KUALA LUMPUR (April 27): Asia-Pacific's energy transition will be an uphill journey, said S&P Global Ratings.

In a report titled "Energy Transition: Asia-Pacific Faces an Uphill Climb to a Cleaner Future “released on Tuesday (April 26), the rating agency said that by global standards, the region faces considerable roadblocks as it moves to renewable and stable forms of energy.

It said reliance on fossil fuel-based generation remains close to 70% and demand for power is growing, with significant investment needs.

S&P said the stage may be set for action, but each country will reach the summit at its own pace.

It said to get there will require enabling policies and a reprieve in the high cost of technological solutions.

S&P Global Ratings credit analyst Abhishek Dangra said if the energy transition is to accelerate, the affordability, reliability and sustainability must converge.

"In many Asia-Pacific markets, dirtier fuels are cheaper, and many countries are lagging and more dependent on energy policies to gradually meet the global ambition of lower carbon emissions,” he said.

S&P said nearly 60% of Asia-Pacific power generators are exposed to environmental risk factors, worth about US$500 billion of rated debt.

It said in countries such as China and Indonesia, government policies will determine the energy transition whereas in India the private sector will take the lead because of the favorable economics for renewables.

Short-term transition goals, particularly those of China and India, may face delays because of considerations around energy security and access to electricity.

Meanwhile, S&P credit analyst Apple Li said China's market-based reforms of the power sector will deepen over the next decade.

"Generation companies with better operational efficiencies and a higher mix of renewables will stand out amid the intensifying competition,” she said.

Meanwhile, commenting on the region, the agency said Malaysia has included large hydro capacities to bump up its renewable energy targets by 2035.

It said coal plants with 7GW capacity have a power purchase agreement expiring in 2030 and which will not be renewed.

“The government also claims there will be no more new coal plants after 2030, though plans still include 2.8GW of additional capacity after 2030.

“As coal use declines, higher reliance on gas may lead to price spikes,” it said.