PV Talk: Why solar is set fair in Southeast Asia

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Southeast Asia is making steady inroads into the global solar market, with large-scale operations planned in the Philippines, Malaysia’s feed-in-tariff repeatedly oversubscribed and regional leader Thailand shaking off recent political troubles. Ahead of Solar Energy Southeast Asia in Bangkok next week, Lucy Woods talks to Franck Constant, director of solar developer, Sonnedix, which commissioned a 9.5MW solar power plant in Thailand last year, about his experiences of this burgeoning solar market.

Sonnedix's project in Thailand.

Out of all the emerging markets in Southeast Asia, why did Sonnedix pick Thailand for this project?

Thailand is in the power business. When you look at the market, it is very important to us to look at the track record of the country, in terms of pro-business regulation for the power sector.

We were looking to make a long-term commitment to the country, a long-term investment, so we want to make sure the regulatory structure is robust, and Thailand qualified for that. The power sector in Thailand over the last 20 to 35 years – not in solar, but for other private power businesses – has always been very robust. The regulator is respected; the rule of law applies so it is a level playing field in Thailand.

What do you mean by a pro-business regulation for the power sector?

We look at the track record of the utilities, and PPAs over the last 20 years and also the independence of the power regulator in that country; the tradition that the regulator has in that country, is it a powerful regulator? And is there a level playing field approach for local investors? Do they treat foreign investors equally to local investors? These are the issues we look at.

How much of a difference did the ‘level playing field’ make developing solar in Thailand?

It’s a big difference, because we have some markets in Asia where it is more difficult for foreign investors to enjoy a level playing field. It is not easy if the industry and the power sector say a market is pretty much closed to foreign investors; [Thailand] was one of the markets that was open.

Do you think other Southeast Asian countries will follow in Thailand’s footsteps?

I think so. I think Thailand is probably the most advanced in PV, for regulation and development of megawatts; there is 1,000MW in operation now. I think the Philippines probably is in the next best position to follow in the footsteps of Thailand, with the most megawatts sold this year and in the next year, and also the Philippines has a tradition of having a good regulatory backbone in the power sector. So the Philippines [will follow] Thailand, then as a distant third and fourth, Indonesia and Malaysia.

What do you think it will take for Southeast Asian solar markets to take off?

I think they want to have a level playing field for local and foreign investors; you want to attract as many investors as possible, and to not only be limit to one kind, to keep competition in the market, and you need to have some market effect. A programme for 100-150MW is not likely to attract a lot of interest globally; really a minimum scale for one round of auctions, you need at least 500-1,000MW to attract attention and some of the larger investors.

What challenges did you face developing in Thailand?

When we got the project and developed it, there was no contractor who knew how to build a solar plant in Thailand. We had to bring together some local contractors and marry them with some solar experts in Europe, but they had never built a plant in Thailand or Southeast Asia, where you can have a rainy season, where there is 50cm of water falling, so it was a different restriction.

The challenge was to put together the construction to do what we want; we found the right site and had an excellent know-how transfer between the two contractors.

Do you get to see the differences the solar power plant makes to energy users in Southeast Asia?

I see it when I visit solar plants, compared to old plants, some 20 years ago: when I go to see solar plants I can hear the birds, even when they are working and operating, I never heard the birds in my previous plants, in coal- or gas-fired plants from 20 years ago. To me that is a really big difference: no emissions, no waste water, little noise.

Solar plants can be really decentralised and provide jobs, just 5km or 2km from a rural village, which can change the demographic of a village, and change the pressures on people. If they don’t want to do farming, they don’t need to go to Bangkok or the other larger cities to find jobs, so it reduces exits from rural communities to large cities.  It is a small impact, but it is one of the things that can be improved locally.

What were your experiences of financing the project?

I would not say it was easy, but there was project finance available locally. Solar will become more and more of a hit with local project financing, for the right sponsor and the right project.

Now Thailand has a 1GW starter market flowing, what’s next?

By the end of 2015, there should be 1,000MW in operation in Thailand and the government will continue with its goal for solar, it will link with technological progress and the potential increase in gas prices.

In the future, the cost of electricity from burning gas will become more and more expensive, so the competitive advances of solar will become more and more significant. So solar will make sense for the government, it will makes sense to commission more solar capacity in addition to the 1,000MW in 2015.

Any more predictions for Southeast Asia over next five years?

I wouldn’t make a prediction, but, I think there will be a good uptake of solar. I am quite optimistic for solar development in Southeast Asia in the next five years; it is not going to slow down.

Fanck Constant will be speaking about lessons learnt from developing solar in Thailand and what the next phase may look like at Solar Energy Southeast Asia in Bangkok, on 25 November.

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