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The Rise of Solar Power: An Impending Challenge to Coal in the Asia-Pacific Region

The Rise of Solar Power: An Impending Challenge to Coal in the Asia-Pacific Region

Citing a report from Wood Mackenzie, VP – head of Asia Pacific power research, Alex Whitworth, heralded the emergence of utility PV solar as the most cost-effective power source in the region in 2023. With onshore wind poised to outprice coal post-2025, the energy landscape is undergoing a seismic shift.

China’s strides in reducing renewable costs are highlighted, with utility photovoltaics and wind projects being significantly cheaper (40-70%) than those in other Asia-Pacific markets. The report predicts China will maintain a 50% cost advantage in renewables up to 2050.

Solar power becomes coal’s greatest competitor in Asia-Pacific - report
(Graph by Wood Mackenzie).

The report also notes a significant 23% decline in solar power costs in 2023, ending two years of disruption and inflation. Utility PV now stands as the cheapest power source in 11 out of 15 countries in the Asia Pacific region.

Predictions suggest new solar project costs could plummet a further 20% by 2030, propelled by decreasing module prices and oversupply from China. The drop in solar tech expenses in 2023-24 has intensified pressure on coal and gas, with LCOE for utility PV nosediving by 23% on average across Asia Pacific in 2023.

Contrastingly, distributed solar has seen an even steeper cost reduction of 26% in 2023, making it 12% cheaper than residential power prices on average, paving the way for widespread rooftop solar applications.

Senior research analyst at Wood Mackenzie, Sooraj Narayan, highlights the allure of distributed solar for end-users, especially in markets like China and Australia, where costs are already 30% lower than rising residential tariffs.

The Wind of Change and Fossil Fuel’s Dilemma

Although onshore wind costs lagged behind solar by 38% in 2023, forecasts indicate a 30% drop by 2030, fueled by the influx of budget-friendly Chinese turbines.

Markets like Australia and Southeast Asia are set to benefit from economical wind power equipment imports from China, while Japan and South Korea, focusing on local supply chains, may see onshore wind costs remaining above US$80/MWh by 2030.

The report underscores the escalating competitiveness of offshore wind against fossil fuel power in the Asia-Pacific, with costs dipping by 11% in 2023.

Offshore wind now stands toe-to-toe with coal power in coastal China and is projected to undercut gas power in Japan and the Taiwan region by 2027 and 2028, respectively. With lowering capital outlays and technological advancements, new markets for offshore wind are anticipated in India, Southeast Asia, and Australia over the next decade.

Conversely, coal and gas generation costs have surging by 12% since 2020, and the trajectory points to continued escalation through 2050, chiefly due to carbon pricing mechanisms.

With the carbon price expected to soar in developed Asia-Pacific markets, reaching US$20-55/tonne by 2030, the cost of gas power, sitting above US$100/MWh on average till 2050, is forecast to gradually lose its competitive edge to offshore wind in the forthcoming decade.