Green Recovery

Renewables’ resilience in select Asia-Pacific countries despite the pandemic

In response to the economic slowdown, most governments in the Asia-Pacific region have implemented economic recovery packages. Strategies have varied in different countries. Some have focused on livelihoods and healthcare while others have increased investment in infrastructure. A few have declared strong

green recovery strategies intended to guide the entire economy in a new direction. Some governments have announced plans to accelerate the low-carbon energy transition while others have yet to promulgate new energy policies that would support renewable energy. A study titled, “Resilience of Renewable Energy in Asia Pacific to the Covid-19 Pandemic”, conducted by the Energy Studies Institute, National University of Singapore, with support from Konrad-Adenauer-Stiftunge V., summarises the experience of selected countries in the Asia-Pacific region during and after the pandemic in terms of the resilience of their renewable energy sector as compared to their fossil fuels-based power generation. Renewable Watch presents extracts from the study…

China

The share of solar and wind energy in the electricity mix increased in the first and second quarters of 2020, as compared to the same periods in 2019. While this reflects a stronger implementation of despatch rules favouring renewables, it is less than what might have been expected given the decline in hydroelectricity availability. Further, the share of fossil fuels in the power mix increased from 28.9 per cent in the first half of 2019 to 29.4 per cent in the same period of 2020.

The country’s economic recovery plan lacks strong green credentials and appears to be energy intensive. Although policy support for renewable energy continues, fossil fuels have also received encouragement in two contexts – the relaxation of rules on constructing coal-fired power stations and the clearly stated priority to maximise energy self-sufficiency.

This is in contrast to the Chinese president’s pledges made to the United Nations General Assembly on September 22, 2020 concerning China’s carbon emissions. First, emissions would peak before 2030 rather than just “around” 2030 and, second, the country would strive to achieve carbon neutrality by 2060. The first target is realistically achievable with a combination of low economic growth levels, a sustained decline of heavy industries and associated expansion of the service sector, and the continued rise of non-fossil energy. The second objective is profoundly challenging.

In December 2020, the president announced to the United Nations that the 2030 ambitions for the country’s Nationally Determined Contributions were being raised – the carbon dioxide emissions per unit of GDP would decline by 65 per cent from 2005 levels as compared to the original commitment of 60-65 per cent made in 2015; and the share of non-fossil fuels in the energy mix would rise to 25 per cent, as against 20 per cent in the initial commitment. The government’s plans will presumably appear in the Fourteenth Five-Year Plan for 2021-2025. Nevertheless, the current pace and energy-intensive nature of the economic recovery combined with the president’s proposal that the GDP should double by 2035 will make it difficult for planners to reconcile these trends and goals, at least in the short term.

Indonesia

Indonesia aims to increase the share of new and renewable energy sources in the national energy mix from 9.18 per cent in 2019 to 23 per cent in 2030 and 31 per cent in 2050. Meeting these targets would require a significant increase in the deployment of renewable energy technologies that are currently dominated by hydropower. Biofuels are expected to play a larger role in the future as the country weans itself off fossil fuels. That said, Indonesia has also decided to continue relying on coal for economic development. Before the pandemic, fossil fuels dominated Indonesia’s primary energy mix, particularly coal, which accounted for 37 per cent of the country’s energy mix in 2019 and fuelled two-thirds of all power plants.

Despite a sharp reduction in energy demand during the pandemic, electricity generation from hydro and geothermal rose during the pandemic, along with coal. This is because state-owned electricity company PT PLN prioritised electricity despatch from renewable energy sources and operated renewable power plants on a must-run basis. However, investments in new renewable energy capacity have declined, likely due to the utility’s attempts to delay or cancel new projects in order to ease its financial pressure.

Supporting the coal industry is an essential part of the country’s relief efforts, with several stimulus measures and favourable regulations put in place. This includes continued assistance to new coal-fired power plants as part of the current 35,000 MW programme. Despite the government’s lukewarm support for renewable energy development, there are some promising developments in the recovery plan for an energy transition, including budget allocations for renewable energy technology deployment.

Malaysia

Overall, the share of renewable energy (including hydro) in the power generation fuel mix increased by 11.45 per cent in the first half of 2020. Non-hydro renewable energy, mainly solar generation, has increased in the range of 38.74-143.52 per cent for selected plants in west peninsular Malaysia. The higher power generation from hydro is due to the lower marginal cost of generating units during this period. With new non-hydro renewable energy projects continuing to be tendered and a new quota for the large-scale solar programme being introduced by the government in the first half of 2020, renewable energy has shown higher resiliency in the short term. The Sustainable Energy Development Authority is also actively promoting the adoption of rooftop solar. However, with companies being cash-tight, especially small businesses and homeowners, it is foreseen that there will be restricted spending on big-ticket items like solar modules. In the long run, a global recession post-pandemic, coupled with the falling oil prices, might affect investment in renewables. This is especially true for the transportation sector, where biodiesel is relatively more expensive than diesel fuel.

To increase the renewable energy share in power generation to 20 per cent by 2025, Malaysia aimed to have 3,758 MW of new renewable energy capacity installed in 2020 – 1,172 MW solar and 1,586 MW non-solar. According to the country’s power generation plan, another 5,100 MW of gas-fired capacity will be installed by 2030. This is consistent with a recent think tank policy brief produced by IDEAS, which urged the government to stop building coal-fired power plants and utilise natural gas as a bridge for low carbon transition towards renewable energy.

The 12th Malaysia Plan (2021-25) will play a pivotal role in decarbonising the energy sector while reviving the economy in the long run. As a result, renewables will emerge stronger post-Covid-19, especially if the government integrates support for clean energy into the economic recovery plan.

The Philippines

The economic recovery framework of the Philippines from Covid-19 is not notably green. Still, the pandemic encouraged energy policymakers to rethink their current policies – from being technology-neutral to pushing for an “energy transition”. In its newly updated Philippine Energy Plan 2018-2040, the Department of Energy emphasised that it plans to synergise the country’s economy “from the crippling effect of the pandemic with sustainable energy goals”. By 2040, the Department of Energy estimates 44.6 GW of new capacity from geothermal, renewable energy and possibly nuclear energy sources. The declaration of a moratorium on coal power plants in October 2020 also signalled the types of future energy projects that the government will support during the recovery period. The Duterte administration is also expected to go back to its infrastructure strategy, “Build Build Build Campaign”, when the pandemic subsides.

The pandemic has exposed the weaknesses of the energy sector and the current grid system. The country remains highly dependent on coal-fired power plants, which are inherently inflexible and vulnerable to fluctuating energy demand. Covid-19 has also highlighted the challenges faced by smaller power stakeholders such as electric cooperatives, which could not negotiate force majeure as compared to big players like Meralco. On the other hand, variable renewable energy systems like small- to medium-scale solar photovoltaic systems proved useful and increased their share of power generation during the lockdown. The Energy Department’s strict compliance with the mandatory blend despite oil companies’ pressure also positively affected the biofuel outlook.

Thailand

Thailand’s economic stimulus packages were not notably green as they were focused on supporting livelihoods and the financial sector. The quantity of electricity generated from hydropower and non-hydro renewable resources declined in the first nine months of 2020 as compared to the same period in 2019. All other sources of electricity also declined except for coal, which showed a small increase. This suggests that the obligation on the Electricity Generating Authority of Thailand to purchase renewable energy was not fully effective in 2020. The lockdown measures during Covid-19 also curbed the construction of renewable electricity projects.

Despite the disruption caused by Covid-19, the government continues to support renewable energy development. Five proposals were submitted to the Energy Ministry and other relevant government agencies in December 2020. These were for electric vehicles and charging stations, power generation from waste energy, electricity generation from crops, electricity generation from solar and wind energy, and power generation for own use. The government is dedicated to developing not only solar and wind power, but also various renewable energy sources.

Although renewable electricity projects in the pipeline have experienced slowdowns due to Covid-19, many of these projects will come online once the pandemic is under control. Thailand’s power generation businesses can expect to continue growing steadily, driven by domestic demands for electricity and government support for investment. Increasing investments in business and industry will continue to feed the rising consumption of electrical power. Once the pandemic finally comes to an end, the Thai government could apply lower interest rates, making investments more profitable. This may lead to a boom in renewables investment after Covid-19. In the long term, the recovery of the economy and the growing demand for electricity, along with government support, will make non-hydro renewables more resilient. That said, natural gas will continue to hold the largest share in electricity supply.

Although biofuel demand decreased marginally in the transport sector, the production has increased, showing resilience in the short term. The key reason is the government’s requirement for mandatory use of biodiesel and its price subsidy incentive. In the renewable electricity sector, contracts that have already been signed are immediately executed once safety is ensured. Therefore, in the short term, it is government support that has made renewable energy fairly unaffected by Covid-19.

Vietnam

In the two years before the Covid-19 pandemic, Vietnam had become one of the most active countries in Southeast Asia in regard to the installation of non-hydro renewable energy capacity, notably solar PV. This was principally due to generous feed-in tariffs and a requirement of the grid company to connect, despatch and purchase renewable energy. Nevertheless, the level of curtailment was high due to a shortage of grid capacity. During the first eight months of 2020, the share of non-hydro renewable energy in the electricity mix was higher than that in the second half of 2019. This may have been the result of new capacity coming online in late 2019. What is more notable is that the share of hydropower increased significantly at the expense of coal-fired power in June-August when the seasonal rains arrived.

The country’s economic recovery plan aims to boost foreign investment, notably in manufacturing and processing, but it lacks any robust green features. During 2020, the government pushed forward with new policies to support both solar and wind energy. The most significant potential for new capacity lies with offshore wind, but the reduction in feed-in tariffs may deter investors. Several coal-fired plants are also under construction. In the future, LNG imports will reduce the dependence on coal. Still, fossil fuels are likely to continue dominating the electricity mix for many years to come, assuming that the economy continues to grow as expected.

Conclusion

In contrast to some European countries, none of the governments in the Asia-Pacific region framed their economic recovery packages as being “green”. This is understandable because their immediate priority was to protect livelihoods and support healthcare. Nevertheless, many Asian states announced new energy policies or visions. The most notable of these was China’s pledge to achieve carbon neutrality by 2060. However, this seemed to be in conflict with the call to further develop self-sufficiency in energy supply that would require increased coal, oil and natural gas production.

In several countries (Malaysia, the Philippines, Thailand, Vietnam), governments declared continuing support for renewable energy, but at the same time called for additional thermal generation capacity – with a gradual switch from coal to gas in Malaysia and Thailand. Therefore, it is not clear how fast the share of renewable energy will grow in these countries. The outlook for renewable electricity in Indonesia is even more uncertain – the coal industry and coal-fired power generation continue to receive strong support from many quarters. A critical factor in the success of renewables is the effective implementation of national policies requiring the despatch of low-carbon electricity.

Governments will encounter tensions in formulating and implementing their energy policies. They will continue to face international and domestic pressure to switch to cleaner energy sources to curb their rising carbon emissions and air pollution. At the same time, opposing pressure will come from interest groups in the fossil fuel industry keen to sustain their economic dominance, and from wider society seeking affordable supply of energy.

As the cost of non-hydro renewable electricity sources continues to decline, it is incumbent on national governments in the region to put in place and enforce credible policies to support the deployment and despatch of renewable energy, both utility-scale and off-grid. Such measures can be market-based or administrative, or both, depending on national circumstances. These can be supplemented by the development of regional grids to transmit renewable electricity from the areas of surplus to the areas of deficit. In the long term, these efforts will support economic growth, emission reduction and energy access.

This article is an extract from the study, “Resilience of Renewable Energy in Asia Pacific to the COVID-19 Pandemic”, conducted by the Energy Studies Institute, National University of Singapore, with support from Konrad-Adenauer-Stiftunge

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