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SLIDES: Asia-Pacific's Different Pathways To Energy Transition

SINGAPORE (S&P Global Ratings) March 30, 2023--The countries of Asia-Pacific still have a long way to go before they can meet their ambitious energy targets.

This is a according to a chartbook-style commentary we published today, titled, "Asia-Pacific's Different Pathways To Energy Transition."

"Policies are still evolving and some key countries such as China and India have no specific timeline to phase out coal," said S&P Global Ratings credit analyst Abhishek Dangra.

"Access and affordability will trump long-term energy-transition goals while energy security considerations may delay transition for some," Mr. Dangra said.

The slides cover the energy targets and progress on transition for Australia, China, India, Indonesia, and Vietnam.

"Market factors are propelling a faster shift in Australia to renewables; but the revolutionary change appears harder than perceived," said S&P Global Ratings credit analyst Parvathy Iyer.

"The private sector has limited incentives to keep the coal plants operating due to declining profitability; and it's difficult to see who will bear the risk," Ms. Iyer said.

In China, renewables momentum continues. "China's market-based reforms of the power sector will deepen over the next decade," S&P Global Ratings credit analyst Apple Li said.

"The reforms will allow for better reflection of power supply-demand dynamics via market-based price setting and will accelerate the transition to renewable energy consumption," Ms. Li said.

India's transition is progressing, led by the private-sector. "India is entering in the next stage--Renewables 3.0--with industry diversification into hybrid, pumped storage, round-the-clock projects, etc. It is moving away from feed-in-tariff (1.0) and highly competitive bidding (2.0). Execution risks and return profiles can significantly diverge," Mr. Dangra said.

In Indonesia, an absence of supportive policies is delaying an ambitious transition.

"Indonesia's energy policies will need to tackle subsidized power, cheaper coal, and government reluctance to increase tariffs," Mr. Dangra said.

In Vietnam, curtailment risk and weak power-purchase agreements may jeopardize the transition.

"Strengthening of power purchase agreements in Vietnam to alleviate curtailment risks will be critical for success of renewables," Mr. Dangra said.

The slides also examine the emerging technologies, such as energy storage and green hydrogen, that will play a key role in the energy transition.

Key Takeaways

  • Energy security considerations will affect the policy direction and pace of energy transition; not always delaying transition (as seen in Europe).
  • Economics (India) and policies (China) will lead growth in renewables. Countries with ambiguous policies (Vietnam) or cheaper fossil fuels (Indonesia) face a more difficult transition.
  • Changing energy policies and dependence on technological and cost breakthroughs with heavy capital investments create credit risks for most Asia-Pacific power utilities.
  • Utilities could face rating downside if their competitiveness/cash flows deteriorate, or if they adopt more aggressive leverage for investments. Unregulated players will be more exposed than regulated utilities.
  • Governments, consumers or utilities will need to bear costs of transition; the mix will determine the rating impact.
  • Hybrid, pumped/battery storage solutions are being integrated with the grid to provide stable power; while green hydrogen and carbon capture may likely play a meaningful role only in the long-term (beyond 2030)

This report does not constitute a rating action.

The report is available to subscribers of RatingsDirect at If you are not a RatingsDirect subscriber, you may purchase a copy of the report by calling (1) 212-438-7280 or sending an e-mail to Ratings information can also be found on S&P Global Ratings' public website by using the Ratings search box located in the left column at Members of the media may request a copy of this report by contacting the media representative provided.

Primary Credit Analysts:Abhishek Dangra, FRM, Singapore + 65 6216 1121;
Parvathy Iyer, Melbourne + 61 3 9631 2034;
Apple Li, CPA, Hong Kong + 852 2533 3512;
Media Contacts:Richard J Noonan, Melbourne + 61 3 9631 2152;
Ning Ma, Hong Kong (852) 2912-3029;

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