Wood Mackenzie’s latest report, ‘Asia Pacific Power & Renewables: Five things to watch in 2024,’ highlights the robust growth of power demand in the Asia Pacific region, with India, China, and Southeast Asia emerging as the primary drivers. Alex Whitworth, Vice President and Head of Asia Pacific Power Research at Wood Mackenzie, underscores the significance of these regions, noting that they have collectively surpassed the 50% mark in global power demand as of 2023.
The report underscores the momentum in power sector investments across the region, encompassing renewables as well as conventional energy sources like coal, gas, nuclear, and hydro. Whitworth emphasizes the rarity of such growth rates globally, attributing them to comparatively low end-user power tariffs, notably less than US$100/MWh, and a continued reliance on coal among these markets.
Despite the slowdown witnessed in more developed markets such as Japan, South Korea, and Taiwan, Asia Pacific nations continue to contribute over two-thirds of global demand growth annually. However, concerns loom over China’s power demand growth in 2024 due to a sluggish real estate sector and subdued domestic demand sentiment. Conversely, India and Southeast Asia appear to be on a firmer footing.
China’s energy demand remains high, propelled primarily by its industrial sector, which accounts for nearly 70% of power demand. Government initiatives shifting focus towards energy and technology security have driven China towards domestic coal and renewables, fostering rapid advancements in the energy transition and technology landscape, including a notable switch to electric vehicles.
Amid China’s massive expansion of solar and renewables, questions arise regarding the sustainability of such growth. The report highlights China’s PV module production capacity exceeding global demand by over double, potentially leading to an oversupply scenario and subsequent price wars. Despite this, Wood Mackenzie anticipates further expansions in 2024, potentially driving prices down and affecting profitability.
In the realm of offshore wind, despite short-term challenges, such as cost inflation and construction delays, the outlook remains promising. China dominates the Asia Pacific offshore wind market, capitalizing on its market scale and robust supply chain to lower costs significantly. This, coupled with aggressive expansion plans and overseas targeting by Chinese manufacturers, suggests a favorable future for offshore wind in the region.
In conclusion, while challenges persist, Asia Pacific continues to emerge as a powerhouse in global power demand growth, fueled by India, China, and Southeast Asia. Wood Mackenzie’s insights shed light on the evolving dynamics of the region’s energy landscape, emphasizing opportunities and risks in the years ahead.
