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Asia renewables offer US$1.1 trillion opportunity
Non-panel, non-turbine components to constitute 75% of investment through 2050
Tom King 8 Jul 2024

The renewable energy sector in seven Asian markets – Japan, South Korea, Malaysia, Taiwan, Vietnam, the Philippines and Indonesia – presents an investment potential exceeding US$1.1 trillion by 2050, according to a recent report.

This situation offers investors a number of significant opportunities in the solar and offshore wind supply chains, which are projected to generate up to 873 gigawatts (GW) of clean energy, finds the report by the Institute for Energy Economics and Financial Analysis (IEEFA).

The seven markets are expected to achieve a combined solar photovoltaic (PV) capacity of 634 gigawatts (GW), requiring an investment of US$394 billion, with US$346 billion potentially spent on local supply chains.

While offshore wind projects in the same countries are projected to deliver 239GW of capacity, representing a US$621 billion investment opportunity, with US$425 billion anticipated to be localized.

In addition, the maritime sector presents a further investment opportunity of US$72 billion to US$97 billion to build offshore wind installation and support service vessels. Most of these ships are also expected to be sourced regionally.

That investment in non-panel and non-turbine components, the report notes, will constitute at least 75% of the total investment through 2050, representing a US$770 billion opportunity for domestic industries in the seven countries, with areas such as materials, components, infrastructure, logistics and services, providing significant value to their domestic economies with the potential to be marketed regionally and beyond.

The immediate investment benefits in solar energy for the Asia-Pacific region and the longer-term advantages in the offshore wind supply chain are emphasized by Grant Hauber, the report’s author and IEEFA’s strategic energy finance adviser for Asia.

And while China currently dominates the global supply chain for solar PV panel manufacturing, delivering nearly 85% of global demand, countries in the region, Hauber suggests, can focus on other project-level components instead of producing PV modules.

Progressive policies needed

The offshore wind sector in Asia benefits from abundant, high-quality resources and the region's traditional and well-established maritime economies. This sector, Hauber says, is well-suited for large-scale offshore wind projects, leveraging strengths in shipbuilding, steel fabrications, marine maintenance and offshore services.

Shipbuilding for offshore wind is a significant opportunity, potentially worth up to US$97 billion, with a particular need for specialized wind turbine installation vessels.

Currently, only about 20% of wind farm inputs are locally sourced in the region, but this could grow to between 66% and 80% with sustained demand. The combined offshore wind farm and specialty vessel market represents an investment opportunity of around US$878 billion through 2050.

While the report claims the renewable supply-chain investment could be more than a hefty US$1.1 trillion by 2050, the market’s potential, Hauber suggests, could actually be much larger than the current projections.

Falling capital costs for solar PV and offshore wind technologies are expected to make these the lowest-cost electricity sources on each national grid. As a result, capacity targets are likely to expand to capture economic benefits.

However, to underpin and capture this investment potential in the region, governments will need to adopt progressive renewable energy policies.

Countries will need to focus on maximizing low-cost capacity additions at scale, which Hauber says will create recurring demand and allow local industries to take advantage of the growing solar and offshore wind supply chains.

This alignment in turn will benefit domestic businesses, consumers and governments by providing low-cost electricity, while paying back the investment with significant progress towards each country’s decarbonization targets.

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