Corporate renewable PPA activity in Asia Pacific more than doubled to 3800MW in 2020 compared to the previous year, according to Wood Mackenzie.
This is despite project delays from labour shortages and logistic disruptions from the pandemic.
Wood Mackenzie senior analyst Rishab Shrestha said: “Corporate renewable procurement is on the rise and Asia Pacific is starting to play a bigger role with 10.9 GW of cumulative capacity procured until H1 2021.
“Demand for renewable procurement is largely driven by ambitious decarbonisation 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.”
Renewables premium have fallen across all markets in Asia Pacific and is expected to be 45% below power tariffs on average by 2025.
Wheeling and transmission charges will offset some of these gains, but the discount is expected to remain above 30% by 2025.
Currently, India, Australia and Taiwan region lead in Asia Pacific’s corporate renewable procurement market, with a cumulative procurement capacity of 5.2GW, 3.2GW and 1.3GW respectively.
Attractive project economics and enabling policy framework in Australia and India account for the greater corporate PPA activity in these markets.
Shrestha added: “We expect Singapore and Japan 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.”
Breaking down the buyer profile, industrial offtakers were the largest buyers of renewables, accounting for 57% share of PPAs contracted in 2020.
This is due to the high energy demand of the electronics manufacturing and mining industries.
Retail and service offtakers were the next largest group, accounting for 25.4% share.
Technology sector offtakers make up 16.9% share, with energy procured primarily directed towards powering data centres.
Shrestha said: “Interestingly, although RE100 memberships in Asia Pacific have increased year-on-year, only 10% of the 99 member companies signed corporate PPAs in the region.
“Most Asia Pacific headquartered RE100 companies rely on onsite installation and net-metering solar projects to power their operations using renewables.”
Asia Pacific RE100 companies account for only 22% of total cumulative contracted PPA capacity share.
Most companies that signed corporate PPAs in the region have not committed to RE100, as limited regulations permitting large-scale procurement of renewables in the region form a major barrier.
Large energy users, particularly companies in the manufacturing industry, would demand more policy certainty regarding procurement from offsite projects to satisfy their large energy requirement for RE100 targets to be feasible.
With ambitious carbon neutrality targets and corporate emission reduction obligations, Asia Pacific businesses are increasingly pressuring regulatory bodies to ease corporate procurement regulations towards offsite generation projects offering larger capacities.
Shrestha said: “While challenges remain, policy, corporate ambition and economics are starting to tilt the balance towards a more conducive corporate PPA landscape for growth.”