ASIA investment in renewable energy assets All capital providers have also been
in the region has ballooned. While encouraged by regional government
traditional forms of renewable energy announcements with respect to
– for example, hydro, geothermal and renewable energy targets and
wind – have been obvious beneficiaries incentives. A 2021 study conducted
of this investment, “cleantech” energy by the Asia Development Bank found
has been a focus for many developers that feed-in tari s (“FiT”) – a policy
James Orme and investors in the region too. Against designed to support the development of
Partner
this backdrop, we survey the increased renewable (and cleantech) energy
[email protected] investment in the “cleantech” industry sources by providing a guaranteed,
+65 6428.2545
in Asia and the sub-sectors which are above-market price for producers –
Rosaline Yusman attracting most interest. have had the greatest overall e ect in
Associate Asia in driving capital into this sector.
[email protected] Some governments continue to rely
m INVESTMENTS IN CLEANTECH on FiT schemes, with Vietnam having
+65 6428.2426 ENERGY extended its FiTs for wind power
Cleantech energy (often interchange- projects until December 2023 – a fact
With urbanisation and industrialisation that continues to drive investments.
able with “greentech”) is, in essence,
ramping up and its middle-class However, given falling prices (say,
any process or product that reduces
population growing rapidly, Asia’s in solar power) and more countries
negative environmental impacts
economic growth continues apace. shifting to auction systems in sectors
through energy e ciency improve-
Some countries – namely, India, China such as solar and wind, the trends seem
ments or through the use of sustainable
and Vietnam – are posting 5-7% or to demonstrate a move-away from
resources, or o ers some level of envi-
more GDP growth year over year. This FiT and an indication that, in Asia and
ronmental protection. According to
economic growth translates into an globally, unsubsidized grid parity may
published research, the top cleantech
increased demand for power which, be nearer than once expected.
sectors in the region are currently (i)
coupled with a desire to decarbonize,
solar technology, (ii) waste manage-
makes the renewable energy (and
ment and recycling, (iii) carbon capture
cleantech) story in Asia compelling.
technology and (iv) batteries and
energy storage. CLEANTECH SECTORS TO
WATCH
While countries in the Asia-Pacific still
produce approximately 75% of the Solar
world’s consumable coal, the tide of Funding for these technologies comes
from a variety of sources. Traditional Solar is one of the most attractive
fossil fuel production and consumption
sources of capital are reported to have sectors for cleantech. In addition to
in the region has turned. Due to
made investments in the space: for greenfield solar projects, investors
geopolitical and other pressures, many
example, ING Bank made a green loan to have been active in the M&A space,
Asian countries have now publicly
fund Cleantech Solar’s expansion in with acquisitions of both solar panel
announced a move away from fossil
Asia, and the multilateral agency, Asia manufacturers and photovoltaic (PV)
fuels and just this month President Xi
Development Bank, announced two projects reported. One example includes
Jinping of China pledged to cut funding
investments into an Indian electric the acquisition of a stake in Singapore’s
for coal projects outside of China.
vehicle manufacturer and an Indian Sunseap Group solar rooftop projects
energy e ciency service provider via in Vietnam by a subsidiary of Malaysia’s
To both meet Asia’s growing energy its venture capital arm, ADB Ventures. national electricity producer Tenaga
demand, and to provide an alternative Nasional Berhad.
energy source to fossil fuels,
Private equity is also playing its part. Technologyadvancementshavepushed
Some of the demand is coming from costs down (and increased e ciency) for
the limited partners or institutional PV cells, leading solar power to
investors who want to allocate capital to become both cheaper and more
fund managers who focus on, or who reliable and, as a result, a more realistic
include, renewables as a key part of option for industrial, commercial, and
their investment strategy. The COVID- residential users across the region. With
19 pandemic has helped to accelerate land procurement often a di cult issue
this trend. With “dry powder” to for energy projects in Asia, floating
deploy, private equity players have solar PVs are gaining traction too -
been happy to fund technologies and Indonesia has just procured the 145
developments that would otherwise MW Cirata floating solar project and
have received government subsidies or Singapore has built a 60 MW floating
incentives, had they been available. solar farm at the Tengeh Reservoir.
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advice and readers should not act upon the information in this publication without consulting counsel.
Carbon Capture Technology sources (all while generating revenue for “Innovation in batteries and electricity
Carbon capture technology allows high municipalities and governments). storage – a global analysis based on
carbon emitting industries to siphon o patent data” reported that batteries
carbon dioxide before it is emitted into Some commentators project that the account for nearly 90% of all patenting
the atmosphere. The greenhouse gas is Asia-Pacific WTE market is projected to activity in the area of electricity storage
then either buried underground or used grow at a rate of 5% or more for and that the rise in innovation is chiefly
as a resource to create other products the next 5 years. The mix of capital driven by advances in rechargeable
such as concrete, fertilizers and other providers in this technology space is lithium-ion batteries used in consumer
fuels. Carbon capture technology is varied and includes commercial banks, electronic devices and electric cars.
(currently) one of the few scalable and multilateral development banks and Japan and Korea, in particular, have
cost-competitive solutions available. credit agencies, financial sponsors, established a strong lead in battery
Interest in carbon capture technology and private equity firms. China and technology globally, and that technical
has been growing. Projects of this Japan have led the way in terms of progress and mass production have led
type, which are being explored across WTE generation (domestically in to a significant drop in battery prices in
Indonesia, Malaysia, Singapore and the case of China, and in exporting recent years. The Asian Infrastructure
Timor-Leste, require in excess of US$1 its expertise in the case of Japan). Investment Bank (AIIB) has been
billion of investment a year until 2030. However, the pipeline in Southeast making a number of investments in this
Asia in countries such as Singapore, sector too. Most recently, AIIB made
Thailand, Indonesia and Vietnam is loans to the Tata Cleantech Sustainable
extremely active and supported by Infrastructure On-lend Facility in India
Carbon capture technology may also
strong government mandates. which targets energy storage and to
be utilised for existing projects in the
the SUSI Asia Energy Transition Fund
energy sector. Players in the LNG
which aims to provide equity finance
industry, for example, are reportedly
Battery(and Energy Storage) to green energy solutions in Southeast
looking at installing carbon capture
Technology Asia, including energy storage.
storage facilities as a means for
reducing emissions attributable to gas Energy storage technologies are
processing – so called “green” LNG. set to catalyse transitions to clean
Australia has led the way with various energy around thein world.
study published A joint
late 2020 by THE ROAD AHEAD
projects either in advanced stages
the International Energy Agency As Asia continues to grow, environ-
or in operational stages, including its
and European Patent O ce titled mentally sustainable energy sources
Chevron’s 4-mmtpa Gorgon carbon
will be crucial to underpin the region’s
capture storage facility that is intended
development in the coming years,
to reduce the emission intensity of the
which will drive the demand for
Gorgon project by around 30%. In Asia,
cleantech technology. This demand will
carbon capture solutions are reportedly Asia’s development be compounded by the region’s domi-
under consideration for a number of
nance in manufacturing, particularly in
projects including BP’s Tangguh in the coming years countries such as China, Korea and India
project in Indonesia. With increased
where cleantech products manu-
pressure on the reduction of emissions, will drive the demand facturing is its own industry.
carbon capture technology is likely to be
heavily utilised going forward. for cleantech
Encouragingly, nearly all countries in the
technology, and this region have taken steps to adopt nation-
Waste Management and Recycling demand will be al and regional renewable energy
targets and some have introduced
Waste-to-Energy (“WTE”) technolo-
gies convert non-recyclable waste into compounded by the governmen- tal incentives aimed at
promoting invest- ment in cleantech
usable forms of energy.
region’s dominance (with hopefully more to come),
signaling the region’s firm
Waste management is at the forefront of in manufacturing, commitment to the energy transition.
many large cities in the region as
While some inherent risks remain
they are running out of landfill sites particularly in with respect to uncertain or unfamil-
(typically the traditional method of
disposing waste). With increasingly countries such as iar regulatory and legal landscape in
limited land availability as a result of some countries, we expect investors
urbanisation and industrialisation, China, Korea and to continue to tap into the immense
WTE technologies have the dual opportunity in Asia.
advantage of reducing landfill India where
requirements in urban environments,
while replacing fossil fuel-based power cleantech products
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manufacturing is its here.
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ProjectsPlus is an information source for clients of Milbank LLP. Its contents should not be construed as legal
Winter 2021/2022 |
advice and readers should not act upon the information in this publication without consulting counsel.
