The recently published joint report by Ember, CREA and IEEFA titled “The sunny side of Asia” explores the growth of solar power in seven key Asian countries, namely China, India, Japan, South Korea, Vietnam, the Philippines and Thailand, the potential for future growth and the avoided fossil fuel costs due to solar electricity generation in 2022. It combines electricity generation analysis, energy generation cost estimates and in-depth policy assessments.

The report also estimates the potential cost of additional fossil fuel abatement if solar generation is expanded in line with each country’s solar power goals contained in their respective 2030 National Action Plans. Finally, this analysis outlines the key policy challenges and opportunities for expanding solar power across the region, using a country-by-country policy assessment.

Meeting Asia’s growing demand

Accounting for almost half of the global energy demand, Asia is the world’s highest emitting region. In January, the IEA published a report showing the increase in electricity demand is expected to come from Asia-Pacific region, making Asia’s clean energy transition more critical than ever. From 2010 to 2021, global electricity demand rose by 31.8%, growing at a compounded annual growth rate of 3%. During this time, Asia’s emerging economies experienced electricity demand growth at a much faster rate. Viet Nam had the highest growth (+125%), followed by China (+102%), India (+82%), Indonesia (+75%), Malaysia (+39%) and even Thailand experienced energy demand growth of 34%.

Global energy demand is almost certain to continue to increase for the foreseeable future, although the rate is expected to slow, with future energy growth likely to come from non-OECD countries, particularly in Asia. If the world is to move towards a net zero electricity system by 2040, equipping these rapidly growing economies to meet their energy demand with clean energy will be one of the most crucial challenges of the next decade.

A key step to ensure future energy security

The global fossil fuel market has always been subject to volatility. After a period of relative stability, importing countries are now paying exorbitant prices to secure their energy supply. This highlights the dangers of continued reliance on fossil fuels. With the exception of Indonesia and India, most of Asia’s major fossil fuel consumers import a significant amount of coal, oil and gas to meet their electricity demand. This has left many of the region’s major economies vulnerable to the resulting sky-high commodity prices in the global market.

As the last 12 months have shown, reliance on fossil fuels reduces energy security by exposing countries to the volatility of the market. This vulnerability has directly contributed to a rise in energy poverty and a slowdown in economic growth. Solar capacity expansion is largely being driven by cost efficiency.

According to IRENA, the levelled cost of electricity (LCOE) of new utility-scale solar panels fell by 88% over the last decade, with an average year-on-year reduction of 13%. Renewables must be the cornerstone of cost-efficient, future resilient electricity systems. Given the region’s massive potential for solar, the growth of solar needs to be the priority in Asia’s energy transition and economic expansion.

A decade of growth (2010-2021)

China, Japan, India, South Korea and Viet Nam slid into the top ten countries with the highest solar capacity in 2021. A decade ago, only two countries in Asia made it to the list, while European countries dominated the top of the solar capacity ranking.

Solar power is expected to continue growing exponentially across the five key Asian countries (China, India, Japan, the Philippines and Indonesia), with an average of 22% growth each year, positioning the region to become a global hub of solar power. The fastest growth rates are expected in the Philippines and Indonesia.

The Philippines has notable ambitions for solar. In 2019, the Philippines legislated plans to increase their solar capacity to 20 GW by 2030, reaching 46 GW by 2040. If achieved, the 2030 mark would be almost 15 times more than the current level (1.4 GW).

Rapid solar expansion is possible, but it needs to be partnered with a focus on transmission and distribution

Viet Nam has shown it is possible to deploy solar at scale within only three years. Between 2018 and 2021, solar power generation rose from basically 0 to 22.65 TWh. However, Viet Nam’s quick ramp up of solar has led to grid and policy challenges. Attractive feed-in tariffs successfully boosted solar in the country, but the grid expansion could not keep up with rapid solar deployment.

At its peak in 2019, the average time for construction and commissioning a solar PV project in Viet Nam was around nine months. On the other hand, grid expansion needs at least three years. This has led to high curtailment rates in Viet Nam solar uptakes.

In order to unlock the full potential of solar power, rapid deployment needs to be followed with investment to improve the transmission and distribution system.

US$34 billion in fuel costs avoided

Solar on the grid is already contributing meaningfully to meeting electricity demand. Assuming solar replaced the most expensive fossil based electricity (i.e. either coal, gas or oil), our analysis found that the contribution of solar generation in seven Asian countries – China, India, Japan, South Korea, Viet Nam, the Philippines and Thailand – avoided fossil fuel costs of approximately US$34 billion from January to June 2022.

Viet Nam’s solar power avoided US$1.7 billion in potential fossil fuel costs. Notably, Viet Nam’s solar generation was close to zero TWh in 2018. In 2022, solar accounted for 11% (14 TWh) of electricity demand from January to June.

In Thailand and the Philippines, where the growth in solar has been slower, the avoided fuel cost is still notable. While solar only accounted for 2% of Thailand’s electricity in the first six months of 2022, an estimated US$209 million of potential fossil fuel costs were avoided. Similarly, the Philippines avoided US$78 million in fuel costs, despite solar accounting for only 1.7% of generation.

As many countries continue to revise their energy development plans, the volatility in commodity markets and the record breaking fuel costs affecting the price of electricity everywhere must serve as a warning against continued fossil fuel dependence. This needs to be translated into more ambitious solar deployments, capitalising on the massive solar potential in the region.

The full report can be accessed here.