To combat these threats, the governments in this region are laying emphasis on renewable energy development through acts and laws.
New analysis from Frost & Sullivan (businessfinancialservices.frost.com), InvestFrost Energy - Southeast Asian Renewable Energy Market, finds that the market earned revenues of $2.34 billion in 2008 and estimates this to reach $4.31 billion by 2014 due to the rising awareness about clean energy, emission control, and various green initiatives.
"The economic growth in Southeast Asian countries is likely to increase their energy consumption levels," says Frost & Sullivan Research Analyst Sivapriya Ramakrishnan. "Owing to the increased volatility of crude oil prices, the countries in this region are promoting higher use of renewables."
Southeast Asia has significant potential for energy production from renewables, particularly in geothermal, biomass, and solar energy, because of its abundant natural resources and favorable topography. These favorable factors have encouraged investments in renewables, resulting in an expected compound annual growth rate of 12.4 percent from 2007 to 2014.
To further encourage uptake of renewable energy and attract considerable investments, some Southeast Asian countries have set renewable energy targets. For instance, in December 2008, the President of the Philippines brought into effect the Renewable Energy Act of 2008 (Republic Act of 9531), which is expected to bring in investments worth $25.00 billion for renewables between 2008 and 2010.
"This act is considered a milestone legislation, as the Philippines is one of the key markets for renewable energy not just in Southeast Asia, but at a global level," notes Ramakrishnan. "This in turn is expected to stimulate similar legislations in other countries in Southeast Asia, which can add significant investment to the market."
Despite these efforts by governments, the market is experiencing funding constraints. Renewable energy projects continue to remain low-capacity projects, as the lack of finance restricts the expansion/implementation of large-scale projects. This is because investors are keen on shorter payback periods and provide only limited funds to the project developers even though renewable projects involve heavy installation and equipment costs.
Funding will be a lot easier to come by if banks make obtaining loans more hassle-free and if market participants catch the attention of institutional investors.
"Meanwhile, government funding for renewables is gradually increasing every year," observes Ramakrishnan. "As new renewable energy targets and legislations are being rolled out, government funding is expected to increase further."
On the back of such earnest efforts, investors are showing greater eagerness to invest in large-scale renewables projects. In fact, Japanese, Danish, and Spanish investors have financed a 40MW wind farm in the Philippines. This wind farm is considered the largest in Southeast Asia.
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