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The energy transition in Asia is threatened by coal subsidies and policy instability

Industry executives warned on Wednesday that Asia's clean-energy push would stall unless the governments cut fossil fuel subsidies and offered a stable policy direction. They also said they needed to invest in upgrading grids.

Executives cited the cancellation of renewables' auctions and the subsidies given to fossil fuel industries as the main obstacles to growth for green investments, at a time that data centres are driving the growth in energy demand.

"Coal is still subsidised, and energy and power in general are used to gain votes." Lawrence Wu, Chief Financial Officer for Asia at Portugal-based renewable energy firm EDP Renewables told the APPEC Conference in Singapore that this was the biggest obstacle.

The coal industry in major Asian economies, including Indonesia and India, continues to be rewarded, claiming that it keeps retail electricity tariffs low. They also cite lower emissions per capita to justify their dependence on fossil fuel.

Nitin Apte is CEO of General Infrastructure Partners' Vena Group in Singapore. The company has quadrupled the construction of renewable energy project in Asia.

We can estimate the risk if we know that a permit will take four years to obtain and we are certain of all the steps. Apte explained that the concern arises when an auction is run and then cancelled, or if the power purchase contract is not bankable.

Taiwan has revoked its offshore wind generation licenses following a review in this year. India, on the other hand, has cancelled 11,4 gigawatts of renewable energy tenders over the past two years due to high tariffs.

He said that data centres are causing a surge in demand for power across the region. This is not due to renewable energy.

"I don't believe they (data centers) really care about the carbon intensity of their data centres." "They just want energy," Apte stated.

Malaysia, one the most important data centres markets in Southeast Asia, has increased coal-fired electricity production and imported fuels at record levels to take advantage of low prices.

The executives said that delays in obtaining permits and other challenges were increasing financing costs. They also called for a long-term plan and predictable timelines.

Wu said EDPR was "doubling down" in Japan and Australia because they had "sustainable" risk that the company is "prepared to accept".

The predictability of the project helped to reduce capital and financing costs. (Reporting and editing by SonaliPaul; Sudarshanvaradhan)

(source: Reuters)