The renewable energy transition is coming to Asia

Author: Tim Buckley, Institute of Energy Economics and Financial Analysis The COVID-19 pandemic has changed the world. It is a truly global threat, ignoring national borders and domestic politics. But this pandemic highlights the need for a global response to a second key global threat: climate change. It is now more important than ever to […]

The renewable energy transition is coming to Asia

Author: Tim Buckley, Institute of Energy Economics and Financial Analysis

The COVID-19 pandemic has changed the world. It is a truly global threat, ignoring national borders and domestic politics. But this pandemic highlights the need for a global response to a second key global threat: climate change. It is now more important than ever to listen to the advice of experts before it’s too late.

Despite the current global economic shutdown, the global energy transition is well underway. This transition is being driven by renewable energy technology that disrupts incumbent industry business models, much like the rise of the mobile phone and the internet.

The technology disruption is fundamentally reshaping the global energy landscape. A key impetus is the dramatic, ongoing deflation in the cost of solar energy and battery storage. Both have seen costs drop 80 to 90 per cent over the last decade and the Institute for Energy Economics and Financial Analysis (IEEFA) expects both to halve again in the coming decade. Renewables are now a cheap source of energy generation, beating the costs of new imported coal.

Such a global market transformation has significant implications for energy security.

India, for example, imported some US$250 billion worth of fossil fuels in 2019, both a massive economic drain and a major energy security risk. Leveraging renewable energy resources — wind, solar and hydro — allows for domestic diversification away from imports and helps reduce energy security risks. India is targeting 450 gigawatts of renewables by 2030.

China has been the world’s largest investor in renewable energy in the last decade. The IEEFA expects Chinese renewables to reach grid parity with coal-fired power nationally in 2020 as capacity expansions drive economies of scale and continuing deflation.

While South and Southeast Asia have been renewables laggards, Asia is nevertheless on the cusp of a dramatic pivot. Recent developments across India, China, Japan, South Korea, Vietnam and Taiwan highlight the potential for change.

Back in 2016–17, India’s then Energy Minister Piyush Goyal accelerated the use of online reverse auction tenders for the supply of renewable energy for a term of 25 years with zero indexation, backed by bankable central government contracts.

The result was staggering.

In one year, the price of tariffs dropped by 50 per cent to below Rs 3 per kilowatt-hour (US$40 per megawatt hour). This price was 30 per cent below the cost of existing domestic thermal generation and 50 per cent below new imported thermal power. Since then, India has taken advantage of global investor interest to invest US$10 billion annually in renewable infrastructure.

In the last decade, India has scrapped plans to build 600 gigawatts of new coal-fired power plants, including 46 gigawatts in 2019 alone. Stranded asset losses in the Indian thermal power sector have reached US$60 billion.

This promise of low-cost, domestic, zero-emissions renewable energy is yet to be realised in Southeast Asia. But this will change dramatically, with finance playing a key role.

In the first half of the last decade, global financial giants provided the bulk of debt and equity capital for investment in new coal-fired power plants across Asia. But the global investor push to align with the Paris Agreement has seen coal jettisoned as the most carbon-intensive fuel source and the one easiest to replace. As of today, 129 globally significant financial institutions have formal coal divestment or exclusion policies.

But coal financing is not totally out of fashion yet. In the last five years, government-owned export credit agencies (ECA) of just three countries — China, Japan and South Korea — funded the majority of the world’s new coal-fired power plants.

In 2016–17, China was ‘Going Global’. An IEEFA report in January 2019 revealed Chinese financial institutions had committed US$36 billion for over one-quarter of the 399 gigawatts of coal plants currently under development outside China. Most of the power projects span Asia, from Pakistan to Bangladesh to Vietnam.

But with the energy disruption accelerating globally, the US–China trade war and COVID-19 have massively impacted coal financing.

One analysis demonstrates this dramatic change when looking at China’s commitment to its Belt and Road Initiative. China’s outbound ECA finance for power generation dropped by two-thirds in 2018 from a peak of US$18 billion in 2017 and then dropped again in 2019 to a decade low of just US$2 billion.

Japan has been pivoting away from coal, with the government renewing its commitment to the Paris Agreement. This started in 2018 with a global appeal by Prime Minister Shinzo Abe to recognise the disastrous implications of climate change. This was followed by a slowly accelerating exit from thermal coal mining by most Japanese trading houses and financial institutions.

South Korea is also on the move. In April 2020 the ruling Democratic Party won a landslide victory on the back of an announced plan for a Green New Deal, starting with a cessation of global coal financing.

The world’s three largest subsidisers of coal plants are all getting cold feet. The cost and financial risks of continuing to provide subsidised capital for projects are now threatened by cheaper alternatives.

Vietnam’s government announced last month a dramatic reduction in its coal-fired power plant development plans, pivoting towards a greater focus on wind and solar. Vietnam shocked the world in 2019 when it expanded solar capacity 10-fold in one single year.

Taiwan has been a regional leader on climate policy, with plans to roll out 27 gigawatts of renewables to supply 20 per cent of total electricity needs by 2025. Taiwan is also expanding its offshore wind projects, which could progress plans for 100 gigawatts of new offshore wind capacity in Asia.

The global energy transformation is belatedly coming to Asia. The speed of that change is likely to be dramatic and consistent with disruptions seen in Europe, the United States, Australia and India over the last five years.

Tim Buckley is Director of Energy Finance Studies, South Asia, at the Institute of Energy Economics and Financial Analysis (IEEFA), Sydney.

Source : East Asia Forum More   

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Beijing’s Man in Taiwan Crashes and Burns

Han Kuo-yu fails miserably to expand power with China’s support

Beijing’s Man in Taiwan Crashes and Burns

By: Jens Kastner

The astonishing political career of Han Kuo-yu, who came from nowhere to run for Taiwan’s presidency just four months ago, seems set to end on June 6 in disgrace in a recall vote that seeks to oust him from the mayoralty of Kaohsiung, Taiwan’s second-largest city.

Belonging to the Kuomintang, the island’s relatively-China-friendly main opposition party, Han has been a backbench lawmaker, an unemployed husband and the general manager of an agricultural marketing company. Then an out-of-the-blue, overwhelming media campaign apparently orchestrated by Chinese agencies and paid for by Taiwan’s China-friendly tycoons catapulted him into the mayoral job in 2018 and into the presidential race in January this year, in which he was drubbed, 57.13 percent to 38.61 percent by incumbent president Tsai Ing-wen.

Han’s fortunes turned around for myriads of reasons, including the Hong Kong protests, which turned the electorate against the KMT. Some of his ideas, such as scaling down military purchases and bypassing longstanding laws barring investment by China in the real estate sector, strayed far from mainstream public opinion. Piecemeal revelations about his shady private life played a role, too.

Han was caught lying about a gambling habit and of buying and selling an expensive house in Taipei while he was trying to portray himself as a poor or middle-class individual. Even his KMT comrades accused him of heavy drinking and womanizing. Nevertheless, the recall vote is not based on the compromising results of due diligence investigations but the accusation that Han is neglecting his mayoral duties, including by taking a three-month leave from his job during his presidential campaign.

“Han told Beijing what it wanted to hear but not what Taiwanese wanted to hear, and Beijing’s hope in Han is just another sign it doesn’t ‘get’ Taiwan despite claiming Taiwanese as its own,” said Sean King, a Taiwan expert affiliated with the University of Notre Dame Liu Institute for Asia & Asian Affairs.

“90 percent of Taiwanese oppose unification under any scenario and no amount of trade and investment is going to change that,” he added.

Han won the mayoral elections in 2018 after two local media stations controlled by pro-China business bigwigs – namely TVBS of HTC Corp chairwoman Cher Wang and CtiTV of rice cracker king Tsai Eng-meng – for months bombarded the public with a ceaseless stream of flattering news about Han.

TVBS and CtiTV allegedly paid local eateries and hotels and other such popular sites NT$500 (US$16.70) a month to have their broadcasts running 24/7, with algorithms doing a similar job in terms of social media coverage.

Similar to Philippine President Rodrigo Duterte, Han campaigned as an anti-intellectual, anti-elite man of the people, deploying a tough-talking style with grandiose economic promises, such as bringing a Disney theme park and Formula 1 racing to Kaohsiung. He promoted the Macauization of Kaohsiung as Duterte sought to facilitate the Macauization of the Philippines, allowing Chinese gaming interests to swarm into Manila.

Han will hardly be able to expand his political power with China’s support, unlike Duterte, who won the presidency and subsequently in exchange for Chinese grants and loans allowed Beijing to gain control over Philippine-claimed parts of the South China Sea while terminating a key defense agreement with the U.S.

Indeed, auguring that the noose is going to tighten for Han, Taipei prosecutors on May 8 indicted seven suspects on suspicion of using money from China’s Taiwan Affairs Office to buy votes for him in the presidential campaign in January in breach of the Presidential and Vice Presidential Election and Recall Act that could entail long prison sentences.

Bringing Han’s bleak outlook for June 6 into context, Han won only 62,000 Kaohsiung votes in the presidential elections in January, and a simple majority will suffice to oust him from the mayoral job. As a last desperate resort, Han’s city government has been trying to limit space in schools and temples to be used for the recall vote, citing Covid-19 prevention measures.

“He looked so good after the 2018 election, but a lot changed in 14 months,” said John F Copper, a Taiwan expert and professor of international studies (emeritus) at Rhodes College in Memphis, Tennessee.

Source : Asia Sentinel More   

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