Asia corporates turn to wind and solar deals as fossil fuel prices surge

Corporate renewable energy power purchase agreements (PPAs) in Asia have hit record levels in 2022, mostly because wind and solar offer a far cheaper alternative to fossil fuels, particularly gas.

Asia Pacific accounts for 15 per cent of the global PPA market and only 35 of the 122 regional companies to join the RE100 global renewable energy initiative have signed a PPA, but this is mostly due to regulatory hurdles, says Kyeongho Lee, Wood MacKenzie principal analyst of Asia Pacific power and renewables.

“Where they are viable, PPAs are an easy and relatively inexpensive way for companies to access renewable power. The main barrier is a lack of regulation permitting large-scale procurement of renewables in some jurisdictions to drive growth,” he wrote in a research note.

“Countries including South Korea, Japan, and China are all gradually easing regulations surrounding offsite corporate PPAs, which should open up opportunities in the coming years.”

Australia, India, and Taiwan are driving corporate PPAs in renewables in Asia Pacific and account for 89 per cent of all PPAs signed. Indian companies lead the race with a cumulative 8.1GW of PPAs signed in total.

Solar and wind are equally popular in Australia; solar dominates PPAs in India; and offshore wind is the preferred technology in Taiwan.

Most Southeast Asian PPAs are hamstrung by the size of the installations available, which are largely rooftop solar, Lee says.

Cheaper by the megawatt

The growing interest in corporate PPAs is due to the rapidly decreasing cost of renewable energy across the region.

“Historically, the demand for renewable procurement has mainly been driven by ambitious decarbonisation targets, both from governments and companies themselves. However, price is becoming an increasingly important part of the equation,” Lee said.

“Renewable power costs are 46% below average industrial end-user tariffs in 2022.”

Since 2019 LNG prices are up 2.4 times, and crude oil has doubled. Conversely, the levelised cost of electricity (LCOE) renewables is dropping: down 4.9 per cent for utility-scale solar, 14.2 per cent for commercial solar, and 8.6 per cent for onshore wind.

Could exports reshape corporate PPAs?

Corporate PPAs may be in line for upheaval in the coming years, if renewable energy exports take off.

Lee says India’s biggest three solar developers Amp Energy, Amplus Solar and Cleantech Solar are in control of that market, and the same goes for Taiwan’s top three wind developers. Both either have little or no capacity installed outside their countries.

Aside from small bilateral agreements such as hydropower exports from Bhutan to India, the opportunities for corporations looking to expand their renewable energy options within the region are slim.

A rare pure-play renewables export opportunity is Sun Cable in Australia which is planning to start exporting solar power to Indonesia and Singapore in 2028 via its Australia-Asia PowerLink cable between Darwin and Singapore.

“Deeper integration of South Asia’s power systems would allow countries in the region to leverage significant untapped hydropower potential and accelerate the deployment of solar and wind resources,” wrote World Bank South Asia infrastructure director Guangzhe Chen in July.

But the main opportunity the region is leaning on is green hydrogen: Australia wants to be a top-three exporter of hydrogen to Asian markets by 2030 to replace fading coal and gas markets with Western Australia is financing the Mid West Hydrogen Hub with a view to exports and Queensland is fostering plans to do the same in its state.

Using corporate PPAs to promote the use of green hydrogen in Asia is still theoretical — given any projects manufacturing the gas are still in very small scale pilot stages.