KPMG: Decarbonisation through renewable energy
AS more and more countries respond to climate change and announce their commitments to Net Zero, supporting mechanisms and measures continue to bloom. Renewable energy, one of the major components to achieve decarbonisation targets, has started to become mainstream worldwide.
Global accounting firm KPMG saw that in the Asia Pacific region, many governments are already pushing for increased renewables to reduce greenhouse gas emissions and drive energy transformation, resulting in a more friendly environment for the development of the renewable industry.
“In addition to the Net Zero targets at a national level, renewable electricity procurement at the corporate level is a vital action to take for walking the talk on commitments of RE1001 and science-based targets,” commented Niven Huang, ESG leader for KPMG Asia Pacific and KPMG in Taiwan in a special report on the matter.
“The need for corporate renewable power in the Asia Pacific region is growing rapidly due to the global supply chain requirements and local carbon reduction regulations.
“However, many obstacles are yet to be overcome in order to create a robust demand and supply market.
“The impact of climate change is beyond our imagination. The cost of inaction is even higher. Asia Pacific is one of the most vulnerable regions to climate change on this planet.”
KPMG noted that Corporate Power Purchase Agreement (CPPA) schemes offer an effective way to help decarbonise countries’ power consumption not only by increasing corporate investment in the renewable energy sector, but also by providing large power consumers an effective tool to meet their sustainability commitments.
With dedicated commitment and advocacy from corporations, CPPA has the potential to accelerate energy transition across the Asia Pacific region, said KPMG global infrastructure power sector lead Steven Chen, who focuses on current CPPA market in Asia Pacific.
“However, every market in this region has varying levels of maturity in electricity market liberalisation and regulatory framework, which makes green energy procurement even more challenging,” he explained.
“According to the RE100 annual report in 2020, 42 per cent of its new members are from the Asia Pacific region. Corporations are looking for ways to power their regional operations, supply chains and product life cycle with clean energy.
“They have also identified Asia Pacific region markets such as China, Japan, South Korea, Taiwan, Singapore and Indonesia as the most challenging markets for achieving 100 per cent renewable electricity.”
The report highlighted that the CPPA market in Asia Pacific is not fully developed but showing significant potential for growth.
As of 2020, 12 per cent of cumulative CPPA volume was originated in Asia Pacific, led by India and Australia.
The Asia Pacific market has been a challenging market for businesses to source renewable electricity due to limited availability, regulatory complexity and high costs, but it also offers the biggest opportunities for clean energy investment and growth.
Evolving regulatory framework to implement changes to the CPPA framework.
“Taiwan, South Korea, the Philippines and Vietnam now stand out for regulatory reforms to enable CPPAs,” the report said. “In Taiwan, the liberalisation of the renewable energy market allows corporations to purchase green energy from the generators. South Korea opened its renewable energy market to third-party PPAs this year with state-owned utility KEPCO as an intermediary.
“Vietnam is piloting synthetic direct PPA mechanisms for renewable energy projects at a scale from 400MW to 1,000MW to be implemented from 2021 to 2023.
“In the Philippines, the implementation of a green energy option program offers choice for large power users to source their own electricity from renewables.
The phase-out of generous feed-in-tariff (FiT) scheme is expected to increase the appetite for CPPAs.”
In many Asian markets such as Japan and Vietnam, the report said that renewable energy projects have benefited from high FiT, making CPPA a less attractive option then.