Analysis by energy researcher Wood Mackenzie shows that across the region, new investments in renewables are anticipated to be 23% lower cost than coal power on average by the end of the decade
In 2019, global energy-related CO2 emissions increased by 0.5% with economic growth of 2.9 (Credit: pxfuel)
Most markets in Asia Pacific can expect to see cheaper levelised cost of electricity (LCOE) for renewables compared to coal power by 2030, according to a report.
The analysis by energy researcher Wood Mackenzie shows that across the region, new investments in renewables are anticipated to be 23% lower cost than coal power on average by the end of the decade.
It added that renewable power currently costs about 16% more on average compared to coal power but has been at a “discount to gas-fired power since 2019”.
Wood Mackenzie senior analyst Rishab Shrestha said: “Today, India and Australia are the only markets in Asia Pacific with LCOE for renewables cheaper than new-build coal.
“However, by the end of the decade, we can expect almost all markets in the region to have renewable power at a discount compared to the lowest cost fossil fuel. The stage is set for rapid growth of subsidy-free renewables in Asia Pacific.”
Renewables set to be considerably cheaper than new-build coal in India and Australia by 2030
By 2030, the report highlights that renewable power in India and Australia are expected to be 56% and 47% cheaper than new-build coal.
It added that India is a “cost leader” for renewables due to “low construction and labour costs and good renewable resources”.
Wood Mackenzie said the “massive” renewables market potential has attracted many investors, leading to “intense competition and cost declines”.
While Australia and China have similar solar costs, the energy researcher claims the former market has “better solar insolation” whereas CAPEX is cheaper in the latter market. But, due to lower coal LCOE in China, the renewables premium remains “relatively high”.
Shrestha said: “The winds will change in China as we expect renewables’ LCOE to be cheaper than coal next year.
“Over this decade, the renewables discount over fossil fuels will grow to 40% on average across China, as the LCOE of new wind and solar plants fall below those of fossil fuels, and also taking into consideration a carbon price.”
Three other markets – South Korea, Thailand and Vietnam – will join China with lower renewable power cost compared to coal in 2021, according to Wood Mackenzie.
It expects a “modest “carbon price to impact the LCOE of coal and gas in Asia Pacific. In the region, carbon prices are pushing up LCOE by more than 4% for coal and gas today and could double to 8% in 2030.
The analysis notes that the inclusion of a $30 per tonne carbon price would expedite new-build solar (utility PV) and wind (onshore wind) costs to be lower than coal by 2023 and 2030, which is five years earlier than the original timeline.
Despite low renewables costs, government policy “still critical” in future to attract investors
Northeast Asia’s renewables premium currently averages at about 25%. Wood Mackenzie said Japan, the most expensive renewables cost country in 2020, can also expect a 1% renewables discount against fossil fuels by 2030.
It added that the market’s high premium is largely due to higher labour costs, environmental permit costs, land constraints and lower availability of renewable resources.
The energy researcher anticipates South Korea and Taiwan will see the cost of renewable power to be about 30% cheaper than fossil fuel power costs by the end of the decade.
Southeast Asia has a high renewables LCOE premium of 30% due to its lower coal LCOE in 2020. The report notes that Vietnam is expected to “lead the region” as utility PV power becomes cheaper than coal power as early as next year.
Shrestha said: “Despite low renewables costs, government policy is still critical in the future to attract investors, manage grid reliability and transmission upgrades, and encourage battery storage to manage intermittency of renewables.
“Our LCOE estimates for solar plus storage and wind plus storage projects show that they can start to compete with gas in 2026 and 2032, respectively. However, it will take much longer for these technologies to compete with coal.”