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In the latest quarterly release of the IHS Markit Clean Power
Additions Ranking (CPAR) for Asia Pacific, renewables have further
accelerated in the region. However, fossil fuel plants remain
prominent and may jeopardize governments' climate ambitions as US
President Joe Biden hosts a global Leaders Summit on Climate on
Earth Day 2021, with many Asian leaders attending.
By the end of March 2021, a total of 463 Gigawatts (GW) of new
power generation projects were under construction in the region's
16 key power markets. This was up 5% from the previous quarter,
indicating more projects moving into construction phase than those
that were completed.
The capacity mix of the under-construction projects did not
change significantly from the previous quarter, with coal's share
down by 2% while hydro up by 2% in terms of share in the mix.
Australia widens the gap with other markets as the clean energy
leader
Australia confirmed its top position in the
Renewable Additions Index (RAI), scoring 91 in the second quarter,
up 2 points from the previous quarter thanks to new announcements
of solar PV and wind projects with a combined capacity of 4 GW last
quarter.
An RAI score of 91 implies that 91% of new projects at the
different stage of planning is non-hydro renewables, which in the
case of Australia are composed of solar PV and wind.
South Korea rose to third from fourth place,
driven by the announcement of 1.8 GW solar PV and 800 MW of onshore
wind projects. The country installed a record 4.1 GW for solar PV
last year and has already deployed 0.8 GW in the first two months
of 2021.
Taiwan moved up to eighth from ninth thanks to
0.6 GW of new solar PV project announcements and a strong offshore
wind pipeline. The island is currently building 3 GW of offshore
wind projects, which include Ørsted's 900 MW Greater
Changhua 1 and 2a Offshore Wind Farms.
Vietnam dropped two places from third to fifth,
mainly due to solar projects completion (about 1.6 GW) during the
last quarter, but with fewer new renewable projects moving into the
pipeline.
New coal projects in the pre-construction planning phase have
decreased by 6% compared with the previous quarter, reflecting a
decrease in appetite for proposing coal-fired power as climate
pressure ramps up.
In absolute terms, however, the capacity of coal-fired power
being developed remains large: 190 GW under construction and 148 GW
in pre-construction planning. These projects, if all brought
online, would increase the region's coal-fired power fleet by over
20% and make ambitious climate goals much harder to reach.
In the Philippines, India, and Vietnam, more
than half of the power projects currently under construction are
coal-fired. Even in developed economies like Japan
and South Korea, coal accounts for 29% and 44% of
all projects under construction, respectively.
Singapore and Taiwan are the only
two markets in the region that currently do not have coal projects
being built or planned.
This reflects a difficult reality in the energy transition
process: fast-growing emerging markets require baseload generation
capacity additions and coal is the immediate, easy option;
meanwhile, some mature economies still have coal projects in the
pipeline from past planning. Together these create immense "coal
inertia," akin to trying to turn a supertanker.
However, given that coal plants typically have a technical life
of at least 30 years, for any region aspiring to reach net zero
emissions by 2050 but still building new coal plants today, e.g.,
Japan and South Korea, it will have to either retire these coal
plants early before they reach 30-40 years of age or mitigate
carbon emissions with carbon capture/storage or carbon offsets,
both incurring significant new costs.
Role of natural gas is still uncertain
Gas-fired power accounts for 15% of new generation projects
under construction in the region, a share that's unchanged from the
previous quarter, but representing a small increase in capacity.
While new gas accounts for majority of projects under construction
in markets like Thailand, Taiwan,
Bangladesh and Malaysia for
baseload requirements, its role in other markets are less certain,
especially those that have committed to net zero targets, i.e.,
Mainland China, Japan, and South Korea.
Overall, 68 GW of gas-fired capacity are under construction, led
by Mainland China, India,
Australia, and Japan in terms of
capacity. Another 264 GW are in pre-construction planning , with
most of them in Mainland China,
Indonesia, and Australia,
followed by South Korea, the
Philippines, and Vietnam, but this
pre-construction projects are much less certain with many having
sat in the pipeline for months, if not years.
It is important to note that gas-fired power also emits carbon
dioxide, although only releasing about half the carbon emissions
compared with coal. Like coal plants, any new gas plants built
today may very well still be operating three decades from now. The
question of carbon mitigation will likely arise in the decades
ahead as well.
Hydro and nuclear are indispensible in regional energy
transition
Accounting for a quarter of all power projects under
construction, hydro and nuclear are playing an important role in
meeting Asia's baseload electricity demand with carbon-free
energy.
Hydro is the largest source of low-carbon power among the
projects under construction in the Asia Pacific region. In
particular, Pakistan and Myanmar
are ranked second and third, respectively, in the Low-Carbon
Additions Index (LCAI), thanks to the significant hydro capacity
being developed. In Sri Lanka too, 75% of power
projects under construction are hydro.
Nuclear power is growing in a few regional markets.
Mainland China, India, South Korea, Bangladesh,
Pakistan and Japan are all actively
building and/or developing new projects. In fact, based on IHS
Markit research, over half the world's nuclear reactors under
construction today are in Asia Pacific.
The CPAR is issued on a quarterly basis. The full report
containing market-level details and technology-specific analysis is
issued to clients of the IHS Markit Global Power & Renewables
Service and Asia Pacific Regional Integrated Energy Service.
A word on methodology
The IHS Markit Asia Pacific Clean Power Ranking
represents two interlinked indices that track the region's electric
generation project pipeline:
Renewable Additions Index (RAI): This index
draws upon the share of nonhydro renewable power capacity in the
project pipeline, where renewable power includes power generation
capacity of solar, onshore/offshore wind, geothermal, and
biomass.
Low-Carbon Additions Index (LCAI): This index
draws upon the share of low-carbon power capacity in the project
pipeline, where low-carbon power includes power generation capacity
of solar, onshore/offshore wind, geothermal, biomass, nuclear,
hydro, and hydrogen.
The capacity of projects in pre-construction development is
discounted by 25%, reflecting uncertainties associated with
projects' permitting, financing, and/or other regulatory and market
risks widely observed before projects at early planning stages can
move to start construction. The discounting factor is derived from
the average rate of canceled projects out of the total project
capacity in pre-construction development. Coal- and oil-fired power
plants receive an additional 25% discount given high regulatory
risks associated with the coal phaseout move in most markets.
The capacity of projects already under construction stage is not
discounted, since they are almost certainly going to come
online.
