New WoodMac report forecasts renewables cheaper than coal by 2030 across Asia-Pacific


A new report from Wood Mackenzie (WoodMac) shows that the Asia-Pacific region will see cheaper levelised cost of electricity (LCOE) from renewables than coal by 2030, and solar plus storage projects will be competitive with gas by 2026. 

The report forecasts that new renewable investments will be a substantial 23% lower than coal power before the decade is out. This is quite a swing, currently WoodMac puts the cost of renewable power 16% higher than coal power on average. Before the decade is done we should see those numbers flip like President-Elect Biden flipped the battleground states. 

Of course, these forecasts are for region as a whole. In Australia, thanks to the sunburnt country’s splendid insolation, renewables are already at the tipping-point. In fact, by 2030 WoodMac predicts renewables will be 47% cheaper in Australia than new-build coal. 

“Today, India and Australia are the only markets in Asia Pacific with LCOE for renewables cheaper than new-build coal,” said WoodMac senior analyst Rishab Shrestha. “However, by the end of the decade, we can expect almost all markets in the region to have renewable power at a discount compared to the lowest cost fossil fuel. The stage is set for rapid growth of subsidy-free renewables in Asia-Pacific.” 

Of course, we are already seeing the effects of the energy transition with expedited coal-fired power station closures, themselves a reflection that coal is fast becoming a stranded-asset. 

Earlier this week, Japanese industrial giant the Sumitomo Corporation reported a stunning ¥26bn (AUD$341m) loss on its Western Australian Bluewaters coal-fired power investment. The loss assures the company’s worst ever annual performance and comes as a result of international and financial pressure against coal funding, as well as reduced demand due to renewable uptake, especially rooftop solar. 

Even if fossil-fuel companies won’t yet concede the obsolescence of their assets, the financial world is already beginning to turn their backs. According to a report from the Institute for Energy Economics and Financial Analysis (IEEFA), Sumitomo’s loss stems, at least partially, from Sumitomo’s and joint venture partner Kansai Electric’s failure to refinance loans of almost AUD$400m on the Bluewaters plant due in August 2020, “as a growing wave of major banks decline further coal funding.” 

Late last month, ANZ Bank announced plans to follow in the footsteps of fellow Big Four competitors Commonwealth Bank and Westpac by releasing a new climate change policy that set out a plan to disentangle its finances from thermal coal and actively support the transition to a net zero emissions economy by 2050. 

According to the report, more than 120 major global banks and insurers have announced policies restricting coal financing and more are being announced every week.

Regional forecast

According to the WoodMac report, the tide is changing throughout the Asia-Pacific. 

India: Renewables are surging on the sub-continent as result of great solar resources combined with low construction costs. The great nation’s politics is hungry for investment and investors are flooding in, meaning competition in the renewable space is strong and costs continuing to drop. 

China: “The winds will change in China as we expect renewables’ LCOE to be cheaper than coal next year,” noted Shrestha. “Over this decade, the renewables discount over fossil fuels will grow to 40% on average across China, as the LCOE of new wind and solar plants fall below those of fossil fuels, and also taking into consideration a carbon price.” 

South Korea, Thailand, and Vietnam: Renewables are expected to fall in cost below coal next year in all three of this important energy markets. With South Korea and Taiwan expected to see renewbles outstrip coal by 30% by 2030. Vietnam is expected to lead Southeast Asia through its rapid uptake of utility-scale solar PV projects, which, as mentioned above, will have a lower LCOE as compared to coal by 2021. 

Japan: The land of the rising sun is the most expensive renewables cost country in 2020, but even still, by 2030 renewables are expected to sit below coal in LCOE. 

“Despite low renewables costs, government policy is still critical in the future to attract investors, manage grid reliability and transmission upgrades, and encourage battery storage to manage intermittency of renewables,” concludes Shretha. 


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