A new study released by Wood Mackenzie has found an increasing role by corporates in the decarbonisation of economies in the Asia Pacific.
Corporate renewable power purchase agreements (PPAs) are starting to play an increasingly important role in the expansion of the region’s renewable energy portfolio, a trend that has been witnessed in Europe and North America, according to the study.
Despite challenges brought by the pandemic to the renewable energy sector, corporate PPAs more than doubled in 2020 compared to 2019. Corporate PPAs accounted for 3.8 GW in renewable energy capacity in 2020 despite project delays from labor shortages and logistic disruptions from the pandemic.
Rishab Shrestha, an analyst with Wood Mackenzie, said: “Corporate renewable procurement is on the rise and Asia Pacific is starting to play a bigger role with 10.9 GW of cumulative capacity procured until H1 2021.
“Demand for renewable procurement is largely driven by ambitious decarbonisation targets set by governments and companies in the region. But more importantly, falling renewables premium and rising power tariffs in Asia Pacific are making corporate renewable PPAs more attractive.”
Renewables premium is expected to be 45% below power tariffs by 2025, creating a favorable environment for corporate PPAs.
Factors including attractive project economics and favorable policies are driving corporate PPAs in India, Taiwan, and Australia, the region’s leaders in corporate renewable energy procurement. Today corporates in India have procured 5.2 GW of renewable energy whilst Australian firms have acquired 3.2 GW and Taiwanese 1.3 GW.
Singapore and Japan are expected to join the race to become leaders in corporate renewables procurement in the coming years. However, the unavailability of land for renewable energy projects is expected to hinder anticipated progress.
Under efforts to meet the high energy demand required for industrial processes including manufacturing and mining, the industrial sector led in renewable energy procurement by accounting for 57% share of PPAs in 2020.
The retail and service sector accounted for 25.4% of the share whilst the technology sector accounted for 16.9% with the majority of the capacity being procured to power data centers.
Shrestha added: “Interestingly, although RE100 memberships in Asia Pacific have increased year-on-year, only 10% of the 99 member companies signed corporate PPAs in the region.
“Most Asia Pacific headquartered RE100 companies rely on onsite installation and net-metering solar projects to power their operations using renewables.”
Asia Pacific RE100 companies account for only 22% of the total cumulative contracted PPA capacity share. Most companies that signed corporate PPAs in the region have not committed to RE100, as limited regulations permitting large-scale procurement of renewables in the region form a major barrier.
With ambitious carbon neutrality targets and corporate emission reduction obligations, Asia Pacific businesses are increasingly pressuring regulatory bodies to ease corporate procurement regulations towards offsite generation projects offering larger capacities.