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Over the past five years, the Asia Pacific region made up over three-quarters of global power demand growth, and led the world in wind and solar capacity installations. According to Global Wind Turbine Materials Market, Forecast to 2026, global focus on renewable energy has created tremendous growth prospects for wind. With record levels of investment across Asia Pacific over the last couple of years in Wind and Solar power, the region is set to continue booming in the near-term and long-term future.
Over the past five years, China and other key governments have strongly supported renewables with subsidies and preferential policies triggering a massive expansion of projects. Moreover, generation costs of new solar and wind plants across Asia Pacific have fallen by 54% and 29% respectively. This took average costs for new projects below those of gas-fired power by 2018, though in most places renewables are still around 30% higher than coal. Government support for renewables has also been increasing, notably in China, where we saw subsidies and preferential dispatch policies.
However, it is worth noting that as the scale of renewable investments has increased, many governments are now reducing or cancelling these subsidies. As the collapse in oil and gas prices and fall in coal prices together, it will undermine support for renewable energy in most countries. Even though wind generation costs in APAC have fallen by an average of 29% in the last five years, in a recession with lower fossil-fuel prices, renewables would only be competitive with coal-fired power plants in most of APAC beyond 2025.
Governments will have even less ability to offer direct financial support and renewable energy supply chains have also been disrupted. As a result, the switch from fossil fuels to renewables could be delayed by several years across many countries, Philip Andrews-Speed, senior principal fellow at the Energy Studies Institute at the National University of Singapore told Energy Voice.
According to new research, there is another challenge that if a post-Covid-19 recession continues into 2021, up to 150GW of wind and solar capacity across Asia-Pacific (APAC) could be delayed or cancelled over the next five years. Governments may defer support for clean energy to deal with more pressing economic issues. Given the weak economic environment, the imperative in developing economies may shift to supply power as cheaply as possible. Replacing dirty fossil fuel power generation with new cleaner renewable technologies with high upfront investment looks far less appealing now than pre-COVID-19.
Nevertheless, some governments have shown willingness to extend subsidies for delayed wind and solar projects. For example, Vietnam’s ministry of industry and trade proposed a two-year extension of feed-in tariffs for wind to 2023, while China is discussing extending subsidies beyond the planned 2020 cut-off.
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