The Malaysian Reserve

Solar power sees record year for new power generation

An aerial view of solar panels. China accounts for just over half of that new global solar capacity in 2017 (Pic: Bloomberg)

The rise to prominence of solar power in 2017 saw the sector doing better compared to the net additions of coal, gas and nuclear plants put together

By HABHAJAN SINGH / Pic By BLOOMBERG

Solar power energy dominated global investment in new power generation like never before in 2017.

The world installed a record 98GW of new solar capacity, far more than the net additions of any other technology — renewable, fossil fuel or nuclear, and solar power attracted far more investment at US$160.8 billion (RM623.9 billion), up 18%, than any other technology, according to a latest energy report.

The “record prominence” of solar power last year saw the sector doing better compared to the net additions of coal, gas and nuclear plants put together.

“The strength of these renewable energy (RE) investment totals over the years has happened despite steady falls in capital costs, particularly in solar. Those reductions meant that developers have been able to instal year-on-year more megawatts for the same number of dollars,” according to the Global Trends in RE Investment 2018 report.

The report, published jointly by the United Nations Environment Programme (UNEP), Frankfurt School-UNEP Collaborating Centre and Bloomberg New Energy Finance, found that falling costs for solar electricity, and to some extent wind power, was continuing to drive deployment.

Last year was the eighth in a row in which global investment in renewables exceeded US$200 billion — and since 2004, the world has invested US$2.9 trillion in these green energy sources. Overall, China was by far the world’s largest investing country in renewables, at a record US$126.6 billion, up 31% in 2016, noted the 86-page report.

In total, it said US$279.8 billion was invested in renewables excluding large hydro and a record 157GW of renewable power was commissioned last year, up from 143GW in 2016 and far outstripping the net 70GW of fossil fuel- generating capacity added (after adjusting for the closure of some existing plants) over the same period.

China accounted for just over half of that new global solar capacity in 2017, and it accounted for 45% of the US$279.8 billion committed worldwide to all renewables, excluding large hydro-electric projects.

The report does not cover larger hydro- electric dams of more than 50MW, as well as energy smart technologies such as smart grid, electric vehicles and energy storage.

Regional Outlook

The energy report also noted that developing economies in Asia-Oceania, excluding China and India, had a mediocre year in terms of renewables investment.

Malaysia ranks third, after Indonesia and Hong Kong, in a chart measuring RE for that part of the world.

Indonesia led the chart due to the 80MW PT Supreme Energy Muara Laboh geothermal project with an investment of US$610 million, while Hong Kong owes its presence in the ranking more due to the public market activity, rather than to the build-out of RE capacity.

Noting the “smattering of project financing in wind and solar” elsewhere, the report mentioned the ItraMAS Scatec Malaysia photovoltaic portfolio, at 197MW and US$292 million, and the Energy Logics Pasuquin East wind farm in the Philippines, at 132MW and an estimated US$205 million.

“The modest RE investment figures for the populous South-East Asian economies with fast- growing electricity demand resulted mainly from policy uncertainty.

“Indonesia announced competitive tenders for solar, but the tender evaluation process has been unclear and participation limited to a few developers.

“In the Philippines, developers of more than 1GW of wind projects have been unable to progress because of the lack of a suitable regulatory framework,” the report said.

It added that Thailand was host to US$671 million of RE investment in 2017, but this was down from US$2.4 billion the previous year, mainly due to a cut in the size of the country’s second Agro-Solar programme and the introduction by the government of a new type of power purchase agreement (PPA) less friendly to intermittent generation.

“Vietnam announced a solar feed-in tariff, but developers were in a cautious mood over the bankability of PPAs.

“Meanwhile, international investors and manufacturers have announced ambitious plans for wind projects in Vietnam, but so far the tariffs on offer have been insufficient for many projects to be built,” the report said.

Falling Costs

One continuous development captured in the report was the steep reductions in capital and generating costs for renewables, which have been instrumental in creating a bigger market than ever before for these technologies.

“Some projects that would not have been economic at the cost levels prevalent in earlier years have become viable.

“The new capacity added of renewables excluding large hydro has jumped from 69GW in 2010 to 143GW in 2016, and a record 157GW in 2017,” it said.

It cautioned, however, that investment decisions made in one year may not translate into capacity commissioned in the same year, but in a later one.

Offshore wind projects, for instance, often reach commissioning two to three years after the final investment decision.

For solar projects, that gap is usually much shorter, at three to six months.