Incited by rapid economic and population growth, Asia’s rising demand for power surpasses that of any other region. To power its own developing economy, Asia has become increasingly dependent on coal - the same fuel that drove the European Industrial Revolution - due to its affordability and availability as compared to renewable energy alternatives. With a rapidly increasing population that surpasses that of Europe and the US, Asia’s rising dependence on coal has the potential to have a devastating impact on the fight to prevent climate change. It is therefore now more important than ever that significant measures are taken in this region to make an effective and substantial transition to renewable energy. For this transition to be achievable, renewable energy needs to be an economical and reliable source of power.
Largely due to global pressures to reduce emissions and fight climate change, Asian governments and corporations are beginning to embrace the social transition from coal power to renewable energy. Whilst climate change may be in the hearts and minds, only with the globally falling prices of renewable energy and grid parity with fossil fuel alternatives is it possible to start considering the realization of the transition of this social conscious to an economic reality.
ASEAN Centre for Energy (ACE) executive director Dr. Nuki Agya Utama was quoted in an interview with Asia Power stating that “even with the persistence of coal in Southeast Asia, renewables are projected to represent 43% of the region’s capacity by 2040. The deployment of renewables is supported by new government policies, primarily led by Malaysia and Vietnam with large concession tenders and associated tariff schemes1.”
With the noticeable rise of approved solar and wind projects, we have seen this momentum kicking in in 2019, but governments need to continue to adopt even stronger renewable-friendly policies to maintain the downward momentum of renewables costs. Going into 2020, government intervention will be crucial in introducing stronger renewable policies and incentives to ensure that the Asian countries maintain on course to a more renewable future. It is not only important to keep renewable energy costs low so that it can be economically viable; costs need to be kept low in order to allow for more investments to be made into developing the required power infrastructure.
As the “fuel” that powers renewable energy is only available as long as the sun is shining and the wind is blowing, traditional power grid designs are not flexible enough to adjust to the unpredictable peaks and troughs of the renewables power supply. Technological solutions are necessary to improve the ability of power grids to absorb the more variable generation produced from renewable power sources, providing storage solutions, and to ensure that the transmission and distribution systems are reliable and have sufficient capacity. Regardless of how cheap an alternative, Asian countries will continue to rely on coal and other sources of fossil fuels if renewable energy is not readily accessible, available and reliable.
The growing need for Asia to transition to renewable energy will only be sustainable with a rapid increase in investment into the industry, and insurance markets and project financing banks have been key in promoting this shift. Not only are insurers leading the movement by pulling back on insuring coal, they are developing innovative solutions which are tailor made specifically to tackle issues such as the lack or shortfall of sun or wind energy. By transferring these business risks to the insurance markets, this allows for an improvement of cashflow which allows for business models to succeed and ultimately aid in the shifting of investments from coal to where they are truly needed – renewable energy.
Elizabeth Kobes is Division Director at Willis Towers Watson, Singapore.
1 https://asian-power.com/regulation/in-focus/tariffs-and-tenders-drive-southeast-asias-renewables-boom