While there are many opportunities for solar in Southeast Asia, each country has its unique market conditions and challenges. pv magazine brings you this report from Solar Media’s Solar and Off-Grid Renewables Southeast Asia conference.
The Solar and Off-grid Renewables Southeast Asia conference hosted by Solar Media ran from Tuesday, November 29 to Wednesday, November 30. The conference gathered investors, developers, consultants, and officials from across the region to highlight promising opportunities like the opening of Myanmar and discuss on-going challenges like inconsistent and uncertain regulation.
Discussion topics ranged from small solar lanterns to multiple MW, utility scale projects. The markets in focus were Myanmar, Thailand, the Philippines, Indonesia, Laos, and Cambodia.
The Keynote Panel summed up the region nicely in saying that there are few commonalities across the region except the enormous untapped potential. With over 130 million people without electricity, there is great opportunity to utilize off-grid solar to provide electricity to rural people. On the grid, power generation is expected to double by 2025, and solar is already competitive with grid prices in many countries. These economic fundamentals will underpin the expansion of rooftop and utility scale installations.
Myanmar was the most discussed countries at the conference with two panels devoted to the country. The recent opening of the country has many solar developers and energy access practitioners alike eager to make their mark. To turn the challenges into opportunities, patience will be required as basic governmental and financial infrastructure still needs to be put in place.
Several investors and developers noted the lack of credit for solar projects stating that loan terms beyond 1 year were hard to obtain from local banks. Other investors who had recently visited Iran, which is undergoing a comparable opening of its market, consoled that these challenges are natural in a newly opened economy and would subside over the coming years.
The expansion of telecommunications in Myanmar has proved a good opportunity for solar developers. A developer called Micropower International is powering telecom towers and stated that the number of telephone connection has increased from 5 million connection two years ago to up to 45 million mobile connections today.
Micropower International has a unique model that uses microgrids to supply power to telecom towers and nearby un-electrified villages alike. The company signs a contract to provide power to the cell tower and also sells power on a pay-as-you-go basis to the villages around the cell tower. The long-term power purchase agreement (PPA) with the telecoms tower helps lower the risk of the microgrid giving Micropower a chance to build a repayment history with the local villages.
Alakesh Chetia, CEO of Micropower International, sees his business model as facilitating a paradigm shift that is allowing Myanmar to leapfrog the old electricity paradigm. “Across the world, we have seen a shift from wired telephones to wireless mobile communications,” stated Chetia. “Now, the world is undergoing a shift from physical banking to mobile digital money.”
“In Myanmar, those two trends are happening simultaneously along with a jump from centralized power generation to decentralized power generation and distribution through PV. We are helping to make the paradigm shift a reality.”
Outside of Myanmar, the expectations were more muted. Political instability over the last few years in Thailand has depressed installations, and developers expect a slow end to the year as the country mourns their late king.
Overall, Thailand is the largest market for solar with 2.7 GW of installed capacity by mid-2016. 95% of that capacity is coming from utility-scale projects. Thailand’s feed-in tariff, clear regulations, and level playing field for domestic and foreign investors have made it easier than in other countries to develop projects.
Certain issues have dogged the rooftop market such as interconnection delays and uncertainty over the rights of third-party ownership. As the feed-in tariff price nears the peak rate of retail electricity, the rooftop market is shifting away from subsidies towards a market driven by economics. That said, the lack of net metering, or the ability to export excess power, will add cost and complications to rooftop installations.
In the Philippines, the political uncertainty from the recent election of Rodrigo Duterte has slowed the already low level of development. The President continues to waver over his support for the Paris Climate Agreement, which would focus government attention on the need for more solar development.
While the Philippines has good regulators and relatively more stability in government, only around 150 MW of capacity has been installed over the last three years. A feed-in tariff has been signed into law, but the law hasn’t been implemented leaving the early movers that have built projects without any payments for the electricity they have generated.
Indonesia seems ripe for microgrid and off-grid development, yet many companies have left the country. As one speaker mentioned, the developers who will do well are those that can push through hurdles and turn challenges into opportunities.
The Indonesian grid is highly decentralized. There are around 150 separate grids larger than 50 MW, and the largest grids on Java and Sumatra are 40 GW and 8 GW in capacity. All other grids are much smaller, limiting the potential for large-scale utility projects. With roughly 12,500 un-electrified villages, there is great potential on Indonesia for off-grid and mini-grid development. Supportive policies have not been passed, though the grid operator seems receptive to developers that can help it maintain stability and reliability of supply.
The only government official at the conference was from Laos. Laos has expressed interested in diversifying its energy mix away from hydro though the speaker acknowledged that competing with cheap electricity from hydro is extremely difficult. Currently, Laos gets over 90% of its electricity from hydropower, and no policies have been promoted to support solar development.
While the economics of solar are very attractive in Cambodia, the lack of good regulations and consistent guidance from government has slowed growth in the country. Electricity prices vary between US$0.18-0.30 per kilowatt-hour for industrial, commercial, and residential users making solar an attractive investment.
Cambodian law is unclear on the legality of connecting rooftop solar projects to the grid, which means all rooftop systems are behind the meter without the options of exporting electricity. A few megawatt-sized power plants are being built around Cambodia, especially to meet the needs of special economic zones focused on light industry.
There are many opportunities for solar in Southeast Asia, though each country has its unique challenges. Overall, solar is becoming increasingly competitive with retail and even wholesale electricity markets in certain areas. Even without supportive policies, solar growth will be underpinned by strong economic fundamentals, though progress will be slow for the new few years.