The Institute for Energy Economics and Financial Analysis (IEEFA) has released a report revealing that investment opportunities in solar and offshore wind power supply chains could surpass US$1.1 trillion by 2050. These investments are expected to generate 873 gigawatts (GW) of clean energy.
Grant Hauber, IEEFA’s Strategic Energy Finance Advisor for Asia, emphasized the current opportunities within the renewable energy supply chain. “Solar energy offers immediate investment benefits to the Asia Pacific, while the advantages of participating in the offshore wind supply chain will develop over the next several years,” Hauber stated in the report.
Solar PV and Offshore Wind Supply Overview
The report examines seven Asian markets: Japan, South Korea, Malaysia, Taiwan, Vietnam, the Philippines, and Indonesia.
IEEFA projects that solar PV plans will achieve 634 GW of capacity by 2050, requiring an investment of US$394 billion, with US$346 billion potentially allocated to local supply chains. Offshore wind represents a US$621 billion opportunity to deliver 239 GW of capacity, with US$425 billion expected to be localized.
Additionally, the maritime sector presents an investment opportunity worth US$72 to US$97 billion for building offshore wind installation and service vessels, with most of this investment expected to be sourced regionally.
Beyond Panels and Turbines
The report highlights the potential to localize significant portions of the solar and offshore wind supply chains necessary for fully operational power generation projects.
Non-panel and non-turbine spending will account for at least 75 percent of total investment through 2050, representing a US$770 billion opportunity for domestic industries over the next 25 years. Materials, components, infrastructure, logistics, and services can provide significant value to the domestic economy over sustained periods and potentially be marketed regionally and beyond.
China currently dominates the global supply chain for solar PV panel manufacturing, delivering nearly 85 percent of global demand. Instead of competing with China in PV module production, countries can invest in other project-level components that contribute to completed solar farms.
Hauber emphasized the importance of the balance of system (BOS), which comprises all costs and components beyond the solar panel. IEEFA calculates that BOS investments constitute the majority of PV farm costs, ranging from 55 percent to 75 percent of total project expenditure.
“Nearly all the project development and financing costs within the solar PV project supply chain are locally incurred, and potentially half or more of the BOS costs could be domestically sourced,” Hauber noted.
Offshore Wind Opportunities
Asia’s offshore wind resources are abundant, high-quality, and predictable. The region’s traditional maritime economies possess inherent advantages in shipbuilding, steel fabrications, marine maintenance, and offshore services, making them well-suited for large-scale offshore wind projects.
The wind energy capacity available to nearly every country in the Asia Pacific is greater than their current total installed capacity from all sources of generation. Wind farms are becoming competitive enough to undercut imported natural gas and coal.
Shipbuilding for offshore wind presents a standalone opportunity worth up to US$97 billion, with most of that investment needed in the near term. Hauber highlighted the need for specialized wind turbine installation vessels, as only a few can install the largest, next-generation turbines.
Currently, only about 20 percent of wind farm inputs are locally sourced in the region, but with sustained demand, this could grow to between 66 percent and 80 percent of the total investment value. The combined offshore wind farm and specialty vessel market represents an investment opportunity of around US$878 billion through 2050.
Untapped Potential
The report notes that capacity targets for solar and offshore wind are conservative, and the market potential could be much larger. If the capital costs for solar PV and offshore wind continue to fall as predicted, these technologies will offer the lowest levelized costs of electricity on each national grid. With such attractive energy costs, capacity targets are likely to expand to capture economic benefits.
However, many Asia Pacific countries appear to be underestimating this opportunity. Despite nearly every country in the region having world-class solar and wind resources, planned renewable capacity additions remain a limited share of electricity supply.
For instance, Indonesia has one of the smallest solar bases in Asia, with the least aggressive additions relative to its available resources. Japan, despite having one of the best wind resources globally, has modest offshore wind program targets, aiming for less than 5 percent of total demand by 2050.
Policy alignment is needed to help countries realize this potential. Focusing on maximizing low-cost capacity additions at scale will create recurring demand, allowing local industries to capitalize on the solar and offshore wind supply chain.
GreentechLead.com News Desk