KUALA LUMPUR – Emerging Asia’s (EM Asia) decarbonisation initiatives are backed by policies and increased renewable energy competitiveness, leading to a long-term transition to lower carbon energy mix.
According to Moody’s Investors Service, EM Asia’s decarbonisation efforts are underway but being implemented at different speeds.
In a recent statement, it noted that key obstacles exist for certain nations and it includes inconsistent policy execution as well as high leverage to fund the increased capacity of renewable energy.
Moody’s vice president and senior credit officer, Boris Kan, said that government initiatives, such as placing priority in dispatch and obligatory renewable energy consumption targets, will boost the expansion of the sector throughout EM Asia.
Furthermore, he added that the transition from coal will depend on how governments would balance short-term objectives, such as energy costs and security compared to the emission reduction goals.
The decarbonisation transition of nations in EM Asia would depend on moving away from the mainly thermal powered fuel mix towards clean and renewable energy.
The statement explained that based on policy scenario predictions, International Energy Agency stated that the capacity for non-hydropower renewable energy in China, India, and Southeast Asia is expected to increase from the 700 gigawatts recorded in 2020, to 5,300 gigawatts in 30 years time.
Some EM Asia countries like China and India have primarily used wind and solar as their renewable energy sources, mostly due to the decline in wind turbine and solar module prices over the previous three to five years, although recent prices are volatile.
Despite that, the agency also said that challenges would remain for companies in the renewable energy sector. This includes their non-compliance with renewable purchase obligations, disruptions to tariff payments by off-takers, uncertain renewable tariff rates, and higher leverage amid substantial renewable expansion even though major companies will have access to more affordable financing, and electricity transmission limitations.
“Given their high strategic relevance to their countries’ power supply security and decarbonization aspirations, the majority of rated state-owned utilities in EM Asia will benefit from policy support,” the statement added.
Meanwhile, Abhishek Tyagi, another vice president and senior credit officer at Moody’s, stated that a majority of privately owned rated issuers have a reasonably lengthy record of stable operations and strong funding from sponsors.
For Malaysia, the country’s government has set a goal of expanding its renewable energy generation capacity to 31% by the year 2025 and reach carbon neutrality by 2050 at the earliest.
The statement said that the Malaysian government is assessing its decarbonisation measures in order to hit its targets, with plans of completion by the end of this year.
Moody’s added that a timely and supportive decision, which might include the imposition of a carbon fee, could encourage investment in renewable energy generation but a prolonged delay would further cause uncertainties and result in challenges to power generators.
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