Chennai, Aug 31 (IANS): Government policy support coupled with improving competitiveness of renewable energy will fuel Emerging Asia's (EM Asia) long-term transition to a lower carbon energy mix, albeit at different speeds, said Moody's Investors Service in a new report.

However, key challenges remain for certain countries, including inconsistent policy implementation and high leverage to fund renewables' capacity expansion.

"Government policies, such as priority in dispatch and mandatory renewable energy consumption targets, will further support the sector's development in EM Asia. Still, the move away from coal will depend on how governments balance near-term objectives such as energy affordability and security against long-term emission reduction goals," Boris Kan, a Moody's Vice President and Senior Credit Officer said.

EM Asian countries' plans to reach net-zero emissions depend on shifting the fuel mix from mainly thermal power toward clean and renewable energy.

The International Energy Agency's stated policy scenario predicts total installed non-hydropower renewable capacity in China, India and Southeast Asia will increase from about 700 gigawatts (GW) in 2020 to about 5,300GW in 2050.

In EM Asian countries such as India and China, wind and solar power are the most competitive energy sources, mainly driven by a drop in wind turbine and solar module prices over the past 3-5 years despite recent price volatility.

But difficulties remain for renewable energy companies, including (1) their non-compliance with renewable purchase obligations, (2) delays to renewable tariff payments by off-takers, (3) uncertainty of the renewable tariff regime, (4) higher leverage amid significant renewable expansion, although major companies will have access to lower-cost financing, and (5) electricity transmission constraints, Moody's said.