Currently, the US and China are the world’s top producers of renewable energy, with China’s five-year outlook for additional wind and solar installation set to double that of the US. India and Brazil have also been rising up the global ranks, with abundant natural resources and supportive governments. India’s government in particular has been strongly behind a transition to renewable energy production, with ambitious targets and large inflows of foreign investment.
In this special series of forward-looking articles, renewable energy experts at Pinsent Masons, the law firm behind Out-Law.com, outline the current status of, and challenges and opportunities for, the development of renewable energy resources in Asia Pacific, the Middle East and Australia. You can also find out about developments in Europe in this companion piece.
What is the current status of the Asia Pacific renewables market?
China has the strongest market for renewables in Asia Pacific, moving from 1st to 2nd place worldwide in the latest EY Renewable Industry attractiveness index. Since 2010, China has had the world’s largest installed onshore wind capacity, with a total of 115.6GW installed as of the end of 2014. However, poor grid planning and wind data monitoring in earlier years have meant that many wind projects do not generate at planned levels, if at all, either due to lack of grid connections or lack of suitable wind.
Solar has become increasingly popular in Asia Pacific over the last five years. For example, Thailand has significantly increased its solar capacity over the last five years from practically zero to a current installed capacity just shy of 3GW as a direct consequence of government policy, and there are ambitions to take this up to 6GW by 2036. Japan has also seen a push towards solar post-Fukushima with a new feed-in tariff approved in 2012, although that tariff has since been reduced due to the success of the programme. Total installed solar capacity in Japan increased from just under 5GW in 2011 to over 23GW in 2014.
Large dam hydro power plants provide a large capacity of hydro electricity in the region. However, these projects are often controversial and some governments do not consider hydro as a form of renewable energy.
What does the future hold for renewables in Asia Pacific?
China has an impressive five-year outlook for additional wind and solar installation, and is expected to raise its 2020 solar target to 150GW (from 100GW) and wind target to between 250GW and 280GW (from 200GW) to fill the supply gap forecast by expectations that it will miss its nuclear and hydro targets. Renewable sources accounted for 16.4% of Chinese power in 2014, and are expected to reach 22% in 2020.
Solar will continue its growth across South East Asia provided PV prices continue to stay competitive. Given their proximity to the equator, wind will not be a significant contributor to countries in South East Asia but will continue to play an important role in North Asia. Hydro will continue to drive the installed capacity of renewable energy particularly in Laos, Myanmar and China, although environmental challenges and related financing limitations will make large hydro projects increasingly difficult.
What is the current status of the Middle East renewables market?
The renewables industry in the Middle East is currently dominated by hydropower, but there has been a significant increase in solar possibilities in the region as part of a growing desire to diversify energy production.
Over the past decade, a number of Gulf states have adopted renewable energy targets:
- Abu Dhabi: 7% of energy from renewable sources by 2020;
- Dubai: 7% of energy from renewable sources by 2020 and 15% by 2030;
- Qatar: 20% of energy from renewable sources by 2024;
- Jordan: 7% of energy from renewable sources by 2015 and 10% by 2020; and
- Saudi Arabia: one third of electricity from wind, geothermal and nuclear by 2032. This target appears to have been pushed back to 2040, although this has not been confirmed.
Previously, it had been cheaper and preferable for national governments to focus on oil and gas reserves rather than explore the obvious potential for solar power generation in the region. However, the combination of the dramatic fall in the price of solar in the region and the increase in the cost of generating electricity from natural gas is fuelling a sharp rise in solar projects in the Middle East. Concentrated solar projects in the Middle East increased dramatically, from 17MW to 117MW, in 2013, due to activity in the UAE; while a record 294MW worth of projects were awarded in the Middle East in 2014.
The UAE has played a role in funding onshore wind projects abroad, including in other Middle Eastern countries – most notably, Jordan. However, the sector has not yet had its potential exploited within the country.
Hydropower accounts for 98.22%, or 30.6GW, of renewable energy generation in the Middle East. Iran dominates hydropower, providing almost 10GW of the total 15GW recorded for the region in 2014, made up exclusively of large projects of 10MW or more.
What does the future hold for renewables in the Middle East?
Although the future of renewables in the Middle East is in solar, there is still much work to be done before government regulators adopt the appropriate policies. Although this is starting to happen in some countries, there are still some notable exceptions.
Most of the region’s solar projects have so far been focused on the UAE. However, large-scale solar tenders are due in at least 10 different markets in the Middle East this year alone. Jordan is expected to make a big splash in particular, and smaller regional countries like Qatar, Kuwait and Lebanon are also making progress with their solar programmes.
Activity in the region will become more pronounced once Saudi Arabia enters the market. Saudi Arabia’s most recent plans for solar PV include building 6GW of capacity over the next 10 years.
(Jason Rosychuk and Lachlan Doyle)
What is the current status of Australia’s renewables market?
Investor confidence in Australia has taken a hit in recent times, but the appointment of a new prime minister has resulted in renewed interest in the clean energy agenda and the future of clean energy agencies in Australia. The recent announcement of the Commonwealth Department of Environment’s new Office of Climate Change and Renewables Innovation, which will include the Australian Renewable Energy Agency (ARENA) and the Clean Energy Finance Corporation (CEFC), has also provided positive news for the industry.
Some recent amendments to the National Energy Rules have been criticised from within the industry for not guaranteeing connection for renewable generators and requiring generators to negotiate with networks directly. One suggestion supported by the Clean Energy Council is the establishing of a regulators access regime, but it is not yet known what the government’s appetite will be.
Some states and territories are more overtly supporting of the clean energy agenda than others. For example, the Australian Capital Territory (ACT) is continuing to promote wind farm projects with its second wind farm reverse auction having recently been released to market. This is expected to double the amount of electricity that the ACT purchases from wind farms within three years. It is hoped that the second wind auction will support at least two more wind farm projects, on top of the three plants already proposed under the first auction. Bids are due in mid October, and winners are expected to be announced in February 2016.
Renewables currently only account for around 10% of the electricity that is generated in Australia, and only a small number of large-scale solar projects have been successfully delivered despite the proliferation of small-scale solar projects. However, Australia is leading the way with residential solar power, with the highest rate of household solar panel installation in the world. Over two million Australian households have solar hot water systems or solar PV systems.
What does the future hold for renewables in Australia?
In recent times, the Australian renewables sector has suffered from a decline in investor confidence and a perceived lack of government support. The recent change in leadership is boosting confidence in the sector and we are cautiously optimistic that we will see increased support for the growth of the renewable energy industry – particularly as it appears to closely align with the new prime minister’s economic ambitions.
Monetary investment in the renewables industry will need to be substantial in order to make a real and positive impact. Stable and predictable policy will also be needed to maintain this investment, and it is likely that the interest of investors will be influenced by the outcome of the next election.
Provided that ARENA continues to operate, we expect that it will continue to fund technology development projects, for example its recent announcement that it will be providing funding to Australian solar company Dyesol towards the commercialisation of its Perovskite solar cell technology.