Planning for an energy future: Asia at a fork in the road

The challenge is to set up an energy portfolio based on future costs, as infrastructure lasts decades.

Ten years have passed since the first Singapore International Energy Week. In that time, the world's energy landscape has undergone a dramatic transformation, spurred by an unprecedented expansion in renewables.

Globally, new power-generating capacity from renewables has outstripped those fuelled by conventional sources for the last five years.

Growth in the power sector has been especially rapid. Between 2001 and last year, renewable generation capacity additions grew 10 times from 16 gigawatts (GW) to 161 GW. A fifth of the energy delivered to consumers comes from renewable sources. Wind and solar, which account for the bulk of renewable-energy investments, are now among the renewable sources that are economically competitive with conventional sources of power.

In recognition of this, more than 170 countries have established renewable-energy targets. Cities, companies and private citizens are also increasingly relying on renewables for their energy needs. Major global businesses such as Google, Facebook, Apple and Microsoft are producing and procuring renewable energy to power their operations.

In addition to its strong business case, the global drive to address climate change is providing further momentum to the deployment of renewables worldwide, given that the energy sector accounts for two thirds of global emissions.

Our analysis finds that an energy transition by 2050, in line with the "below 2°C" objective of the Paris Agreement, is both technically feasible and economically attractive. Renewable energy and energy efficiency would meet 90 per cent of emissions reductions needed. Global gross domestic product (GDP) will be boosted by around 0.8 per cent in 2050, the equivalent of almost US$19 trillion in increased economic activity between today and 2050. Jobs in renewable energy would reach 26 million by 2050 from 9.8 million today.

Against this backdrop, Asia is at a crossroads. The pathway that Asian countries choose today will have significant implications for the future of the region as well as the world. In this context, we are seeing more positive signs that Asia is embracing a sustainable energy future.

Asia currently accounts for 62 per cent of employment in renewables worldwide. China, already the world's leading investor in hydro, wind and solar power, is proposing further scaling-up of its renewables plans as a means of reducing environmental pollution and curb its greenhouse gas emissions.

India aims to install 275 GW of renewable energy by 2027. Singapore, an alternative-energy disadvantaged state, plans to raise installed solar power capacity to 350 MWp (megawatt peak) by 2020 and to 1 GWp (gigawatt peak) beyond 2020.

AMBITIOUS TARGET

Last month, I was honoured to participate in the first dialogue between the International Renewable Energy Agency (Irena) and the Asean Ministers on Energy Meeting in the Philippines, where we discussed how Asean countries could achieve their ambitious target of securing 23 per cent of their primary energy from modern renewable sources by 2025, and agreed to establish a strategic partnership for this purpose.

Much more can be done to enable cost reductions through economies of scale and technology improvements, and to stimulate investment. In Asia, Irena's cost benchmarking places hydro and biomass at the lower end of the global scale, at around US4 to US6 cents per kilowatt-hour.

Solar PV and wind are still costly, relative to the rest of the world. There is thus a role for government policy in these sectors to bring down costs, develop mature markets of sufficient size, and provide a clear trajectory for the market.

Renewables have much lower marginal operating costs and, within a policy environment that increasingly favours clean technologies, may also benefit from priority grid access.

Furthermore, high-pollutive sources like coal generate additional regulatory burdens that favour increases in capital market flows to renewables. For Asia, which is poised to make record-breaking investments in fossil fuels, asset stranding is an issue that must be explored carefully as countries make energy choices for the future.

More generally, the energy sector is undergoing a tremendous transformation, driven by rapidly-evolving innovative technologies, new business models and the blurring of lines between different sectors (for instance, the electrification of automobiles). The conventional carbon-intensive energy infrastructure will have to respond to this transition.

THE ENERGY-ACCESS CHALLENGE

Finally, renewables can help tackle the energy-access challenge in Asia. For urban populations and others on the periphery, extension of the power grid remains a feasible option. However, roughly 80 per cent of those without access to electricity live in rural areas (many on small islands, especially in Asia). Off-grid renewable energy solutions such as stand-alone and mini-grid renewable electricity solutions are more adaptable and are now viable, thanks to improved reliability, rapidly falling technology costs and supportive policies.

One of the most compelling arguments for off-grid solutions is that they are decentralised, and because project development activities occur locally, job creation is also localised.

Irena estimates that stand-alone and mini-grid solutions will respectively account for 19 per cent and 44 per cent of electricity generation in developing Asia by 2030, with only 36 per cent coming from on-grid solutions.

Indeed, the story of renewables over the past decade is one in which renewables have consistently surpassed expectations at every turn. Moreover, the benefits of switching to renewables - in terms of fuelling economic growth, increasing jobs, reducing pollution and reducing emissions - have never been clearer.

The challenge for the region is to establish a portfolio of energy sources based on their potential future cost rather than current cost, as the energy infrastructure will last for decades once built. Such a forward-looking strategic approach will help yield considerable benefits.

The transformation of the global energy landscape is inevitable. How Asia rethinks its energy future and navigate change during this upheaval is a question that energy leaders in the region have to think through today, to reap the benefits tomorrow.

Adnan Z. Amin is director-general of the International Renewable Energy Agency (IRENA). 

This was originally published in The Business Times on 20 October 2017.

By: International Renewable Energy Agency (IRENA)

         

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