The Covid-19 pandemic blindsided the world, and led to an economic downturn globally, with countries experiencing a sharp fall in national gross domestic product (GDP), income and employment levels.
Governments around the world have worked tirelessly to protect their people and reduce the economic disruption through various relief packages and fiscal stimuli.
Despite this global disruption, the transition to clean energy did not come to a complete halt. In fact, the pandemic led to greater focus on climate issues.
In the article, Clean energy innovation in the Covid-19 crisis, International Energy Agency (IEA) highlighted a survey by the Smith School of Enterprise and the Environment in mid-2020 that found broad agreement among 231 government officials and economists from 53 countries that clean energy R&D and clean energy infrastructure investment scored highest among various stimulus spending options for both positive impact and long-run multipliers.
As IEA Executive Director, Dr. Fatih Birol said during the launch of the special report on sustainable recovery in June 2020, “Governments have a once-in-a-lifetime opportunity to reboot their economies and bring a wave of new employment opportunities while accelerating the shift to a more resilient and cleaner energy future.”
And it appears that markets in Asia agree. An EY study on clean energy projects in eight economies across Asia – Indonesia, Japan, Malaysia, Philippines, South Korea, Taiwan, Thailand and Vietnam – found a robust pipeline of over 800 projects with a total investment potential of over US$316b.
Particularly, countries like Malaysia have procured large commitments from solar energy developers amid the pandemic, through tender processes. Other Asian economies have dedicated sizeable portions of their Covid-19-related relief packages to clean energy transition. For example, Malaysia earmarked US$2.9b for energy efficiency, while South Korea launched its Green New Deal worth US$65b.
Other Asian markets have announced their sustainability ambitions. In the last quarter of 2020, mainland China announced its target to achieve net-zero emissions by 2060. Japan and South Korea followed with similar announcements thereafter, to be net zero by 2050.
In many sectors of the economy, the private sector has been badly affected by the pandemic and companies are working to restore their capital and revitalise their businesses. Questions around whether they are willing to continue investing in the green transition, and if there is sufficient capital ready to be deployed, have surfaced.
Yet, the EY study reveals that the clean energy transition remains as attractive as ever, and confirms that the private sector is ready to deploy vast amount of capital. In many geographies studied, the number of projects currently in development, would allow authorities to exceed the existing targets set for clean energy if all were implemented.
A unique opportunity to reframe the economic recovery in a sustainable manner
The EY study, commissioned by the European Climate Foundation, identified a pipeline of over 800 shovel-ready projects across the eight Asian markets with an aggregate investment value in excess of US$316b across renewable energy, energy efficiency, electric vehicles, and transmission and distribution sectors. This is likely just the tip of the iceberg as some developers may keep information on projects out of public domain.
The findings validate a strong interest in clean energy development and energy management from the private sector. Hence, there is an opportunity for governments to reset their short-, medium- and long-term targets for the deployment of clean energy and recognise the opportunity to position the clean energy transition at the center of the economic recovery. These Asian markets can also leverage this private sector enthusiasm and consider more ambitious green targets.
A clean energy transition can help economies to “build back better” by supporting responsible investment and innovation and contributing to job creation. Backing a clean energy transition can help economies achieve twin goals of economic recovery and climate resilience through emissions reduction.
Yet, the path towards clean energy development is not without roadblocks. Challenges remain in the form unclear or changing regulations, lack of grid capacity, or lengthy land acquisition process. Further, there is a lack of commercially viable business opportunity for energy efficiency projects even when the potential benefits are well recognised.
However, the pandemic presents an opportunity for policy-makers to unlock economic and social benefits of low carbon energy transition by structurally reforming the clean energy sector. Although specific interventions need to be localised for each market, providing an enabling market framework through appropriate incentives and regulations can clear the pathway for rapid deployment of renewable energy.
A more comprehensive framework is needed to develop commercially viable and attractive investment opportunities to induce private sector participation in the energy efficiency sector. For example, electric vehicles are still in the early stages of the adoption curve, but some quick wins, such as public transport e-bus fleet replacement programs, can stimulate the sector.
Recovery in a post-Covid-19 environment requires coordinated action from various stakeholders. With greater collaboration between the public and private sectors, economies can tap into the immense potential that clean energy projects can offer to drive better economic, environmental and social outcomes. The choices today will shape the economies of tomorrow.
Gilles Pascual is EY Asean Power & Utilities Leader. The views in this article are those of the author and do not necessarily reflect the views of the global EY organisation or its member firms.
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