Asia braced for $600bn green energy investment, Macquarie Capital says

Hajir Naghdy, chairman of Macquarie Capital Asia, tells Infrastructure Investor how his firm is tapping into the region’s renewables space, especially the offshore wind sector in North Asia.

Q: Your firm’s vice chairman for Asia, John Walker, described Asian renewables as the “investment opportunity of the century” in a video with us. What is your take on this and how does developed Asia compare with developing Asia?

HN: Falling costs are making renewables the cornerstone of the future global power industry, and Asia is already a renewable energy giant. In 2017, Asia accounted for nearly two-thirds of the global growth in renewable energy generating capacity, emphasising the extraordinary sense of urgency across the region.

In developed economies such as Japan, South Korea and Taiwan, a transition from nuclear and coal to clean energy sources is under way given the current need to import fuel and manage the challenges of a seismically active region. Well-established regulatory and legal frameworks across these markets provide developers with transparency and fairness which support their ability to successfully de-risk projects from an early stage.

In developing Asia, there is momentous growth taking place and economies are being driven by the need for new, and clean, energy installation. Almost one billion people gained electricity access in Asia’s developing nations between 2000 and 2015, and economic growth and rapid urbanisation continue to boost electricity demand in the region. ASEAN markets are looking to learn from more advanced economies, and developers with global experience can really assist in delivering effective solutions.

Over the next five years, $600 billion of green energy investment in Asia is expected, and private sector experience and capabilities will be critical to meet the challenging goals that have been set. What that means for Macquarie Capital is that we have the opportunity to share our global experience in a sustained manner, as markets evolve.

Q: What are Macquarie Capital’s investment strategies for Japan, Korea and Taiwan’s renewables markets?

HN: Different economies are driven by different factors, however the transition to clean energy sources is an ambition shared by Japan, South Korea and Taiwan, and respective governments have set ambitious renewable generation targets and have provided a transparent framework for developers to operate within.

This ongoing reform has created real opportunities for Macquarie to become part of the solution, and Macquarie Capital is currently developing more than 3.9GW of generation capacity in key markets across North Asia. Whether that’s harnessing natural resources through more traditional technologies such as solar and wind, or pioneering new technologies that can make a real difference to local communities, such as environmental services. As well as providing clean energy and waste solutions, we engage closely with local communities and supply chains, transferring our global knowledge for years to come.

Q: Do you feel comfortable investing in projects at the development stage?

HN: Our ability to be flexible and invest in early-stage projects allows us to control the development of the project and ensure it is developed in a manner consistent with our approach to create stable and attractive long-term infrastructure assets.

We also have the benefit of a global platform. Having already developed many projects from conception across the world, we have established a unique skill set that we can draw upon as we grow the renewables business across the region. The acquisition of the Green Investment Bank from the UK government in 2017, creating the Green Investment Group has created an even more powerful platform to support the next phase of expansion in global renewable and green energy.

Q: How large a portfolio is Macquarie Capital looking to build in the North Asian offshore wind sector?

HN: Our ambition is to become a leading developer, operator and investor in Asian offshore wind. We are currently developing Taiwan’s first offshore wind farm with generation capacity of 128MW which is part of a government plan to install more than 1,000 turbines by 2023, along with more than 2GW of offshore wind under development across Asia.

Q: Would you also consider markets in Southeast Asia, China and Australia?

HN: Macquarie Capital is constantly reviewing all renewable opportunities in those markets as it seeks to grow its renewables portfolio across Asia.

It’s very relevant, however, to note that China will be the major force behind capacity growth in Asia and will maintain its position as the largest renewables market in the world with the country’s wind and solar capacity expected to increase eightfold by 2040.