3 ways to mobilise transition to renewable energy in Asia

Wind turbine energy generaters on wind farm

At the inaugural Marsh Asia Energy Industry Conference (EIC), industry leaders and experts discussed three key business enablers that can empower innovation and mobilise investments for a balanced energy transition.

With Asia contributing to more than half of carbon emissions globally, it is crucial for organisations to mobilise efforts towards clean energy resources to foster sustainable economic growth. Experts at Marsh Asia’s EIC agree that achieving net-zero energy targets and facilitating a successful and sustainable energy transition means focusing on three key business enablers: technology and innovation, people, and capital and finance.

1. Technology and Innovation

Driving innovation for affordable renewable energy solutions

Due to coal’s affordability and reliability as a power source, coal-fired power plants remain essential to several countries in Asia. However, it is crucial to recognise that as many countries in the region continue to develop and experience rapid growth in the coming decades, the need for sustainable energy alternatives becomes increasingly urgent. While renewable energy solutions hold great promise for long-term environmental sustainability, they currently face challenges in terms of cost competitiveness. For renewable energy solutions to be a competitive alternative, innovation and technological advances are vital.

An area that has seen technological innovation improve the financial viability of green energy is wind power. Innovation in the decade leading up to 2021 has resulted in a 60% reduction in the cost of wind energy due to the development of larger and more efficient turbines.¹ While there have been challenges in the transportation of larger turbine parts and blades, innovation has led to the design of an aircraft capable of landing on shorter runways, eliminating the need for traditional airports and expanding the number of locations available for onshore wind generation.²

To aid continued technological advancement in renewable energy solutions, three elements are key:

Governmental support
Government policies and regulations not only play a vital role in encouraging companies to invest in and adopt clean energy practices but also set a tone and direction for investment, development, and the overall trajectory of firms and the industry. In Japan, for instance, the government issued US$140 billion in bonds to support transition technology and plans to implement carbon pricing from 2026.³ This combination of financial support and carbon levy not only drives the adoption of clean energy practices but also supports the companies that propel our industries, fostering an environment that promotes sustainable and responsible growth, and ultimately accelerating the energy transition.

Consumer demand
Consumer behaviour and sustainability have a symbiotic relationship, as evidenced by the textile industry. Consumer demand is a key sustainability driver, with 87% of consumers in emerging Asian markets expressing a strong interest in adopting sustainable lifestyles, surpassing the global average of 73%.⁴ Changing consumer expectations and heightened awareness have prompted Bangladesh's textile industry to implement sustainable practices, such as reducing water and energy consumption through dry washing technologies and enhancing energy efficiency via waste heat recovery. These proactive measures demonstrate the industry's response to changing consumer expectations and its commitment to achieving a more sustainable future.
Partnerships
Fostering innovation and establishing effective and inclusive partnerships across and between public and private sectors is crucial for driving sustainability and facilitating positive change. Reinvesting funds into educational and research institutes that drive innovation forward is essential, as it nurtures the development of groundbreaking technologies and solutions.

Partnerships also encourage collaboration and collective action. This inclusive approach allows everyone to contribute their expertise, resources, and perspectives towards addressing sustainability challenges. By working together, these diverse collaborations can facilitate knowledge sharing, access to funding, and the implementation of sustainable practices on a larger scale.

Insight: Innovative hydrogen solutions

Hydrogen is gaining attention as an alternative fuel in Asia with its demand from China, Japan, Singapore, and South Korea expected to account for an estimated 70% of global demand by 2040. Therefore, innovation and technology are urgently needed to ensure that hydrogen can be produced, transported, and stored cost-efficiently.

An example shared at the conference was about a power generation facility in the US that utilises salt caverns to store hydrogen generated by surplus solar power. The hydrogen was used to generate power to complement existing solar capacity in times of higher demand, to offset negative prices during periods of oversupply.

As worldwide investment in hydrogen production facilities surges, Marsh has introduced a hydrogen insurance facility to safeguard investments in hydrogen projects. Supported by a panel of top-rated global insurers, this facility provides 100% capacity for construction and operational risks, and is available for any hydrogen project anywhere in the world.

Acknowledging the importance of collaborating with carbon-intensive industries to support their efforts in transitioning to a low-carbon future and its commitment to leading the way in decarbonising these challenging sectors, Marsh has also introduced a specialised carbon capture and storage (CCS) solution for effective transportation and storage of carbon dioxide (CO2).

2. People

Developing a diverse and agile workforce to fill new renewable energy skills

The transition to renewable energy promises to create new job opportunities, including an estimated 24 million green jobs by 2023, which necessitates a career shift for 14% of the global workforce. However, the energy industry is facing a challenge in attracting and retaining talent, particularly among the younger workforce, as they gravitate towards careers in more technology and data-oriented roles, companies, and industries. As a result, key players in the energy industry are recognising the need to adapt and capture this younger talent pool. To ensure a successful and sustainable energy transition, it is crucial to have a growing pool of skilled and diverse individuals driving the industry forward. However, research revealed that energy companies may be unprepared for this change, as only 38% have a clear understanding of the skills their existing workforce possesses.⁵

To address this talent gap and mitigate potential disruptions, strategic workforce planning is essential. This involves upskilling and reskilling the existing workforce to equip them with the necessary skills for the renewable energy sector. Additionally, companies need to redesign work structures and provide opportunities for career growth to support employees' professional development. It is imperative to invest in talent development, both within the existing workforce and by attracting new talent.

By actively addressing the talent challenges and embracing a diverse workforce, the energy industry can navigate the energy transition more effectively to ensure a successful and sustainable energy future.

Insight: Helping a mining corporation close the gender pay gap

An international mining and metals company committed to a gender-balanced workforce by 2025 by attracting a more sustainable pipeline of talent. To achieve this, Marsh worked with the company to redesign work and close the gender pay gap. A key focus was removing biases in recruitment and policies.

3. Capital and Finance

Securing cost-effective green financing and insurance

The renewable energy transition journey necessitates significant capital investment, with projects relying on new technologies requiring financing support. To make this transition possible, investments will need to triple from current levels to reach an estimated annual value of US$4 trillion.⁶ However, challenges may arise, particularly when it comes to securing cost-effective financing and insurance coverage owing to uncertainties surrounding the viability of projects, especially those involving new technologies.

The insurance industry can play a vital role in overcoming these challenges by acting as a strategic partner. By engaging early in project lifecycles, insurance brokers can help mitigate risks and enhance project viability. They can also encourage differentiated pricing for green insurance coverage, which can be known as "greenium”, with favourable terms and incentives.

To successfully support the energy transition, it is crucial to utilise capital and financing as catalysts and enablers for research, development, and deployment. By supporting firms in these stages, we can foster innovation and accelerate the adoption of advanced and sustainable energy solutions. Collaboration with institutes of higher learning can further enhance knowledge sharing and drive advancements in the field. A focus on economic and social viability ensures that the transition is sustainable.

Overall, capital and finance are critical enablers that, when used effectively, propel the energy transition forward.

Insight: A blended finance initiative to support Asia’s energy transition

The Monetary Authority of Singapore (MAS) launched an Asia-focused blended finance initiative, Financing Asia’s Transition Partnership (Fast-P), to facilitate the early phasing out of coal and decarbonisation of hard-to-abate sectors such as cement and steel manufacturing. With participation from the Asian Development Bank and Global Energy Alliance for People and Planet (GEAPP), FAST-P aims to mobilise concessional capital globally, and crowd in private capital to de-risk and finance energy transition projects.

Navigating the diverse pathways to successful energy transition in Asia

With varying demographics, economic conditions, geography, and political situations, each Asian country faces unique challenges in achieving carbon neutrality and net-zero targets. A 2021 report by the UN Economic and Social Commission for Asia emphasised the need for “considerable and focused efforts from governments, civil society, and the private sector” to achieve social development goals, which include the energy transition.

Collaboration is key to a successful energy transition. From policy development to mobilising private finance, successfully navigating the various possible pathways towards net-zero and carbon neutrality would require productive cooperation among all stakeholders. Multiple stakeholders working together to solve the energy trilemma of balancing affordability and access, energy security and environmental sustainability is critical to ensuring that energy transition efforts can drive sustainable economic growth.

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^{1 World Economic Forum (2023), Wind power costs: Why the industry is facing cost headwinds | World Economic Forum (weforum.org)}

^{2 Radia (2024), Radia to Provide Low-Cost Clean Energy with the World’s Biggest Wind Turbines Enabled by the World’s Largest Aircraft | Business Wire}

^{3 DGB Group (2024), Japan commits 20 trillion yen to accelerate emissions trading and carbon reduction}

^{4 Retail Asia (2023), Nearly 90% of consumers from emerging Asian markets want more sustainable lifestyle | Retail Asia}

^{5 Mercer (2023), People risks evolving as the energy transition advances (mercer.com)}

^{6 World Economic Forum (2023), How to finance the energy transition in Asia | World Economic Forum (weforum.org)}