In 2019, wind and photovoltaic power generation in the Asia-Pacific region is about 790 TWh, which is enough to replace coal-fired power plants that emit 700 million tons of carbon dioxide per year. Although the installed capacity of renewable energy has increased significantly, in the past ten years, the Asia-Pacific market still relied mainly on traditional power generation technologies to meet new power demand. Over 80% of the new power generation came from coal, natural gas, nuclear and hydropower.
For the decade 2020-2029, whether renewable energy can further replace traditional fuels and meet the growing power demand in the Asian market is a key issue currently facing the power industry.
The key role of the Chinese market
In the past decade, China has established the world's largest photovoltaic industry supply chain, with photovoltaic installed capacity exceeding 200GW, ranking first in the world. Policy support and the implementation of innovative strategies (such as establishing a one-stop "industrial ecosystem" for photovoltaics) have made low-cost photovoltaic power generation possible.
At the same time, in terms of equipment manufacturing and construction capabilities for renewable and traditional energy generation technologies, Chinese companies have also matured. In the early 1910s, international developers and equipment manufacturers rushed into the Chinese market. Today, in the Chinese market competition with newly installed capacity exceeding 100GW, Western companies are generally powerless.
How fast will Chinese companies "go global"? This is a question that should be considered in the new stage. We expect that with the slowdown in China's power market development, local manufacturers will pay more attention to overseas market strategies, develop products for overseas markets, and establish partnerships with foreign investors.
Geopolitics and Trade War
Geopolitical tensions have a certain positive significance for the development of the Asia-Pacific power market. The Sino-US trade war has created investment opportunities for the development of other regions in the Asia-Pacific region. For example, photovoltaic module manufacturers in China and the United States have shifted production capacity to Southeast Asia, making Southeast Asian manufacturing a beneficiary.
On the other hand, the trade war has also prompted the Chinese government to further advance the "Belt and Road" initiative, increase infrastructure investment in Asia and Africa, and strengthen trade with developing countries. At the same time, green energy investors from Europe and the United States are looking for photovoltaic and wind power assets and related business opportunities in Asia.
Lack of investment and financing has always been a challenge for developing countries. It is expected that in the next ten years, as the United States, Europe, China and Japan compete for their influence in the markets of developing countries, financing and development opportunities in developing countries will increase.
New energy faces more market risks
The trend of declining renewable energy costs (WoodMac Research | Research on the Cost of Renewable Energy in 12 Asia-Pacific Regions) is undoubtedly a double-edged sword. On the one hand, this can promote a significant increase in new installed capacity of wind power and photovoltaics; on the other hand, it also accelerates the government's steps to subsidize and introduce bidding and Internet access mechanisms, allowing new energy to face competition with fossil fuel projects. We expect this phenomenon to continue in the next decade and bring many uncertainties to the development of renewable energy projects.
Whether it is abandoned wind and power, transmission loss, Australia ’s “marginal network loss coefficient” or “unexpectedly low electricity prices” in the wholesale electricity market, with the expansion of renewable energy installed capacity, renewable energy in the next ten years Difficulties in grid connection will also increase. In markets where renewable energy penetration is low, this problem is easier to solve. But in Australia, parts of China, and the Indian market, how to deal with the oversupply of renewable energy at certain times of the day or year has become a major challenge for system operators and investors.
These uncertainties will help stabilize the new installed capacity of wind power and photovoltaics in Asia in the next few years, and also trigger a fierce debate on how the market will develop further. What is certain is that renewable energy investment has become mainstream, but it will face more market risks in the next decade, including policy and price shocks.