Phoenix Solar has a number of ground-mounted and rooftop projects in Southeast Asia – including Thailand’s first rooftop project and Singapore’s biggest. How do you see those two markets maturing in Southeast Asia and what are some of the local considerations that may impact that?
The market conditions vary from one country to another so it is difficult to generalise. Many Southeast Asian countries have announced or formulated ambitious expansion targets for solar energy and initiated the requisite policies, but PV is deployed at different speeds in different countries. For example in land-scarce Singapore, we didn’t really have a rooftop market until 2009. It started slowly, driven by intangible returns such as CSR benefits or green building certification. The price of PV was too high to earn an acceptable commercial return for a grid-connected PV system, and the Singapore government has always refused to subsidise the market. Last year system prices dropped to the point of commercial viability in Singapore, making solar energy an attractive investment. Installed capacity now looks set to double every year, so it is definitely a hot market for us.
Thailand is a different story. With a growing demand for energy and limited resources, the country has enough land to build both solar farms and rooftop installations. The government has successfully attracted PV investors with generous payments for PV electricity mostly through the renewable energy adder programme and more recently through the feed-in tariff for rooftop installations. As a result many companies have adopted PV as a sound investment that fulfils sustainability criteria and provides favourable returns. We have installed over 54MW of PV systems there with our local partner PESCO for both local and international developers. One good example of the latter is our recent 1MWp installation on IKEA’s flagship store at the Megabangna shopping complex, a joint venture owned by Thailand’s Siam Future Development PLC and Ikano.
A lot of companies entering new markets fail to understand local customs, policies and ways of doing business. What tips or advice would you give to a company looking at a completely new market?
It’s important for a foreign company to build a strong partnership with a credible local company. The foreign company should add value with an established track record and systems expertise, but needs a local partner to navigate the local bureaucracy, comply with local regulations, and source a competent workforce. Solar farms are inextricably linked with real estate, and no country lets foreigners walk in and buy land without restrictions; you need local knowhow. In many cases, there is also a language barrier to overcome. On the other hand, the local company needs the foreign partner’s systems experience to reassure investors and banks that the project is reliable. Lower perceived risk translates into lower financing costs, which means higher investor returns.
In terms of local economic contribution, what are you doing locally to develop jobs and joint ventures with local companies?
For reasons similar to those driving partnerships between foreign and local partners, we need to engage the local community wherever we construct our solar farms. The construction work provides job opportunities for the community workforce. And after completion, we also need to hire staff for operations, maintenance and security. It’s always better if the local community feels an association with the solar farm, and it’s a disaster if they perceive it as a threat to their livelihoods. Whenever we undertake a solar farm project, we make sure to engage the local community early on.
Thailand is a huge potential opportunity and policy is starting to fall into place but what are the other conditions which are already in place to accommodate solar?
With plenty of space to install PV and excellent irradiation levels solar PV has grown at a fast pace in the last years thanks to the government-based incentives to support both large-scale solar farms and rooftop PV systems. The recent political turmoil put things on hold for a while, but PV is now back on the agenda. The Thai Energy Ministry just announced plans to purchase 800MW of electricity from solar farms in 2015/2016 and the industry is abuzz with anticipation for the release and allocation of a second wave of PPAs.
How necessary are incentives in the region?
With the right combination of sunshine and retail electricity tariffs, there is no need for incentives; they just distort the market. Singapore is an example where incentives are unnecessary, and the same holds true in a growing circle of countries. However, many countries either have too little sunshine and/or prevailing electricity tariffs are too low for solar to compete without some support. In such cases, carefully calibrated incentive schemes can kick start the solar market.
In the long term no country can afford to maintain energy subsidies – whether for solar or for conventional power. Indonesia and Malaysia have both realised this and are trying to wean their populations off subsidies for fuel and electricity. It’s a political hot potato! But once they succeed, they will find that unsubsidised solar is often cheaper than conventional electricity.
What has most surprised you about Southeast Asia?
The pace at which the solar business is growing here, compared to only a few years ago, when all the action was in Germany. It’s great to see so much business opportunity for PV in this region.
Cristophe Inglin will be a keynote speaker at Solar Energy Southeast Asia, in Bangkok on 25-26 November 2014, organised by PV Tech’s publisher. Further details are available here.