Asia's corporate clean energy market is poised for explosive growth, but significant challenges remain in meeting surging demand. Despite global energy market disruptions, investments in the energy transition continue to grow, with 2023 marking a record US$1.7 trillion in energy transition investments.
David Kang, BloombergNEF's Head of Japan and Korea Research, highlighted that these investments have significantly boosted the manufacturing capacity of solar, wind, and battery technologies, leading to a substantial drop in costs. Solar and wind power are now the cheapest sources of electricity in many parts of the world, accounting for around 82% of global power demand.
The APAC region is emerging as a significant player in clean power procurement, with Asia accounting for a growing share of new Power Purchase Agreements (PPAs). Technology giants like Google and Amazon are leading the way, but local champions such as TSMC and global players like Microsoft and Meta are also signing massive deals.
Solar power dominates the PPA market, representing 65-70% of annual deals, while wind-based contracts, particularly offshore wind in Taiwan, are also on the rise. Kang highlighted that the Asia-Pacific region is expected to account for 36% of global corporate clean energy demand by 2030. This surge is driven by a dramatic increase in Asian companies joining initiatives like RE100, with membership growing 80-fold over the past six to seven years.
However, challenges remain. By 2030, South Korea and Japan alone could face a shortfall of nearly 80 terawatt-hours in clean power supply for corporate buyers. In South Korea, a significant gap exists between buyer and seller price expectations for PPAs, hampering deal closures. Corporate PPA prices remain 5-19% higher than buyer expectations, hindering deal closures. Regulatory barriers also pose challenges, with many Southeast Asian markets lacking open retail electricity competition, thus limiting procurement options. Additionally, popular options like green tariffs often lack direct links to new renewable energy projects, raising concerns about additionality.
Credit: AFP
Despite these hurdles, Kang sees a massive opportunity. He emphasized the need for diversified clean power procurement strategies, including renewable energy certificates, different types of PPAs, on-site generation, and investments in renewable projects. He also stressed the importance of government support in lowering regulatory barriers and providing financial incentives.
Notably, BNEF's analysis of over 400 companies found an average score of just 31 out of 100 in readiness for 24/7 clean power, with US tech giants currently leading the pack.
To achieve net-zero emissions by 2050, companies need to focus on high-additionality procurement options, set ambitious internal targets, and invest in demand-side flexibility technologies. The next generation of carbon-free technologies, such as hydrogen and long-duration storage, will also be crucial.
As Asian corporates ramp up their clean energy ambitions, Kang emphasized the need for collaborative efforts between businesses and policymakers to overcome these challenges and capitalize on the region's green power potential.
