According to Wood Mackenzie, commercial renewable PPA operation in the Asia Pacific over doubled to 3800MW in the year 2020 from the previous year. Despite project delays caused by labour shortages and logistical interruptions caused by the pandemic, this is the case. “Corporate renewable procurement is now on the rise, as well as the Asia Pacific is beginning to play a bigger role, with 10.9 GW of cumulative capacity bought until H1 2021,” said Wood Mackenzie, who serves as the senior analyst Rishab Shrestha. Governments and enterprises in the region have set high decarbonization targets, which are driving demand for renewable procurement.”
However, in the Asia Pacific, declining renewables premiums and rising power tariffs are rendering corporate renewable PPAs more appealing.” Renewable’s premiums have declined across Asia Pacific markets, and by 2025, they are predicted to be 45 percent lower than power tariffs on average. Some of these gains will be offset by wheeling and transmission costs, but the discount is predicted to remain around 30% by 2025. With 5.2GW, 3.2GW, and 1.3GW of cumulative purchase capacity, India, Australia, and Taiwan now lead the Asia Pacific corporate renewable procurement market. The increased corporate PPA activity in Australia and India is due to the attractive project economics and supporting policy framework in these regions.
Shrestha continued: “Singapore and Japan are expected to join the ranks of corporate green procurement leaders. Singapore has Southeast Asia’s most developed procurement market, however, land availability for renewable energy projects is limited.” Japan’s procurement is generally limited to onsite initiatives, but policy changes are expected by the end of the year.”
When it comes to buyer profiles, industrial offtakers were the biggest buyers of renewables in 2020, accounting for 57 percent of all PPAs signed. This is owing to the electronics manufacturing as well as mining industries’ high energy demands. The next largest group, retail and service offtakers, accounted for 25.4 percent of the total.
Offtakers in the technology industry account for 16.9% of total demand, with energy mostly used to power data centres. “Interestingly, while RE100 memberships in the Asia Pacific have grown year over year, just 10 percent of the 99 member firms in the region have signed corporate PPAs,” Shrestha added. To power their operations with renewables, the majority of RE100 enterprises with headquarters in the Asia Pacific depend on onsite installation as well as net-metering solar projects.”
Approximately 22 percent of the total cumulative leased PPA capacity is held by Asia Pacific RE100 businesses. The majority of corporations that inked corporate PPAs in the area have not pledged to RE100, owing to the region’s restrictive regulations allowing large-scale renewables procurement. For RE100 targets to be viable, large energy consumers, notably those in the industrial industry, would require more policy certainty concerning procurement from offshore projects to meet their massive energy requirements.
With aggressive carbon neutrality objectives and corporate emission reduction commitments, Asia Pacific firms are actively lobbying regulatory agencies to relax corporate procurement regulations for larger-capacity offshore generation projects. “While hurdles persist, policy, corporate ambition, and economics are beginning to push the balance in favour of a more hospitable corporate PPA scenario for growth,” Shrestha added.