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Strategic Directions: Electric Industry Asia 2021

Technical Advances, Lowering Costs Will Drive Renewables in Asia, but Integration and Regulatory Challenges Remain

Technical advances, lowering costs will drive renewables in Asia, but integration and regulatory challenges remain

Renewable energy is critical to Asia’s future, but delivering on its promise will require a coordinated effort between the energy sector, regulators and other critical stakeholders. In fact, Black & Veatch’s Strategic Directions: Electric Industry Asia 2021 respondents place renewables second among the most-challenging issues facing Asia’s electric industry, just behind uncertainty of investment caused by financial downturn. Energy storage — a crucial element in the successful deployment of renewables at both utility scale and for DER — is the third most-challenging issue; level with economic regulation and market structure.

The renewables challenge can be construed as one of change management, rather than a challenge rooted in the technical aspects of decarbonizing Asia’s power infrastructure. The theme of managing change, often through the prism of government policy, regulation and socio-economic factors, is a trend across survey responses.

Asian renewables investments to increase

The most significant investment growth is anticipated in solar: 60 percent of respondents believe land-based solar would attract “much more investment than today,” and 28.6 percent say it would receive “somewhat more investment than today”. Floating solar ranks third in terms of new generation capacity investments with 34 percent of respondents anticipating “much more investment,” and 46 percent foreseeing “somewhat more investment.”

Sandwiched between land-based and floating solar, in terms of predicted investment, is energy storage. Given that storage is vital for the successful adoption of solar it is reasonable to interpret investments in storage as going hand-in-glove with investments in solar generation.

Other forms of renewable energy in ascendance are onshore and offshore wind, DERs and waste-to-energy. A noteworthy trend is floating/offshore renewables investments. In many Asian countries — especially Southeast Asia — drivers include competition for landbank suitable for large-footprint solar and wind arrays, coupled with land acquisition challenges.

Regulation, investment community to drive change

The changes Asia’s energy sector has to manage are driven from the top. Respondents cite government regulators as having the greatest influence, followed by the financial and investment sector then customers. In further evidence that change in Asia’s power sector is led by socio-economic and policy factors, rather than technology-driven, the technology sector is cited as joint last as an influence for change.

Technical advances, lowering costs will drive renewables in Asia, but integration and regulatory challenges remain

The drivers for Asia’s renewable energy investments show that the renewables challenge is one of change management rather than technical implementation. Of the factors behind renewable energy investments, only two are technical: improved competitiveness and efficiencies from new technologies, and battery storage making it easier to manage and reduce losses (ranked third and seventh, respectively).

With the exception of changes in the levelized cost of energy (LCOE), all of the other factors driving change are rooted in socio-economics and/or government policy. Lower LCOE, which sits at the nexus of technical advances and socio economics and/or government policy, is the factor respondents feel is most important in driving renewable energy investments.

Technical advances contributing to solar’s lower LCOE include:

  • Bifacial photovolatic technology offers higher electricity production from a module that incurs almost no additional balance of system cost; allows sub-prime locations to maintain the amount of required generation using less land and fewer development costs.
  • Bifacial gain factors — that can be engineered to optimize performance — include adjusting the surface albedo or reflectance of the surrounding ground, the row pitch, module height and backside shading levels. Most of these are new factors, not relevant previously to solar facility design.

A combination of lower LCOE and increased owner/shareholder desire for decarbonization is likely to motivate the sectors most vocal in demanding renewable electricity sources. These are typically newer tech-related sectors or large-scale users of the services these tech-related sectors provide: data centers, banking and large IT companies. Demand for change from more established, traditional sectors — e.g., food and beverage, pharmaceutical and mining — is lower. Another socio-economic factor driving the change towards a digital economy and the growing significance of the companies and sectors facilitating that change is driving the demand for renewables.

Storage is key to renewable integration

A significant part of the challenge posed by renewables lies in managing solar and wind’s variable generation. Although investment issues — network investment not keeping pace with demand, and underinvestment in more reliable transmission networks — are seen as the biggest threats to reliable grid operations and performance, the introduction of too much intermittent renewable energy is the third biggest threat. The flip side of the variable generation coin — not enough storage capacity — is seen as the joint fourth biggest threat. DER, which frequently encompasses small-scale renewables and storage, is not seen as a major risk to grid performance.

On a technical level, managing the introduction of significant amounts of renewable energy is being managed with ever-greater success and efficiency, but this requires significant storage capacity investments. Battery energy storage systems (BESS) are gaining favor due to lowest-ever capital costs. BESS share the lithium-ion cells used in cell phones and electric vehicles; economies of scale from these industries are lowering the cost for BESS in power systems. In the past decade, the cost of lithium-ion energy storage in terms of U.S. dollar per kilowatt hour has fallen by more than 75 percent. The cost 10 years hence is predicted to be half current levels.

A future of more efficient and integrated renewables

The prospects for more solar deployments in Asia look promising, given expected levels of investments and declining costs of complementary BESS. This combination will be significant in overcoming technical challenges of integrating utility-scale solar and other variable generating renewables, but the biggest challenges overall regarding the decarbonization of Asia’s power sector are predominantly rooted in government policies, or lack thereof, and broader socio-economic factors.

To help them prosper in a decarbonized future, power and grid companies need partners familiar with every aspect in the lifecycle of generation, transmission and distribution assets. Such partners also need to be expert in integrating these assets — especially storage — to create a stable, efficiently functioning whole. The best partners will be able to marry technical expertise with the ability to help the power sector navigate and influence regulations and advise on investment strategies along each point in the asset lifecycle.

About the Authors

Sam Scupham is associate vice president and director of Asia renewable and distributed energy within Black & Veatch’s power business. With more than 20 years of experience, Scupham is responsible for the growth of Black & Veatch’s Renewable Energy engineering, procurement and construction and consulting services business across Asia.

Mitesh Patel is business development director and associate vice president for Black & Veatch’s renewable energy business in Asia, helping Black & Veatch’s clients with end-to-end solutions for large and small renewable and distributed energy projects. With 27 years of experience across the lifecycle of power projects, Patel’s career spans from structuring and executing complex deals and project development strategies to serving on owner’s engineer and operations and maintenance teams of large independent power producers.

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