Asia-Pacific energy demand will grow at an average annual rate of 2.4% until 2030, more than double the global average. Solar photovoltaic technology is the fastest growing power generation technology globally.

There is huge potential in the Asian market for solar energy, with exponential growth prospects and development co-benefits. Large parts of Asia are on prime equatorial and tropical land, enjoying some of the world’s highest solar insolation levels.

Advertisement

National programmes in Asia are already promoting solar energy as a mainstream energy source. Simple, easy-to-use technology enables the operation and maintenance of solar photovoltaic and solar thermal (i.e. low temperature) applications to be less cost-intensive than conventional technologies.

Solar energy development provides an excellent opportunity to replace expensive fossil fuels in situations where the demand is remote and distributed, and where grid development and centralised generation are not possible.

Japan’s earthquake and its aftermath resulted in Japan’s Feed-in Tariff Scheme for Renewable Energy, which obliges Japanese electric utilities to purchase electricity generated from renewable energy sources in Japan and across Asia.

Challenges exist, however. Transmission and distribution grids remain constrained. Steep up-front charges, high borrowing costs and the lack of access to long-term capital are stalling solar energy growth. The availability and cost of long-term debt remains one of the biggest challenges for solar energy project developers in Asia.

The weak institutional capacity of government is viewed as risky by investors hesitant to commit to projects that rely exclusively on support mechanisms that are not well developed, have shorter durations or are likely to change over time. Add to that inadequate coordination of knowledge management activities, resulting in information gaps.

Once these challenges are addressed, Asia will benefit from improved social and rural development enabled by decentralised solar power generation for remote and rural communities.

Lawrence Yeo is CEO of AsiaBIZ Strategy, a Singapore-based consultancy that provides Asia market research and investment/trade promotion services.

E-mail:Lawrence@asiabizstrategy.com