energy (MNRE). The

milestone was crossed during April 2012.

Most of Renewable Energy capacity

installed was Wind Power.

• Emergence of Australia, and re-emergence of Japan, as magnets for Renewables Investment

Among the regions’ other leading economies, Australia and Japan are preparing to

make major pushes to develop renewable energy. Australia has long been the

region’s slacker in renewables promotion, but that is about to change.

The country’s renewable energy industry is set for a huge boost after Parliament

passed legislation setting a 20% renewable energy target for 202015.

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http://en.wikipedia.org/wiki/Mandatory_renewable_energy_target

Figure 6: Renewable Energy Capacity Installed

in India on 30 April 2012

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Australia currently generates about 8% of its electricity from renewables. The new targets will come

into force from next year, with the 2010 target increasing to 12,500 GWh from 9,500 GWh, rising to

45,850 GWh in 2020, and remaining at 45,000 GWh from 2021 to 203016.

As under Australia’s previous renewables legislation, generators of power from such

renewable sources as wind, solar, hydroelectricity and geothermal will receive one

Renewable Energy Certificate (REC)17 for each MWh of power they produce.

In terms of renewable energy, Japan has made huge technological advancements

and is one of the major players in the world renewable energy market. However,

non-aggressive national targets for renewable energy may hinder the development

of renewables in the country. The country uses Renewable Portfolio Standards as

the main policy instrument to support renewables. However the targets specified

under the Renewable Portfolio Standards are too low. It aims to establish 16.0 TWh 16

http://en.wikipedia.org/wiki/Mandatory_renewable_energy_target 17

The Renewable Energy Certificate System (RECS) is a voluntary system for international trade in renewable energy certificates that was created by RECS International to stimulate international development of renewable energy. (Source: http://en.wikipedia.org/wiki/Renewable_Energy_Certificate_System)

0

5000

10000

15000

20000

25000

30000

35000

40000

45000

50000

2009 2010 2020 2021-2030

Target of Electricity Generated from Renewables (GWh)

Figure 7: Target of Electricity produced from Renewables in Australia

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of renewable electricity by 2014, implying that only 1.63% of the total electricity is

required to be generated from renewable energy sources18. The renewable energy

sector in the country is strongly positioned for growth and this growth would

drastically increase if the government pursues stronger and more aggressive targets.

• Growing interest in Renewable Energy in Southeast Asia

Beyond Asia’s major economies, there are signs that countries throughout the region

are starting to deploy renewables based on their domestic resources. Southeast

Asia, due to its abundant natural resources and favorable topography, has immense

potential in terms of energy production from renewables including geothermal,

biomass and small hydropower, whereas solar PV and wind energy are classified

under emerging technologies.

In six of the ten countries that comprise the Association of Southeast Asian Nations

(ASEAN): Indonesia, Malaysia, the Philippines, Singapore, Thailand, and Vietnam

(collectively identified as ASEAN-6) have put considerable effort into setting

renewable energy targets and are introducing supportive policy frameworks to

attract private sector investment. Nearly all ASEAN-6 countries have adopted

medium- and long-term targets for renewable energy.

Interest in renewables varies considerably among the ASEAN-6 countries. Targets

are important indications of a country’s willingness and determination to tap its

renewable energy potential. An effective system of financial and non-financial

incentives must also be in place to ensure appropriate conditions to exploit

renewables potential. Several ASEAN countries have recently introduced price

support systems for renewable energy drafting guidelines for the introduction of

FITs19, for the examples,

18

http://www.ssj.iss.u-tokyo.ac.jp/archives/discussion/index.html 19

http://aseanenergy.org/

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• Thailand introduced renewable electricity feed-in tariffs (FITs) in 2007.

• Indonesia was introducing a FIT for geothermal electricity in 2010

• Malaysia and the Philippines had just started

Other financial incentives for renewable energy in the ASEAN-6 countries include tax

exemptions for certain renewable energy technologies in Malaysia, the Philippines

and Indonesia, capital costs grants in Thailand and R&D incentives in Singapore.

The focus of the potentials analysis is on the so-called medium-term to 2030

“Realizable Potentials”. The realizable potential represents the maximum achievable

potential for a specific technology, assuming that all barriers can be overcome and

countries have effective policies in place. The advantage of a realizable potentials

approach is that it reveals the maximum deployment possible over a certain time

period assuming best policy practice.

The bar chart shows that the

realizable potential for

renewables is large across all

the ASEAN-6 countries except

Singapore, due to its small land

area. The composition and

relative weight of individual

Renewable energy technologies

are similar in all six countries,

with hydro, biomass, wind and

solar PV contributing significant

shares. Geothermal electricity

and heat are concentrated in

Indonesia and the Philippines. .

Figure 8: Realizable Potential for Renewables of ASEAN -6 in 2030

According to the medium term to 2030, there is significant realizable potential for renewables in

ASEAN-6 countries, especially for non-hydro sources. Among non-hydro renewables, significant

contributors would be biomass, onshore wind, geothermal and solar PV.

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CONCLUSION In Asia, renewable energy promise to become a significant industry, driven by falling

renewable energy prices, increasing fossil fuel price, public health impacts around

fossil fuels, and fast-growing regional energy demand. These situations speed up the

Renewable Energy development and technology, especially four major leading

countries in Asia: China, Japan, Australia and India whose Renewable Energy

markets seek to grow substantially along with the rapidly increase of the installation

for Renewable Energy Capacity. As a result, it is expected that Asia Countries will

dominate the share in the overall renewables energy market in the world in very

soon future.

Government policy structure and promotional measures for renewables are expected

to play a vital role in the renewable energy development especially with the global

economic downturn and lower crude oil prices causing renewables energy projects

to become uneconomical. The major tools that the Government uses to accelerate

and promote the Renewable Energy investment are Renewable Portfolio Standards

(RPS), Renewable Energy Certificate (REC) and Feed in tariffs. Furthermore, most

countries also have the setting medium to long-term renewable energy targets varied

according to their potential in order to outline the framework of renewable energy

development plan. We can see that the development of renewable energy in Asia

has taken into one of the important account in national policy and it is one of the

indicators that used to measure the economic development of each individual

country as well.

Nowadays, China currently positions as the world leader in the wind power. Apart

from wind, other renewable energy technologies like solar, geothermal, small hydro

and biomass are also expected to have dramatic growth in many countries in Asia,

for the examples, Boom market of solar power and wind power development in India,

Growth of electricity production from Renewable Energy in Australia and Japan and

Emerging interest and effort to promote the renewable energy in Southeast Asia by

introducing supportive framework and adopting the Realizable Potentials analysis to-

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CONCLUSION (cont’d) realize the potential of renewable energy within the region and attract private sector

investment,

Lastly, due to significant growth of the trends driving the use of renewable energy in

Asia, the development of renewable energy in Asia seems to continue unceasingly in

the future.

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REFERENCES

• http://en.wikipedia.org/wiki/Grid_parity

• http://www.climatechange.gov.au/government/initiatives/renewable-target.aspx

• http://en.wikipedia.org/wiki/Renewable_portfolio_standard

• http://en.wikipedia.org/wiki/Feed-in_tariff

• http://www.boifrankfurt.eu/2010/july/11.htm

• http://en.wikipedia.org/wiki/Renewable_electricity_in_New_Zealand

• http://en.wikipedia.org/wiki/Mandatory_renewable_energy_target

• http://www.gwec.net/

• http://en.wikipedia.org/wiki/Renewable_energy_in_the_People's_Republic_of_China

• http://en.wikipedia.org/wiki/Solar_power_in_India

• http://www.eco-business.com/events/india-wind-energy-summit-2012/

• http://en.wikipedia.org/wiki/Renewable_Energy_Certificate_System

• http://www.ssj.iss.u-tokyo.ac.jp/archives/discussion/index.html

• http://aseanenergy.org/

• http://www.altenergymag.com

• http://www.chinadaily.com.cn/bizchina/2012-08/16/content_15680451.htm

• http://spectrum.ieee.org/green-tech/wind/the-long-and-windy-road

• http://www.cleanenergyasia.net/

• http://insights.wri.org/news/2012/03/renewable-energy-asia-opportunities-through-innovation

• http://www.redorbit.com/news/business/1009962/the_green_energy_market_in_asia_renewa

ble_investment_capacity_growth/

• http://logistics.dpim.go.th/news/detail.php?id=4354

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