Offshore wind is likely to be the major addition to non-hydro renewable generation capacity in Asia-Pacific in the near term, said Sunny Huang, associate director of Fitch Ratings.
The share of renewables is rising, and will be boosted further by falling technology costs and greater availability of cheaper finance for renewables issuers.
Government policy will generally remain supportive of renewables, but improving economics in the sector will allow the gradual withdrawal of subsidies, favourable feed-in-tariffs, and generous tax and accounting treatment.
Renewables issuers – particularly in the wind and solar sector – are likely to tap the bond market increasingly over the next few years, with their access supported by longer operating histories, larger scale and improved credit profiles. The success of Asian thermal power issuers in raising project finance has also laid the groundwork for renewable issuance.
Renewable energy issuance has been limited so far in APAC. The share of renewable energy generation continues to rise in Asia due to strong policy mandated targets. Renewables, particularly solar, have been making progress in grid parity with coal-based electricity tariffs as they benefit from abundant resource available, falling costs and availability of cheaper finance.
There will be increase in offshore wind capacity in Taiwan, driven by resource characteristics and a supportive regulatory framework. Renewable issuers will be tapping the capital markets with project finance structures as they build scale and an operating track record.
Energy demand is likely to continue to rise strongly in Asia-Pacific, driven by economic growth and long-term government targets for electrification, says Fitch Ratings.
Coal will dominate the fuel mix across most of the region. Shift toward renewables in developed economies, could create competitive pressures for some coal-based power projects.
Coal’s contribution to electricity generation is well above the global average of less than 40 percent in most APAC countries, and is as high as 75 percent in India and 68 percent in China.