The Asia-Pacific (APAC) region offers huge potential for renewables developers, investors, and operators. But its size and complexity mean that navigating the region’s renewables markets is far from straightforward. Because opportunities and challenges vary widely from one market to another, players must adopt a granular, de-averaging approach.

Despite the region’s diversity, we find that five factors are still essential across all APAC markets. Renewables players need to have a strong strategic focus, local partnerships, a broad selection of financing options, proactive supply chain management, and offtake expertise. Players must build these factors into their plans in order to succeed.

The Promise of APAC Renewables

Renewable-energy development in the APAC region is growing strongly—although from a low base. Installed generating capacity is expanding at an average compound annual growth rate of 9%. ¹ 1 The average CAGR is based on ten markets: mainland China, Indonesia, Japan, Laos, Malaysia, the Philippines, Singapore, Taiwan, Thailand, and Vietnam. Notes: 1 The average CAGR is based on ten markets: mainland China, Indonesia, Japan, Laos, Malaysia, the Philippines, Singapore, Taiwan, Thailand, and Vietnam. As a result, renewable energy in 2030 is expected to make up 30% to 50% of the power generation mix in most APAC markets, with renewables playing a dominant role in mainland China, Laos, and Vietnam. (See Exhibit 1.)

Finding Your Focus. To avoid spreading themselves too thin, investors and developers should concentrate their efforts on a few markets and renewable-energy technologies. Selecting a technology that will provide a distinct competitive advantage is particularly important in APAC markets, where the risks of failure and sunk costs are high and, consequently, developers and investors are under pressure to achieve returns more quickly than in other regions.

Resource availability is often a key driver of market-specific renewables opportunities in APAC. For example, developers in Japan are prioritizing rooftop solar PV and offshore wind projects owing to the limited availability of land. Distributed solar power combined with microgrids is emerging as a growth area in the Philippines for electrifying the country’s many remote regions. And biomass-based projects are gaining popularity in southern Thailand because of the abundance of feedstock in that region and the prevalence of agricultural communities. (See “Renewables Opportunities Across the APAC Region.”)

Establishing Local Partnerships. Forging strong partnerships with local players can be essential for unlocking access to land, navigating the local business environment—even gaining the right to develop a renewable-energy project in the first place. Malaysia, for example, is a key destination in the APAC region for solar power investment, helped by the country’s strong commitment to net zero emissions, export potential to neighboring Singapore, and growing solar PV manufacturing industry. However, under local rules, Malaysian interests must own at least 51% of any company developing large-scale solar installations.

Thailand’s renewables market is also geared toward domestic developers, making it difficult for foreign players to secure land or finalize offtake agreements on their own. To succeed in this market, foreign payers typically form a joint venture with a local player or acquire an equity stake in a local company.

In Japan, partnering with local players that have established relationships and a strong reputation, such as one of the country’s manufacturing conglomerates, is essential for developing renewable-energy projects. Such partnerships can help foreign developers with two key requirements when bidding for offshore wind tenders: a detailed plan for stimulating the local Japanese economy and the formation of a fund that distributes part of the wind farm’s profits to the local community.

Broadening Financing Options. In some APAC markets, foreign developers are experiencing pressure over projects’ internal rates of return because greater competition is leading to lower power payments. This is the case in Thailand, where a fall in feed-in tariffs has created pressure on players to optimize the cost side of projects to cushion the impact of reduced returns.

Local renewables players are better placed to withstand these challenging conditions. Because of low-interest sustainable loans from local banks, local players are more cost competitive than foreign developers are. In mainland China and Indonesia, we’ve found that financing costs are an estimated 4% to 8% lower for local state-owned enterprises than they are for international developers.

However, the rise of blended finance and green funding from multilateral development banks and nations—through initiatives such as the Asian Development Bank’s Energy Transition Mechanism and Just Energy Transition Partnerships—is set to close the gap between local and foreign developers. These initiatives encourage international private developers to participate in APAC renewables projects by lowering their cost of capital and reducing risks. The Asian Development Bank’s initiative is using blended finance to rehabilitate hydropower projects in the Philippines and fund Thai renewables projects that combine wind farms with energy storage.

Access to development bank financing and similar funding sources allows international developers and investors to enter more saturated markets. But they still need to alter their expectations and become comfortable with potentially lower returns. For example, Taiwan’s rooftop solar market is an attractive market for renewable-energy players because of its double-digit growth, robust offtake mechanisms, and strong demand for power from companies. However, Taiwan’s declining feed-in tariffs and rising construction costs mean that would-be developers need to both secure low-interest loans and be prepared to accept single-digit returns.

Navigating the Supply Chain. When entering new APAC markets, players often face onerous requirements involving local partnerships and local content. In Taiwan’s offshore wind sector, 60% of the components of wind farms must come from local suppliers, 26 key components have to be produced locally, and foreign companies must create partnerships with local players to build farms. Foreign developers face similar challenges in Indonesia and Malaysia, both of which also have local content rules; while in Japan, bidders for renewables projects must show that they have stable supply chains and can meet short delivery lead times—both of which favor local manufacturers.

Such requirements mean that players need to take a tailored approach if they are to win renewables contract auctions. That’s because ensuring there is sufficient local content impacts not only project cost structures but also bidding strategies and supply chain management. In these situations, players should consider integrating companies in the upstream value chain—which in the case of solar-panel production includes suppliers of silicon, silicon crystals, and silicon wafers—more closely with their own operations through partnerships. This can result in cost efficiencies, enabling developers to both meet local requirements and maintain the financial viability of their bids. However, value chain integration involves a deep understanding of the local market, including the capabilities and availability of local suppliers, and it requires developers to forge strong relationships with suppliers.

Leveraging Offtake Expertise. As renewable-energy tenders become increasingly competitive, developers that can demonstrate expertise in structuring and managing PPAs as part of their bids can gain a significant advantage. This is particularly true in markets where tenders are highly contested, such as the Philippines, Singapore, and Thailand.

Developers experienced in structuring direct PPAs—where companies buy power directly from a renewable-energy generator—often have a particular edge over other players. These agreements are emerging as an attractive route to market in mainland China, Japan, and Taiwan. For corporate end users, direct PPAs provide long-time price certainty, the ability to meet sustainability targets, and potential cost savings, compared with fossil fuel-based agreements. And for project developers and investors, direct PPAs offer a stable revenue stream and access to a growing market segment.