Finger on the Pulse: 4 Driving Factors Powering Asia's Renewable Energy Investment Landscape
Finger on the Pulse is a content series from Infrastructure Asia that covers key developments and trends across Asia's infrastructure landscape, providing you with key insights from the inside.
Asia stands as one of the world's fastest-growing energy and power markets, driven by its robust economic and population growth. Over the past two decades, energy demand in Southeast Asia has increased on average by around 3% a year. According to the International Energy Agency, three-quarters of the increase in energy demand by 2030 will be met by fossil fuels, which would correspond to a near 35% increase in CO₂ emissions. This urgent need to reduce reliance on fossil fuels is accelerating the momentum for the transition to renewable energy.
Here are four key trends shaping the renewable energy investment landscape in Asia and the opportunities they present for infrastructure developers.
1. Increasing Capacity and Lowering Costs
Technological advancements and economies of scale are enabling the development of larger and more cost-effective renewable energy projects. This creates a favourable environment for infrastructure developers to capitalise on the growing demand for renewable energy and achieve greater cost efficiencies.
Solar energy continues to experience significant demand due to its simpler and cost-efficient installation compared to wind and geothermal power plants. But this surge raises concerns such as increased competition with agricultural land and its potential impact on food security. To address this challenge, innovative approaches such as agricultural-photovoltaics (Agri-PV)—combining agriculture infrastructure with photovoltaic installations—could be explored. Other technologies like floating solar PV systems are also gaining traction, with the global floating solar panels market projected to grow to at a compound annual growth rate (CAGR) of 22.6% from 2023 to 2030. This system can be deployed on reservoirs or other open water environments and have shown promising results so far — performing between 5% to 15% better due to the cooling effect of the water and the unobstructed nature of these spaces.
The increasing bankability and investability of renewable energy projects signal a promising opportunity for infrastructure projects to secure financing successfully and drive project advancement. Through our Asia Infrastructure Forum (AIF) Conversations held earlier in May this year on the Philippines’s Green Energy Auction Programme (GEAP), we were able to promote frank and insightful discussions among renewable energy developers, financing institutions, consultancies, and associations on how to make business more conducive for investors. We look forward to collaborating with the Philippines’ Department of Energy (DOE) on future iterations of the GEAP, leveraging successful practices from other Southeast Asian markets.
2. Energy Storage Advancements
Energy storage technologies are crucial to adapt to the intermittency of renewable energy sources. It is projected that approximately US$400 billion would be invested into grid-connected energy storage over the next decade, with 75% going to pumped-hydro and 25% to batteries. But we need more investments in this space, as this investment projection would only provide less than a fifth of intermittent renewables capacity by 2030 for a couple of hours.
We anticipate that the deployment of Battery Energy Storage Systems (BESS) will become a mainstay to manage grid issues, playing a vital role in managing renewable energy intermittency and alleviating grid congestion. The Vena Energy-sponsored Wandoan BESS project in Queensland, Australia project is a prominent example of how such energy storage systems can help to address critical grid challenges and foster renewable energy integration. With a discharge capacity of 100MW and the ability to store 150MWh of energy, the facility is helping mitigate intermittency issues associated with local renewable energy generation in the state. By optimising energy dispatch during periods of high demand and low supply, it contributes to a more balanced national electricity grid. Notably, as the first privately financed utility-scale standalone BESS in the region, this initiative sets a noteworthy precedent for future investments in renewable infrastructure; underscoring the viability of such projects while spurring similar developments across the wider Asia-Pacific region.
Storage solutions have garnered strong financing interest, particularly in emerging Southeast Asian markets like Vietnam, Indonesia, and the Philippines. BESS can be implemented as standalone assets or integrated with solar or wind projects, offering substantial benefits to regulators and developers in Asia by enhancing grid operations and facilitating renewable energy integration. With regional insights and access to expertise within Singapore’s infrastructure ecosystem, we can streamline collaboration between infrastructure developers and relevant stakeholders on energy storage advancements to enhance grid stability.
3. Decentralisation and Distributed Generation
Asia is also witnessing a notable shift towards local, smaller-scale renewable energy generation systems, driven by increased corporate-led demand for clean energy to meet sustainability and net-zero targets. For instance, industrial park owners in Bangladesh are installing rooftop solar as a supplementary energy source to green their operations.
Off-grid electricity systems, including microgrids, have also emerged as viable alternatives for storing and distributing renewable energy in remote communities. Microgrids offer a way to electrify archipelagic countries like the Philippines. Additionally, standalone systems have gained traction and can be scaled across the country. The implementation of smart grids optimises the flow of energy along a network and enables real-time responses to change in demand. Decentralised generation offers diverse benefits, including increased energy efficiency, grid flexibility, and resilience.
4. Supportive Policies and International Commitments
Governments across Asia are taking decisive action by implementing supportive policies and making international commitments to accelerate the adoption of renewable energy. This includes establishing enabling frameworks, incentives, and targets aimed at attracting investments and promoting technology deployment. Infrastructure developers can capitalise on these favourable policy environments and leverage international commitments to drive renewable energy projects forward.
The implementation of new policies and international agreements is driving renewable energy adoption and fostering collaboration in the region. Recent notable developments include:
- Philippines: The Philippines has opened its renewable energy sector to 100% foreign ownership and launched initiatives such as the GEAP, positioning itself as a growth market for renewable energy.
- Vietnam: Vietnam has approved the long-awaited PDP8, which sets ambitious targets for renewable energy to account for almost 50% of the energy mix by 2030. We eagerly anticipate working with our trusted partners to materialise these commitments.
- Cambodia: Similar opportunities are emerging in markets not traditionally seen as renewables frontrunners. Cambodia has released its Power Development Plan until 2040, which includes a promising pipeline of utility-scale solar farm and battery storage projects. We are collaborating with our partners to unlock a larger project pipeline.
- India: India has announced its plans to add 250GW of renewable energy capacity in the next five years, aiming to achieve its target of 500GW by 2030.
Through closer collaboration between the private sector and regional governments, we can optimise Southeast Asia's diverse mix of renewable energy sources and maximise regional cooperation on energy. In collaboration with regional government leaders, we can leverage the collective capabilities and networks of the Singapore-based infrastructure ecosystem to contribute significantly towards infrastructure development in the region.
As part of the upcoming Singapore International Energy Week (SIEW) 2023 held in October, Infrastructure Asia will be jointly organising the Energy Efficiency track with Sustainable Energy Association of Singapore (SEAS) for the Asia Clean Energy Summit. By bringing together policymakers and industry leaders from across the region, we hope to carve a path forward for the transition to a cleaner and more energy-efficient future.
