Lying in wait08 / 2012, Markets & Trends | By: Becky Beetz, Jonathan Gifford
SE Asia: The region has been identified as one of the emerging solar markets of the future. With the IMF reporting economic growth at a rate of 6.5 percent per annum, electricity demand is also growing. However, cumulative installed PV capacity and support schemes are comparatively negligible. Despite this, many companies are lying in wait, preparing their plans, ready to pounce as soon as the markets are ripe.
Interest in photovoltaics is progressively increasing in Southeast Asia. As a manufacturing location, the region has built a steady PV base but, as an end market, it is yet to meet its potential. However, signaling change, the Organization for Economic Cooperation and Development (OECD) has called for the ASEAN region (non-OECD countries) to pursue a “green growth” path.
Pushing for change, the Asian Development Bank (ADB) has been active in promoting PV. In May 2011, it launched the Asia Solar Energy Initiative (ASEI), through which it hopes to develop three GW of solar power in the Asia Pacific region by the end of 2012. Meanwhile, in 2010, the bank installed a 571 kW demonstration array on the roof of its headquarters in the Philippines. The installation, it hopes, will serve as an example, with the ADB opting for a “solar leasing” or power purchase agreement (PPA) model (see ADB’s solar power business graphic, left).
The ADB is particularly active in Thailand, where it has supported, among others, a 73 MW power plant in the Lopburi Province and 44 MW worth of projects in the Ayutthaya Province. ADB’s Seethapathy Chander observes that costs for PV in Thailand have fallen from around US$0.35/kWh, to US$0.22/kWh. “I am very hopeful over the next two to three years that US$0.09/kWh will be the average cost [in Asia],” he tells pv magazine. In terms of return on investment, a “steady” 15 to 18 percent can be expected. Meanwhile, analysts at Frost & Sullivan predict that the Southeast Asian PV market will grow from US$469.5 million in 2011, to $667.9 in 2012, $648.3 million in 2013, and $874.8 million in 2016.
While Thailand has been flagged as the leading country for solar, many, like Conergy and juwi, are expecting other regions, particularly Malaysia and the Philippines, to take off. As such, they are preparing their market entry. Alexander Lenz from Conergy says the company is keeping a close eye on what is happening in these two countries. “The time to really scale up in these markets, however, is not yet here,” he adds. In terms of doing business in Southeast Asia, Lenz counsels that it is very much network and relationship driven. Meanwhile, juwi believes that to be successful in Southeast Asia localization is key. Juwi’s Amiram Roth-Deblon, Regional Director Asia Pacific, says it is important to “be flexible, be swift, and evaluate exactly in which part of the value chain there is added value that you bring.” He further reports that while the permitting and bureaucratic processes in Thailand are challenging, they are not prohibitively so. A timeline for large-scale projects in the region is between 18 and 24 months, with the biggest roadblock being the activation and clearance for power purchase agreements.
Financing also remains a challenge, however this differs between markets – Malaysia is said to be particularly challenging in this respect. Thomas Reindl Cluster Director, Solar Energy Systems at the Solar Energy Research Institute of Singapore (SERIS) adds that it is important to work with good local partners to get a deep understanding of all the potential pitfalls and processes. Meanwhile, Frost & Sullivan reports that Japanese module manufacturers Sharp and Kyocera are well positioned to take advantage of the available opportunities, as they enjoy strong brand recognition. Chinese manufacturers are also gradually gaining market entry.
The three end markets are discussed in more detail below. For information on Singapore, see the information box.
Companies and analysts are unanimous in their belief that Thailand has the most established PV industry in Southeast Asia. Lenz tells pv magazine it is the obvious market to enter, due to its solar policies, and governmental and financial support.
Although Thailand doesn’t have a feed-in tariff (FIT), the country’s government does offer support to PV projects in the form of an “adder” premium, which is paid on top of the retail price for electricity. In keeping with the falling cost of PV, the adder rate has been reduced since its introduction in 2007, from 8 THB/kWh (US$0.25), to 6.5 THB/kWh (US$0.20). Thidarat Sawai, from the Thai Ministry of Energy explains that it applies to “any installation up to 90 MW, and not only for capacity smaller than 10 MW.” In a recent blog entry, Chris Sunsong, a Solarbuzz analyst wrote that while the adder has provided “limited traction … Thailand is now offering significantly improved downstream economics – stimulated by the extension of payment terms to a ten year period from the previous seven, coupled with the collapse in module average selling prices that characterized the PV industry during the past 12 months.” He said that due to attractive project returns, the number of PV project applications rose in 2011 to such a level that the Thai government had to suspend new submissions.
Underpinning this, in its latest Global Market Outlook for Photovoltaics until 2016, released this May, EPIA added that as of March 2012, 950 MW worth of power purchase agreements had been approved, of which just 150 MW had been installed. According to the Ministry of Energy, two GW of projects, the majority of which are said to be large scale, are in the pipeline. On the back of this surge, Sunsong wrote that Thailand’s “policy makers have reacted by increasing the country’s PV target for 2020 from 500 MW to 2 GW.” IHS further forecasts that new installations will reach 200 MW in 2012, and there is the potential for them to hit one GW in 2016. Refer to the Thailand table below for EPIA’s PV installation forecasts.
Currently the largest installation in the country is Sharp Corporation’s 73 MWp thin film plant, located in Lopburi. SERIS’ Reindl comments, “Through the involvement of the ADB in the 73 MWp project in Lopburi, three major Thai banks (Kasikorn Bank, Bangkok Bank, Siam Commercial), were brought in for the financing portion. This kick‐started the Thai market, since the banks got familiar with PV at an early stage of the market development. Later Kasikorn Bank, Bank of Ayudya and Thanachart Bank also teamed up with International Finance Corporation for project finance.” A number of other companies have also completed PV projects in Thailand, albeit it on a smaller scale.
Malaysia’s fast growing economy has begun the switch to renewables and instituted a FIT, based on Germany’s model, in its Renewable Energy Act 2011. According to EPIA, the program is targeting 1.25 GW of PV installations by 2020. “But,” it says, “targets are defined on a yearly basis, with only 46 MW for PV projects foreseen in 2012 (149 MW in 2016).” Tariffs differ for the various segments and a bonus is available for building integrated PV, and domestic production of modules and inverters. Meanwhile, one third of the target – 11 MW in 2012; 19 MW in 2016 – is expected to be allocated to systems smaller than one MW. Reindl adds that a power system study is required for systems over 180 kWp, prior to the FIT application.
Having been passed by the Malaysian Parliament in April 2011, the FITs first applied, across a varied tariff range, to installations up to 30 MW, but the Sustainable Energy Development Authority (SEDA), the body created to administer the FIT, altered the installation size cap on December 1, reducing it to only five MW. Then in May, SEDA reportedly told media outlet Malaysian Reserve it was considering adjusting the FIT, due to an “imbalance in the RE resource mix.” The authority said it was looking to change the tariffs before it calls for the next round of quotas. Specifically, solar has come under fire from CEO Badriyah Abdul Malek, who reportedly said that the amount being installed in comparison to other renewable energies could be sending the “wrong signal.” To date, of the reported 311.6 MW of renewable energy installed in the country, solar is said to comprise 140 MW. Furthermore, SEDA says applications for solar totaled 348 out of 377 applications under the FIT.
Nevertheless, players in the PV development field have begun to emerge, including the Cypark group. The landfill site rejuvenation company intends to transform itself into a “green utility company” and hopes to develop 25 MW worth of projects by the end of the 2012. This March, Cypark opened its eight MW Pajam plant – the largest of its kind in the country. Frost & Sullivan believes Malaysia offers a lot as both a PV market and location. Analyst Suchitra Sriram has conducted an analysis on the region and says that PV investment will grow by 194 percent in 2012, to US$72 million. It expects 12 MW to be added in 2012, representing annual growth of 242.9 percent. Sriram also expects Malaysia to become the second largest PV producer by 2020. A spokesperson for Bosch goes on to tell pv magazine that the Penang region in particular is set for strong PV growth. Refer to the Malaysian table below for EPIA’s PV installation forecasts.
SERIS’ Reindl believes there is “huge market potential” in the Philippines. However, the implementation of a FIT has been both troubled and controversial. Gunter Matschuck, VP of the Philippine Solar Power Alliance (SPA), has been a part of the negotiations and hearings surrounding its implementation. He reports the process as having been marred by controversy, which has resulted in uncertainty. “It is a very big mess,” he concludes. The legislation creating the broad framework for the FIT is progressive and does set the right framework for PV, says Matschuck. However, the Energy Regulatory Commission (ERC), which will determine the implementation, is where the holdup has occurred. In addition to the initial FIT rate being “too high,” a second snag was hit when a 50 MW cap was proposed. This is despite applications worth 210 MW having already been provisionally submitted. A reverse-auction process has been suggested by the ERC, however this is being contested by the SPA. It submitted claims that a 50 MW cap for PV is not consistent with the technology’s ability to meet supply issues in regions that currently suffer from brownouts. To date, Reindl reports that around 10 to 12 MWp have been installed in the Philippines, the majority of which are off-grid. The largest PV system is the one MWp project on Mindanao. Frost & Sullivan also confirms that “substantial opportunities” exist for off-grid PV in the country, as its topography makes it unfeasible to extend the grid to “islands and remote places”.
EPIA’s installed capacity predictions for Thailand (MWs)
EPIA’s installed capacitypredictions for Malaysia (MWs)
By 2014, IHS iSuppli expects around 4.7 GW of new PV installations to have been realized in Southeast Asia (although it also includes India in these calculations). Due to their current economic situation, it seems less likely that countries like Cambodia and Burma will become big solar markets in the near future. However, Henning Wicht believes solar will penetrate all these regions at varying levels. “The penetration typically starts with governmental support,” states Wicht. “I would say half of the area will have some programs and half won’t have in the next two years, due to the economic limits.” The ADB, meanwhile, predicts that energy demand for the Asia Pacific region will grow at an annual average rate of 2.4 percent until 2030, compared with the world average of 1.5 percent. Pil-Bae Song tells pv magazine, “One of the biggest challenges confronting the region is how to provide adequate, affordable access to energy ... in a socially and environmentally acceptable manner. Added to this are issues of energy security and pricing, as well as energy delivery. There are still nearly 700 million people in the region who have no access to electricity.” He adds, however, that these challenges represent “vast opportunities” for the solar industry in particular. And, as Reindl says, PV can be deployed much faster than other sources of power.
Singaporean PV landscape
It will be the first country in SE Asia to reach retail grid parity, possibly within this year, or the next; It is a “safe haven” in terms of contractual security; despite the small size of the country, there is potential for some hundreds of MW of PV to be installed; it is home to the first commercial 2 MWp “solar leasing” project (selling electricity rather than PV systems); and it boasts an established PV manufacturing industry for wafers, cells and modules.
Cumulative installed capacity
Around seven MWp
Solar support programs
There is some government funding for so-called test bedding projects available (“Solar Capability Scheme”, “Solar Pioneer Awards”) for innovative applications. However, no general feed-in tariff is available, as it would be considered a “market-distortion” by the Singapore government, which rather enables free and competitive market forces.
The financing sector is “ready to go,” once grid parity is reached. One local bank is already involved in the “solar leasing” scheme. Overall, Singapore is an established financial hub in Asia, with major banks eager to finance solar PV projects.
Currently, there is no feed-in tariff system (and there won’t be). On the contrary, any kWh that is not used within the premise will incur so-called “grid utilization charges” of S$0.04. This, however, is likely to change in the future.
Singapore has one of the most efficient public sectors globally.
Singapore has one of the most stable power grids among megacities. There are activities underway to prepare the power grid for an increasing share of distributed, intermittent generation from PV.
Information provided by Thomas Reindl, SERIS