Corporate renewable power purchase agreements (PPA) are starting to play a bigger role in decarbonization efforts in the Asia Pacific region, global energy consultancy Wood Mackenzie said Wednesday.
A corporate renewable PPA is a contract between a company and a renewable power producer to buy electricity at a certain price and for a set period of time.
Wood Mackenzie estimated that the volume of corporate renewable PPAs more than doubled to 3.8 gigawatts (GW) in 2020 compared to the previous year.
“This is despite project delays from labor shortages and logistic disruptions from the pandemic,” it added.
Wood Mackenzie senior analyst Rishab Shrestha said corporate renewables procurement is on the upswing, with 10.9 GW of total capacity bought until the first half of 2021 in the Asia Pacific.
“Demand for renewable procurement is largely driven by ambitious decarbonization targets set by governments and companies in the region. But more importantly, falling renewables premium and rising power tariffs in Asia Pacific are making corporate renewable PPAs more attractive,” he said.
Woodmac predicted that renewable premiums have fallen across all markets in the Asia Pacific and are expected to be 45% below power tariffs on average by 2025. It added that wheeling and transmission charges will offset some of these gains, but the discount is expected to remain above 30% by 2025.
With 5.2 GW, 3.2 GW, and 1.3 GW of cumulative procurement capacity, India, Australia, and Taiwan now top the Asia Pacific corporate renewable procurement market, the consultancy agency said.
The increased corporate PPA activity in Australia and India is due to the attractive project economics and supporting policy framework in these regions, it said.
Shrestha noted that Singapore and Japan are also expected to join the ranks in becoming leaders in corporate renewable procurement.
“Singapore is the most developed procurement market in Southeast Asia but has limited land availability for renewable projects. Japan’s procurement is largely limited to onsite projects, but we expect policy updates by year end,” he said.
WoodMac highlighted that industrial offtakers were the largest buyers of renewables, accounting for a 57% share of PPAs contracted in 2020. “This is due to the high energy demand of the electronics manufacturing and mining industries,” it said.
Retail and service offtakers were the next largest group, accounting for a 25.4% share, which is followed by technology sector offtakers with a 16.9% share.
By Sibel Morrow