China’s switch to financing overseas renewable energy projects from coal-fired power plants to be slow and challenging

Name: Floating solar farms off Singapore offer hope for land-scarce city to boost renewable energy
Uploaded: 2021-10-04T08:00:20.000Z
Duration: 1 min 33 s
Description: Floating solar farms off Singapore offer hope for land-scarce city to boost renewable energy

President Xi Jinping said last month that China will no longer build new coal-fired power projects abroad, and will increase support for low-carbon projects

In Southeast Asia, an immature regulatory environment and insufficient power grid investment are seen as hurdles to investment despite a clear preference for renewable energy projects

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Chinese President Xi Jinping said in a speech to the United Nations on September 21 that Beijing would stop funding coal-fired power plants overseas. Photo: Bloomberg

Eric Ng

Published: 4:00pm, 4 Oct 2021Updated: 10:29pm, 4 Oct 2021

China’s decision to stop building coal-fired power plants overseas is likely to open up opportunities for renewable energy project developers and financiers from the mainland, but the transition will be slow and challenging, according to industry observers.

This is particularly true of Southeast Asia, where there is a clear preference for renewable energy due to growing energy demand, but an immature regulatory environment and insufficient power grid investment present obstacles. For mass development to take off, guaranteed offtake, dispatch and tariffs are needed, besides robust power purchase agreements and a creditworthy off-taker – typically the grid operator, say experts.

“The region looks attractive for building renewable projects, especially solar farms, as nations there have fantastic solar irradiance,” David Fishman, a manager at power sector consultancy The Lantau Group, adding that it is the policies that makes these projects unattractive for international developers and financiers.

President Xi Jinping told the UN last month that China will no longer build new coal-fired power projects abroad, and will increase support for low-carbon projects in developing countries. It was another positive boost from China for global efforts to fight climate change, after Xi announced a year earlier that it will aim to peak carbon emission before 2030 and achieve net zero emissions by 2060.

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Floating solar farms off Singapore offer hope for land-scarce city to boost renewable energy

“China has yet to put at date on [the overseas coal ban] nor did they say whether the pledge would only cover financing from policy banks only or include other commercial or state-owned banks,” said Belinda Schäpe, climate diplomacy researcher at climate risk, finance and energy policy advocacy think tank E3G.

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