Renewable energy still faces challenges to viability in Asia

Daniel Mallo, head of energy, infrastructure, metals and mining in Hong Kong at Societe Generale, said that contrary to the impression given by many developers, he sees no lack of funding for renewable energy projects in the region. Rather, the problem is that the projects available tend to be below investors' standards, while approval delays tend to discourage higher-quality developers.

"Development timelines to me are unprecedented in this part of the world compared to Latin America or Europe," he said. "Secondly, the efficiency of tendering processes is sometimes questionable, and some of the necessary processes to award projects to private investors tend to be cumbersome and costly, and builders lose interest."

Yuichiro Yoi, Indonesia head in the private sector operations department of the Asian Development Bank (ADB), pointed out that the development costs associated with renewable energy are still much higher than for conventional sources such as coal and oil. This puts a damper on enthusiasm for renewables, especially in growing economies that need to expand their energy production capacity quickly. As a result, conventional generation methods, seen as more reliable and more understandable, will remain dominant.

"The region really needs base load power. And one thing investors are aware of is that we are in an era of plentiful and inexpensive gas," Mallo said, noting that imports of natural gas from Australia and the US have expanded considerably in recent years in Southeast Asia. "In my mind that opens the gates for more gas power as base load power in this region."

Given the necessary investment in research to alleviate the challenges of renewable energy, investors do expect the sector to take a larger role in Asia's energy mix in the long run. One area of focus is storage, which could address the inconsistent supply issues that have always been a problem for wind and solar energy.

"In India the grid is not in a position to accept unscheduled power to any large degree," said Shiva Rajaraman, CEO of L&T Infra Debt Fund. "I would say that development of storage solutions would probably have a higher impact in terms of India's energy sector than natural gas solutions."

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