Corporate procurement of renewable energy more than doubled in Asia Pacific last year, according to new analysis.
Companies signed power purchase agreements (PPAs) for around 3.8GW of renewable energy capacity in 2020 — more than double the previous year’s total, according to Wood Mackenzie. Wind accounted for the largest share (47%) of this capacity, followed by solar (44%), while the remaining 9% is undisclosed.
This increase came despite project delays resulting from labour shortages and logistic disruptions during the coronavirus pandemic, the analysts noted.
By the end of the first half of 2021, corporate PPAs had been signed for 10.9GW of renewable energy capacity.
Wood Mackenzie senior analyst Rishab Shrestha said corporate renewable procurement is starting to play a bigger role in Asia Pacific.
“Demand for renewable procurement is largely driven by ambitious decarbonisation targets set by governments and companies in the region. But more importantly, falling renewables premiums and rising power tariffs in Asia Pacific are making corporate renewable PPAs more attractive,” he added.
Renewables premiums have fallen across all markets in Asia Pacific, according to Wood Mackenzie.
Transmission charges will offset some of these premium reductions, but the total discount compared to feed-in tariffs should still be more than 30% by 2025.
Wood Mackenzie explained that attractive project economics and enabling policy frameworks in Australia and India account for the greater corporate PPA activity in these markets
Shrestha added that he expects Singapore and Japan to also become leaders in corporate procurement of renewable energy.
He explained: “Singapore is the most developed procurement market in south-east Asia but has limited land availability for renewable projects. Japan’s procurement is largely limited to onsite projects, but we expect policy updates by year-end.”
Corporate trends and barriers
Industrial offtakers accounted for 57% of PPAs contracted in 2020, due to high energy demand of electronics manufacturing and mining industries
Retail and service buyers accounted for 25.4%, while the technology sector accounted for 16.9%, with energy procured primarily used for powering data centres
Membership of the RE100 – through which companies commit to power 100% of their operations with renewable power – increased year on year, but only 10% of the 99 member companies signed corporate PPAs in the region.
Most RE100 members with Asia Pacific headquarters use onsite installations and net-metering solar projects to power their operations instead. Limited regulations enabling large-scale procurement of renewables in the region form a major barrier, Wood Mackenzie explained.
Shrestha said: “While challenges remain, policy, corporate ambition and economics are starting to tilt the balance towards a more conducive corporate PPA landscape for growth.”