KUALA LUMPUR: Growing availability of green finance, underpinned by diversifying funding channels and manageable financing costs will support power companies’ sizable investment needs for decarbonisation in Asia Pacific (APAC), said Moody’s Investors Service.
In a research note, the rating agency said while coal fired power will remain critical to the APAC power sector in the medium term, coal-fired power companies without credible transition plans will face increasing operating and refinancing risks.
“We expect the renewable energy sector will continue to steer growth in sustainable bond markets given governments’ decarbonisation commitments.
“Thermal power companies with well defined energy transition strategies can potentially tap transition finance,” it said.
Moody’s said decarbonisation is at the heart of APAC governments’ energy policy given their commitments to reaching carbon neutrality in 2030 and net-zero emissions by 2050-2070.
Governments in APAC have pledged carbon emissions reductions and net-zero targets through the United Nations Nationally Determined Contributions Registry as part of the Paris Agreement.
The rating agency said ambitious decarbonisation strategies have created vast investment opportunities as APAC’s investment in the power sector to navigate energy transition was US$418 billion in 2022, a record high year-on-year growth of nine per cent from 2021.
Wind and solar power were the largest contributors to energy transition investment in the region and various countries in APAC have outlined ambitious expansion plans for renewable energy capacity in response to their emissions targets for 2030.
It said APAC power companies that remain highly dependent on fossil fuels face rising carbon transition risk given governments’ commitments to decarbonisation and net-zero targets.
“Financial institutions, investors and market participants have been increasing their scrutiny over funding for coal-fired projects.
“That said, coal-fired power has been and will likely remain a major power source to support local power consumption in many APAC countries for some time.
“It will take time for countries like China and India to reduce the dominance of coal-fired power in their power mix,” it added. – BERNAMA
