By River Davis
Renewable-energy operators are planning for further growth in
Asia despite a falloff in subsidies, betting energy demand will
keep rising.
In China, government support has driven a rapid buildup and
turned the country into the world's largest producer of renewable
energy. That stimulus is drying up, putting the industry at risk.
Solar-energy subsidies were halved this year, while offshore wind
subsidies will end in 2020, to be followed by onshore next
year.
Nonetheless, French utility Electricité de France SA said it
expected growth in the post-subsidy era, predicting that offshore
wind capacity in China would rise to more than 50 gigawatts by 2030
from 6.8 gigawatts today.
EDF in June closed a more than $1 billion deal with
state-controlled China Energy Investment Corp. to add capacity to a
wind farm off the coast of Jiangsu province. The two companies will
jointly operate that portion of the wind farm, as well as an
existing portion of it, making EDF the first foreign entity to take
a stake in China's offshore wind market.
Renewable energy made up roughly 11% of EDF's
electricity-generation mix in 2019, with projects largely
concentrated in Europe and North America, but it is now looking to
grow in emerging regions such as China and India. "The Asia region,
as a whole, offers significant opportunities for EDF to invest in
sustainable growth," an EDF spokeswoman said.
Around 400 gigawatts of wind and solar capacity are likely to be
added in Asia over the next five years, according to an estimate by
Wood Mackenzie, an energy-research consulting firm, up slightly
from the 380 gigawatts added over the past five years.
Wood Mackenzie expects investment in renewable electric power in
the Asia-Pacific region to outpace investment in fossil-fuel power
such as coal and natural gas every year for the next five years.
With much of the fossil-fuel investment going toward replacing old
facilities, that means the lion's share of added capacity is likely
to come from renewables.
Australian bank Macquarie Group Ltd.'s renewable-energy
investment unit said it was evaluating five gigawatts of new solar
assets in Asia, the equivalent of roughly 15 million solar
panels.
The bank is also backing a group that plans to cover about 2,500
square miles in Western Australia -- an area roughly half the size
of Connecticut -- with solar panels and wind turbines. Most of the
power will be used to generate hydrogen and hydrogen derivatives
that can be exported to Asian nations such as Japan to generate
electricity or to fuel vehicles.
"Amid the pandemic, there's been no slowdown in activity," said
Ivan Varughese, who leads Macquarie's renewables-investment unit in
the Asia-Pacific region.
Today, Asia accounts for nearly half of global renewable-energy
capacity, according to the International Renewable Energy Agency.
That is up from less than one-third a decade ago.
Relative to its size, Asia still lags behind the West with
renewables accounting for less than 5% of energy consumption last
year. That compares with 10% in Europe, where hundreds of billions
of dollars of the European Union's economic-rescue package are
being earmarked for funding projects related to climate change, and
6% in the U.S., according to the BP Statistical Review of World
Energy.
Investors' bullish outlook might be challenged if the
coronavirus pandemic sparks a prolonged global recession. This
would lead to stunted power demand and might impel governments to
cancel or reduce subsidies more quickly, regional analysts say.
"In this scenario, we could see 150 gigawatts of project
cancellations or delays across Asia Pacific in the next five
years," said Alex Whitworth, head of Asia-Pacific power and
renewables research at Wood Mackenzie. That would amount to pushing
back the renewables construction pipeline in the region by nearly
two years, he said.
For now, both overall energy demand and renewable energy in Asia
appear to be on track for further growth. China's electricity
consumption rose 6.1% in June over the year-earlier level,
according to official data, after falling in the year's first
quarter.
Over the past decade, the price of solar panels and wind
turbines has plummeted as cheap Chinese products flood the market.
The cost of solar modules has fallen 90% since 2010, according to
the Institute for Energy Economics and Financial Analysis.
As a result, more countries are calling on renewable-energy
projects in the 2020s to stand on their own. Vietnam is allowing
high-efficiency solar projects that reach commercial operation by
the end of 2020 to receive a guaranteed price for their output, but
the subsidies are set to expire after that.
Lionel Steinitz, chief executive of Singapore-based solar-power
company Lys Energy Group, said business has been strong in recent
months. His company installs and operates solar-power systems for
industrial and commercial sites. New projects have moved ahead in
Malaysia, Vietnam and Indonesia, he said, even though lockdowns
delayed construction at some Singapore projects.
Even if the end of subsidies in countries like Vietnam leads to
a lull in new project orders, "this gives us breathing room to
finance a growing number of other projects in Southeast Asia," said
Mr. Steinitz.
In July, Japan's Ministry of Economy, Trade and Industry said it
would phase out most of the nation's low-efficiency coal-fired
plants by 2030, and it nominated 10 sites as offshore wind
promotion zones.
The country's largest power-generation company, Jera Co., said
last week it was beginning an environmental assessment for a wind
farm of up to 65 turbines off the coast of Japan's northernmost
island of Hokkaido. Jera also said in June it would work with
French investment company Ademe Investissement SAS in developing
two gigawatts or more of offshore floating wind projects over the
next five years.
"Our vision is to become a global leader in liquefied natural
gas and renewable energy. The turbulent energy market this year is
not changing that," said Jera President Satoshi Onoda. "Right now,
our portfolio has little renewable capacity, but we're at a turning
point."
Trefor Moss contributed to this article.
Write to River Davis at River.Davis@wsj.com
(END) Dow Jones Newswires
August 30, 2020 07:14 ET (11:14 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.