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ENVIRONMENT, POWER UTILITY | Staff Reporter, Singapore
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APAC renewables a ‘compelling' investment pick as energy demand rises: BlackRock

A low carbon recovery can help restore job demand, fiscal balances.

APAC is set to be the dominant driver of renewable investment in the coming years, reports investment firm BlackRock, as demand rapidly grows across the region, reports BlackRock. Specifically, investors could enjoy swift gains in installed capacity as well as contracted revenue streams, which has improved relative risk-adjusted returns.

Despite the pandemic-fueled recession, energy demand impacts are less uniform. Although industries have been disrupted, household demand remains firm.

“Certainly, a continuing pandemic and a global recession would heavily curtail demand, but this adjustment is not uniform. Impaired trade and personal mobility are driving very disproportionate impacts on specific types of energy demand, like automotive petrol, aviation kerosene and shipping bunker fuel,” the report said.

“Meanwhile, household electricity demand has been more resilient, supported by the relentless living/working/entertainment needs of the stuck-at-home,” it added.

Amongst markets Taiwan, Japan and South Korea has the most compelling investment cases; whilst Australia, Malaysia, Indonesia and Vietnam on a secondary basis.

Other APAC markets are also being considered on a more opportunistic basis, especially if they see a better blend of policy support, power pricing and operating risks, BlackRock added.

Furthermore, there is much to be gained from a low-carbon recovery, especially in restoring job demand and fiscal balances.

“Whilst this pandemic is causing a tragic loss of lives and a lamentable loss of livelihoods, there are potentially positive policy initiatives that may follow on from this disruption. As noted by The International Renewable Energy Agency (IRENA), the post-COVID recovery agenda provides considerable scope for increased renewable energy investment,” the report further noted.

In particular, it is helping pave the way to address the issues of elevated unemployment—renewables have three times the labour intensity of fossil fuels—and strained fiscal finances from increased private capital participation.

Currently, the APAC region remains somewhat more focussed on wind and photovoltaic solar power generation when it comes to scaled deployment, although there are also clear opportunities in hydro, geothermal, biomass, waste-to-energy and storage in specific markets.

As for capital strategy, BlackRock sees good, viable entry points for both equity and debt.

“Whilst the equity component offers scope for attractive risk-adjusted returns and scalable deployment, there is also a sizeable debt component, which is drawing in more conservative insurance capital, particularly where there is a currency-matched and long-dated revenue income stream,” BlackRock explained.

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