According to International Energy Agency (IEA) website publication on Renewables 2022 Analysis and forecast to 2027 report:
New auction schemes will accelerate deployment in upcoming years, but policy uncertainty remains a challenge
Renewable capacity in the ASEAN region is expected to increase by 51 GW during 2022-2027 (+56%). Solar PV will account for over half of the growth, followed by onshore wind and hydropower. ASEAN is also expected to be a leading region in geothermal power deployment worldwide, responsible for close to one-third of global additions up to 2027. Solar PV leads renewable capacity growth, and the speed of deployment is expected accelerate over the forecast period owing to policy improvements, notably new auction and procurement schemes in the Philippines and Indonesia.
Viet Nam leads expansion as its commercial distributed PV deployment accelerates and its planned auction system hastens wind uptake. Renewable capacity expansion, led by PV, will also accelerate in other ASEAN countries over 2022-2027, driven by policy improvements such as the Philippines’ and Indonesia’s new competitive auction schemes. In addition, a few large-scale hydropower projects are expected to come online in Malaysia and Indonesia. Although the main-case forecast is largely unchanged from last year, the accelerated case has been revised 9% downwards due to delays in implementing new policies in Viet Nam, Indonesia and Thailand.
Although the ASEAN region has the potential for much stronger renewable energy growth, policy uncertainty is the main challenge. In almost all countries in the region, delays in introducing support policies are discouraging investment, while lengthy and complicated permitting procedures are hindering faster project development. Gaps in policy support have led to boom-bust cycles in Viet Nam and Thailand.
Furthermore, low project bankability due to limited risk protection in standard PPAs is curbing the interest of international investors, and strict local-content and project ownership rules further inhibit foreign investment and raise the cost of renewable energy. Under the accelerated case, all these challenges are resolved with focused policies, leading to significantly higher deployment.
Viet Nam is expected to lead ASEAN renewable capacity expansion over the forecast period. While generous subsidies led to deployment booms in utility-scale solar PV projects in 2019, in distributed solar PV in 2020 and in wind in 2021, a significant slowdown in annual additions is expected in 2022-2023 with the phasedown of incentives.
Further deployment of both wind and PV will depend on how quickly Viet Nam’s new Power Development Plan (PDP8) and planned auction scheme are implemented. It is expected that auctions will focus on wind, with 20 GW of additions targeted in the draft PDP8 and just 4 GW of utility-scale PV. Rapid capacity growth is forecast for the commercial PV segment, owing to economically attractive self-consumption and new policies facilitating bilateral PPA contracts.
In Indonesia, renewable capacity deployment in 2022-2027 is expected to quadruple from the 2016-2021 level. Solar PV accounts for almost half of this growth, followed by hydropower. We also expect the country to add over 1.5 GW of geothermal capacity by 2027, the second-highest addition globally.
A presidential decree of September 2022 introduced competitive auctions, which will be the main impetus for utility-scale PV and onshore wind deployment in the second half of the forecast period. The decree is an important step towards faster renewable energy uptake in Indonesia, but a lack of detailed regulations leads to forecast uncertainty. In addition, several large-scale hydropower projects are to be commissioned by 2027, based on bilateral PPAs with the state-owned utility (PLN).
The Philippines is set to add more than 7 GW of renewable capacity over 2022- 2027 (almost four times as much as during 2016-2021), mainly in solar PV and wind. In June 2022, the Philippines awarded 2 GW of renewable capacity through its Green Energy Auction Program, and in July 2022 it introduced the National Renewable Energy Program 2020-2040, targeting 35% renewable energy in electricity generation by 2030 and 50% by 2040. The government also plans to double the geothermal share in installed capacity from the current 12% to 24% by 2040.
Competitive auctions are expected to be the main tool used to achieve all these targets. Furthermore, the Philippines’ government is considering allowing more foreign ownership of renewable energy assets to encourage international investment, which is assumed to hasten capacity deployment in the main case.
In Thailand, commercial PV installations producing power for self-consumption are expected to drive capacity growth over 2022-2027 as policy support for renewable energy technologies remains limited. Although a new power development plan is under consideration, it is unclear which targets and measures for renewable capacity will be included. Auctions and net metering continue to support growth in utility-scale and commercial PV in Malaysia, while the private PPA market will continue to propel rooftop and floating PV uptake in Singapore.
In the accelerated case, renewable capacity deployment in ASEAN during 2022- 2027 is over 50% higher than in the main case. Solar PV and wind offer the greatest upside potential because their generation costs are the lowest of all renewable technologies and are rapidly becoming more competitive with coal-fired generation. Faster implementation of new auction schemes in Viet Nam and ambitious auction schedules in Indonesia and the Philippines could drive much faster deployment of these technologies.
Increased investment in grid infrastructure, especially in Viet Nam, is also needed to achieve faster solar PV expansion. Simplifying permitting procedures, easing local-content requirements and implementing standardised bankable PPAs should propel international investment. Additionally, reducing delays in updating energy strategy documents with more ambitious renewable capacity targets in Viet Nam, Thailand and Indonesia could provide long-term policy certainty and further boost deployment.
