Konrad‐Adenauer‐Stiftung e.V. commissioned the Energy Studies Institute, National University of Singapore to conduct an analysis on the performance of fossil fuels and renewable energy taking the impacts of the COVID‐19 crisis into account. The report “Resilience of Renewable Energy in Asia Pacific to the COVID‐19 Pandemic” summarises the experience of selected countries in the Asia‐Pacific region in terms of the resilience of their renewable energy sector when compared to fossil fuels during and after the pandemic. REGlobal presents an extract from the report.
The Asia‐Pacific region has global significance for the low‐carbon energy transition. In 2019 it was home to 60 per cent of the world’s population, about 40 per cent of annual GDP in purchasing power parity terms. The region also accounted for 44 per cent of primary energy consumption. Moreover, its energy mix is dominated by fossil fuels (87%), notably coal (47.5%). Whilst fossil fuels made up 82 per cent of the energy mix for the rest of the world; coal made up only 11 per cent of the total. Asia‐Pacific accounted for 77 per cent of global coal consumption in 2019, up from about 50 per cent in 2000, over which period global coal consumption has risen by nearly 50 per cent. The difference between the energy mix of the Asia‐ Pacific region and the rest of the world is even more pronounced in regard to electricity generation. Coal provides 58 percent of Asia‐Pacific’s electricity supplies, compared to 17 per cent in the rest of the world.
Over the last few years, governments of middle‐ and lower‐income countries in the Asia‐Pacific region have been pursuing clean energy strategies with varying degrees of commitment and success. Such variability has persisted under the shadow of the COVID‐19 pandemic. National and sub‐national governments put in place a range of restrictions that have constrained economic activities over different periods of 2020. As a result, economies have been growing less rapidly, and many have experienced negative growth. Demand for most forms of energy, including electricity, has undergone a sharp decline in most countries. This sudden reduction has provided an opportunity to assess the short‐term resilience of the countries’ renewable energy. Its share in the energy mix has increased in states where renewable energy receives supportive policies. In the electricity sector, this occurred either in a competitive electricity market, with or without carbon pricing, or in a tightly regulated market where renewable energy ranked high in the merit order.
In response to the economic slowdown, most governments in the Asia‐Pacific region have implemented economic recovery packages. Strategies have varied. Some have focused directly on livelihoods and healthcare, while others have increased investment in infrastructure. A few have declared strong green recovery strategies intended to guide the entire economy in a new direction. Similarly, some governments have announced plans to accelerate the low‐carbon energy transition, whilst others have yet to promulgate new energy policies that would support renewable energy.
The share of solar and wind energy in the electricity mix increased by a small amount in both the first and second quarters of 2020 compared to the same periods in 2019. Whilst this reflects a stronger implementation of dispatch rules favouring renewables, it is less than might have been expected given the decline in hydroelectricity availability. As a result, the share of fossil fuels in the power mix increased from 28.9 per cent in the first half of 2019 to just 29.4 per cent in the same period of 2020.
The economic recovery plan lacks strong green credentials and appears to be energy‐ intensive. Whilst policy support for renewable energy continues, fossil fuels have also received encouragement in two contexts: the relaxation of constraints on constructing coal‐fired power stations and the clearly stated priority to maximise energy self‐sufficiency.
Set against this assessment are President Xi Jinping’s two pledges in a 22 September 2020 announcement to the United Nations General Assembly concerning China‘s carbon emissions: first, that emissions would peak before 2030 rather than just “around“ 2030 and, second, that the country would strive to achieve carbon neutrality by 2060. The first target is realistically achievable with a combination of low economic growth levels, a sustained decline of heavy industry and the concomitant expansion of the service sector and continued rise of non‐fossil energy. The second objective is profoundly challenging.
In December 2020, the President announced to the United Nations that the 2030 ambitions for the country’s Nationally Determined Contributions were being raised: the carbon dioxide emissions per unit of GDP would decline by 65 per cent from 2005 levels, compared to the original commitment of 60‐65 per cent made in 2015; and the share of non‐fossil fuels in the energy mix would rise to 25 per cent, compared to 20 per cent in the initial commitment.
The first indications of the government’s plans will presumably appear in the 14th Five‐Year Plan for 2021‐2025, expected to be released before the end of 2021. Nevertheless, the current pace and energy‐intensive nature of the economic recovery combined with Xi’s proposal that GDP should double by 2035 will make it difficult for the planners to reconcile these trends and goals, at least in the short term.
India’s pandemic economic recovery plan does not constitute a green stimulus, and it appears to be a missed opportunity for India to further accelerate its green agenda. However, as is consistent with global trends, where renewable energy continues to record growth despite the pandemic with strong investor appetite, India likewise appears to be on track with its pre‐pandemic goals to rebalance its energy mix.
Interest in renewables continues to be robust and resilient, although comparatively more so in the electricity sector compared to the transport sector. Although electricity demand dropped during the lockdown (in 2Q2020), renewables (including hydropower) generated 34 per cent more electricity in absolute quantities compared to 1Q2020 owing to the “must‐run” status of renewables.
To unlock India’s full renewable energy potential, several issues remain unaddressed despite tremendous opportunities arising from falling solar and wind tariffs with already achieved grid parity. Apart from high tariffs on imports, in the absence of structural reforms, mounting debts and payment delays by distribution companies to the renewable power producers, future renewable projects could be rendered unviable. One such example is Adani Green’s US$6 billion 8 GW utility‐scale solar PV project, which now has no potential buyers to purchase power.
Structural reforms are required whereby distribution companies exercise the flexibility to procure power from the least expensive sources and to operate in a more competitive liberalised market. Further, opening‐up of the power distribution sector for private competition could fulfil the shortcomings of the state‐run distribution companies. Large‐scale energy storage systems are required, along with better coordination between central and state governments to accommodate more renewables in the generation mix and improve grid stability.
India may fall short of its national target for ethanol blending levels in gasoline. To address this issue, the government would need to provide adequate financial incentives and a stable policy environment to mitigate investment risks and sustain the biofuels industry’s long‐term growth.
There is still a long road ahead for India’s clean energy transition. Subsidies for fossil fuels were seven times larger than subsidies for renewables and electric mobility in FY2019 with coal continuing to dominate the primary energy mix. That said, efforts have been made to increase domestic coal production efficiency and improve the air pollution standards of coal power plants. More importantly, renewables’ role has been recognised as being fundamental to the government’s long‐term energy transition strategy, even with the disruption brought about by the pandemic.
Indonesia aims to increase the share of new and renewable energy sources from the current 9.18 per cent in 2019 to 23 per cent in 2030 and 31 per cent in 2050 in the national energy mix. Meeting these targets would require a significant increase in the deployment of renewable energy technologies currently dominated by hydro. Biofuels are expected to play a larger role in the future as the country weans itself off its reliance on fossil fuels. Yet, Indonesia has also decided to continue relying on coal to spur economic development and appease vested interests. Before the pandemic, fossil fuels continued to dominate Indonesia’s primary energy mix, particularly coal, which accounted for 37 per cent of the energy mix in 2019 and fuelled two‐thirds of all power plants.
Despite a sharp reduction in energy demand during the pandemic, electricity generation from hydro and geothermal rose, together with coal. This is owing to the requirement for PT PLN to prioritise electricity dispatch from renewable energy sources and operate renewable power plants continuously or on a must‐run basis. However, investments in new renewable energy capacity have declined, likely because the utility was trying to delay or cancel new projects to ease its financial pressure.
As one of the countries hardest hit by the pandemic, the COVID‐19 recovery plan’s priority is to achieve economic sufficiency by reducing import dependence and strengthening domestic capacity in priority sectors, including health, food and energy, with no clear green features. Supporting the coal industry is an essential part of the relief effort, with several stimulus measures and favourable regulations put in place. Assistance towards the new coal‐fired power plants also continues as part of the current 35,000 MW programme.
Despite the government’s lukewarm support for renewable energy development, there are some promising developments in the recovery plan for an energy transition, including budget allocations for renewable energy technology deployment. On the regulatory front, the MEMR’s newly amended regulation is expected to make investments in the sector more attractive, including abolishing the BOOT requirement for IPPs. However, the regulation stopped short of overhauling the current buy‐in tariff requirement. Should the new and renewable energy bill currently being debated in parliament be passed, it may go some way to introduce more political and policy certainty for the sector.
Overall, the share of renewable energy (including hydro) in the power generation fuel mix increased by 11.45 per cent in 1H2020 while non‐hydro RE, namely solar generation, has increased by between 38.74 per cent and 143.52 per cent for selected plants in west Peninsular Malaysia. The higher power generation from hydro is due to the lower marginal cost of the generating unit during this period. With new non‐hydro renewable energy projects continuing to be tendered and new quota for the large‐scale solar programme being introduced by the government in 1H2020, renewable energy has shown higher resiliency in the short term for power sector. SEDA is also actively promoting the adoption of rooftop solar. However, with companies being cash‐tight, especially small businesses and homeowners, it is foreseen that there will be restricted spending on big‐ticket items like solar modules. In the long run, a global recession post‐pandemic, coupled with the low oil price, might affect investment in renewables. This is especially true for the transportation sector, where biodiesel is relatively more expensive than diesel fuel.
To achieve a 20 per cent share of renewable energy in power generation by 2025, Malaysia aimed to have 3,758 MW of new renewable energy capacity installed in 2020, consisting of 1,172 MW of solar and 1,586 MW of non‐solar. According to the country’s power generation plan, another 5,100 MW of gas‐fired capacity will be installed by 2030. This is consistent with a recent think tank policy brief produced by IDEAS urged the government to stop building coal‐fired power plants and utilise natural gas as a bridge for low carbon transition towards renewable energy.
It is also much anticipated that the 12th Malaysia Plan (2021–2025) is a pivotal moment for Malaysia to navigate through the decarbonising energy sector while reviving the economy in the long run. However, at the point of writing, Malaysia was experiencing a third wave of COVID-19, which prompted a second MCO since the first in March 2020. Meanwhile, the ongoing political instability might continue to cause government priorities to change. Nevertheless, economic recovery and sustainable energy do not have to be mutually exclusive. Renewables can emerge stronger than pre‐COVID-19. This is especially when the government integrates support for clean energy into the economic recovery plan.
The economic recovery framework of the Philippines from COVID‐19 is not notably green. Still, the pandemic encouraged energy policymakers to rethink their current policies — from being technology‐neutral to pushing for an “energy transition”. In its newly updated Philippine Energy Plan 2018–2040, the Department of Energy emphasised that it plans to synergise the country’s economy “from the crippling effect of the pandemic with sustainable energy goals”. By 2040, the Department of Energy estimated 44.6 GW of new capacity from geothermal, renewable energy sources and possibly nuclear energy. The declaration of a moratorium on coal power plants in October 2020 also signalled the types of future energy projects that the government will support during the recovery period. The Duterte administration is also expected to go back to its infrastructure strategy, “Build Build Build Campaign”, when the pandemic subsides, which will be generous support to the power sector.
The pandemic has exposed the weaknesses of the energy sector and the current grid system. The country remains highly dependent on coal‐fired power plants which are inherently inflexible and vulnerable to fluctuating energy demand. COVID‐19 also highlighted the challenges faced by smaller power stakeholders such as electric cooperatives who could not negotiate force majeure compared to big players like Meralco. On the other hand, the variable renewable energy systems, like small‐ to medium‐scale solar PV systems, proved useful and increased their share of power generation during the lockdown. The Energy Department‘s adherence to the mandatory blend‘s strict compliance despite oil companies‘ pressure also positively affected the biofuel outlook.
These challenges to conventional sources of electricity during the health crisis encouraged forward‐thinking greener energy sources. However, these grand schemes will need to include more actionable plans that allow immediate solutions to the country’s specific energy needs and problems. These are on top of other challenges that may be brought about by the persistence of COVID‐19 and its new variants that could shift the government’s current priorities. The government has numerous policy documents and a supportive framework and incentives to drive large‐scale renewable energy projects. However, energy planning remains based on “what is available” rather than “what could be developed”.
Thailand’s economic stimulus packages were not notably green as they were focused on supporting livelihoods and the financial sector. In the short term, the quantity of electricity generated from hydropower and non‐hydro renewable resources declined in the first nine months of 2020 compared to the same period in 2019. All other sources of electricity also fell except for coal which showed a small increase. This suggests that the obligation on EGAT to purchase renewable energy was not fully effective in 2020. The lockdown measures during the COVID‐19 also curbed the construction of renewable electricity projects.
Despite the disruption caused by COVID‐19, the government continues to support renewable energy development. Five proposals were submitted to the Energy Ministry and other relevant government agencies in December 2020. These are electric vehicles and charging stations, power generation from waste energy, electricity generation from crops, electricity generation from solar and wind energy, and power generation for own use. The government is dedicated to developing not only solar and wind power but also various renewable energy sources.
Although renewable electricity projects in the pipeline have experienced slowdowns due to COVID‐19, many of these projects will come online once the pandemic is under control. Thailand’s power generation businesses can expect to continue growing steadily, supported by domestic demands for electricity and government support for investment. Increasing investments in business and industry shall continue to feed the rising consumption of electrical power. Once the pandemic finally comes to an end, the Thai government could apply lower interest rates, making investments more profitable. This may lead to a boom in renewables investment after COVID‐19. In the long term, the recovery of the economy and growing demand for electricity will continue to make non‐hydro renewables resilient with government support. However, natural gas will continue to provide the largest electricity supply share, increasing the gas share through importing LNG.
Although biofuel demand decreased slightly in the transport sector, the production has increased, showing resilience in the short term. The key reason is the government requirement for biodiesel’s additional mandatory use and the government incentive price subsidy. In the renewable electricity sector, contracts that have already been signed are immediately executed once safety is ensured. Therefore, in the short term, it is the government support that has made renewable energy fairly unaffected by COVID‐19.
In the two years before the COVID‐19 pandemic, Vietnam had become one of the most active countries in Southeast Asia in regard to the installation of non‐hydro renewable energy capacity, notably solar PV. This was principally due to generous feed‐in tariffs and a requirement of the grid company to connect, dispatch and purchase renewable energy. Nevertheless, the level of curtailment was high due to a shortage of grid capacity. During the first eight months of 2020, the share of non‐hydro renewable energy in the electricity mix was higher than in the second half of 2019. This may have been the result of new capacity coming online in late 2019. What is more notable is that hydropower’s share increased dramatically at the expense of coal‐fired power in June–August when the seasonal rains arrived.
The economic recovery plan aims to boost foreign investment, notably in manufacturing and processing. But it lacks any robust green features. During 2020, the government pushed forward with new policies to support both solar and wind energy. The most significant potential for new capacity lies with offshore wind, but feed‐in tariffs’ reduction may deter investors. Numerous coal‐fired plants are also under construction. In the future, LNG imports to feed power stations will reduce the dependence on coal. Still, fossil fuels are likely to continue dominating the electricity mix for many years to come, assuming that the economy continues to grow as the government hopes.
The outlook for biofuels looks more positive than in recent years after moves that should boost ethanol imports from the US. However, with oil demand continuing to rise at 4–5 per cent per year, considerable effort will be needed from the government to boost biofuels’ share in the transport fuel mix substantially.
In contrast to some European countries, none of the governments studied framed their economic recovery packages as being “green” in Asia‐Pacific. This is understandable because the immediate priority was to protect livelihoods and support healthcare. Nevertheless, many Asian states announced new energy policies or visions. The most notable of these was China’s pledge to achieve carbon neutrality by 2060. However, this seemed to be in tension with a call to further develop self‐sufficiency in energy supply that would require increased coal, oil, and natural gas production.
In several countries (India, Malaysia, Philippines, Thailand, Vietnam), governments declared continuing support for renewable energy, but at the same time called for additional thermal generation capacity ― with a gradual switch from coal to gas in Malaysia and Thailand. Therefore, it is not clear how fast the share of renewable energy will grow in these countries. The outlook for renewable electricity in Indonesia is even more uncertain ― the coal industry and coal‐fired power generation continue to receive strong support from many quarters. A critical factor in all the countries studied will be the extent to which national policies requiring the dispatch of low‐carbon electricity are rigorously enforced.
For these reasons, it cannot yet be said that the pandemic will have enhanced the share of electricity from non‐fossil fuels or non‐hydro renewable sources above pre‐existing trends in the countries studied. That is not to deny that governments might reconsider their strategies for electricity supply once the worst effects of the pandemic are past.
Governments will encounter competing tensions in formulating and implementing their energy policies in nearly all the countries covered by this study. They will continue to face international and domestic pressure to switch to cleaner energy sources to constrain rising carbon emissions and air pollution. Opposing pressures will come from the need to boost national energy supply as fast as possible, from interest groups in the fossil fuel industry keen to sustain their economic dominance, and from wider society seeking affordable supplies of energy which has traditionally been from fossil fuels.
As non‐hydro renewable electricity sources’ costs continue to decline, it is incumbent on national governments in the region to put in place and enforce credible policies to support the deployment and dispatch of renewable energy, both utility‐scale and off‐grid. Such measures can be market‐based or administrative, or both, depending on national circumstances. Where relevant, these should be supplemented by the development of regional grids to transmit renewable electricity from areas of surplus to those in deficit. In the long term, these efforts will support economic growth, emissions reduction, and energy access.
The original report can be accessed here