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Southeast Asian economies have grown on average by 4% to 7% per
annum since the start of the decade. In terms of power demand, this
has translated to peak demand growth of almost 48 GW from 99 GW and
consumption increasing by 315 TWh from 760 TWh over the past eight
years.
This sustained high growth has so far been fueled by low-cost
coal-fired generation and domestic gas fired generation, as many of
the countries began their growth trajectory from relatively
low-income levels. Coal-fired capacity has grown from 32 GW to 71
GW as compared to gas-fired capacity which grew 66 GW to 90 GW
between 2010 to 2018. In terms of generation, coal has increasingly
been dominating the power mix, from 29 % in 2010 to 40% in
2018.
Many countries in the region face a decline of domestic gas
production increasing cost of domestic gas, while at the same time
maintaining a keen interest in growing the share of gas-fired
generation, potentially through imported liquified natural gas
(LNG). The issue of affordability is becoming less of a hurdle for
the development of gas-fired generation as countries have been
gradually increasing their electricity tariffs to a less subsidized
level and have become more cost reflective. Comparing the levelized
cost of electricity for a new entrant combined-cycle gas turbine
fueled by LNG and the current electricity prices, all the prices in
countries in Southeast Asia (except for Indonesia and Singapore)
are enough to recover both the capital and operating cost of a
CCGT.
The Association of Southeast Asia Nations (ASEAN) have set an
aspirational target to incorporate 23% of renewables into their
energy mix by 2025. Alongside this regional target, the individual
countries have also set renewable targets, which are mostly less
aggressive than the aspirational one but still highly ambitious.
These targets were either announced by the government or
incorporated into the countries' power development plans and have a
myriad of policies to support the achievement of the targets.
In addition to these policies, the cost of renewables is
declining and is expected to continue, driven by technology
learning curves, competitive tenders, and improvements in local
expertise. Owing to the above factors, the increased availability
of green financing, and the growing demand for green energy,
renewables are forecasted to experience strong growth in the
future.
Although it seems like coal's growing dominance will persist
based on the capacity under construction, new coal-fired generation
is facing increasing challenges to secure financing as more
financial institutions tighten their financing policy towards coal.
The coal market also faces external threats from the declining cost
of renewables and growing interest in the transition away from
coal-fired generation towards a cleaner fuel mix. The significant
decline in coal's share in the planned capacity indicates that a
transition will be taking place in the future.
The region is expected to continue along its strong growth
trajectory, with peak demand more than tripling to around 350 GW by
2050, a compounded annual growth rate of 4.3%. Given this strong
sustained growth, even with falling cost of renewables and both the
emergence and growth of LNG imports to fuel the power sector, IHS
Markit expects strong growth across all generation types to meet
the demand. Overall, the share of gas and renewable capacity and
generation is forecasted to grow in the region. By 2050, 72% of the
installed capacity will come from gas and renewables (compared with
63% in 2018) while the generation share will reach 62% from 57% in
2018.
Learn more about IHS Markit's Asia-Pacific power and renewables
insight and analytics.