Orrick’s APAC Energy Pulse

The Asia-Pacific region has experienced some headwinds in the renewable energy sector (particularly offshore wind) in recent times.  These headwinds take the form of, for example, higher devex and capex costs, inadequacy or lack of subsidy mechanisms and lukewarmness of policy makers.  These have cast some doubt on the viability of certain projects in some markets to eventually reach FID. 

However, despite that, certain markets in the Asia-Pacific region have made significant strides in renewable energy and carbon reduction in the third quarter of 2024. Key highlights include government-held auctions for offshore wind projects, renewable energy certificates and nature-based carbon credits, and the refinement of plans to transition from coal to renewable energy.

Here is a look at some of the recent developments in energy transition and decarbonization in the Asia-Pacific region:

1. India introduced new procedures for its Carbon Credit Trading Scheme and draft guidelines for EV charging infrastructure. 
2. Taiwan’s offshore wind auction awarded 2.7 GW capacity.
3. Korea announced a revised framework for offshore wind auctions.
4. Malaysia’s inaugural auctions for renewable energy certificates and nature-based carbon credits showcased its expanding carbon market. 
5. The Philippines announced upcoming Green Energy Auctions and a $500 million coal transition investment plan. 
6. Thailand approved a direct power purchase pilot project and revised its Power Development Plan to focus on cleaner energy. 
7. Vietnam issued new decrees on direct power purchase agreement mechanisms and launched a hydrogen energy strategy, creating ample opportunities for private sector investment.

In More Detail: Energy Transition and Decarbonization Updates from the Asia Pacific Region

1. India introduced new procedures for its Carbon Credit Trading Scheme and draft guidelines for EV charging infrastructure. 

Carbon Credit Trading Scheme

The 2023 Carbon Credit Trading Scheme came into effect on 28 June 2023.  In July 2024, the Bureau of Energy Efficiency issued “Detailed Procedures” for compliance and accreditation as well as eligibility criteria for accredited carbon verification (ACV) agencies. 

Key Takeaways

• Obligated entities:
  • Will have to comply with greenhouse gas (GHG) emission intensity targets for three consecutive years. 
  • Can obtain carbon credit certificates (CCCs) if they exceed the targets, or purchase CCCs if they fail to achieve targets. 
  • Have to prepare a long-term action plan to reduce GHG emissions and establish a credible monitoring and reporting procedure. 
  • Must appoint an ACV agency to verify their performance and submit a verification report to the Bureau of Energy Efficiency and the state-designated agency.
    • The Bureau will issue or cancel CCCs based on the verification report and the recommendation of the National Steering Committee for Indian Carbon Market. 
    • It also will also accredit and monitor the ACV agencies based on minimum eligibility requirements. 
• Non-obligated entities can register projects in the Indian Carbon Market registry and trade CCCs on the power exchanges registered with the Central Electricity Regulatory Commission.

Why does it matter?

• The Detailed Procedures create a uniform framework for issuing and trading CCCs.  This will incentivize reducing GHG emissions and promote a low-carbon economy.  
• The guidance establishes a governance and oversight mechanism for the Indian Carbon Market.  The goal is to ensure transparency, accountability and credibility of the carbon market.  
• Non-obligated entities are afforded the opportunity to participate in the carbon market and contribute to mitigating climate change.

Electric Vehicle Charging Infrastructure Guidelines

On 1 July 2024, the Ministry of Power issued draft Revised Guidelines & Standards for Electric Vehicle Charging Infrastructure. The Ministry is seeking public comments on the draft Revised Guidelines, which will supersede previous Ministry of Power guidelines related to India’s electric vehicle charging infrastructure. 

Key Takeaways

• Public charging stations may source open access electricity, which is expected to increase competition and efficiency and provide more choices to charging station operators.
• Concessional electricity rates will apply for charging stations during solar and non-solar hours.  This can reduce operational costs and encourage the use of renewable energy sources. 
• The guidelines create a ceiling for service charges levied by public charging stations to protect consumers from excessive fees and ensure a uniform pricing mechanism across states. 
• Public charging stations will be registered with the Bureau of Energy Efficiency through state agencies using the “EV Yatra” portal. This can create a national online database of public charging stations and charge point operators. 
• Government land will be made available to create public charging stations on a revenue-sharing basis, which is expected to incentivize private sector participation and investment in charging infrastructure. 

Why does it matter?

• The Revised Guidelines aim to accelerate the adoption of electric vehicles (EVs) and ensure a robust and accessible charging infrastructure.  
• By addressing critical aspects, such as standardization, interoperability and consumer safety, the Revised Guidelines pave the way for a seamless transition to electric mobility.   
• Emphasizing public-private partnerships and encouraging innovative solutions reflects the government’s commitment to fostering a collaborative approach.  
• As India advances, implementing the Revised Guidelines effectively will be crucial to achieve the country’s goals of reducing carbon emissions and enhancing energy security. 

2. Taiwan’s offshore wind auction awarded 2.7 GW capacity.

• In early August, Taiwan’s Ministry of Economic Affairs released a list of offshore wind projects that were awarded a total capacity of 2.7 GW in Taiwan’s latest Round 3.2 offshore wind auction. 
• Authorities awarded capacity to these five projects, which are expected to begin commercial operation in 2028 or 2029:
  • Taiwan developer Shinfox’s 700 MW Youde project.
  • SRE’s 800 MW Formosa 6 project, the largest project to have been awarded capacity in Round 3.2.  
  • Copenhagen Infrastructure Partners’ 600 MW Fengmiao 2 project.
  • Corio and TotalEnergies’ 360 MW Formosa 3 project.
  • Enervest’s 240 MW Deshuai project.  
• A sixth project, Orsted’s Greater Changhua 3, was dropped from the list. 

What happens next?

Each selected developer must submit a formal notice by 11 November 2024.  All the projects submitted bids at a rate of NT$0 per kWh, i.e. zero-subsidy bids, consistent with Round 3.1. Projects need to secure corporate power purchase agreements (CPPAs) to move forward. 

It remains to be seen whether the projects will be able to conclude CPPAs at prices sufficient to justify the increasing costs of developing offshore wind projects in Taiwan in the current market, particularly given the localisation commitments required of project developers.   As seen in Round 3.1, a project being selected in the auction is just the first major step to FID in a challenging environment.  

The possibility of a Taiwanese government-backed guarantee scheme for renewable energy offtakers may, in due course, encourage the expansion of the pool of bankable offtakers.  This would in turn improve the viability of projects in a zero-subsidy system.  Further details on the scheme remain to be seen.

3. Korea announced a revised framework for offshore wind auctions.

• On 8 August 2024, the Ministry of Trade, Industry and Energy of Korea announced a revised framework for offshore wind auctions.   This year’s auction will be held in October and detailed rules will be announced in September.
• Timing: Annual wind auctions will be held in the second quarter of each year (as opposed to the fourth quarter), with supplemental auctions to be announced in the fourth quarter as needed.  The aggregate capacity for the 2024-2026 offshore wind auctions is expected to be 7 to 8 GW.
• Two-stage bidding process: A two-stage bidding process, designed to ensure local content, will be implemented.   At the first stage, projects representing 120%-150% of the total auction capacity will be selected based solely on qualitative factors.  At the second stage, bid price will be taken into consideration together with qualitative factors; the clearing price for bottom-fixed projects will be disclosed in advance.  Fifty of 100 points will be allotted to all qualitative factors combined (as opposed to 40 of 100 points in the 2023 auction).  The new set of qualitative factors and allotted points for each factor is as follows:
  • Local community engagement – 4 of 100 points (previously 8 points)
  • Contribution to the Korean economy and supply chain, including security and public/private nature of the project – 26 of 100 points (previously 16 points)
  • Foundational work and maintenance – 8 of 100 points (previously 0 points)
  • Track record in Korea – 0 points (previously 4 points)
  • Stage of project development - 4 of 100 points (no change)
  • Grid acceptance – 8 of 100 points (no change)
• Floating projects: A separate bidding process will be introduced for floating offshore wind projects, independent from bottom-fixed projects.   The government is considering whether to disclose the clearing price for floating projects in advance. 
• “Public” projects: As the current RPS (Renewable Portfolio Standard) system will be phased out, preference may be given to projects sponsored by public sector participants (e.g., RPS Mandatory Generators), for instance in the form of additional points.  A separate bidding process will be introduced as early as 2025 for “public-led” wind projects (e.g., projects in which the public sector owns no less than 70%).  A separate set of weighting factors will govern this process.
• Timelines: Project completion timelines will be extended as follows.  Projects that start construction early may be given additional points in the auction.
  • Projects below 100 MW: 60 months from auction (previously 54 months)
  • Projects between 100 MW and 300 MW: 72 months from auction (previously 60 months)
  • Projects above 300 MW: 78 months from auction (previously 60 months)
• REC Multiplier: The final REC multiplier applicable to the project will be calculated based on the REC multiplier criteria in effect at the time of the auction.  A single project will be permitted to enter into REC offtakes with multiple RPS Mandatory Generators.

4. Malaysia’s inaugural auctions for renewable energy certificates and nature-based carbon credits showcased its expanding carbon market. 

Renewable Energy Certificates

• On 25 June 2024, the Bursa Carbon Exchange, a global spot exchange that enables trading of carbon credits, completed its inaugural auction for renewable energy certificates (RECs).
• The online auction saw fifteen buyers from various industries purchase a total of 268,800 hydropower RECs from vintage year 2024 contracts at RM4.50 ($0.96) per contract.  
• The Murum Hydroelectric Plant in Sarawak granted the RECs.  The plant is the first large-scale sustainable energy project in Malaysia.  It has an installed capacity of 944MW.
• In the fourth quarter of 2024, the Bursa Carbon Exchange will be ready to offer RECs via continuous trading and to facilitate off-market transactions. 

Nature-based Carbon Credit Auction

• On 25 July 2024, the Bursa Carbon Exchange carried out its first Malaysian Carbon Credit auction with credits from the Kuamut Rainforest Conservation project in Sabah. 
• The auction attracted participation from businesses and organizations committed to reducing their environmental impact by offsetting GHG emissions through carbon credits, among other things. 
• The auction of the domestic forest protection and regeneration project was cleared at RM50 (US$10.78) per contract. 
• The Bursa Carbon Exchange said the successful bidders were mostly larger corporates, including companies such as local lenders CIMB Bank Berhad and Malayan Banking Berhad, PETRONAS, and oil and gas service provider, Yinson Holdings.  

Why does it matter?

The Kuamut project delivers tangible climate, community and biodiversity benefits, earning a “Gold Level for Climate” status under the Climate, Community and Biodiversity Standards. 

This milestone represents the first Malaysian nature-based carbon project admitted onto the Bursa Carbon Exchange.  It demonstrates Malaysia’s capability to develop carbon projects that comply with international standards.  The auction also set a benchmark price for voluntary carbon credits for Malaysian nature-based carbon projects. 

5. The Philippines announced upcoming Green Energy Auctions and a $500 million coal transition investment plan. 

Green Energy Auction

• The Philippines Department of Energy announced plans on 30 July 2024 to conduct its fourth Green Energy Auction over the last two years in the fourth quarter of 2024. 
• The third Green Energy Auction is scheduled for the third quarter of 2024.  It is intended to cater to non-FIT eligible renewable energy facilities, namely, geothermal, impounding and pumped-storage, as well as FIT-eligible run-of-river hydro.   
• The fourth auction, on the other hand, will focus on storage solutions.  It will cover Integrated Renewable Energy and Energy Storage Systems (IRESS).  
• IRESS is essentially an energy solution that combines renewable energy sources with energy storage technologies, with the aim of enhancing energy efficiency and reliability.  The Philippines Department of Energy is studying the design and economic viability of IRESS.

Why does it matter?

• The first two rounds of the Green Energy Auction saw a total commitment of 5,306 MW of renewable energy capacity to deliver power from 2024 to 2026. 
• The upcoming two rounds will no doubt add to this pipeline and contribute greatly towards the Philippines’ clean energy goals. 
• The spotlight on storage solutions is also an encouraging sign for the battery and energy storage market in Asia.  
• With the recent opening of the Philippines’ renewable energy sector to full foreign ownership, these auctions present opportunities for significant new projects for international industry participants. 

Coal Transition Investment 

• In June 2024, the Climate Investment Funds (CIF), a multilateral climate fund focused on providing low-cost finance to developing countries, endorsed the Government of the Philippines’ new Accelerating Coal Transition investment plan.  
• The CIF allocated $500 million for a just transition in the Philippines from coal to renewable power, including ensuring that affected employees gain access to sustainable income.  
• This funding will help retire early or repurpose coal-fired plants, among other things.  It will add 1,500 MW of renewable energy capacity.  
• The Philippines aims to retire up to 900 MW of coal generation capacity by 2027.  
• The Accelerating Coal Transition investment plan is expected to help the Philippines eliminate 33 million tons of carbon dioxide in greenhouse gas emissions by 2030.

Why does it matter?

The concession funding from the Climate Investment Fund will likely boost private sector investment and participation in energy transition projects in the Philippines, particularly in the areas of coal transition and the development of battery systems, offshore wind, floating solar and pumped hydro projects. 

6. Thailand approved a direct power purchase pilot project and revised its Power Development Plan to focus on cleaner energy. 

Direct Power Purchase Pilot Project

What has happened?

• On 25 June 2024, Thailand’s National Energy Policy Council approved a direct power purchase agreement (DPPA) pilot project.  It would allow businesses to purchase electricity directly from power producers.   
• The Council has announced 2 GW of renewable energy capacity for private offtakers under this pilot project, for renewable sources including solar, wind, hydropower and biogas.  Details are still being developed.
• In the meantime, the Energy Regulatory Commission will study the negative impacts (if any) that DPPAs may have on power users.   
• The Commission is also drafting new regulations for DPPAs.  These would include fees for using state transmission lines (since the renewable energy produced will be transferred to private offtakers via the state grid network).

Why does it matter?

• Thailand has historically had a single-buyer power procurement system.  All power companies are required to sell the electricity they generate (including from renewable sources) to the Electricity Generation Authority of Thailand and state distribution agencies.  
• This DPPA pilot represents a significant step forward for Thailand towards a more open electricity procurement market.  It is consistent with the steps taken by other countries in Asia.  
• If the pilot project is successful, and the DPPA scheme is formally established with clear regulations and policies, we expect this would be of significant interest to corporations with large energy demands. 

Revised Power Development Plan

What has happened?

• On 20 June 2024, the revised version of Thailand’s Power Development Plan (PDP) reportedly was ready to be presented to authorities for approval, and for implementation in 2024. 
• This revised plan is expected to facilitate Thailand’s transition to cleaner energy and help reduce carbon dioxide emissions.   
• The plan will cover the period from 2024 to 2037 and will include, among other goals, achieving a larger percentage of renewable energy in Thailand’s energy mix, coupled with coal reduction.  
• Renewable power sources likely will include solar, wind, biomass, biogas, floating solar, waste to energy, geothermal as well as energy imports.  Hydrogen will play a role in the gas fuel mix, but it is not clear yet if this refers to blue or green hydrogen.

Why does it matter?

The revised Power Development Plan demonstrates Thailand’s commitment to its clean energy targets.  We are hopeful that the policies put forward through the PDP will encourage private sector participation and facilitate the development of clear rules and regulations for implementing renewable energy projects in the future.

7. Vietnam issued new decrees on direct power purchase agreement mechanisms and launched a hydrogen energy strategy, creating ample opportunities for private sector investment.

Decree on Direct Power Purchase Agreement Mechanism for Renewable Energy 

What has happened?

On 3 July 2024, the Government of Vietnam issued a decree on direct power purchase agreement (DPPA) mechanisms between private renewable energy generators and large-scale consumers (end users connected to a 22 kV supply line and using over 220 MWh per month).  Known as Decree 80, it took immediate effect. 

The regime under Decree 80 contemplates two DPPA models:

• Private transmission line DPPAs: Electricity is delivered via a private wire between a renewable energy generator and a consumer.  This applies to generators owning solar (including rooftop solar), wind, small hydro, biomass, geothermal, sea waves, tides, ocean currents, rooftop solar power systems and other renewable energy plants.
• Virtual DPPAs: Electricity is sold by renewable energy generators at wholesale market prices to the state utility, Electricity of Vietnam (EVN).   EVN then transmits power through its grid to a private buyer who has contracted to purchase the supplied capacity.  The generator and consumer enter into a forward contract.  This applies only to wind and solar power plants with a capacity of 10 MW or more that are directly connected to the national electricity grid and that participate in the Vietnam wholesale electricity market. 

Why does it matter?

• Before Decree 80, EVN was Vietnam’s sole electricity supplier.  Companies were not allowed to buy electricity directly from producers. 
• This decree marks a milestone in the government’s efforts to develop the Vietnamese renewable energy market. 
• It creates business opportunities for investment in constructing and operating private transmission lines and developing carbon credits markets. 

Vietnam’s Hydrogen Strategy 

What has happened?

• On 7 February 2024, Vietnam decided on a new strategy to develop its hydrogen energy capacity. 
• The strategy is based on the National Energy Development Master Plan, which lays out the foundation for the Vietnamese energy sector from 2021 to 2030, with a view towards 2050. 

Why does it matter?

• The overarching goal of the Hydrogen Energy Strategy is to develop various stages of Vietnam’s hydrogen energy ecosystem, including production, storage, transportation, distribution, domestic use and export. 
• Major goals include transitioning traditional power plants to use hydrogen energy, applying carbon capture technologies, increasing hydrogen production capacity and repurposing infrastructure for the hydrogen energy market supply chain. 
• Vietnam’s goal is to produce 100,000 to 500,000 metric tonnes of hydrogen per year by 2030, with output to be raised to 10 to 20 million tonnes by 2050, including green hydrogen.  
• The Hydrogen Energy Strategy represents opportunities for private sector investors and developers to be part of Vietnam’s journey to achieving these goals.

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Want to know more? Contact one of the authors on the Orrick team (Karthik Kumar, Adam Smith, Albert Yu, Lynette Lim, Mae Ji or Kelly Choo).