Green recovery opportunities in Southeast Asia, Japan ...

Green recoveryopportunities inSoutheast Asia,Japan, SouthKorea andTaiwan

Context, objectives and methodology (2)

Contents

Executive summary (Page 3)

About the pipeline projects covered in this study (Page 25)

Geography analysis (Page 33)

Executive summary

1

The green recovery opportunity4

The COVID-19 pandemic has impacted livesand businesses significantly. To helpbusinesses and individuals, governments inAsia have focused efforts on meeting theimmediate needs of their economies.

The need for financial relief and emergencyresponse services coupled with dwindling

tax revenues from reduced economicactivity have resulted in geographiestapping into national coffers. Moving to alow-carbon economy can create jobs andcontribute to help economies meet theirNationally Determined Commitments (NDCs)under the Paris Agreement. Manyeconomies have started to do so.

Executive summary

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Green stimulus as a % of total GDP

The European Union has launched a “NextGeneration EU” recovery fund that willprovide US$590b in grants and US$295b inloans for member states, of which 25% willtarget climate action. In Asia, someeconomies have also announced greenstimulus measures:

• South Korea has launched a newUS$141b Korean New Deal, of whichabout US$65b will be invested to supportinvestment in green technologies. TheKorean New Deal will focus on three mainareas: green transition of infrastructure;low carbon and decentralized energysupply; and innovation in thegreen industry.

• Malaysia has rolled out phase four of itslarge-scale solar action program (LSS4)1GW tender and a MYR13b (US$2.9b)expenditure for installation of LEDstreetlighting, rooftop solar panels andtransmission lines as a part of itsCOVID-19 stimulus package.

• The Indonesian government isformulating the Surya Nusantara (orSolar Archipelago) plan to installthousands of rooftop solar panels with acombined capacity of 1GW a year formillions of the country’s pooresthouseholds over the next five years.

Data as per announcements until September 2020

The green recovery opportunity

EY undertook a study of the green investments inthe energy sector in selected markets inSoutheast Asia, Japan, South Korea and Taiwan.

And indeed, opportunities abound.

Just looking through public sources, we identifiedover 800 projects, which represent an aggregateinvestment of US$316b. About US$306b ofthese investments are from the renewable energysector and 85% of them are expected to comefrom offshore wind and solar photovoltaics (PV).

These projects can support up to 870,000 jobs.With a higher job-intensity ratio than in mostother traditional and fossil-based industries and apotential for participation from small andmedium-sized enterprises, the low-carbonprojects identified can have a significantcontribution to a sustainable and green economicrecovery in Asia.

Further, on an aggregate basis, the greenhousegas emissions avoided are estimated at around229 MTCO2e per annum. The emission savingscan help to support economies in meeting theirrespective NDCs under the Paris Agreement.

While other potential benefits such as improvedair quality and energy independence were notassessed as part of this study, they form part ofthe value that the selected projects can deliver.

The COVID-19 pandemic presents a win-win opportunity to recover inan economically sustainable and environmentally responsible manner.

870,000Job creation

potential

229 MTCO2eEmission reduction

potential

811Projects identified

90GWRenewable energy

capacity in the pipeline

US$316bInvestment potential

5


Objectives of this study

• Uncover a pipeline of shovel-ready projects, that are expected toreach financial close in the next two to three years.

• Identify the key barriers and challenges for a green recoverypost COVID-19 pandemic.

• Support policy-makers across the focus geographies to formulatetheir economic recovery strategy and tap on the potential forgreen recovery.

1 Sustainable Recovery: World Energy Outlook Special Report, International Energy Agency, June 2020,accessed via https://www.iea.org/reports/sustainable-recovery on 18 January 2021

Dr. Fatih BirolIEA Executive Director1

Governments have a once-in-a-lifetimeopportunity to reboot their economies and bringa wave of new employment opportunities whileaccelerating the shift to a more resilient andcleaner energy future.

“


From the study, renewable energy is themost active sector for investment where thepipeline is well-structured and significantmarket interest is present.

Despite the immense potential of energyefficiency in the markets covered in thisstudy, the limited pipeline reveals a lack ofmomentum and low investor interest.Greater awareness is needed on thecommercial value proposition of energyefficiency projects and efforts are requiredto encourage such projects.

The electric vehicle (EV) sector is still in itsinfancy in the region, with focus geographiesonly starting to feature EVs as part of their

mobility strategy. The pipeline is limited butcould develop in coming years if EVs areintegrated with the broader energytransition strategy.

Although not directly green, gridinfrastructure projects are seen as criticalenabling infrastructure. Transmission anddistribution (TD) infrastructure projects arelargely developed by state utilities, undereach specific market’s framework. Hence,limited representation of such projects in thepipeline should not be interpreted as a lackof activity in the sector.

Key findings

Overview

Investment in renewable energy (US$b)

12

121

3

65

42

4

3721

0

20

40

60

80

100

120

140

Indonesia Japan Malaysia South Korea Taiwan Thailand The Philippines Vietnam

Inve

stm

ent (

US$

b)

97%

0.11%2% 1%

Renewable energy (RE)

Energy efficiency (EE)

Electric vehicles and energystorage systems (EV and ESS)

Transmission and distribution(TD)


US$316b

US$306b

40%

21%

14%

12%

7%4%1%

1%

Japan

South Korea

Taiwan

The Philippines

Vietnam

Indonesia

Thailand

Malaysia

US$306b

Investment share by renewable energy subsector

Investment share in renewable energy by geography

Investment share by sector

75%

12%

7%4%

2% 0.32%

Offshore wind

Solar PV

Onshore wind

Geothermal

Hydroelectric (<30MW)

Others


In terms of investment size, Japan and SouthKorea lead as the investment for offshorewind projects are considerably higher whencompared to other renewable energy sub-sectors. Philippines and Vietnam lead interms of the number of projects in thepipeline. In general, solar energy dominatesthe pipeline in Southeast Asia.

The study identifies that much of the capitalneeded for the projects are available and canbe deployed quickly by the private sector,should some of the inherent challengeshindering the projects, particularly those forthe smaller-scale projects, are addressed.

The pipeline shows diversity in terms ofinvestment size. Approximate 48% ofprojects identified are small and requireinvestments less than US$50m.

The project sponsors consist of a mix of localdevelopers, regional conglomerates andinternational developers and small andmedium enterprises (SMEs). Supportingthese projects can help spur economicactivity across various investor groups,contributing to national objectives ofeconomic activity revival.

Diverse pipeline

Breakdown of projects by investment range

49 37

300

117171

73

10

50

100

150

200

250

300

350

0-5 5-10 10-50 50-100 100-1000 1000-10000 >10000

Investment (US$m)

Vietnam

The Philippines

Thailand

Taiwan

South Korea

Malaysia

Japan

Indonesia

97

46

44

5114

40

298

221

4%

40%

1%21%

13%

1%

12%

8%IndonesiaJapanMalaysiaSouth KoreaTaiwanThailandThe PhilippinesVietnam

Number of projects by geography

811

Investment by geography

US$316b


When pipeline projects are realized,geographies are better able to meet theirrenewable energy targets. In Southeast Asia,solar projects dominate the pipeline:

• In Indonesia, the solar pipeline can meetthe 2025 targets of the PerusahaanListrik Negara (PLN), a state-ownedcompany tasked with supplying theelectricity needs of the Indonesianpeople. However, the target remainsmodest compared to the potential,indicating a possibility to develop moreambitious targets.

• In Malaysia, the renewable energy pipelineis closely linked to the LSS program.

• For Thailand, the country’s 2025 onshorewind target is modest. Thailand’s pipelinehas the capacity to exceed the country’splanned solar capacity additions until2025 by a significant margin due to thehigh level of interest in the solar sector.

An upward revision of targets, particularlyfor wind, could help catalyze sectorswhere there is considerable interest fromprivate sector.

• For the Philippines, the current installedsolar capacity in the country has alreadyexceeded the 2030 national target whilethe pipeline capacity for onshore wind isthrice the amount required to meet thetargets. The imminent National RenewableEnergy Plan is expected to set moreambitious targets for solar and wind.

• For Vietnam, over the next two to threeyears, the pipeline has the potential tomeet a significant portion of its revisedforecasts for renewable energy. Thepipeline identified is only a small fractionof the applications received by Vietnam'sMinistry of Industry and Trade. Thepipeline highlights growing activity andprivate sector interest.

Solar dominates in Southeast Asia’s pipelines

Indonesia (2025) Malaysia (2025) Thailand (2025) The Philippines (2030) Vietnam (2025)

Pipeline capacity

Target capacity additions

850 840 1,29016

7521,951

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12,000

15,500

495 793 1,23616

2,211

6,592

11,142

4,752

9,120

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6,000

8,000

10,000

12,000

14,000

16,000

18,000

Onshorewind

Solar Solar Onshorewind

Solar Onshorewind

Solar Wind Solar

Ener

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ity (

MW

)


The pipeline of Japan, South Korea and Taiwan can significantly exceed the national offshorewind targets, indicating strong market interest in the offshore wind sector.

However, solar projects in the pipeline fall significantly short of meeting the national targets.

One reason for solar projects attracting less interest than offshore wind could be challengesaround land availability, as articulated by developers and stakeholders.

Offshore wind dominates the pipeline in North Asia

Pipeline capacityTarget capacity additions

Japan (2030) South Korea (2030) Taiwan (2025)

6,300

14,200

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16,188

25,995

483

5,610

16,402

200

16,587

9190

18,023

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8,081

263 00

5,000

10,000

15,000

20,000

25,000

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Ener

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Realizing the pipeline is hinged on addressingseveral challenges. The availability offinance is generally not a challenge forgrid-connected renewable energy generationprojects. However, access to finance,particularly for smaller renewable energyprojects (e.g., bioenergy, small hydro androoftop solar) and energy efficiency projects,remains a challenge.

Close to half (48%) of the projects in theidentified pipeline require an investment ofless than US$50m. Smaller-scale projectsstruggle to get access to local finance asinstitutions are cautious of the credit risksassociated with small developers. Suchdevelopers also lack the ability to tap intothe international financing pool. The specificfinancing challenges vary between sectors,developers and project types.

Financing is only one of the barriersidentified. For most projects andgeographies, the main challenges are non-financial and related to inherent regulatory,administrative and commercial issues.

For example, clarifications on policy such asFeed in Tariff (FiT) extensions, improving thequality and standardization of powerpurchase agreements (PPAs), insufficientgrid capacity, delayed grid access andcurtailments during operations are cited aschallenges that impact the cost andavailability of finance.

Incremental improvements may make accessto financing easier and deployment of theseprojects faster.

The pipeline underlines the significantinterest from the developers andinvestors in these markets. For policy-makers, it highlights the potential forsetting more ambitious targets to leveragethis enthusiasm.

Thus, an enabling framework for project roll-out through policy and regulatory measuresand adequate transmission infrastructureinvestments will be required to deliver thepotential environmental and social value.

Renewable energy and grid infrastructure


Renewable energy enablers

Financing and bankability• Availability of financing is generally not

an issue with a few exceptions (e.g., non-recourse financing in Vietnam).

• Policy-makers should focus on enablingfinancing solutions for SMEs andsmall-scale projects, which remain lessbankable across the focus geographies.

Favorable supply-demand• Growing energy demand across Asian

economies due to increasing prosperity andeconomic development supports thedevelopment of renewable energy.

Robust transmission capacity• Investment in grid capacity must happen in

tandem with increase in renewable energycapacity to boost investor confidence andcombat curtailment.

Allocable land parcels• Lengthy and complex process for land

acquisition is often cited as a constraintto project development.

Adaptive renewable energy policy• Investors need continuity in terms of policy. A

streamlined process can help providecertainty to investors in cases such as annualtenders in Malaysia, which led to a 50%reduction in levelized cost of energy (LCOE)between LSS1 and LSS3.

• Clarity of regulations around procurementand pricing of renewable energy is cited as animportant driver for accelerating renewableenergy development.

Supportive market framework• Most markets in Asia are single

buyer markets.• Options should be developed to allow

corporates to achieve their renewableenergy ambitions through corporatepower purchase agreements (PPA).

• This will help attract foreign directinvestments (FDIs) from companies thatare increasingly seeking green electricity(e.g., through commitments under theRE100 initiative).

National ambition and targets• The pipeline capacity has the potential

to exceed national targets in varioussectors by a significant margin.

• Price competitiveness of renewableenergy is an opportunity for focusgeographies to set renewed and moreambitious targets.

Thorough resource assessment► A lack of clarity of the offshore wind

potential in the Philippines impedes thedevelopment of the sector.

► Private developers echo the cost ofassessing geothermal resource iscapital-intensive and often makes projectsunviable for investment.

High perceived risk

Low perceived risk

Medium perceived risk

•

•

•

•

•

•

••


Energy efficiency

The energy efficiency sector in SoutheastAsia has untapped economic potential,especially energy conservation mechanismssuch as government building retrofitting andpublic street lighting projects, which awaits astrong nudge for activation.

The relative lack of energy efficiencyprojects in the investable pipeline reveals thelagging momentum in the region’s energyefficiency effort. Industry experts attributethis to various factors, including a lack ofcapacity at the host country level tomandate energy efficiency laws,shortcomings of public sector procurementand budgeting processes that do not allowthe roll-out of large-scale energy efficiencyprojects in the public sector.

The business case for energy efficiencyprojects is also weaker in markets whereretail electricity prices are subsidized.Stakeholder consultations reveal that energyefficiency projects are perceived to be “lessattractive” to decision-makers whencompared to renewable energy projects.

Recognizing the benefits and the enormoussocioeconomic potential of energy efficiencyprojects, geographies like Malaysia andSouth Korea are considering energyefficiency projects as part of theirgreen recovery packages. However,structural reforms are needed to supportwider implementation.

Electric vehicles

The EV sector is still at the very earlystages of development across the variousfocus geographies, with EVs contributing toa negligible share of new passengervehicle sales.

There are a few pilot stage initiatives such asfleet replacement in Indonesia, promoting e-jeepney in the Philippines and incentives forEV manufacturing in Thailand. The marketneeds a combination of push and pullincentives to promote the sector.

Although the case for EV adoption remainsweak in these markets due to the lack of aclear economic case, low consumerawareness and an absence of visionarytargets, the future outlook remains bullish.

More to be done to create commercial opportunities for energyefficiency and EVs


Need for systematic programs to induce commercial activity in theenergy efficiency sector

Electricity tariff• Subsidized retail tariffs prevents the

realization of the full potential ofenergy efficiency solutions.

Consumer awareness• Limited awareness of the business model of

energy services companies (ESCO) and theexpected savings potential among SMEs, areoften cited as significant barriers.

Incentive and penalties• While some schemes such as the ESCO

fund in Thailand are available for SMEs tosupport energy efficiency solutions,industry practitioners cite financing as asignificant barrier for new projects. Thereare limited financial incentives forinvesting in energy efficiency projects inmany geographies.

• An absence of stringent penalties for non-compliance or non-performance is cited asa deterring factor.

Mechanism to capture value fromenergy savings• Lack of a mechanism to retain the

savings earned through energyefficiency projects by governmentdepartments is a barrier promotingnew projects by government agencies.

Government targets andassociated programs• National-level targets are present, but lack

detailed implementation plans in mostgeographies. Ongoing efforts are focused oninterventions like replacing lighting systems,minimum energy performance standard(MEPS) and labeling products likeair conditioners.

• More wide-scale energy efficiency projectslike street lighting and governmentbuildings' retrofits are needed.

Technical knowledge• Limited availability of required skill set

and service providers.• ESCO associations are present in each

geography like Malaysia and Thailandto encourage skill development, butneed greater support and awareness.

High perceived risk


••

•

•

•

•


The EV sector is still in the early stages of development with focusgeographies at early stages of adoption

Incentives• Incentives are focused on manufacturing – several incentives are offered for manufacturing

in Thailand, Indonesia and Malaysia.• Limited tax and import duty exemption are further slowing adoption.

Electric vehicles enablers

Ecosystem for EV adoption• To encourage private sector participation in the EV sector, an ecosystem needs to be created

through policies that support the development of charging infrastructure and associatedbusiness models.

• There are a few players who are active across the region such as VinFast (Vietnam), PetronasDagangan and TNB (Malaysia), Energy Absolute (Thailand). This demonstrates interest fromthe private sector. Market activity can be further strengthened by government incentivesand policies.

National targets and regulatory framework• All geographies have set some targets for EVs. However the focus in Southeast Asia remains

on strengthening manufacturing capabilities.• In addition to national targets, definitive regulatory framework and strategies can help

EV adoption.• EV adoption is increasingly seen in e-bikes across Vietnam and Indonesia.• Pilot-stage initiatives launched by focus geographies such as fleet replacement in Indonesia,

promoting e-jeepney in the Philippines and incentivizing EVs in Thailand reflect an increasingmarket interest in the sector.

Price competiveness• Internal combustion engine (ICE) vehicles still retain their price competitiveness over EVs in

most vehicle segments. Technological advancements, coupled with local manufacturingcapability, are expected to bridge this gap in future.

• The business case for private cars remains weak, which hinders investments into the sector.• However, there is a viable business case for bus fleets, which could emerge as a focal entry

point for EV strategy in the region.

High perceived risk


•

•

•

•


Interventions today can help achieve a green recovery and address someprevalent challenges

Regulatory clarity and certainty

• Regulatory clarity, clarification ofapplicable FiTs, offtake certainty andbetter coordination between all relatedstakeholders could support the greaterdeployment of renewables.

• Malaysia’s LSS auction program is anexample of how a well-structured processcan support accelerated deploymentof renewables.

Clear pipeline of projects

• There is a strong signal from the privatesector for a clear procurement frameworkfor new projects. Development of newprojects has stagnated in Thailand due toa lack of clear procurement frameworkpost the expiry of the FiT.

• Creating a pipeline and developing aprocurement framework providesconfidence in the investment communityand creates a promisinginvestment outlook.

Establish frameworks fordevelopment of energyefficiency projects

• The main challenge faced for developingenergy efficiency projects is the lack ofcommercially attractive businessopportunities for investors and lack ofawareness of the benefits to customers.

• Incentives and penalties for promotingenergy efficiency projects are needed forlarge-scale deployment of energyefficiency solutions.

• Greater awareness is needed for the ESCOsavings model, particularly for commercialand industrial customers. Programs likeretrofit of government buildings couldkickstart the large energy efficiencytransformation projects.

Support in creating an ecosystemfor EVs

• EVs is still in the early stages ofdevelopment. Most focus geographies arecurrently focusing on establishing amanufacturing base for EVs. Greatereffort is necessary to incentivize andsupport adoption.

• While EVs are not yet price competitivewith conventional vehicles, particularly inthe individual user segment, there areimmediate opportunities for fleetreplacement of public transport such asbuses where the economics are viable.


Snapshot of focus geographies shows immense potential that can berealized in the short term

Geography Key observationsEstimatedpotential from agreen recovery

Indonesia • Renewable energy is the most attractive sector forinvestment. Within the renewable energy sector, thegeothermal sector has the largest number of projects.

• Market interest and availability of finance are strongfor utility-scale projects. But high local contentrequirements could affect the levelized cost ofrenewable energy.

• There is limited interest in the development of energyefficiency projects despite the strong awareness ofthe benefits of energy management.

• Renewed national targets and a clear procurementprocess can accelerate implementation. Developmentof renewable energy projects is highly linked to thePLN’s ability to offtake clean energy. Greatercoordination between the national vision and thePLN’s plan could provide clarity to the market.

97projects identified

US$12binvestmentpotential

4GWrenewable energyin the pipeline

34kjob creationpotential

19MTCO2eemissionreductionpotential

Japan • Renewable energy is the most attractive sector forinvestment. Within the renewable energy sector,offshore wind is the most prominent sectoraccounting for approximately 94% of the pipeline,followed by solar PV.

• Lack of appropriate land area and market saturationare key barriers for the development of solar andonshore wind projects.

• The recent offshore wind tender process is expectedto provide the framework for future development.

• EIA and decommissioning requirements arehighlighted as complex factors affecting the cost ofdeveloping projects.







Snapshot of focus geographies shows immense potential that can berealized in the short term (continued)


Malaysia • Renewable energy is the most attractive sector forinvestment. The solar sector has the largest numberof projects within the renewable energy sector,followed by small hydropower (<30MW).

• The market is primarily driven by the LSS auctionprocess, which provides a clear and transparentframework for project development.

• Access to finance is not generally considered an issuefor the development of large solar projects. However,the reliability of feedstock, access to the grid andthe sponsor’s creditworthiness are some of theconcerns that impact the availability of finance forbioenergy projects.

• The energy efficiency sector shows promise. As partof Malaysia’s recovery plan, MYR13b of infrastructureprojects to upgrade LED street lighting, rooftop panelsand transmission lines have been launched.






SouthKorea

• Renewable energy is the most attractive sector forinvestment. Within the renewable energy sector,offshore wind is the most prominent sector accountingfor approximately 86% of the pipeline, followed bysolar PV.

• Land availability, grid access and the uncertaintyaround the purchase price of renewable energyprojects are some of the challenges echoed by theprivate sector.

• The Green New Deal has been announced tospearhead a sustainable recovery. The Green NewDeal consists of eight projects base on three mainthemes: (1) green transition of infrastructuresthrough energy efficiency measures; (2) low-carbonand decentralized energy through the development ofsmart grids and renewable energy; and (3) innovationin the green industry through the development of low-carbon and green industrial complexes.









Taiwan • Offshore wind dominates the pipeline with 12 out ofthe 14 identified projects.

• Change in law risk and the uncertainty around theapplicable FiT are among the most pressing concernsfor developers. Other barriers include stringent localcontent requirements specified by the IndustrialDevelopment Bureau.

• Land availability, public acceptance and environmentalconcerns impact the development of other sectors.Innovative solutions such as co-location of renewableenergy plants with farmlands etc., could address someof these concerns.



8GWrenewable

energy in thepipeline



Thailand • Solar PV is the most prominent sector within therenewable energy sector. The pipeline appears to bewell-diversified among the other focus sectors.

• Development of large-scale projects has slowed sincethe expiry of the FiT. The market awaits clarity on theprocurement plan for renewable energy projects toachieve the 2037 target of more than 18GW.

• Thailand has announced plans to develop severalfloating solar projects over the next decade and hascompleted the first procurement in 2020.Procurement plan and framework for other sectorsis awaited.

• Several pilot initiatives exist for the development ofEVs and new energy solutions like smart grids.









ThePhilippines

• The renewable energy sector is the most prominentsector with 265 projects and 21GW capacity in thepipeline. Majority of these projects are in the earlystages of development.

• Clarity is needed on several policies and programssuch as the National Renewable Energy Program(NREP 2020-2040), the Green Energy Option Program(GEOP) and the Renewable Portfolio Standards (RPS).

• Some challenges include complex permitting and landacquisition procedures, which contribute to lengthyproject development cycles and higher costs.

• Despite the high potential, the energy efficiencysector remains relatively untapped. The economiccase for energy efficiency projects is high dueto cost-reflective retail tariffs. The lack of capacity,capacity and confidence deters investors. Developinga strong business case and pipeline of projects cancatalyze the sector.






Vietnam • Renewable energy, particularly solar, dominates theproject pipeline.

• The market awaits revised targets to be adopted in theupcoming Power Development Plan VIII, together withsupporting regulatory mechanisms.

• Teething curtailment issues have affected projects inthe past. However, EVN has acted quickly in anattempt to address curtailment issues. Significantinvestments are planned to supplement grid capacity.

• Lack of awareness of the energy savings potential, thehigh minimum investment for energy efficiencyprojects and the absence of energy efficiency projectsfor streetlighting are additional factors preventing thesector from being explored.






Context, approachand methodology

2


The study aimed to identify an investablepipeline of shovel-ready opportunities, with abalance between short-term COVID-19recovery liquidity stimuli and long-termorientations, to support the roll-out ofcompetitive climate-neutral economy. It alsosolicits feedback from investors anddevelopers active in the field. The investablepipeline would indicate the investable capitalready to be deployed if a conducive marketenvironment is created.

The study focused on presenting a data-driven analysis of the potential for greenrecovery and aims to echo the views ofmarket participants and policy-makers ratherthan provide an independent opinion.

The analysis focused on the following mainsectors under energy transition:• Renewable energy*• Electric vehicles• Energy storage systems• Energy efficiency• Grid infrastructure

* Excludes hydro (>30MW), nuclear energyprojects and waste-to-energy sector

The analysis covered the followinggeographies:• Indonesia• Japan• Malaysia• South Korea• Taiwan• Thailand• The Philippines• Vietnam

The study was conducted in three phases:

Phase I: ScopingReview of existing policies and targets

Phase II: Pipeline of opportunitiesCollation of list of projects

Phase III: Insights and recommendationsDevelopment of final report on challengesand recommendations

The study commenced on 11 August 2020and was completed on 25 September 2020.Therefore, this study does not take intoaccount events or circumstances arisingafter 25 September 2020.

Overview of the study


The database of over 800 projects wascollated via primary research using an onlinesurvey and extensive desktop research.

As the purpose of the study was to uncover apipeline of shovel-ready projects, the teamfocused on projects that are expectingfinancial close in the short-term. Due toconfidentiality concerns, exhaustiveinformation about each project is notavailable in the public domain. This list ofprojects that the EY team has uncovered wasput together in just over four weeks andillustrates the huge project pipeline thatexists across the selected geographies tounderpin a green and resilient recovery fromthe COVID-19 economic crisis.

The list of projects selected represents onlya fraction of projects under development inthe region due to a short research timeframe of four weeks, as well as the limitedavailability of public information and reach ofthe study.

As Asia is not a homogenous region, thepipeline reflects the priorities of the localmarket in these focus markets.Consequently, the coverage of focussectors is different. Realizing the pipelinewill also require addressing thegeography-specific challenges.

Detailed approach and methodology

Phase IMarket analysis of thefocus geographies andsectors undertaken tounderstand currentlandscape, regulatoryframework and policies.

Phase IIAn exhaustive list of over2,000 projects wascollated via extensivedesktop research,responses to an onlinesurvey and interviews withindustry experts.

This list was filtered downto over 800 shovel-readyprojects to meet theobjectives of the study.

Phase IIIInterviews withstakeholders wereundertaken to identifybarriers in the focusmarkets and sectors,and to build on thefindings from theidentified pipeline.

The Enhanced Rule ofThumb methodology wasapplied to find theeconomic impact of theproject pipeline in termsof employmentgenerated and CO2emissions avoided.

Researchparticipants:

Industryexperts8 Developers

and investors26

About the pipelineprojects coveredin this study

3


The study revealed a robust pipeline of 811projects with a total investment potential ofUS$316b across eight geographies. Theproject team initially set out to identify a listof 500 shovel-ready projects using primaryand secondary research.

As part of the research, an initial list of over2000 projects were compiled. The broaderlist of projects was then filtered based oncertain criteria set out for the study:• Minimum capital investment of more than

US$10-15m• Projects in development stage – projects

that have not reached financial close• Projects with a potential to reach financial

close in the next couple of years

The study excludes projects with insufficientinformation, as well as those that are notpart of the focus sectors, e.g., largehydropower, which may be consideredrenewable in certain geographies.

The list of projects is based on informationavailable in the public domain, supplementedwith research based on othersecondary sources.

Independent verification of the projectsidentified and associated details were not apart of the scope of this study.

This report presents the study's findingsinformed by the data-driven analysis of theidentified pipeline and the views ofinterviewed stakeholders.

It is noted that the focus markets are atdifferent stages of development. Themarkets are also highly dynamic and seeconstantly evolving pipelines. Hence, theremay be some divergence in the coverage anddepth of information available.

Robust pipeline

811Projects

Clean energy projects in the pipeline

229Mt of CO2 equivalent

Estimated potential of greenhouse gasemissions avoided per annum in the renewable

energy sector

8 geographies90Gigawatts

Renewable energy supply in the pipeline.Offshore wind and solar PV correspond to 52%

and 32% respectively

870,000Jobs creation potential

*"The post-COVID recovery: An agenda for resilience, development and equality", International Renewable Energy Agency, 2020, accessed viahttps://www.irena.org/-/media/Files/IRENA/Agency/Publication/2020/Jun/IRENA_Post-COVID_Recovery_2020.pdf on 20 November 2020

605

1044

152

RE EE EV and ESS TD


The Philippines and Vietnam account for 64%of the total number of projects in thedatabase, of which the Philippines accountsfor 37% of the total number of projects. Thisreflects great interest from investors aheadof the new FiTs or auctions.

Although the North Asia markets account foronly 111 projects out of the total 811projects in the pipeline, it makes up for 74%of the estimated investment potential ofthe pipeline.

The study revealed that 51% of the projectsare in the pre-development stage and hence,capital can be deployed quickly. Only 17%projects are at development stage.

According to the study, 75% projects belongto the renewable energy sector, making itthe most dominant of the focus sectors. Thisis followed by transmission and distributionsector, accounting for 19% of the projects.

The lack of representation of energyefficiency and EV projects in the pipeline,which account for 1.2% and 5.4% of theproject database respectively, aligns withthe limited momentum in these sectors.Projects in the energy efficiency sectorinclude district cooling, demand response,smart streetlight and building retrofittingamong others. Projects in the EV segmentcomprise fleet replacement and batterystorage manufacturing projects.

*The pre-development stage refers to projects in “launchedfeasibility”, “pre-development”, “approved” or “permitting” stage.**The development stage refers to projects “under procurement” or“development/financing” stage.

97

46

44

5114

40

298

221

Indonesia Japan MalaysiaSouth Korea Taiwan ThailandThe Philippines Vietnam

Number of projects by geography

Number of projects by sector

811

811

811

257

417

1343

Announced Pre-Development*Development** PPA Signed

Number of projects by development stage

Pre-development*PPA signed


Forty-eight percent of the projects require an investment of less than US$50m, highlightingthe strength of small-scale projects in the pipeline. Majority of the projects in this categorybelong to the small hydroelectric (<30MW) (40%), solar (22%) and transmission anddistribution sectors (30%).

The pipeline identifies only a few projects in some of the emerging renewable energy sectorssuch as tidal and energy storage. With market maturity, these sectors could yield a greaternumber of opportunities in coming years.

49 37

300

117

171

73

1

0

50

100

150

200

250

300

350

0-5 5-10 10-50 50-100 100-1000 1000-10000 >10000

Investment (US$m)

Breakdown of projects by investment range

Indonesia Japan Malaysia South Korea Taiwan Thailand The Philippines Vietnam

73%

12%

6%

4%2% 2%

1.13%

0.31%

0.11%1%

Investment potential by sector

Offshore wind Solar PV Onshore wind Geothermal EV and ESS Hydroelectric (<30MW) TD Others EE

Investment share by renewableenergy subsector

75%

12%

7%4%

2%0.32%

Offshore wind

Solar PV

Onshore wind

Geothermal


Others


The total renewable energy capacity in thepipeline is 90GW and is mainly located inSouth Korea, Japan and the Philippines.

Offshore wind has the largest capacity in thepipeline with an estimated capacity of 46GWunder development, followed by solar PV at29GW and onshore wind at 9GW.

The pipeline emphasizes the emerging focuson offshore wind projects in the region, bothin terms of capacity and investment.

Offshore wind boasts of huge potential,constituting 73% of the total investments inthe pipeline, followed by solar PV at 12% andonshore wind at 7%.

The majority, 13 out of 14, of the identifiedprojects in Taiwan are in offshore wind. Dueto the capital-intensive nature of thetechnology, Taiwan has the second highestinvestment potential in the pipeline.

Renewable energy

4

18

1

21

8

2

21

14

0

5

10

15

20

25

30

35

40

45

Indonesia Japan Malaysia South Korea Taiwan Thailand ThePhilippines

Vietnam

Renewable energy capacity: 90GW

Geothermal Hydroelectric (<30 MW) Offshore wind Onshore windSolar PV Solar + storage Others Total

40%

21%

14%

12%

7%4%1%

1%

Japan

South Korea

Taiwan

The Philippines

Vietnam

Indonesia

Thailand

Malaysia

US$306bUS$306b

Investment share in renewableenergy by geography

Where investment value is not available, capital costs have been estimated using investment benchmarks

34

219

6

245

105

11

151

99

-

50

100

150

200

250

300

Jobs

(‘00

0)

Potential jobs additions


The collated pipeline has the potential tocreate up to 870,000 jobs across the focusgeographies. Most of these jobs are likely tobe created in the offshore wind sector,followed by the solar PV sector.

Japan and South Korea show the highestaddition in jobs due to the dominance ofoffshore wind in their pipeline. ThePhilippines has a high job creation potentialdue to the high number of projects in thepipeline. However, actual job creation will

depend on the convertibility of the identifiedpipeline into actual investment.

Potential jobs from projects in the pipelinehas only been calculated for the renewableenergy sector. All subsectors from the REsector have been analyzed to determine thejob-creation potential of the project pipeline.The ”others” category under RE includesgeothermal and tidal.

Estimated job creation potential

28

24

46

173

599

- 100 200 300 400 500 600 700

Others


Onshore wind

Solar

Offshore wind

Jobs (‘000)

Potential jobs by sector


The pipeline estimates emission savings on the basis of displaced emissions due to thereplacement of conventional sources with renewable energy sources.

For renewable energy sector, the emission saving potential is estimated to exceed 229 MtCO2e, assuming the entire pipeline is realized.

The emission saving from other focus sectors has not been estimated at this stage due to thefragmented nature of the projects and initiatives being largely new-build pilot projects (ratherthan replacement).

Carbon dioxide reduction potential

1927

166

282

5432

0 10 20 30 40 50 60 70

IndonesiaJapan

MalaysiaSouth Korea

TaiwanThailand

The PhilippinesVietnam

Mt CO2e

CO2 emissions avoided by geography

229 Mt CO2e

9%

3%

56%

13%

19%0.21%

CO2 emissions avoided by sector

Geothermal

Hydroelectric (<30 M)

Offhsore Wind

Onshore Wind

Solar PV

Others

Offshore wind

Onshore wind


MalaysiaA well-designed and transparent reverse auction mechanism helped thesolar industry flourish, where LSS3 saw the lowest tariff offered at MYR0.17/kWh, reducing tariffs with each round.

JapanVehicle-to-grid pilot program started by Chubu Electric Power, ToyotaTsusho and Nuvve, funded by METI and ANRE that enables EVs to beused as power generation assets for frequency regulation.

TaiwanSecond-largest offshore market in the region, due to a well-structuredregulatory framework, attractive FiTs and conducive businessenvironment. There are also plans to develop solar plants co-locatedwith farms as a strategy to help small agricultural stakeholders togenerate energy, along with other farm activity.

ThailandThe country’s first peer-to-peer renewable energy trading project usingblockchain technology at Sansiri’s Town was developed by BCPG andPower Ledger. As well, leveraging a combination of floatingphotovoltaics and hydropower, the Sirindhorn Dam Hydro-FloatingSolar Project in Sirindhorn District is expected to be the largest floatingPV system in the world. Thailand is also planning several floating solarIPPs in the coming decade.

VietnamAn attractive FiT and standard PPA led to the installation of 4.5GWsolar capacity by 2019, exceeding the 4GW national target for 2025.The MoIT is now evaluating a direct power purchase agreementmechanism between renewable energy and private power consumers.

Transformative projects in the region

Geography analysis

4

Indonesia


A total of 97 projects with an estimatedinvestment of US$12b was identified. Therenewable energy sector is the most prominentsector and remains most attractive, with 94projects and 4GW capacity in the pipeline.Geothermal, solar and wind are the sectors ofmost interest; the geothermal sector has thelargest number of projects, which is uniqueto Indonesia.

Although large hydro projects are not typicallyconsidered renewable and hence, not includedin this study, these are considered asrenewable energy in Indonesia’s national plans.

The study only includes projects available in thepublic domain with an estimated investment ofmore than US$10-15m per project. Hence, thisstudy identifies only a small portion of thegreen projects under development.

*Target capacity additions are as per the PLN’s RUPTL 2019-2028

Comparison of pipeline capacity and target additions required

0.50 0.79

2.090.85 0.84

4.17

-

1

1

2

2

3

3

4

4

5

Onshore wind Solar Geothermal

Ener

gy c

apac

ity (G

W)



4GWRenewable energy


34kJobs creation potential

19 MTCO2eEmissions avoided



The pipeline shows modest additions of lessthan 1GW each for solar and wind projects.Interviews suggest that the absence of aclear plan for the procurement ofrenewable energy and the delay in RUPTL2020-2030 hampers the development of ahealthy pipeline.

The National Energy Policy (KEN) andNational General Energy Plan (RUEN) have atarget for the renewable energy share of theprimary energy mix to reach 23% by 2025.The National General Electricity Plan (RUKN)

and National Electricity Business Plan(RUPTL) 2019-2028 have a target for thepower sector's renewable energy share toreach 23% by 2025.

Per IESR estimates, to be on track with theenergy transition scenario, installed capacityshould be at least 23.7GW by 2025 and atleast 408GW by 2050. ComplementingRUEN’s detailed breakdown of 23% targetamong different technologies by includingthese targets as part of the PLN’s strategycan send strong policy signal to the market.

Renewable energy

There is continued interest from the private sector in renewable energy tocontribute to Indonesia's energy transition. Renewed national targets and aclear procurement process can accelerate implementation.

52%

10%

13%

20%

4%1%

Renewable energy capacity

Geothermal

Hydroelectric (<30 MW)

Onshore wind

Solar PV

Solar + storage

Others

71%

7%

9%

6%7%

0.08%


Geothermal


Onshore wind

Solar PV

Others

EE

4GW US$12b


Geothermal sector remains the mostprominent sector in the pipeline (withplanned capacity of more than 2GW). Thisappears to be consistent with the PLN’sRUPTL 2019-208, which targets almost 4GWof additions in geothermal power plants.

Recent announcements from the PLNindicate that the PLN’s green transformationis focused on four levers:• Co-firing• Diesel plant replacement• Floating solar PV plants• Usage of existing dams for hydropower

generation

There is no particular focus on solar andwind. The PLN plans to replace 2240 dieselpower plants (lifetime >15 years) with1.78GW renewables from 2021 to 2024.

As the sole offtaker of electricity, the PLNplays a central role in the development ofrenewable energy in Indonesia. Developershave cited that an increased interest by thePLN to consider applications for newrenewable energy projects and shorteningPPA negotiations could accelerate renewableenergy development.

Future renewable energy development in Indonesiawill hinge on the PLN’s strategy

A total of 61 out of 97 projects in theIndonesian pipeline require an investment ofless than US$50m. Of the 97 projects,only 20 projects are at or beyond thedevelopment stage.

The lack of non-recourse financing solutionstypically hampers the development ofsmall-scale projects. Higher lending rates in

the local market, limited availability of long-term debt finance and collateralrequirements are barriers for small andindependent developers. The financingchallenge for small-scale projects is notspecific to Indonesia and is often the case inmany developing markets.

Limited financing is a constraint in the development ofsmall-scale projects

40 37

18

20

10

20

30

40

50


Local content requirements for renewableenergy (solar, geothermal and hydropower)is challenging to achieve in the currentcontext and increases the cost ofrenewable generation. Concerns over thequality of locally manufactured moduleshamper the ability to finance projects withinternational lenders.

While costs are high, the tariff for purchaseof renewables is capped at a ceiling price of85% of BPP (Biaya Pokok Penyediaan

Pembankit or system cost of generation).Investors say that tariff caps are notreflective of the cost of generation fromrenewables considering the localcontent requirements.

The development of a local manufacturingindustry and the corresponding reduction incost can be achieved if ambitious targets areset for each technology and supportedby a clear regulatory framework andprocurement process.

High local content requirements inhibit the development of projects atcost-competitive rates

0 0

61

6

25

2 00

20

40

60

80

Investment (US$m)

Number of projects by investment range

*The pre-development stage refers to projects in “launched feasibility”, “pre-development”, “approved” or “permitting” stage.**The development stage refers to projects “under procurement” or “development or financing” stage.


6 5

14 4 3 2 1

31

5 52 2

16

1 1 1

6

2

13

1

5

13

02468

1012141618

Number of projects by provinces


The interviews reveal that Indonesia needs regulatory clarity toaccelerate its energy transition

Financing and bankability• Although financing large-scale and grid connected

projects is not a challenge, limited access to long-termfinance impacts the development of small-scale projectsand SMEs.

Robust transmission capacity• Investment in strengthening grid capacity

in tandem with the development of newrenewable energy capacity can supportlong-term development of the renewableenergy sector.

• Support in the expansion of decentralizedsolutions such as micro-grids and smartgrids can be pivotal in supportingrenewable energy development,particularly in remote islands.

Favorable supply-demand• Energy demand is growing by about

5-7% annually.• Balancing the development of new

capacity with oversupply in certainplaces can be a potential focus area.

National ambition and targets• The pipeline suggests a strong market

interest, which is capable of meeting thenational target addition for solar as thepipeline capacity is 94% of the additionsrequired to meet the target suggestingthat there is scope for the targets to berevised higher.

• The PLN’s plans do not indicate anyadditions in the solar and wind sector andthe additions stated could also fall short ofthe national targets.

Supporting market framework• Allowing companies to source 100%

green electricity is an area of opportunitythat can be pursued by leveragingthe PLN’s recently announcedservice offering.

• Generation for self-consumptionpermitted. Selling back to the grid isdiscounted at 65%.

Thorough resource assessment• Government assistance in resource

assessment for geothermal sites canreduce the appraisal cost fordevelopers and accelerate the paceof geothermal development.

Allocable land parcels• Land acquisition remains a challenge due

to lack of clarity on ownership in certainlocations and lengthy process.

Adaptive renewables policy• MEMR regulations set out methods for

the PLN to source renewable energypower and the relevant pricing regime.Most of the procurement is based ondirect selection or appointment and at amutually agreed tariff.

High perceived risk

Low perceived risk


•

•

•

•

•

•

•

•


Despite the potential for socioeconomicbenefit, the estimated investment in theenergy efficiency sector is only 0.08% ofIndonesia’s total pipeline. The small pipelineis not due to lack of potential but from a lackof interest in the sector. Industrypractitioners estimate the market size ofstreet lighting projects to be upward ofUS$1b with up to 30% energy savingpotential. However, the sector has not yetpicked up momentum due to limitedstakeholder interest, lack of awareness ofthe energy and cost-saving potential.

Energy efficiency projects in Indonesia areusually initiated by project developers suchas ESCOs. However, initiatives have beenlimited due to the inadequate financialcapacity and constrained access to financing.

The government has introduced MEPS forcertain products such as ACs and CFL lamps.In addition, there are requirements for largeenergy consumers to appoint an energymanager, perform energy audits andimplement energy conversation programs.While guidelines are prescribed, there are noreal incentives for compliance or penaltiesfor companies who fail to submit theirenergy audit reports. Hence, the reportingand compliance rate remains low.

The adoption of green building codes alsoremains limited due to high investmentcosts, lack of funding scheme, littleawareness of the cost-saving potential and alack of understanding of the energy savingcompanies’ cost-saving models. The greenbuilding code has to be enacted in the local(sub-national) regulation since buildingpermit and license are the authority of sub-national government. Unclear regulatoryframework and incentives from localgovernment also slow down the adoption ofgreen building standard.

Energy efficiency

Lack of stimulus, energy-intensive industries are indifferent toenergy management self-reporting. Some of major barriers to theimplementation of energy management reporting are no tangiblebenefits seen by the industries to reporting their programs andno real penalties or retributions imposed on entities that fail tosubmit their reports.Indonesia Clean Energy Outlook: Tracking Progress and Review of Clean Energy Development inIndonesia, Jakarta: Institute for Essential Services Reform (IESR), 2019

“

RE

EE TD

-2

0

2

4

6

8

10

12

14

16

Inve

stm

ent (

US$

m)

Indonesia’s pipeline snapshot by sector


The start of the energy transition inIndonesia will require alignment among therelevant ministries, authorities and the PLNto provide the market a clear direction ofupcoming opportunities. The study highlightsthe PLN’s pivotal role in providing an anchorfor Indonesia’s green energy transition,given its strategic role in the sector. ThePLN can be tasked to implement specificmarket-based programs:

Coordinate market efforts between thegovernment and the PLN: For Indonesia’sclean energy transition, a strongcommitment to supporting renewable energytechnologies is essential. Greater alignmentis required between the PLN’s annual powerdevelopment plans and nationalannouncements made by the government.The market remains hopeful that RUPTL2020-2030 will reflect the statements madeby MEMR Minister in January 2020.

Initiate a clear pipeline of renewable energyprojects with a transparent procurementprocess: A FiT-type approach forprocurement may be adopted to addressexisting barriers while considering the localcontent requirements, the peculiarities ofeach grid location and the size of projects.As well, the introduction of a standard PPA

can shorten the contract negotiationprocess. The development of large-scalerenewable energy procurement frameworkcan create a systematic plan and pipeline forthe market.

Introduce an “optimal” tariff to promoterenewables: The tariff for renewable energyprojects must reflect the costs of renewableenergy generation given the local contentrequirements. Schemes like the SolarArchipelago (Surya Nusantara) plan,which is currently under development,could help to kick start the green recoveryand is estimated to create localemployment opportunities.

Incorporate support mechanisms: Measuressuch as credit guarantees, bridge financingand loans can be included as part ofstimulus packages that can help financesmall-scale projects.

Encourage the roll-out of energy efficiencyinitiatives: Programs like governmentbuilding retrofits, street lighting projects toencourage energy efficiency projects can beencouraged as part of the COVID-19recovery packages.

Recommendations

15

10

2 1 0.3602468

10121416

MtC

O2e



Create a supporting ecosystem for EVs: This can help toencourage the penetration of electric motorbikes.

Implement the recommendations outlined by IESR in its report:These include reforming taxation schemes based on tailpipe CO2and pollutant emissions; providing non-fiscal incentives such asroad toll exemptions, free parking, exemption from odd-even policyand allowance to use bus lanes; establishing a mandatory fueleconomy standard to reduce transport emissions while EVs are notyet competitive; creating an initial market through publicprocurement of EVs such as for public buses and official vehicles forgovernment officials; and increasing the fuel price through fuelquality standard improvement.

Recommendations

The pipeline hasthe estimatedpotential tocreate up to34,000 jobs

The pipeline hasthe estimatedpotential toavoid more than19 MtCO2e ofCO2 emissionsper annum

5

-2

7

20

-

5

10

15

20

25

Jobs

('00

0)

Number of jobs by sector


The study identifies 46 projects with an estimatedinvestment of US$126b. While the renewable energysector is the most prominent sector with 41 projects and18GW capacity in the pipeline, the remaining projectsbelong to the EV and transmission and distribution sector.

Offshore wind is the most prominent subsector within therenewable energy sector, with 94% of the capacity in thepipeline, followed by solar PV, which accounts for 5% ofthe capacity.

The pipeline is the largest in terms of estimatedinvestment required and the realization of theseprojects is contingent on addressing some of theinherent challenges.

The Japan chapter does not cover energy efficiency andEVs because of limited information on ongoing activities.

The study only includes projects available in the publicdomain that exceed a certain minimum threshold. Hence,this study identifies only a small portion of the greenprojects under development.

*Target capacity additions to achieve 2030 targetsSource: Agency of Natural Resources and Energy








17

1

6

14

1 - 2 4 6 8

10 12 14 16 18

Wind Solar Geothermal

Ener

gy c

apac

ity (G

W)


94%

0.15%5%

1%


Offshore wind

Onshore wind

Solar PV

Solar + storage


The lack of appropriate land area and marketsaturation are key barriers for the furtherdevelopment of onshore wind projects.Onshore wind only accounts for 0.15% of thetotal capacity in the pipeline. The landavailable for wind farms is becomingsaturated, due to factors such as nationalforest, distance from the grid line,permission restrictions and restricted areasfor rare animals and plants.

Experts believe that the onshore windmarket is headed toward saturation due tothe presence of many stakeholders as well aslow availability of appropriate land. Theexpected introduction of an auction system,similar to the offshore auction processlaunched in June 2020, under a fixedprice mechanism, could impactmarket attractiveness.

In the offshore wind sector, there are manyopportunities available. However,uncertainty around promotion zones andincreasing project costs pose challenges.Currently offshore wind dominates the

pipeline with 94% of the total capacity. Foroffshore wind, the government has slowlybegun allocating geographical regions knownas promotion zones, after consulting withlocal stakeholders, national ministries, localgovernment bodies, fisheries groups andacademic experts.

Uncertainties surrounding where thepromotion zones are likely to be located isexpected to slow the investment pace fornew projects. Still, some developers havebegun preliminary studies, such as feasibilitystudies and environmental impactassessments in anticipation.

The recently launched tender process andassociated framework set out the process foroffshore wind energy procurement in thecoming years. Although project financing isprevalent, the extensive technicalrequirements, permit process, interfaceswith other stakeholders such as fisheries orport authorities increase projectcosts considerably.

Renewable energy

18GW

94%

2%4%


Offshore wind

Solar PV

EV_ESS

US$126b

EV and ESS


EIA and decommissioning requirements arehighlighted as two complex factorsconstraining the development cycle andLCOE. Currently, only 22% of the projects inthe pipeline are at the development stage.Developers cite a lengthy environmentalimpact assessment and development cycle ofprojects, which could take between three tofive years to receive approval, as amajor barrier.

Developers need to submit decommissioningplans for a project, which are usuallyformulated later in the project lifecycle, toJapan’s Ministry of Economy, Trade andIndustry (METI) at the time of initialapplication for certification of business.This process is lengthy and complicated.Developers must also determine how tofactor these decommissioning costs into theFiT to recover this cost.

As well, 90% of the projects require aninvestment of more than US$100m and areduction in LCOE can impactproject economics.

At the same time, integrating renewables inJapan island grid system is a challenge.Although transmission and distributionsector only showcases two projects out ofthe total 46 in the pipeline, developers saythat Japan needs investments ingrid strengthening.

The Japanese power system comprises twomain AC synchronous areas: Western Japan(50 Hz) and Eastern Japan (60 Hz).Integrating renewables into the grid withoutimpacting grid stability remains a majorconcern for transmission system operators.Grid access is granted on a first-come first-served basis, favoring existing generators,making grid connection relatively harder forrenewable generators.

Number of projects by investment rangeNumber of projects by development stage


1 03 2

9

29

00

10

20

30

40

Investment (US$m)

23

1310

00

5

10

15

20

25


A stronger focus on renewables needed to accelerate itsenergy transition

Supporting market framework• Companies have several options to

source renewable energy includingonsite generation, green electricityproducts and energyattribute certificates.

Robust transmission capacity• More investment is required in the

strengthening the grid sector.• Solar facilities over 50 kW could be subject

to curtailment as electricity companies arereserving their transmission capacity fornuclear generators that are currentlyout of operations

Favorable supply-demand• The government has committed to phase

out 100 inefficient coal-powered plantsin the country which create anopportunity for increased renewableenergy share.

National ambition and targets• Strong market interest in the offshore wind

sector with 17GW identified in the pipeline.• The pipeline capacity is more than 2.5 times

the capacity additions of 6.3GW to requiredto meet the national target 10GW windenergy by 2030.

Adaptive renewables policy► The complex EIA and decommissioning

process lengthen the developmentcycle for renewable energy projects.

Allocable land parcels• There is a growing scarcity for land

available for onshore wind and solarprojects. Hence, the focus is shiftingtoward offshore wind.

Financing and bankability• Reduced FiT rates for solar are

impacting the economic feasibility ofprojects. However the financing marketremains robust.

Thorough resource assessment

• •

•

High perceived risk

Low perceived risk


•

•

•

• •


Some of the recommendations to help support green recovery inJapan include:

Create a vibrant pipeline, leveraging lessons learnt from the ongoingtender process to create a transparent process for futureprocurement in the offshore wind sector.

Encourage wider adoptions of programs like the “Net Zero EnergyHouse” and the subsidy program launched in 2019 for householdstorage systems as part of their COVID-19 recovery packages.

Implement subsidy programs to promote energy efficiency in theindustrial and building sector can support energy efficiencyinitiatives for post-COVID-19 recovery.

Greater alignment with interfacing agencies is needed to streamlineprocess. Creating policies in terms of regulation or system changeshould be discussed from a macro viewpoint in the governmentalcommittees and working groups, instead of discussing with individualstakeholders, which often results in a patchwork institutional design.The potential of the offshore wind market can be better realized ifthere is regulatory flexibility provided in the approval process suchas a simplified and short economic impact assessment andtransparency in the announcement of promotion zones. As well, thegovernment can conduct the required surveys prior to launch oftenders, as it is economically challenging for bidders to complete asubmarine ground and other surveys while a project is in the auctionstage. Government surveys can help bring down costs.

Recommendations


Encourage large Japanese utilities to explore new businesssolutions such as microgrids and virtual power plants (VPP).Permitting and actively supporting the emergence of new businessmodels can help further accelerate the adoption of renewables. Forinstance, through the wide-scale adoption of green tariffs (e.g., AquaPremium plan by TEPCO), private sector involvement in a digitalapplication will help accelerate the transition.

Recommendations (continued)


The pipeline hasthe estimatedpotential toavoid up to 27MtCO2e of CO2emissions perannum0.00 0.00

26.20

0.04 0.69 0.0705

10

1520

2530

Mt C

O2e


-

214

0.13 5 - -

50

100

150

200

250

Jobs

('00

0)


Malaysia


The study identifies 44 projects in the pipeline,with an estimated investment of US$3b. Therenewable energy sector is the most prominentsector with 40 projects and 1GW capacity in thepipeline. The remaining projects belong to theenergy efficiency and transmission anddistribution sector.

The solar sector has the largest number ofprojects within the renewable energy sector,followed by hydroelectric (<30MW). The TD andenergy efficiency sectors make up 9% of the totalnumber of projects.

The study only includes projects available in thepublic domain that exceed a certain minimumthreshold. Hence, this study identifies onlya small portion of the green projectsunder development.

*Target capacity additions to achieve 2025 targetsSource: IRENA; Suruhanjaya Tenaga Generation Development Plan 2019


1GWRenewable energy


6,300Jobs creation potential




1.24

1.29

1.201.211.221.231.241.251.261.271.281.291.30

Solar

Ener

gy c

apac

ity (G

W) Pipeline capacity



The pipeline for renewable energy projectsreflects the resources that Malaysia isendowed with. The identified pipeline isdominated by solar PV projects, which makeup 95% of the total capacity, followed byhydroelectric (<30MW) accounting for 5%.The dominance of solar PV can be attributedto the LSS auction process that has beensuccessfully implemented in Malaysia.

For the purpose of this study, waste-to-energy projects have not been considered.However, it must be noted that the sectorshows promise in Malaysia and has garneredactive market interest. Sustainable EnergyDevelopment Authority (SEDA) reportsapproved biomass applications of ~400MW,which will come online by the end of 2021.

While there are opportunities in the biomasssector, the private sector has cited some

barriers for development linked to locationand supply chain. For example, biogasgeneration uses wastewater forpalm oil mills. Developers cite that theinterconnection cost would be prohibitive forremote locations situated far away from thenational grid.

As well, the high costs of interconnectionlimit the number of viable sites to only abouta-third of the country's mills. There are afinite number of palm oil mills in the country,which will eventually all be connected tothe grid.

Developers estimate that for projects locatedmore than 7km from the grid, gridconnection needs to be set up by thedeveloper, the additional costs of which canmake the project economically unfeasible.

Renewable energy

Due to the bespoke nature of projects in sectors like energy efficiency and electric vehicles, comparable investment benchmarks arenot available. Therefore it may be inferred that the investable pipeline may be far greater than estimates made under this study.

4%

96%


Hydroelectric(<30 MW)

Solar PV

US$3b

5%

95%


Hydroelectric(<30 MW)

Solar PV1GW


Small-scale projects need to be financed on acorporate finance basis due to difficulty inaccessing project financing. A total of 7projects out of the total 47 projects in thepipeline reached the development stage,highlighting the difficulty in accessingfunding for projects.

Banks are wary of the sponsor or contractingparty's credit strength for SMEs andsmall-scale projects, other than solarprocured under the LSS program. Appetitefor financing projects where the offtaker isnot Tenaga Nasional Bhd (TNB) is less. Forsuch projects, corporate loans are preferredinstead of project loans.

Small-scale projects make up a significantportion of the pipeline, with 59% projectsrequiring an investment of less thanUS$50m. Facilitating access to finance forsuch projects can help to accelerate thedevelopment of the renewable energy sectorand increase the number of projects that canprogress to the more advanced stages.

Some of the concerns around financingsmall-scale projects include grid access,availability of feedstock for biogas projectsand counterparty strength.



2

35

7

005

10152025303540

02

24

86

0 00

10

20

30

Investment (US$m)


Opportunity for Malaysia to revise national targets given strongmarket interest; streamlining land conversion process can accelerateits energy transition

• Financing and bankability• Access to finance not an issue for

utility-scale projects.• Difficulty in accessing financing for

small-scale projects and projectswhere TNB is not the offtaker(i.e., East Malaysia).

• Robust transmission capacity

• Supporting market framework

• Allocable land parcels

• Thorough resource assessment

National ambition and targets• There is an opportunity for Malaysia to

revise national renewable energy targetsas the private sector has shown stronginterest. The latest tender demonstratescompetitiveness of solar versus gas.

• Adaptive renewables policy► The Large Scale Solar scheme has

invigorated the sector by creating acentralized procurement mechanism.

► The LCOE decreased by 50% fromLSS1 to LSS3.

• Favorable supply-demand► Robust energy demand growing at

over 5% p.a. since 2010.

Low perceived risk


•


The energy efficiency sector shows insofaruntapped potential and this constitutes 4.5%Malaysia’s project pipeline. Low retailelectricity tariffs (at ~US$4-6 c/kWh) andlow input gas price are cited as some of theprimary barriers for adopting energyefficiency measures.

The government has introduced severalincentives for promoting energy efficiency,such as the Government Green Procurement(GGP) initiative, Green Investment TaxAllowance (GITA) and Green Income TaxExemption (GITE), which have been extendeduntil 2023. While these programs have seensome success, expansion of the programwith more ambitions targets can furtherstrengthen the energy efficiency sector.

Although efforts such as the Malaysia DebtVentures Energy Efficiency Fund exist andprovide credit financing for energy efficiencyand energy savings-based projects, there is ageneral lack of awareness on the potential ofenergy efficiency projects.

Customers view the viability of energyefficiency solutions through ESCO cost-saving modes with skepticism and areunconvinced of the potential to earn profitsfrom the cost savings.

Most energy efficiency projects focus onreplacing aging equipment. The approvalprocess for energy efficiency projects iscomplex, lengthy and lacks clarity. There areno specific guidelines regarding whichministry to approach for such projects. Whilethere are subsidies for energy savings,experts believe that the absence of anenergy efficiency law and the commercialenvironment has withheld the sectorfrom developing.

The first tender for government buildingretrofitting was released in early 2020, butthe project has been stalled due to theCOVID-19 outbreak.

Energy efficiency

Bubble size represents number of projects

RE

EE TD

-1-0.5

00.5

11.5

22.5

33.5

4

Inve

stm

ent (

US$

m)

Malaysia’s pipeline snapshot by sector


The EV sector is in nascent stage and holdspromise in the long-term. Malaysia hasintroduced a strategic direction for EVs andother energy-efficient vehicles (EEVs) in itsnational policy. However, more incentivesare needed to drive adoption.

The National Automobile Policy (NAP) 2020aims to accelerate the implementation of lowcarbon mobility solutions. NAP 2020 focusesmainly on the automobile manufacturingaspects and aspires to improve Malaysia’scompetitiveness as a hub for EV-relatedmanufacturing (including components).However, there are limited incentives todrive consumer adoption throughdemand-side interventions.

Further, there are limited EV modelsavailable in Malaysia and the price of EVs aresignificantly higher than conventional ICEvehicles. According to The future of electricvehicles in South East Asia position paper7,only 37% of respondents in Malaysia areopen to buying EVs as their next purchase,indicating limited attractiveness of EVscompared to ICE vehicles.

In terms of EV charging infrastructure,Petronas Dagangan Bhd (PetDag) enteredinto a three-way partnership with GreenTechMalaysia and TNB Energy Services Sdn Bhd(TNBES), a wholly owned subsidiary of TNB,to install ChargeEV charging stations acrossMalaysia. As of 2020, there are 223 publicEV charging stations with 329 chargersacross Malaysia. There are a few otherplayers also in the market such as SchneiderElectric. Sustained deployment to increasecoverage of charging infrastructure willhelp deployment.

In October 2019, the government unveiled inits 2020 Budget, outlining plans to investUS$108m to acquire up to 500 electricbuses of various sizes. However, the plansawait implementation in a post-COVID-19environment and the market is waiting forthe 2021 budget to understand if anyinitiatives are planned in the coming years.Although activity remains limited in theshort-term, the sector has the potential togenerate economic benefits in the long-term.

Electric vehicles

Better safety standards, charging flexibility and convenience,lower operating costs of EVs are the key motivating factor for EVpurchase in Malaysia.

The future of EVs in South East Asia

“

7 “The future of electric vehicles in South East Asia”, Frost & Sullivan,January 2018, accessed via Nissan_whitepaper (frost-apac.com) on20 January 2021


Some of the recommendations to helpsupport green recovery in Malaysia include:

Encourage new energy solutions such asmicrogrids and smart grids to enable themarket to explore alternate contractingmodels and technologies for renewableenergy, particularly in rural areas. The localgovernments can expand programs like theSarawak Alternative Rural ElectrificationScheme (SARES), which has seen somesuccess in Sarawak, to other remoteareas. Increasing awareness aroundinitiatives such as major banks’ fundstargeted at SMEs and small-scaledevelopers can help unlock other sectorssuch as bioenergy and energy efficiency.

Further, introducing dedicated end-to-endtechnical assistance program for energyefficiency projects will be key tostrengthening the pipeline of bankableproject by creating opportunities to replicateand scale energy efficiency best practice.The technical assistance can help withpreparation of a bankable Investment GradeAudit to help investors evaluate the benefitsand risks of investing in a proposed energyefficiency projects.

Encourage more business to takeadvantage of schemes such as the GreenTechnology Financing Scheme 2.0, which willoffer financial support (subject to only to thegreen technology or component costfinance) for a producer, user and ESCOs.The government can also drive furtherawareness regarding opportunities arisingfrom the planned spending of MYR13b(US$2.9b) for the energy efficiency sectoroutlined as part of the COVID-19 recoverypackage. The focus must remain oncreating a robust ecosystem for EVsthrough improved manufacturing andgreater adoption.

Consumers need to have greater awarenessof the value proposition offered by EVs.Private companies can be encouraged todeploy EV charging infrastructure throughthe development of clear policies to enableV2G services and other ancillary services topromote scale. There are severalgovernment programs in place to build aconducive EV ecosystem. The industry willbenefit greatly through incentives such astax exemption, purchase subsidy, taxincentive or special program execution fundor grants that will help combat the highercost of ownership for private purchase.Apart from private adoption, programs suchas fleet replacement for public buses cansupport the public EV sector.

Recommendations


Recommendations


The pipeline hasthe estimatedpotential toavoid more than1 MtCO2e of CO2emissions perannum0.00

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South Korea


The study identifies 51 projects in the pipeline, with anestimated investment of US$65b. While the renewableenergy sector is the most prominent sector with 45projects and 21GW capacity in the pipeline, theremaining projects belong to the EV and TD sectors.Offshore wind is the most prominent subsector withinthe renewable energy sector, with 86% of the capacity inthe pipeline, followed by solar PV, which accounts for13% of the capacity.

The pipeline is the second largest unveiled in the study,in terms of estimated investment required and therealization of these projects is contingent on addressingsome of the inherent challenges.

The study on South Korea does not cover energyefficiency and EV because of limited information onongoing activities.

The study only includes projects available in the publicdomain that exceed a certain minimum threshold.Hence, this study identifies only a small portion of thegreen projects under development. The identifiedpipeline exceeds the national targets and could signal aneed to further rationalize the regulations aroundoffshore wind.

*Target capacity additions to achieve 2030 targetsSource: Renewable Energy Plan 3020









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The renewable energy sector dominated thepipeline, of which offshore wind was themost prominent sector with 86% share of thetotal capacity. The Renewable Energy 3020Plan assumes that wind power wouldcontribute to only 34% of new capacityadditions while solar PV would contribute to63% of new capacity additions by 2030. Thisindicates keener market interest in the windsector, compared to the solar sector.

To spearhead green recovery, South Koreahas announced a Green New Deal, which ispart of the Korean New Deal. Under theKorean New Deal, there are plans to investUS$141b (US$101b worth of fiscalinvestment) to create 1,901,000 jobs by2025 based on two main policies – the DigitalNew Deal and Green New Deal.

The Green New Deal consists of eightprojects based on three main themes: greentransition of infrastructures through energyefficiency measures; low-carbon anddecentralized energy through thedevelopment of smart grids and renewableenergy; and innovation in green industrythrough the development of low-carbon andgreen industrial complexes.

Although the Korean government hasannounced a green COVID-19 recovery,experts remain skeptical due to a lack ofconsistency in policies and a lack of concretemeasures to promote the national roadmap,such as the Green New Deal or theRenewable Energy 3020 Plan.

Green New Deal

The Green New Deal isabout respondingpreemptively to theclimate crisis, a desperatereality already confrontingus. The COVID-19pandemic has reaffirmedthe urgency of respondingto climate change.Moon Jae-InPresident, South Korea

“


Developers cite that government-issuedenergy plans are issued every two to fiveyears. The planning period, goals and issuingagencies are different for each plan,resulting in inconsistencies. The projectdevelopment cycle is longer and the changesin renewable energy-related laws,regulations, incentives, requirements andrestrictions impact the project developmentat the later stage of the cycle.

Although the Green New Deal does notprovide the allocation between the solar andwind power capacity additions of 42.7GW, itis expected that capacity additions will followsimilar proportions as per the RenewableEnergy 3020 Plan, with solar PV being themajority driver.

Renewable energy challenges

86%

1%13%


Offshore wind

Onshore wind

Solar PV

21GW

91%

0.48% 8%0.03%

1%Investment potential by sector

Offshore windOnshore windSolar PVEV_ESSTD

US$65bEV and ESS


Developers in South Korea find it challengingto obtain public acceptance and grid access.In the country, project developers areresponsible for obtaining public acceptance.In many cases, there is a large gap inexpectations between developers andresidents, making it difficult to carry outprojects. In addition, the governmentrequires developers to agree with locals toapply for permits and environmental impactassessment approvals.

Further, some local governments areestablishing ordinances restricting sitesavailable for renewable energy projectdevelopments. Hence, securing grid accessin a timely manner remains a challenge andaffects the project economics as it isexpensive. Some 66% of the projectsin the pipeline are before or at thepre-development stage. On average,only about 25% of the applications areapproved. It can take at least two yearsuntil the construction of a substation iscompleted, significantly impacting projectdevelopment costs.

Experts suggest grid balancing andfrequency management solutions wouldneed to be introduced in the transmissionnetwork and distribution network to allowflexible renewable energy sources.

Further, the uncertainty of the purchaseprice for renewable projects adds risk aroundthe economic feasibility of the projects.Currently, 69% projects in the pipelinerequire an estimated investment of morethan US$100m and only 33% of the projectsare at the development stage.

The revenue for a renewable energy projectis determined through a combination ofvariable system marginal price (SMP) andrenewable energy certificates (REC) prices –post the phase-out of FiTs. The variability inprices has added significant uncertainty onthe purchase price of renewable energyprojects impacting its bankability,particularly in view of the long developmentcycle needed to achieve public acceptanceand grid access.

Renewable energy



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South Korea needs regulations to help developers access land forrenewable energy development, along with a supporting marketframework to accelerate its energy transition

• Favorable supply-demand• Stable electricity demand growth

of more than 2% p.a. over thecoming decade.

National ambition and targets• There is strong market interest in the

wind sector with 18GW in the pipeline,indicating strong potential to revise thetargets upward for the wind sector.

Allocable land parcels• 70% of land area are high mountains and

many of them are categorized as strictlyprotected areas, leaving little land area forrenewable project development.

Robust transmission capacity• Securing grid access in a timely

manner remains a challenge formost developers and impactsproject economics.

Supporting market framework• Consistent enforcement to implement

RPS needed. For instance, thecompliance requirement was loweredfrom 3.5% to 3% in 2015 and from4% to 3.5% in 2016.

• High volatility of RECs price results indifficulty to secure financing andincrease financing cost.

• Financing and bankability• Low access to long-term finance

impact the development of small-scale projects and SMEs.


Adaptive renewables policy• The complex approval process was cited as a

barrier in project development. The processof obtaining government permits can take along time and involves five detailed steps.

High perceived risk

Low perceived risk


•

••

• •


Some of the recommendations tohelp support green recovery inSouth Korea include:

Provide clarity around the plans andmeasures around the deployment of thestimulus in the Green New Deal worthUS$65b and initiate tangible actions. TheGreen New Deal has understandablygenerated significant interest from investorsthat were already active in the renewableenergy sector in the country. Two key areasof focus in the deal are smart grids, whichwill enhance the digital communicationbetween utilities and consumers; andmicrogrids, which will promote renewableenergy and energy storage systems inremote areas of the country. The authoritieswill be tested on their ability to roll outconcrete plans to achieve the followingobjectives set in the stimulus package:create approximately 659,000 jobs over the2020-2025 period; expand the solar andwind capacity to 42.7GW by 2025 and install

solar panels on 225,000 public buildings;and achieve domestic adoption of more than1.13 million EVs by 2025.

Explore connecting renewable energypower plants to the existing grid bychanging the operating system. This can beachieved by changing frequency balancingfrom the current one-day or hourly basis toreal-time basis at the transmission networkstage and by introducing frequencybalancing in the distribution network.

The pipeline indicates strong interest in thewind sector, which has the potential toexceed the national targets set for 2030.Regulatory support can accelerate theachievement of targets, especially foroffshore wind where high marketinterest exists. There is further scopeto rationalize the regulations aroundoffshore wind. Focused effort would beneeded to strengthen market activity inthe solar PV sector.

Recommendations


Recommendations


The pipeline hasthe estimatedpotential toavoid up to 66MtCO2e of CO2emissions perannum

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Taiwan


The study identifies 14 projects in the pipeline, with anestimated investment of US$42b. The renewable energysector is the most prominent sector with 13 projects and8GW capacity in the pipeline. Offshore wind dominates thepipeline with a large margin with 12 out of the 14 projects,with the other two projects being from solar PV andtransmission and distribution sector.

The pipeline is relatively large in terms of estimatedinvestment required with the third-highest investmentpotential among the focus markets covered in this study,given Taiwan has the least number of projects. This can beattributed to the higher investment required by offshorewind projects compared to other technologies.

The realization of the US$42b investment potential iscontingent on addressing some of the inherent challenges.

The study on Taiwan does not cover energy efficiency andEV because of limited information on ongoing activities.The study includes projects available in the public domainthat exceed a certain minimum threshold. Hence, this studyonly identifies only a small portion of the green projectsunder development.

*Target capacity additions to achieve 2025 targetsSource: Bureau of Energy



8GWRenewable energy





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Pipeline capacity



Risk of change in law and uncertainty aroundapplicable offshore wind FiT impact projectdevelopment. In Taiwan, offshore wind hasmajor potential, accounting for 97% of thepipeline. Realization of this capacity willrequire certainty about the legal frameworkand FiT mechanism for developers to foreseeand better plan the project economics.

In 2020, several newly introducedlegislations were imposed, which created anadditional compliance burden on existingprojects. Such requirements couldpotentially delay project implementation.

Regulations for Utilization and Managementin Specific Zones of Non-First-Grade CoastalConservation Zones (Coastal ManagementPermit) impacts a large proportion of utility-scale projects that had been planned inChanghua, Yunlin, Chiayi, Tainan, Kaohsiungand Pingtung and will be expected to addapproximately six months to thedevelopment of the affected projects.

The additional requirements also require siteinvestigations, reporting and implementationcosts, which had not been factored into thecost formula used to set this year’s FiTlevels, impacting project economics. ForTaiwan, land availability, public acceptanceand environmental concerns couldpotentially hinder future projects. Solarconstitutes a mere 3% of the capacity in thepipeline. Between 2016 and 2018, thegovernment announced 38 zones thatenjoyed a fast-tracked approval process toobtain the relevant permits and approvals.Experts cited that by 2019, most of theusable land in these zones have beenexhausted – either due to private landownersnot willing to lease their lands for renewableenergy use or insufficient grid access.

Per the latest regulations, land conversionsbelow 2 hectares are prohibited while landranging from 2 to 30 hectares requiresapproval from both local authorities and theCouncil of Agriculture (COA).

Renewable energy

97%

3%


Offshore wind

Solar PV8GW

99%

1%


Offshore wind

Solar PVUS$42b


Further, solar plant developments have beenhindered by a few controversial projectssuch as the Miaoli foothill project, which hasbeen opposed by environmental groups.Lands that have been the habitat of umbrellaspecies have now been converted to solarplant sites.

Foreign renewable energy developerstend to offer a one-time monetarycompensation to affected parties; however,the government is concerned that this maynot be the most appropriate solution. Thegovernment has urged developers toconsider deepening its local connections inaddition to promoting long-termindustry developments.

At the same time, local contentrequirements of the supply chain canpotentially impact the availability ofcompetitively priced financing. Currently, 6out of the 14 projects are in the

development stage. Increased local contentrequirements could make it challenging tosecure ECA-backed financing, which hasbeen previously deployed for offshorewind projects.

The localization requirements specified bythe Industrial Development Bureau alsospecify requirements on tier 2 of the supplychain such as wind turbine blades, windturbine towers and spinner covers.

Further, disruptions due to the COVID-19pandemic are expected to cause significantdelays and add costs in the developmentcycle. The COVID-19 pandemic has alreadyposed challenges to the development ofoffshore wind projects, where crew membersare of international, non-Taiwanese origin. Ifthe pandemic continues and traveldisruptions persist, experts predict thatdevelopment costs may increase by 20-30%.



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The interviews reveal that Taiwan needs more ambitious renewableenergy targets and clarity around land ownership to accelerate itsenergy transition

• National ambition and targets► Offshore wind market is the

most promising with a strongpipeline and ambitious targets.

Allocable land parcels• Clarity around land ownership is required

particularly for the development ofsolar projects.

• Framework for co-locating renewables withfarmlands can address stakeholder oppositionon renewables development.

Robust transmission capacity• Inadequate distribution networks

has hindered the progression ofsolar power systems, particularlymaking it challenging forremote areas.

Supporting market framework• Market structure is liberalized with the

amendment of the Taiwan Electricity Actin 2017, allowing the sale of renewableenergy directly to end users. Thecorporate PPA market has seentremendous growth with strongcommitment seen from company underthe RE100 initiative. Recent dealsinclude the CPPA (920MW) betweenOrsted and Taiwan SemiconductorManufacturing Company.

• Adaptive renewables policy• Taiwan has reduced FiT for offshore wind,

but retains high local contentrequirements. Developers say that suchrequirements could impact new projects.

• Favorable supply-demand

• Financing and bankability

• Thorough resource assessment► Current offshore wind capacity is

only 5% of the estimated feasiblepotential.

High perceived risk

Low perceived risk


•

•

•


Some of the recommendations to helpsupport green recovery in Taiwan include:

Provide clarity on policy direction after theCOVID-19 pandemic to help developers plantheir investments. For example, for the 2020FiT Extension, the newly introduced OutflowControl and Coastal Management regulationswill provide six-month relief for FiTqualification. Further relief consideringsupply chain difficulties can help affectedprojects. As well, the government haspermitted dual-use fishery PV projects tomeet its renewables targets, given the abilityfor these plants to be co-located withexisting aquaculture facilities. Suchprojects have the potential to increase theproductivity of the lands. However, there is aneed to have appropriately priced FiTs forsuch projects given the higher constructioncosts. The current tariff scheme does notoffer a separate FiT for dual-use projects.

Prioritize the challenges related to landacquisition for the development of newprojects. The central government has beenassisting local authorities in planningrenewable energy zones in several cities orcounties. A streamlined process could helpto accelerate development.

Actively support the development ofinnovative renewable energy solutionstogether with local stakeholders throughtangible innervations that can contribute toan active pipeline of projects. Some targetshave been announced, but need a pipeline tokickstart activity. The COA has promised todevelop 8GW ground-mounted solar plantsby 2025, contributing to the government’stotal target of 14GW. To this, the COAannounced plans to promote aqua voltaicsolar farms and listed approximately 7,000hectares of potential sites.

Recommendations


Recommendations


The pipeline hasthe estimatedpotential toavoid up to 28MtCO2e of CO2emissions perannum0 0

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Thailand


The study identifies 40 projects in the pipeline,with an estimated investment of US$5b. Therenewable energy sector is the most prominentsector with 20 projects and 2GW capacity in thepipeline. Solar PV technology is the mostprominent subsector within the renewableenergy sector.

The pipeline appears to be well-diversified amongthe other focus sectors as well, with five projectsfrom the energy efficiency sector, nine projectsfrom the EVs and energy storage sector and theremaining from the transmission and distributionsector. The pipeline is relatively small in terms ofestimated investment required and the realizationof these projects is contingent on addressing someof the inherent challenges.

The study only includes projects available in thepublic domain that exceed a certain minimumthreshold. Hence, this study identifies onlya small portion of the green projectsunder development.


2GWRenewable energy





*Target capacity additions to achieve 2025 targetsSource: IRENA; Suruhanjaya Tenaga Generation Development Plan 2019


0.02

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The renewable energy pipeline indicatesmodest additions in capacity. The studyidentifies only around 2GW of plannedcapacity additions over the next three years.This seems modest, compared to theapproximate 18GW of renewable energycapacity additions planned in the PowerDevelopment Plan (PDP) 2018-2037 overthe next two decades.

The limited pipeline is validated bystakeholder discussions, which revealedthat there have been very limited additionsin utility-scale renewable energy projectsover the last few years. Experts cite a needfor a dedicated ministry to govern therenewable energy sector. Currently, fourdifferent government bodies are responsiblefor developing and overseeing renewableenergy policy in Thailand: the Department ofAlternative Energy Development andEfficiency (the Ministry of Energy), theEnergy Policy and Planning Office, theEnergy Regulatory Commission and theElectricity Generating Authority of Thailand.

The current pipeline is relatively smallcompared to the other focus markets interms of capacity. Increased coordinationis required to adopt new targets for

renewable energy and propel the stagnantindustry forward.

Onshore wind projects constitute only 1% ofthe total renewable energy capacity in thepipeline due to a lack of an official capacitytarget for the wind sector. This impactsthe pipeline as developers and investorsawait targets for wind power projects in thePDP (2019-2038).

Associations such as Global Wind EnergyCouncil and the Thai Wind EnergyAssociation have been advocating for a windtarget to be included in the PDP. It isunderstood that there is a new draft PDPdeveloped by the previous cabinet and themarket anticipates an ambitious wind targetto invigorate the sector. With a reshuffling ofthe cabinet, it remains unclear whether theexisting draft will be adopted, or a new onewill be put in place instead.

Renewable energy


2%1%

95%

2%Renewable energy capacity

Geothermal


Onshore wind

Solar PV

Solar + storage

2GW

1%

84%

2%5%

8%



Solar PV

Others

EE

EV_ESS

TD

US$5b

EV and ESS


Although solar PV constitutes of 95% of thetotal capacity in the pipeline, the pace ofdevelopment is slower than required to meetthe ambitious PDP (2018-2037) target of10GW. Currently, 48% of the projects are inearly stages of development.

The pace of progress has been slow, despiteambitious targets in the PDP 2018-2037. In2019, some large Thai developers had a verymodest pipeline: e.g., 2019 BGRIMM: 58MW;Blue Solar: 50MW; Super Energy: 21MW.

Although the target of 10GW solar additionhas been set, there is no clarity on theprocurement plan for it. There has beensome activity in the solar and storage sector,though the scale remains small and thesector accounts for only 2% of the totalcapacity in the pipeline and the projectsare in the permitting, development orfinancing stages.

As well, the scale of projects is small, with30% projects requiring an investment of lessthan US$50m. The market is well-structuredand has the highest share of 33% of projectsat the development stage among the focusgeographies, despite the limited pipeline.

Investors say that the main challenge is thelack of a procurement plan for thedevelopment of the PDP 2018-2037 targets.The ERC launched the SPP Hybrid program in2017 and enabled 300MW of solar PVprocurement through a competitive biddingprocess. Since then, there have been noutility-scale solar procurement projectsin Thailand.

In addition, the expiry of the FiT for windpower has brought the sector to a standstilland has prevented the development of newutility-scale projects. The market is waitingfor the Energy for All scheme, currently inthe drafting stage, which aims to roll outprojects totaling 700MW.



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National ambition and targets• The Thailand Integrated Energy Blueprint (TIEB) was created to support the development of all

energy-related sectors. The blueprint brings together different plans such as the PowerDevelopment Plan (PDP), Energy Efficiency Plan (EEP) and Alternative Energy DevelopmentPlan (AEDP) to streamline efforts across all energy-related sectors.

• There is strong market interest in the solar sector as the pipeline capacity is thrice the plannedcapacity additions (until 2025), indicating that there is scope for an upward revision of targets.

• There is currently a 3GW government target for the wind sector for 2037, 50% of which hasalready been achieved by February 2020. The market is calling for more ambitious target,which are being awaited in the next PDP (2019-2038).

Adaptive renewables policy• A detailed and clear procurement process can help achieve the 10GW target for solar.• The expiry of the wind FiT has brought the sector to a standstill.


Thailand needs clarity around renewable energy targets andprocurement mechanism to accelerate its energy transition

Robusttransmission capacity► Integrating renewables into the

national grid is a challenge assufficient capacity is requiredto absorb additional renewablecapacity and ensure a reliableelectricity supply.

► Several opportunities for gridexpansion and improvementare identified in PDP2018-2037.

• Favorable supply-demand


• Financing and bankability► The commercial loan market is well-established, especially for solar and biogas projects and non-

recourse financing is available.► There is also a vibrant green bond market in Thailand, with two major green bond issuances in the past

two years. Thai Bond Market Association has also rolled out an incentive scheme for green, social andsustainability bond issuance.

► Various support schemes are available to support SMEs such as the Energy Service Company (ESCO)fund.

Supportingmarket framework► Thailand’s electricity market is

largely dominated by state-owned entities EGAT, PEA andMEA. Regulations for newenergy tends to balance theneed for innovation andavoiding disruption.

► EGAT is the single buyer ofelectricity from the privatesector. It is involved ingeneration and solelymanages the transmission.

Allocable land parcels► Although 100% foreign

ownership is permitted,there are restrictionsaround land ownershipunder the Land Code.Developers seek to availincentives under theinvestment promotion lawwhich permits 100%ownership.

High perceived risk

Low perceived risk


•

•

• • •


Even though the current pipeline identifiesonly 5 projects in 40, there may be someprojects being developed by the privatesector using the mechanisms such as energyservice company fund. The projects may notbe in the public domain and hence, are notcaptured in this study.

Although Thailand has the strongest pipelinefor EVs among the focus markets, domesticadoption lags in the absence of anyeconomic case. Currently, 23% of theprojects in the pipeline and 8.5% of theinvestment share belongs to the EV sector.There are incentives for manufacturing thathave worked well and attracted internationalplayers to set up EV manufacturing inThailand but the landscape for domesticadoption remains weak.

Thailand’s Board of Investment (BOI)launched the EV scheme in March 2017 toencourage investment proposals andsupporting applications from car makers.The privileges include tax holidays of 3 to 10years and import duty exemptions for carsand machinery, which attracted severalinternational automobile manufacturers. Atotal of 13 companies were grantedincentives for hybrid EVs by BOI to buildplug-in hybrid EVs.

However, the market lacks incentives forpromoting EV adoption. EV cars are stillsignificantly more expensive to ICE vehicles.Range anxiety and availability of charginginfrastructure appear to be significantconcerns for EV adoption in Thailand.

While some pilot initiatives exist to test newenergy solutions, a regulatory framework isneeded for wide-scale deployment. Thailandis relatively advanced compared to otherSoutheast Asian countries in testing newenergy solutions and its pipeline has 12% ofprojects from the energy efficiency sector,higher than any of the eight focus marketscovered in this study.

The ERC has set up the ERC Sandbox as aplatform to promote and pilot newtechnologies, test new business models andinform on energy regulation in Thailand. TheSandbox program allows applicants to obtainsome exemptions from existing regulations,where needed, for the implementation ofnew technologies.

The first round of the Sandbox programallowed a wide range of projects such asmicrogrids, battery storage and peer-to-peertrading to be implemented. While there havebeen rumors of a second phase, no officialannouncements have been made. Themarket awaits the regulatory framework forlarge-scale deployment of such solutions.

Energy efficiency and electric vehicles


RE

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Thailand’s pipeline snapshot by sector


Thailand is well-positioned with a clearinstitutional framework and marketstructure. Recognizing the falling cost ofrenewables, the time is right for Thailand tomove away from the FiT-based scheme to anauction-based process for renewable energyprocurement. A clear pipeline of capacity tobe procured over the coming years willprovide the investor community withinvestment opportunities.

Some of the recommendations to helpsupport green recovery in Thailand include:

Create guidelines for new energy solutionsto further build on the success of ERCSandbox program, which piloted new energysolution projects. Regulations around netmetering, wheeling charges etc. are neededto create a commercial market forlarge-scale deployment of microgridsolutions, particularly in industrial estatesand remote islands.

Develop clear regulations for increasedconsumer adoption of EVs to catalyze fastadoption. Clarity of regulation aroundcharging infrastructure can also supportroll- out. The government can setmedium-term targets around mandatoryfleet replacements to create a pipeline ofopportunity and incentivize privatesector investments.

Encourage the use of available schemes andfacilitate SMEs to utilize the financial andtechnical support offered under the EnergyEfficiency Revolving Fund (EERF) fundand the ESCO Fund by the government.Thailand’s Energy Efficiency Plan(2015-2036) includes various measures:voluntary (e.g., energy-saving measures inthe transport sector, promoting low-interestloans for LED replacement) and compulsory(e.g., the Building Energy Code, Enforcementof ENCON Act 1992, energy labeling onequipment and appliances). There is scopefor SMEs to tap into the support available.

Recommendations

Thailand has highlong-term goals but noshort-term steps to achieverenewable-energy goals.

Chariya SenpongHead of the Greenpeace ThailandEnergy Transition Campaign*

“

*"Thai energy policy comes in come criticism by Green Peace", The National Thailand, 24 September 2020, accessed viahttps://www.nationthailand.com/news/30395057 on 20 January 2021




The pipeline hasthe estimatedpotential toavoid up to 2MtCO2e of CO2emissions perannum

0 0.07 0 0.02

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The Philippines


The study identifies 298 projects in thepipeline, with an estimated investment ofUS$37b. The Philippines has the highestnumber of projects and the highest renewableenergy capacity among the focus markets. Therenewable energy sector is the most prominentsector, with 265 projects and 21GW capacity inthe pipeline. Onshore wind and solar PV are thesectors of most interest. The pipeline hasidentified 11GW of solar PV projects, making itthe most prominent renewable energy sector.

The study only includes projects available inthe public domain that exceed a certainminimum threshold. Hence, this studyidentifies only a small portion of the greenprojects under development.







*Target capacity additions to achieve 2030 targetsSource: NREP 2011-2030 as issued by Department of Energy** The current installed capacity has already exceeded the target set in NREP 2011-2030


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8

10

12

Onshore wind Solar Geothermal

Ener

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apac

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W)

Curr

ent i

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capa

city

alre

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targ

ets



The Philippines has a strong pipeline underdevelopment. The realization of this pipelinedepends on regulatory clarity. The majorityof the renewable energy sector projectshave been taken from the latest database ofprojects published by the Department ofEnergy (DOE). Some of these projects havebeen a part of the DOE database for anextended period. There is little clarity on thecurrent status of these projects.

From being an early adopter of renewableenergy, the sector’s momentum has sloweddown in recent years due to a delay inimplementing new regulations following thefull allocation of the FiT quota. Theregulatory standstill impacts projectimplementation over the last few years, asseen by the falling share of renewables in thecountry (34% in 2015 to 29% in 2019). Thedelay in the launch of the Green EnergyOption Program (GEOP) and Renewable

Portfolio Standards (RPS) following theexpiry of FiT is slowing the energy transition.

Although the RPS was included in 2008 inthe Renewable Energy Act, the final RPSrules were only released in 2017. RPStargets are generally considered to bemodest and can be achieved withoutadditional renewable energy capacity comingonline. Stakeholders suggest that RPStargets can be revised upwards to leveragethe pipeline of investments and acceleratethe energy transition.

The latest draft of the Philippines EnergyPlan (PEP), which will articulate the plan until2040, suggests an increased reliance oncoal-fired power plants. The PEP estimatesthe share of renewables in the installedcapacity to be 32% lower than the previouslymentioned 35% goal.

Renewable energy


4% 7%5%

31%53%

0.01%


Geothermal


Offshore wind

Onshore wind

Solar PV

Others

21GW

8%10%

8%

42%

32%

0.1% 0.30.1%


GeothermalHydroelectric (<30 MW)Offshore windOnshore windSolar PVOthersEEEV_ESS

US$37b

EV and ESS


There is a vast pipeline of projects in thecountry, especially in the pre-developmentstage, which makes up 79% of the pipeline.The process for project approval is extremelylengthy, requiring many signatories andinvolving numerous agencies.

There is also a need to create a level playingfield for independent developers and SMEs asprojects that require less than US$50m ininvestment make up 45% of the pipeline.Investors cite that getting approvals andraising finance is quite complicated in thePhilippines, making it very difficult for smalldevelopers and SMEs to participate in therenewable energy and energy efficiency sectors.The Philippines government is working onimproving the process.

The market is dominated by large players whohave integrated generation and retailcapabilities, leaving little room for independentdevelopers to participate. There is a need tocreate market regulations coupled with apipeline of opportunities for independentdevelopers and SMEs to participate.


*The pre-development stage refers to projects in “launched feasibility”, “pre-development”, “approved” or “permitting” stage.**The development stage refers to projects “under procurement” or “development or financing” stage.Source: DOE–Energy Investment Forum 2018 https://www.doe.gov.ph/eipo/energy-investment-forum-20181 "Challenges in Permitting: 2018 Energy Investment Forum", Department of Energy, Republic of the Philippines, 2018, accessed viahttps://www.doe.gov.ph/sites/default/files/pdf/e_ipo/06_eif_2018_manila_aboitiz_power_corporation.pdf on 20 January 2021

1,340Days to obtain

permits prior toconstruction

359Signatures needed,

IPs not included

74Regulatory agencies

and attachedagencies or bureaus

43Contracts,

certifications,endorsements,

licenses requiredprior to construction

20Governing laws to

comply with

Current challenges in getting a permit inthe Philippines1

26

236

360

0

50

100

150

200

250

5 4

126

62 66

7 00

30

60

90

120

150

Investment (US$m)

Number of projects by investment range

https://www.doe.gov.ph/eipo/energy-investment-forum-2018


The interviews reveal that the Philippines needs regulatory clarity toaccelerate its energy transition

National ambition and targets• The pipeline showcases 7GW of onshore

wind projects, indicating strong marketinterest and an opportunity for revisednational targets.

• The release of National Renewable EnergyPlan is expected to catalyze the market.

• The combined capacity for coal-fired powerplants rose 87% in 2016 from 2005 levels.

Supporting market framework• The process to obtain a permit is

extremely lengthy and complex.

Adaptive renewables policy• The latest draft of the Philippine Energy

Plan (PEP 2018-2040) anticipates theadoption of “highly efficient” coal andnatural gas in its clean energy scenario,indicating a continued focus onconventional power.

• The market is awaiting clear laws andregulations after the expiry of theFiT mechanism.

Allocable land parcels• Gaps in areas such as property rights

recognition, public provision of landinformation, land use planning andmanagement result in significant landacquisition challenges.

• Landowners generally have a tendencyto band together and inflate the priceof land when it is anticipated to be usedfor power projects, raising projectcosts artificially.

Thorough resource assessment• The Philippines may benefit from

assessing its offshore wind resourcepotential.

Robust transmission capacity► The DOE has recently launched the Grid

Planning and Competitive RenewableEnergy Zones (CREZ) process to helpachieve the country’s goals of scaling uprenewable energy generation on the powersystem and to ensure sustainable, secure,reliable, accessible and affordable energy.

Favorable supply-demand► The electricity demand is expected

to grow at a rate of 5.5% p.a.between 2020-2025.

Financing and bankability• If the pending tax reform bill is passed,

the renewable energy sector will lose theincentives it enjoys under the RenewableEnergy Act.

High perceived risk

Low perceived risk


•

•

•

•

••

••


Despite the high potential of the energyefficiency sector, the lack of projects in thepipeline is indicative of the insofar untappedpotential of the sector. Most experts suggestthat energy consumption is not closelymetered, monitored or reported bycompanies, especially among SMEs.Moreover, energy management systems arenot widely adopted. The lack of effort forcompliance with standards like ISO50001indicates a huge untapped opportunity.

Further, the COVID-19 pandemic hasimpacted the pace of development of theSmart Solar Project (Energy Efficiency) inthe outlying islands as access to the site is achallenge. The economic case for energyefficiency is more robust in the Philippinesthan other regional markets as the electricityretail tariffs reflect the real costs and arefree of any subsidies. The electricity tariffsare higher than neighboring countries (atUS$c21/kWh). The primary barriers are alack of capacity, capability and confidenceand very few bankable projects, whichdeters investors.

Industry practitioners estimate that streetlighting projects have an investmentopportunity of more than US$885m.However, the inability to retain savings bythe implementing agency disincentivizesstakeholders from implementing energyefficiency projects.

The potential of EVs is well-recognized andthe sector has 29 projects in the pipeline,which is higher than any other focus marketscovered in this study. However, it is yet to beintegrated into the mainstream energystrategy at the national levels.

There are some initiatives to promotee-jeepney in the country, but the effortsremain sporadic. There is also limitedincentive or official policy direction toretrofit fleets.

Systematic efforts to develop charginginfrastructure, including the regulationsaround tariffs and potential V2G applicationsin the context of the Philippines new SmartGrid Roadmap need to be explored.

Energy efficiency and electric vehicles


Source: Energy Efficiency Market Gap Analysis; Product Standards and Energy Efficiency Business Environment for the UK Foreign &Commonwealth OfficeDue to the bespoke nature of projects in sectors like energy efficiency and electric vehicles, comparable investment benchmarks arenot available. Therefore it may be inferred that the investable pipeline may be far greater than estimates made under this study.

RE

EV_ESS EE TD

-10

0

10

20

30

40

50

Inve

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US$

b)

The Philippines’ pipeline snapshot by sector


Some of the recommendations tohelp support green recovery in thePhilippines include:

Streamline the strategy and policy-makingfor renewable energy. Currently, thegovernance scope falls under four bodies –the Renewable Energy Management Bureau,the Energy Regulatory Commission, theNational Electrification Administration andthe National Renewable Energy Board.Renewables are no more marginal and havethe potential to provide cost-competitivealternatives. This study indicates that thereis a robust pipeline and interest from themarket to participate in the renewableenergy sector. The government hasthe potential to capitalize on this interestby creating a clear framework forrenewable energy development in terms ofprocurement, pricing and financing.As well, the new auction system will be acatalyst for renewable energy development.The implementation of regulations such asgreen tariff (auction program) and laws suchas the energy transition law are windowsof opportunity.

The COVID-19 pandemic has highlighted theinflexibility of the power system –conventional plants have faced forcedoutages. It is understood that certain utilitiesare invoking force majeure clauses andconsumers have faced increased power bills.Experts suggest that the COVID-19 pandemiccould be an inflection point for greater focuson flexible renewable energy solutions andthe role of utilities in the energy transition.The focus should be on implementation ofmodular renewable energy or distributedenergy systems and grid updates overthe development of new baseload(inflexible) power.

Introduce support mechanisms such ascredit guarantees, bridge financing and loansas part of stimulus packages to help financesmall-scale projects.

A combination of policy and capital can alsoaccelerate the growth in the energyefficiency sector. The Department of Energyshould consider initiatives such as issuingdepartment circulars and certifications andcreating a mechanism that incentivizes costsavings due to energy efficiency efforts.Individual departments should be able toretain any savings realized due to energyefficiency projects. Moreover, theprocurement system should be flexible toenable departments to procure projects andsolutions that can be implemented on asavings model rather than a base-cost basis.

Including projects like government buildingretrofits and public street lighting projects inthe COVID-19 recovery packages canincrease momentum in the energy efficiencysector. Creating a pipeline will automaticallycatalyze the sector as financing is not aroadblock because projects do not requireupfront cost and can be financed via thesavings model.

Directing investments into public fleetreplacement to introduce more EVs in thepublic transport sector can increase EVadoption in the country. Initiatives such asthe Green Green Green Program, which waslaunched in 2018 to provide assistance to145 cities to make them more livable andsustainable, can create a strong businesscase for energy efficiency projects.

Recommendations

Source: Philippines Power Sector Can Reach Resilience by 2021 by IEEFA (June 2020)




The pipeline hasthe estimatedpotential toavoid more than54 MtCO2e ofCO2 emissionsper annum

5 5 4

2219

0.010

5

10

15

20

25

Mt C

O2e


16 14

33

81

7

- 10 20 30 40 50 60 70 80 90

Jobs

('00

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Vietnam


The study identifies 221 projects in the pipeline,with an estimated investment potential ofUS$24b. Renewable energy remains the mostattractive sector for investment in Vietnam. Therenewable energy sector showcases 87 projectsand 14GW capacity in the pipeline. Within therenewable energy sector, solar and wind sectorsdominate with 97% of the potential capacity. TheTD sector has 132 projects.

While Vietnam has the second-highest numberof projects among the focus markets covered inthis study, converting the investable pipelineinto actual investments is contingent onaddressing some of the inherent challenges.

The study only includes projects available inthe public domain that exceed a certainminimum threshold. Hence, this study identifiesonly a small portion of the green projectsunder development.







*Target capacity additions to achieve 2030 targetsSource: Draft Power Development Plan VIII


5

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- 2 4 6 8

10 12 14 16 18 20

Wind Solar

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The development of new renewable energyprojects is slowing down until revised targetsare adopted in the upcoming PowerDevelopment Plan (PDP) VIII, together withsupporting regulatory mechanisms. As solarand wind projects dominate Vietnam’srenewable energy pipeline, with 98% of thecapacity belonging to these sectors, PDP VIIIis eagerly awaited by the developer andinvestor community for clarity on newinstallation targets.

Financial close for wind projects is delayeddue to ambiguity of FiT eligibility as thecurrent FiT for wind projects is expiring inNovember 2021. Clarity is required on thegovernment’s stand on FiT extension - if thegovernment will extend the FiT system or optfor an auction-based mechanism – andwhether there will be an ambitious target setfor offshore wind capacity in the country.Speculation on energy sector policies maycontinue until the election results for theNational Assembly and People’s Councils areout in May 2021.

Teething curtailment issues have added toinvestors and lenders’ anxiety. There is a lotof speculation around the curtailment risk,which has impacted lenders’ confidence.

There has been significant commissioning ofnew power plants in Vietnam recently.Corresponding investment in networkinfrastructure by the country’s largest powercountry, Vietnam Electricity (EVN), has beenlagging, which led to grid congestion andcurtailment in some areas. As well, thelaunch of the first Solar FiT attracted manyprojects in concentrated areas. However, alack of coordination in planning and gridaccess has led to a curtailment of up to 30%in 60% of all solar projects. Generally, thereis a risk of congestion to the Vietnamassets due to new projects coming onlinewithout any corresponding increase innetwork capacity.

Teething issues are not unusual and EVN hasacted quickly in attempts to addresscurtailment. The draft PDP VIII indicatesEVN’s new focus on investment into thetransmission network with 12% of thecountry’s potential investment belonging tothe transmission and distribution sector. Thepipeline captures 132 projects in thetransmission and distribution sector,highlighting EVN’s proactiveness in resolvingcurtailment issues relatively quickly.

Renewable energy

For some sectors, due to the bespoke nature of projects, comparable investment benchmarks are not available. Therefore it may be inferredthat the investable pipeline, particularly for sectors like energy efficiency and electric vehicles, is far greater than this study's estimation

0.18%2…

20%

13%65%

Geothermal


Offshore wind

Onshore wind

Solar PV

14GW


0.19%1%

31%

14%41%

13%


Geothermal


Offshore wind

Onshore wind

Solar PV

TD

US$ 24b


Only 13% of the projects in the pipeline areat or beyond the development stage,suggesting that only a small fraction ofprojects in the pipeline have had success insecuring financing.

Other factors that limit projects foradvancing in the development cycle includelengthy processes at different stages ofdevelopment and inclusion in provincial planor masterplan. Investors tend to choosesmaller projects (< 49MW), which onlyrequire provincial approvals as large projectsneed to go through a masterplanapproval process.

Risk allocation in the PPA has preventeddevelopers from raising international non-recourse financing, with very few

exceptions. Domestic funding is available butrequires collateral. Hence, only strongsponsors with necessary credit strength areable to raise necessary finance. Mostprojects, particularly those small in scale, arefinanced on corporate finance basis.

Small-scale projects make a significantportion of the pipeline – 62% of the projectsrequire an investment of less than US$50m.These projects mostly comprise solar PV orhydroelectric (<30MW), bioenergy andtransmission and distribution projects. Thedevelopment of small-scale projects hasslowed due to barriers in accessing finance.



142

5127

10

20406080

100120140160

3730

71

3440

50

0

20

40

60

80

Investment (US$m)


The interviews reveal that Vietnam needs clarity around renewableenergy targets to accelerate its energy transition

Allocable land parcels► Vietnam is one of the few

geographies where investors didnot mention land acquisition asa barrier.

National ambition and targets• The pipeline showcases 14GW of

solar projects.• Vietnam added 4.5GW in solar PV

capacity by June 2019 and the currentcapacity exceeds its 1GW target for2020 by a large extent.

• The official release of PDP VIII is awaitedto give a clear direction to the industry.

Robust transmission capacity► Significant curtailment issues have

been faced in the initial boom ofinstalled solar capacity, which is beingaddressed by EVN.

Supporting market framework• Vietnam is a single buyer market with EVN acting as the sole offtaker for renewable energy.• The direct power purchase agreement (DPPA) mechanisms between renewable energy

developers or power generation companies and private power buyers or consumers isexpected to be approved soon, which will create a vibrant pipeline of projects in coming years.

Favorable supply-demand• A market balance exists between a

growing energy demand and a vibrantrenewable energy pipeline.

Adaptive renewables policy• The solar and wind industry are at a

standstill as the FiT is set to expire inDecember 2020 and November 2021respectively. Clarity around whether theFiT mechanism will be extended can givea clear direction to the industry in thenear future.

Financing and bankability► Domestic banks have limited capacity

to appraise credits for non-recourseproject financing and favor corporatefinance solutions.

► International funding also requiressupport from the developers to mitigategaps in the template PPA.

Thorough resource assessment• Vietnam is finalizing the assessment of

its offshore wind potential.

High perceived risk

Low perceived risk


•

•

•

•

•

•

•

•


Although Vietnam has the will for energyefficiency, there is limited knowledge andinterest, much like the rest of the region. AsVietnam is experiencing high growth inelectricity demand requiring significantinvestments in the generation, transmissionand distribution assets, energy efficiencymeasures can significantly benefit thecountry energy sector. However, the countrystill lacks the motivation to explore andadopt energy efficiency practices. Thepipeline is representative of this as itreflects only one project from the energyefficiency sector.

Industry practitioners indicate that theprimary motivation for industrial companiesto invest in technology upgrades or modernenergy-efficient equipment is to replace oldor faulty equipment. The lack of awarenessof the energy savings potential, the highminimum investment for energy efficiencyprojects and the absence of energyefficiency projects for streetlighting areadditional factors preventing the sector frombeing explored.

Further, the electricity tariff subsidies andambiguous tariff structures limit theincentives for industrial consumers to investin energy efficiency solutions. Decision No.34/2017/QD-TTg on the average retailelectricity pricing methodology for theperiod of 2016 - 2020 and the pricingframework published in December 2017suggest that electricity prices will continueto benefit from subsidies.

Vietnam has introduced the Vietnam EnergyEfficiency for Industrial Enterprises (VEEIE)with funding support from the World Bank.The program aims to improve energyefficiency in the industrial sector throughenergy efficiency investment or lending andproject implementation support. Eventhough a pilot framework has beendeveloped, the utilization of the fundsremains lower than the budget available. Forinstance, of the available funding of US$20min FY19/20, only about US$2.8m was spent.Of the FY20/21 budget of US$35m, onlyabout US$21.6m was spent.

Energy efficiency



RE

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Vietnam’s pipeline snapshot by sector

The green opportunity96

Direct PPAs in VietnamThe Ministry of Industry and Trade of Vietnam (MOIT) had submittedProposal No. 544 to the Prime Minister in the first half of 2020 alongwith a new draft decision for approval of the pilot program on direct

power purchase mechanisms between renewable energy developers andpower generation companies and private power buyers and consumers.

The formal approval, expected to come soon, could create a vibrantpipeline of projects in coming years.

Solar in VietnamVietnam has achieved a cumulative installed solar capacity of over4.5GW as of 2019, far exceeding its 2020 target, on the back of an

attractive FiT regulation and a standard PPA.

Success of Vietnam’srenewable energy sector


The pipeline includes only one project from the EV sector, which indicates a significant lack ofmomentum to explore the sector. While private companies are exploring the potential for EVs,a public vision is also required to accelerate EV adoption in the country.

Electric bikes are now ubiquitous in Vietnam but the economic potential of EVs is stilluntested. Vietnamese company VinFast is focusing on developing EVs both through domesticmanufacturing and through the creation of a supporting ecosystem. Based on press releases,VinFast has partnered PVOil to develop charging stations across Vietnam. Similarly, Mitsubishialso has plans to invest in R&D of EVs in Vietnam. The lack of market participants indicates therelatively untapped potential for the sector.

Further, EVs are yet to feature in public policy. Incentives aimed to stimulate manufacturingand use of EVs are scattered across numerous legal documents such as the NationalAutomobile Development Strategy and tax decrees. Despite special tax rates announced in2016, it is reported that hybrid EVs have not yet been granted tax reliefs.

Electric vehicles


Some of the recommendations to helpsupport green recovery in Vietnam include:

Having an updated policy direction willprovide stakeholders the required clarity todeploy the renewable energy pipeline andhelp in keeping the significant momentumachieved in the past three years. The officialtargets in PDP VIII and supportingmechanisms for solar (new FiT orintroduction of auction) and wind (FiTeligibility) as well as policy direction onoffshore wind has the potential to spur themarket. Investors are also hoping toleverage greater synergy between provincialand national level plans to ensure the sectordevelopment is coordinated for the approvalprocess, inclusion in masterplans and bettercertainty of grid connection.

The inclusion of Resolution 55 in PDP VIIIcan bring about constructive change,incentivizing stakeholders to move forwardwith the projects in the pipeline. Resolution55 aims at encouraging private investmentin renewable energy, diversifying the energysystem and advocating for renewableenergy laws.

Reforming the procurement process andimplementation of the auction mechanismand allowing for direct PPAs can open themarket and make the procurement processconvenient for a range of stakeholders.

Build on the current success by developingstronger incentives to promote energyefficiency projects through mandatorycompliance requirements, incentives forenergy efficiency projects and credit supportfor SMEs.

Build awareness and provide technicalsupport for implementing energy efficiencyprojects to create a bankable pipeline ofprojects. The current stimulus has focusedon tax reductions and waivers to ensure thatbusinesses stay afloat and more measurescan help to ensure an increased participationof local manufacturers in the global supplychain. As part of the COVID-19 recoverypackages, the government can includeobligations for incorporating energyconservation and green technologies such asrooftop solar.

Introduce a comprehensive integratedenergy transition strategy that incorporatesrenewable energy, energy efficiency and EVsectors and recognizes the synergies inapplication. This can help to catalyze theinvestment potential and further build onVietnam’s renewable energy success.

Recommendations




The pipeline hasthe estimatedpotential toavoid more than32 MtCO2e ofCO2 emissionsper annum0 1

10

6

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16

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Mt C

O2e


3

37

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0.24 -

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Conclusion

The environmental and economic benefits of green energy development can no longer beignored. Governments around the world have acknowledged the role the green energy sectorcan play in economic recovery post the COVID-19 pandemic. The study finds that there istremendous investor interest and surplus private capital ready to be deployed in the cleanenergy sector. However, the clean energy transition can be accelerated and amplified onlywhen certain challenges are addressed by the authorities, which will make the sector attractivefor private investment.

Recovery in a post-COVID-19 environment requires coordinated action from variousstakeholders. With greater collaboration between the public and private sector, economies cantap into the immense potential that clean energy projects can offer to drive better economic,environmental and social outcomes. The choices today will shape the economies of tomorrow.

Gilles PascualEY Asean Power & Utilities Leader

The pandemic offers Asian governments aunique opportunity to place the clean energytransition at the center of policymaking to drivethe economic recovery and future growth.

“

Contact the EY team

Gilles PascualEY Asean Power & Utilities LeaderPartner, Strategy and TransactionsEY Corporate Advisors Pte. Ltd.

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