SUSI Partners’ Wymen Chan on renewables in Southeast Asia

In an in-depth article by Infrastructure Investor’s Tharshini Ashokan on the prospects for renewable energy in Asia, Wymen Chan, SUSI Partners’ Head Asia, was able to share his perspective on the topic highlighting the importance of serving emerging Southeast Asian markets.

In the following, Chan’s quotes from the article are presented with minimal context added. The full article is available to Infrastructure Investor subscribers here.

Pointing to the increasing energy demand in Southeast Asia and the fact that renewable energy projects are generally easier to build than traditional energy generation assets, Chan says: “The Southeast Asia region is compelling because of its additionality. There’s the need for power so the plants that we are financing or building essentially don’t replace existing plants. There is an opportunity now for Southeast Asia, which is relatively less developed than markets like China, to make this leap towards renewables as the main conventional form of power. There’s a chance to leapfrog, essentially, because it doesn’t have the burden of existing infrastructure.

On the role that renewable energy certificates (RECs) have to play in the region, he comments: “At this point in time, we don’t consider RECs in our investment process per se. We are certainly aware of it and would like to see it succeed in the market. The critical issues facing RECs right now are the certification bodies. There’s no standardisation. There are big steps towards it at the moment, however. Singapore [regulators] recently issued a certification standard for Singapore and a lot of different countries in the region are looking at improving the robustness of the certificates as well. These things need to be sorted before you actually have an active market for RECs. For us, we view them purely as a bonus or additional revenue, if it becomes viable. But we are all for the concept of a REC.

Chan then elaborates on the risks involved in investing in less developed Asian economies: “The good news is renewable energy is quickly becoming mainstream and governments in emerging markets like Cambodia, Indonesia, and Laos understand that there’s this push towards renewables. There are certainly risks. Development risk is one, as all these assets are new. And regulatory risk, given that not all stakeholders are familiar with renewables. The third risk is financing risk, as local financing banks are also new to renewables as a whole.

Finally, Chan points out that these risks may result in larger funds and institutional investors overlooking promising opportunities in emerging markets and emphasises the importance of Southeast Asia in meeting global climate goals: “In our push for climate change mitigation, it’s important to be inclusive of the emerging Asian economies. I would welcome more competition here because it only improves the sector and improves our chances. Climate change mitigation has to be global. We cannot leave out any particular region or country in order to achieve our climate targets. That’s why we focus on emerging economies in Asia.