Historic Turning Point: Energy Transition in the Asia-Pacific Region

Asia-Pacific's energy transition hits historic milestone: Wood Mackenzie reports record-low Levelized Cost of Electricity for renewables in 2023, challenging coal dominance.

The report highlights reduced capital costs driving renewable energy competitiveness. In 2023, renewables were 13% cheaper than coal, projected to be 32% cheaper by 2030. China leads cost reduction efforts, with solar and wind energy up to 70% cheaper. Photovoltaic solar costs dropped 23% in 2023, making it the cheapest source in 11 of 15 countries. Distributed solar energy is now 12% cheaper than residential rates, showing potential for widespread adoption. However, coal and gas costs are rising due to carbon pricing mechanisms, while carbon prices in Southeast Asia and India remain low.

China stands out as a leader in reducing the costs of renewable energies, with photovoltaic solar, onshore wind, and offshore wind energy being between 40-70% cheaper than in other Asia-Pacific markets. China is expected to maintain a 50% cost advantage for renewables until 2050, consolidating its leadership in renewable energy deployment.

The report also highlights a significant 23% decrease in photovoltaic solar energy costs in 2023, ending two years of supply chain disruptions and inflation. PV solar energy emerged as the cheapest energy source in 11 of the 15 countries analyzed in Asia-Pacific. The costs of new solar projects are expected to decrease an additional 20% by 2030, driven by falling module prices and oversupply from China. The reduction in solar technology costs in 2023-24 has put pressure on coal and gas, with the LCOE for PV solar energy decreasing on average by 23% in Asia-Pacific in 2023, driven by a 29% decrease in capital costs.

Distributed solar energy, on the other hand, has shown an even greater decrease in costs - 26% in 2023 - and is now on average 12% cheaper than residential energy prices, creating significant potential for more solar energy applications on rooftops.

This trend has made distributed solar energy increasingly attractive to end-users in many Asia-Pacific markets, with costs already 30% below rising residential tariffs in China and Australia. However, some markets like India, with subsidized residential energy tariffs, will have to wait until 2030 or later to achieve competitive distributed solar energy prices.

Meanwhile, coal and gas generation costs have increased by 12% since 2020 and are projected to continue rising until 2050, primarily due to carbon pricing mechanisms. Developed markets in Asia-Pacific are expected to experience a significant increase in carbon prices, reaching between US$20-55 per tonne by 2030, while carbon prices in Southeast Asia and India are expected to remain low.