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‘Developing’ Asia Needs More Investments For Energy Infrastructure

23 November, 2011

In its World Energy Outlook 2010, the IEA estimates that the investment needs for energy infrastructure in developing Asia will total nearly $10 trillion over the next 25 years. This translates to an average annual level of investment of $400 billion, with three-quarters of this investment for the power sector. 

About half of the region’s investment will be in China, about one-quarter of the region’s investment will be in India and the remaining one-quarter will be among other developing Asian countries.

Further, IEA estimates in World Energy Outlook 2010 that in order to achieve the GHG emissions cuts needed to meet the 450 ppm scenario, additional global investment will be required in the range of $13.5 trillion-$18 trillion, which translates to an annual global investment of $540 billion-$720 billion.

Investment In Clean Energy 

Investment trends globally and in Asia: Global investment in clean energy quadrupled from 2004 to 2008, reaching $159 billion. The investment continues to rise to $160 billion in 2009 and $211 billion in 2010.

In 2005, OECD countries accounted for nearly 77 per cent of global investment in clean energy and non-OECD countries accounted for 23 per cent. The non-OECD share rose to 29 per cent in 2007 and then to 40 per cent in 2008, reaching approximately $94 billion. Brazil, China and India accounted for nearly all of non-OECD’s 2008 investment (97 per cent).

For the first time in 2010, Asia-Pacific had the largest share of global investment in clean energy, at $59 billion. Annual investment during this period increased nearly fifteenfold.

China and India account for nearly 90 per cent of the 2010 clean energy investment in the Asia-Pacific – with $49 billion for China and $3.8 billion for India. New investments in clean energy in Indonesia, the Philippines, Thailand and Vietnam were in the range of $200-700 million per country.

China: In 2009, China moved ahead of the USA as the country with the highest financial investment in clean energy and it maintained this position in 2010, with $49.8 billion in new investment. The dominant form of investment in Chinese clean energy was made via asset finance, which accounted for $29.2 billion (87 per cent) of the total investment in clean energy in China in 2009 (up from $22.0 billion in 2008). Public market fundraising reached $4.4 billion in 2009, a dramatic increase from $0.2 billion the previous year. Venture capital and private equity investments were relatively insignificant in China at $0.2 billion, down from $0.7 billion in 2008. China accounted for 28 per cent of global financial investment in clean energy and its level of investment grew 53 per cent between 2008 and 2009. China expects that the renewable power share of its total energy consumption will rise to 15 per cent by 2020.

Wind attracted 81 per cent of new financial investment in clean energy in 2009, with $27.2 billion in new funding. China added 13.8 GW, which effectively doubled its wind capacity. In 2009, solar attracted $3.3 billion of investment while biomass attracted $3 billion.

India: Financial investment in clean energy in India stood at $2.7 billion in 2009, down 21 per cent from the $3.4 billion seen in 2008. Nevertheless, India still ranks eighth highest in the world for clean energy financial investment. Asset finance is the largest form of clean energy investment in the country at 73 per cent of the total. However, it dropped from $3.1 billion in 2008 to $1.9 billion in 2009. Public market activity in India made up the bulk of the remaining clean energy financial investment, accounting for 25 per cent of the national total, or $0.7 billion. Private equity and venture capital activity in India constituted a very small proportion of clean energy investment, at just 4 per cent or $0.1 billion. This was down from $0.4 billion in 2008.

The wind energy sector was the largest recipient of new investment in India in 2009 at $1.6 billion, representing 59 per cent of the national total. Biomass attracted $0.6 billion of investment and solar attracted $0.1 billion of investment in 2009.

South-east Asia: According to the IEA, investment in new, renewable energy production capacity increased more than twelvefold between 2004 and 2009 – from less than $200 million in 2004 to more than $2.5 billion in 2009. The investments were predominantly in biofuels, followed by biomass & waste, and small hydro. Geothermal and onshore wind accounted for very small levels of investment in 2009.

Clean Energy Investment By Technology Type 

Based upon the investment figures for China and India above, it is safe to assume that wind is the most dominant renewable energy technology in Asia in terms of new investment. Note, however, that detailed breakdowns of investment by clean energy technology for all of Asia are not currently available. 

Globally, wind also accounts for the majority of new renewable energy technology investment, at 56 per cent of the total. Solar accounts for 20 per cent of new global investment, biofuels accounts for 6 per cent and small hydro and energy-smart technologies each accounts for about 3 per cent.  

Types Of Financing 

The dominant investment type in 2009 was asset financing of utility-scale renewables, accounting for more than 70 per cent of the total. This is followed by research, development and deployment (RD&D), at 17 per cent, and public markets, at 9 per cent. Venture capital and private equity investment accounted for just 3 per cent of new investments in 2009.

Summing Up

Investment needs for energy infrastructure in Asia over the next 25 years will total nearly $10 trillion, three-quarters of which will be allocated towards the power sector.

• Global investment in clean energy nearly quadrupled from 2004 to 2008, reaching $159 billion. The investment continued to rise to $160 billion in 2009 and $211 billion in 2010.

• For the first time in 2010, the Asia-Pacific had the largest share of global investment in clean energy with $59 billion. Since 2004, clean energy investment in the Asia-Pacific has increased fifteenfold.

• In 2009, China moved ahead of the USA for the first time as the country with the highest level of investment in renewable energy. In 2010, China had $49.8 billion in new investment, compared to $41 billion for Germany and $29.6 billion for the USA.  

• Asset financing of utility-scale renewables accounted for more than 70 per cent of total new clean energy financing. 

• Multilateral banks and development agencies provided a total of $65 billion in funding for the energy sector between 1997 and 2005. Together, funding for energy efficiency and renewable energy accounted for 30 per cent of development assistance funding for the energy sector in 2005.

• The Clean Development Mechanism is seen as an important source of investment for renewable energy project developers in Asia, but the level of investment is still relatively small.

(Excerpts from Energy Trends in Developing Asia: Priorities for a Low-Carbon Future- a report by  U.S. Agency for International Development’s Regional Development Mission for Asia —  USAID/RDMA)

 


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‘Developing’ Asia Needs More Investments For Energy Infrastructure

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