(The opinions expressed here are those of the author, a market analyst for Reuters.)

LITTLETON, Colorado - Asia has widened its renewable energy capacity lead over all other regions, adding a record 450,000 megawatts (MW) of new renewable capacity in 2024, according to data compiled by LSEG.

That capacity addition dwarfs the roughly 109,000 MW added in Europe and the 93,000 MW added in North America last year, and cements Asia's position as the main global hub for renewable energy generation.

Asia's total installed renewables generation footprint is now roughly 2,500,000 MW, compared to around 1,000,000 MW in Europe and 700,000 MW in North America, and means Asia is now home to just over half of all renewable generation capacity.

And Asia's capacity lead looks set to widen going forward as diminished political cohesion in Europe and a swing to a climate-sceptic administration in the United States potentially slows the pace of renewables growth in those markets.

Trade spats between China - the world's top producer of renewable power production components - and Europe and the United States may also accelerate Asia's renewables build-out, by forcing China to focus more on local markets for growth.

 

POWER PRICE IMPACT

Sustained renewables capacity growth in Asia just as capacity expansions slow in Europe and North America could spark a divergence in power price trends between those regions.

If Asian power systems steadily increase the share of renewables within generation mixes, local power prices could be driven lower by the resulting increases in output from solar and wind farms that can produce power more cheaply than fossil fuel power plants. 

At the same time, continued high reliance on natural gas for power generation in Europe and North America could keep power costs in those markets on a potentially rising trajectory.

This is especially likely in Europe, where gas plants that previously ran on pipelined supplies from Russia must now be fed by imported liquefied natural gas (LNG), which can cost sharply more than pipelined gas.

Gas prices in North America could also trend higher, especially if the United States ramps up gas exports in the form of LNG to feed the gas demand in other regions, and tightens domestic gas supplies as a result.

The legacy networks of gas pipelines, power plants and ancillary industries that use gas as a feedstock are also powerful forces within Europe and North America, and are effective at thwarting policies that may undermine their status.

These industries are also major local employers and so could spur broad societal disruption if they come under threat.

In contrast, several major economies throughout Asia are intent on reducing their dependence on imported fossil fuels for energy production, and are committed to expanding home-grown power production that is enabled by renewable sources.

 

CHINA'S SKEW

China accounts for roughly two-thirds of Asia's renewables capacity footprint and looks set to remain the world's fastest developer of renewable power generation.

China's mammoth manufacturing base also looks set to remain the largest producer of solar parts and other key components tied to renewables generation, which China plans to export throughout the world.

Local Asian markets are likely to be willing buyers of those China-made parts and products, as several economies in Asia are experiencing rapid growth in energy consumption that can be supplied relatively cheaply and quickly by renewables sources. In contrast, Europe and the United States are liable to slow their uptake of China-made energy products due to ongoing trade disputes, even if those products are among the lowest cost available and are effective in lifting power supplies.

That discrepancy in appetite for China-made renewable energy parts and systems may further accelerate the divergence in clean power capacity trends between Asia and other regions, and amplify the resulting power price trends.

The re-routing of global manufacturing supply chains away from China - in response to ongoing trade disputes with Beijing - may also serve to accelerate Asia's renewables adoption.

Many of the alternative factory locations are likely to be in low-cost Asian nations that have large workforces, while many of the products and parts they assemble will remain tied to the energy transition due to the widespread appeal of clean energy production systems.

Emerging economies across Asia are also keen to wean their energy systems off high-cost and high-polluting fossil fuels, and so are expected to undertake major investments in building out clean energy generation that helps to create jobs and spur economic growth.

In sum, these trends may serve to speed up Asia's collective adoption of renewable energy production over the coming years, just as Europe and North America are poised to potentially reduce the pace of renewables adoption due to their own political and industrial priorities.

The opinions expressed here are those of the author, a market analyst for Reuters.

(Reporting By Gavin Maguire; Editing by Sonali Paul)