Asia Sustainable Finance Briefing: China’s Battery Storage and Hydrogen Efforts Get Big Boosts

China continues to grow its presence in the cleantech space, including a new battery storage program that’s receiving significant funding from the World Bank. Meanwhile, major US investors including Goldman Sachs and Morgan Stanley are backing renewable power developers across India, while a Danish asset manager is nearing $1 billion for a new cleantech fund that will focus on projects in Asia.

We cover all of this and more in this edition of our Asia cleantech and sustainable finance news briefing.

World Bank to Finance China’s Battery Storage Program

The World Bank will loan $300 million to China to support a battery storage project that aims to help the country scale up the use of battery storage at renewable power sites.

China has the world’s largest installed electricity generation capacity of wind and solar power, but transmission constraints have meant the country hasn’t been able to fully utilize that capacity. Battery storage will go a long way to alleviate that.

“This project will help accelerate the on-going clean energy transition in China and contribute to the country’s emission reduction targets,” says Martin Raiser, World Bank Country Director for China. “By providing financing for battery storage and distributed renewable energy applications, the project will reduce curtailment of renewable energy capacity and thus encourage further investments into changing China’s energy mix.”

In conjunction with the World Bank loan, China’s Hua Xia Bank will provide co-financing of at least $450 million.

The loan is part of a commitment the World Bank made last September to invest $1 billion in battery storage programs worldwide,.

New Billion-Dollar Clean Energy Fund to Focus on Asia, Latin America

Copenhagen Infrastructure Partners (CIP) raised $700 million for a new fund that will invest in renewable energy infrastructure, mainly in Asia and Latin America. CIP expects its Copenhagen Infrastructure New Markets Fund to hit $1 billion by final close.

Most of the investors so far have been from the Nordic region.

“CIP has demonstrated its ability to develop and construct renewable infrastructure projects in Europe and America on time and budget and has delivered very attractive returns to its investors.” says Torben Möger Pedersen, CEO at PensionDenmark, one of the investors. “We see the New Markets Fund as a natural next step to broaden the investment universe to new markets in Asia and Latin America, where there is a significant need for renewable energy investments that represents attractive investment opportunities for CIP and its investors.”

Projects the fund will finance are likely to include offshore and onshore wind, solar PV, biomass and waste-to-energy, and transmission grid systems.

CIP manages five funds overall with about €7.5 billion ($8.6 billion) under management.

Goldman-Backed Green Energy Co. in India Scraps IPO PLans

ReNew Power, Indian’s largest green energy company, pulled the plug on plans for an IPO and will instead look to raise funds by selling some assets. It will also get a fresh infusion of capital from existing investors, including Goldman Sachs and a large Canadian pension.

ReNew says it may create its own infrastructure investment trust, or InVit, to raise funds. That’s exactly what rival developer Acme Solar Holdings did last year, putting a hold on its own IPO plans and choosing instead to raise funds through a private InVit. Acme cited volatility in India’s stock market, as well as uncertainties surrounding the country’s renewable energy policies.

ReNew’s existing investors include Goldman Sachs (which holds about 48% of the company), Canada Pension Plan Investment Board (16%) and Green Rock (just under 16%). Goldman, CPPIB and the Abu Dhabi Investment Authority are set to invest another $300 million in the company.

Shanghai Joins Hydrogen-Fuel Vehicle Push

China’s largest city is developing a huge “hydrogen energy port” that will be able to produce more than $7 billion wroth of fuel cells and components by 2025 as Shanghai joins the country’s major push into the hydrogen-powered transportation industry,

The project will help China meet its stated goal of producing at least 2 2 million hydrogen fuel vehicles by 2030.

The central government has sent strong signals that it will support the hydrogen-fuel vehicle industry, which has led to dozens of cities across China launching similar projects in recent months.

As just one example, the city of Datong plans to build three hydrogen fuel cell production plants.

China Remains ‘Most Attractive’ Market for Renewables

Despite the Chinese government trimming subsidies for renewable power, China remains the world’s “most attractive market” for investments in such projects, a new report says.

Ernst & Young says China remains the world’s top investment market for renewables, which it has been for four straight years now. The US is in second place this year, for the second year in a row.

“China’s renewable energy market is undergoing a transition as the government seeks to rein in the costs of the subsidies paid to the sector,” the EY report notes. However, with falling prices and ongoing concerns about pollution, growth in the clean energy market in China will continue, the consultancy says.

France is in third place in EY’s rankings, up from fifth last year, while India fell from third to fourth.

Agencies to Mobilize $7 Billion for Clean Energy Across Asia

The US Agency for International Development and the Asian Development Bank are teaming up to mobilize $7 billion or more for clean energy projects across Asia-Pacific. The goal, the organizations say, is to “accelerate the transition to a more sustainable, secure, and market-driven energy sector” across the region.

The agencies will work to support $7 billion of investments in energy projects , boost clean energy capacity by at least 6 gigawatts, and increase “regional energy trade by 10% over the next five years. They’ll also encourage energy efficiency as well as reform and good governance of the regional energy sector.

The announcement comes a month after ADB agreed to provide $750 million in long-term financing to India Railway Finance Corp., to help modernize and electrify India’s rail network, so it can move away from fossil fuels.

Citi Moves toward 100% Renewable in Hong Kong

Citigroup says it’s taking important steps in Hong Kong that will help the company move toward its goal of getting all of its electricity, worldwide, from renewable sources.

The bank’s Hong Kong unit has bought renewable energy certificates (RECs) that are the equivalent of buying 300,000 kWh of electricity from all renewable energy sources. The purchase makes Citi the biggest buyer of RECs in the Hong Kong finance sector, the bank says.

Next year, the firm is scheduled to install solar panels on the roof of Citi Tower in Hong Kong’s Kowloon East area.

Worldwide, renewables provided Citi with 62% of its electricity last year. The goal is to become carbon neutral across its 7,500 global locations by 2020. To do so, the firm is looking to implement onsite power generation, utilize power purchase agreements and RECs, and increase its focus on energy efficiency at its locations globally.

Morgan Stanely Invests in India’s Adani Green Energy $500 Million Green Bond Issue

A leading renewable energy developer in India has raised $500 million through dollar-denominated green bonds. Adani Green Energy will use the money to fund its large-scale solar and wind energy projects across India.

The five-and-a-half year bonds were offered with a 6.5% yield, and received bids totaling a reported $1.5 billion.

One-third of the money came from US investors. Investors in the bond issue include Morgan Stanley, Manulife, Eastspring, Harvest, Payden, and Lazard Masfi.

Adani is one of the biggest generators of renewable energy in India. It has an operational capcioty of more than 2 gigawatts, and says it will have 4.5 gigawatts of installed capacity by early 2021.

Green bonds are popular currently among many Indian renewable energy developers. Recent or planned green bonds have come from ReNew Power, Hero Future Energies, CLP India and Azure Power.

Taiwanese Tech Co Takes Out Sustainability-Linked Loan

Taiwan-based display manufacturer AU Optronics has taken out the first sustainability-linked loan by an Asia-Pacific tech company. AU Optronics signed the three-year, 2 billion New Taiwan dollar ($65 million) loan with DBS Bank.

The loan’s interest rate is pegged to the company meeting specific sustainability performance targets. Unlike the proceeds of green bonds, money raised by a sustainability-linked loan can be used for any corporate purpose.

The goal of such loans is “to incentivise and reward corporations to advance their sustainability agenda,” says Tony Luo, head of the institutional banking group at DBS Bank (Taiwan).

The Singapore-headquartered bank issued four sustainability-linked loans last year, totaling more than S$600 million ($443 million).

AU Optronics has been part of the Dow Jones Sustainability Index for the past nine years. The company has an “excellent” performance track record in areas like corporate governance, environmental sustainability, science education, cultural preservation, social citizenship and workplace inclusivity, DBS says.

South Korea Formally Endorses Renewables, Hydrogen

South Korea continues to move toward a greater reliance on renewable energy and away from coal and nuclear. In early June, the government’s cabinet formally approved the country’s new energy policy roadmap.

Plans now call for solar, wind and other renewables to supply 35% of the country’s electricity by 2040. Renewables supplied just 6% of the country’s electricity in 2017.

South Korea plans to build no more “conventional” power plants like coal, though some existing coal plants will be converted to run on less polluting fuels, like liquefied natural gas.

The newly approved plan also calls for increased use of hydrogen in transportation.

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