Powering up Asian cities
Building momentum to a sustainable future
Energy demand is projected to almost double in the Asia-Pacific region by 2030, according to a recent Asian Development Bank (ADB) study. At the same time, there is an urgent need to find innovative ways to generate electricity in a socially, economically, and environmentally sustainable manner. This requires the creation of more renewable energy sources of power.
Scott Reinhart, partner, Brawn Capital, explains during a panel discussion organized by The Asset at the 2nd ESG Forum in Hong Kong that currently the world’s energy mix is two-thirds fossil fuel, and that will flip to about two-thirds renewables within the next 30 years.
“Solar is just 2% of that mix, and that is projected to go to 22% in the next 30 years. That presents a US$4 trillion opportunity, and Asia is going to receive the majority of that new investment over the next 30 years,” says Reinhart.
Developed economies in Asia have the necessary conditions in place to manage the transition to renewables, according to Tak Chow Yee, general manager, corporate development, Hong Kong Electric. “However, most of the developing economies are far from energy sufficient and continue to reply on coal-powered energy generation.”
India, despite its relentless traffic and accompanying pollution, already has 20% of its energy produced by renewables and is aiming to make it 40%. But the fact remains that 240 million Indian people don’t have access to any electricity.
“This will create an opportunity,” says Maud Savary-Mornet, regional director, Asia Pacific, responsAbility. “At the end of the day, the challenge is quite clear. You have demand for energy – people that don’t have access to energy – and you also need to cut pollution, so solar is definitely one of the most exciting investment opportunities right now, and that is why we are building blended finance solutions to attract public and private investors.”
Solar is on everybody’s agenda, enthuses Tom Uiterwaal, founder and chief executive officer, Reconergy Hong Kong. “Solar is a very interesting investment opportunity [and] setting up a solar farm is relatively easy – but getting it [the energy] from there to where it needs to be used is a completely different story. And that is where Asia still has a lot of work to do to get the distribution systems in place to be ready for renewable energy.”
Distribution systems in Asia are designed based on a stable supply of electricity from coal fire powerplants, which are running 24 hours a day, 365 days a year, Uiterwaal points out.
“However, if you want to have solar power or wind power, then you will have peaks and lows in electricity production. So, with the growth of renewable energy the variability of electricity production will increase tremendously and will give different requirement on the distribution systems. And that will require serious investments in Asia,” he says.
William Yu, founder and chief executive officer, World Green Organization, agrees with Uiterwaal that in many Asean countries, when launching renewable energy, competition with coal-fired plants for spare grid connection is an issue in the earlier stage. The baseload power supply on the grid is needed to address the limitations of intermittent renewable energy sources. “So, for now, coal plants with stable energy output remain important in the entire energy mix.”
There are three main lessons to learn from Europe, according to Uiterwaal. The first involves setting clear targets. Clear targets help investors feel secure that they will get a return and any governments involved will keep their promises regarding subsidies or tariffs.
Second is distribution. If a country is moving from 4% renewables to 5%, the existing systems will be fine. But if it wants to go to 20%, 30%, 40%, or even higher, the whole distribution system will have to be changed to make sure that it can handle the fluctuations of renewable energy production.
Third, the electricity system must be connected with those of other countries, so that a peak in one country can be consumed somewhere else and a low in another country can be topped up, allowing for a balance over the whole of Asia. This requires investment and trust – and a certain amount of trust is still lacking in Asia.
“[As well] you need to be part of a global portfolio mix - wind, solar, batteries - and those, when integrated together, will also help offset the peaks and valleys,” explains Reinhart. “It is just a matter of time before we start to see carbon taxes more generally discussed and rolled out globally.”
Europe plans to invest heavily in renewable energy under the Green Deal to make the bloc net carbon-neutral by 2050, Uiterwaal notes. “If other countries want to export their products to Europe but don’t do the same, they should expect their products to be taxed on the carbon emitted to produce these products.”
For developing economies in Asia, especially those with remote communities, solar energy should be encouraged, says Tak Chow Yee, “because you could save a lot of investment in building long distribution lines. Most of these communities do not require a huge amount of electricity; so, if a minimal electricity supply takes off, it would help change the national planning mindset of most of these developing economies and their associated remote communities”.
“In Europe, next to the renewables with a variable output, countries are also using renewables with a stable output, such as biomass. Coal powered plants are being transformed into biomass power plants, and they can run 24 hours a day. The stable output can offer a balance to the renewables with a variable output. The right mix of renewables really depends on the specifics of each country,” Uiterwaal adds.
Support for renewable energy in Asian countries, both in tariffs and subsidies provided by governments, has increased, but, in the end, governments don’t always have the budget to pay the subsidies. So, Asia must have a long-term plan regarding the percentage of renewable energy in its total energy mix and be cautious with regard to the financial commitments of regional governments. The key – and this will vary according to each country – is to have the right mix of renewables.