Growth of renewable energy to lay competitive pressure on coal plants: Fitch Ratings

In spite of the dominance of coal as a major source of electricity, a stable shift towards renewable energy is slated to generate competitive pressure on some thermal power plants, particularly in developing economies, Fitch Ratings has said in its latest report.

Report titled, Fitch Ratings 2019 Outlook: Asia-Pacific Energy and Renewable Projects mentioned that coal’s contribution to electricity generation is well above the global average of less than 40% in most APAC countries, and is as high as 75% in India and 68% in China.

The report further said that the share of renewable energy sector, which is already growing, will be further boosted by declining technology cost and rising availability of cheaper finance.

“Government policy will usually remain supportive of renewables, but improving economics in the sector will allow the steady withdrawal of subsidies, encouraging feed-in-tariffs, and generous tax and accounting treatment. Offshore wind is likely to be the major addition to non-hydro renewable generation capacity in the near term,” the report said.

Coal-fired projects that are exposed to the merchant market or unprotected by contractual termination compensation could face a risk of lower electricity sales or, in a worst-case situation, early termination as a result of growing competition from renewable projects.

“We expect sustained innovation in financing options from renewable issuers, such as project bonds, asset-backed securities, ‘green bonds’, and infrastructure trusts, in addition to traditional debt instruments. Renewable energy issuance has been limited so far in APAC,” the report mentioned.