South and Southeast Asian Countries have set themselves on the path of clean energy development by setting ambitious renewable energy targets in their NDCs and introducing policies to encourage its implementation. India plans to upscale its renewable energy capacity addition targets from 30 GW in 2016-17 to 175 GW by 2022. Sri Lanka aims to increase the share of renewable energy to 60 per cent in 2020. Bangladesh has a target to deliver 10 per cent of energy from renewable sources by 2020. Indonesia aims to increase the share of renewable energy in its National energy mix to 23 per cent in 2025 and 31 per cent in 2050. Thailand aims for renewable sources to provide 25 per cent of the country’s total energy consumption. Vietnam plans to increase the share of renewable energy to 5 per cent in 2020 and 11 per cent in 2050. Philippines aims to increase the share of renewable energy in electricity production to 50 per cent by 2030 and triple renewable energy generation capacity from 5 GW in 2010 to 15 GW by 2030.
Finance is critical factor to achieve the targets set out in the NDCs of the Countries. Many Countries have requested for external funding support to achieve additional emission cuts. According to a study by Bloomberg New Energy Finance (BNEF), in Southeast Asia, annual renewable capacity installation of about 2.7 GW of renewable capacity was commissioned in 2016, which represents a 22% increase over 2015. 80% of the new capacity has been added in Thailand and Philippines. Asia will attract about 50 per cent of all new investments worldwide by 2040. BNEF estimates a gap of $ 5 trillion in zero-carbon technologies, which provides significant opportunities for private sector investments.
Mr. Ali Izadi, Bloomberg New Energy Finance quoted, “There is a general perception that economic growth must be compromised to invest in clean energy. The trends in the global carbon emission scenario indicate that emissions have not grown over 2014 to 2016 and the economic growth rate is also not reduced”. The statement is substantiated by the commitments shown by some of the leading private sector companies to increase the clean energy investments. 93 companies have joined RE100, committed to using 100% renewable energy for electricity across their global operations. The ‘Made in Vietnam Energy Plan’ – an outcome of the Vietnam Business Forum, is a plan developed by private sector companies, recommending key policy and regulatory changes in a unified voice. Whilst commitment towards Clean Energy is observed from both – governments and private sectors, Public Private Collaborations is the need of the hour to accelerate clean energy investments.
Most South and Southeast Asian countries presently have markets with a weak regulatory framework for private sector investments or experience challenges in terms of allowances for grid connection of RE, bankability of projects and access to finances. Countries like Thailand, Philippines and Vietnam with a positive regulatory environment have already witnessed increasing private sector investments.
The regulations designed in a country can significantly contribute to reducing the cost for RE investments. Governments are now focussing on ways to ensure development of low cost options. Auction is now being recognised as an important tool for introducing competition in RE procurement for incentivising investments and reducing costs for consumers. There is opportunity for governments to make use of green bonds finance mechanism as the institutional investors are willing to pay a higher price for green bonds due to low associated risks.
Private sectors calls for various measures such as simplifying the approval process, policy level changes, enhancing government infrastructure and capacity to support RE markets, encourage domestic banks to increase clean energy lending etc. to create a conducive environment to enable investments in Clean energy.
Asia LEDS Partnership (ALP) through its Remote Expert Assistance on LEDS (REAL) looks forward to supporting South and Southeast Asian Governments towards designing policies, regulatory frameworks, policy incentives, and potential business models. ALP could also facilitate technical support from the NDC Support Cluster inorder to deal with challenges around private sector investments. ALP also looks forward to developing knowledge papers on successful cases of policy implementation and finance mechanisms existing in the region to promote knowledge sharing.
This blog is prepared based on the discussions and outcomes from the Deepdive Workshop on ‘Enabling Private Sector Clean Energy Investment in Southeast and South Asia: Recommendations from Corporations and Governments’ organised during the Asia Clean Energy Forum on June 5, 2017 in Manila, Philippines. The workshop is organized by USAID CEADIR along with Asia LEDS Partnership (ALP). The workshop was attended by about 160 participants and had discussions on the status and investment needs of clean energy markets in South and Southeast Asian Countries, emphasising on the importance of private sector investments.