Thailand’s PV tiger

There is little doubt that southeast Asia is going to require a big investment in energy infrastructure in the coming years. In October last year, the Asian Development Bank (ADB) released a report in which it estimated that up to US$19.9 trillion will be needed to supply the region’s growing demand for energy through to 2035. “Our projections show the region will consume more than half the world’s energy supply by 2035, with electricity consumption more than doubling as economic growth and rising affluence drive demand,” said the ADB’s Seethapathy Chander.
In contrast to these bullish predictions for the energy sector more widely, the growth of PV in the southeast Asian region continues to underwhelm. In its latest analysis of the region, IHS Solar indicates that it had to revise down its projections for annual installed PV capacity for last year and this, with one, or maybe two, exceptions.

Malaysian frustrations

Malaysia, where the introduction of a feed-in tariff (FIT) regime in 2011 resulted in only meager demand, perhaps best illustrates the frustrations apparent when policy promises fail to materialize into projects. According to figures from the country’s Sustainable Energy Development Authority (SEDA), which administers the FIT, 111.99 MW of PV capacity has been awarded, however the build-out has been very slow. SEDA data reveal that 55.83 MW of that capacity is actually operational to date, although that number may have received a small boost before the end of 2013, after which a FIT digression took place.
Market research company IHS Solar expects 89 MW to be added in 2014 (see table below).

Shining light: Thailand

While Malaysia may have underwhelmed the PV world, Thailand is seeing a real boom. The IHS figures have 690 MW of new PV capacity being added last year, with that increasing to 753.6 MW this year. Behind the boom are the relatively ambitious goals of its government. In July 2013, Thailand increased its target for solar power from 2 GW to 3 GW of capacity through to 2021. It also added a rooftop program, to supplement the previous program, which was aimed primarily at utility-scale development (see box on page 25). Thailand’s major policy driver for PV is what’s known as its Renewable Energy Adder Program, which was introduced in 2011 under the auspices of its Alternative Energy Development Plan. Given Thailand’s archipelago geography, increased renewable energy share is seen as a way to “reduce investment cost for transmission network construction,” according to government documents.
Late last year, the Thai government was beleaguered by protests and civic unrest, but it nevertheless succeeded in spurring the PV industry into action. Under the country’s previous ‘adder’ system, generous payments for PV electricity caused a rush of applications for projects – some purely speculative. The Australian office of global business law firm DLA Piper reports that licenses for around 700 MW of PV, granted under the adder program, may be revoked because of projects with licenses not progressing.

Thai utility-scale PV

In September last year, ClearSky advisors reported that 98.7% of Thailand’s current solar PV capacity is made up of utility-scale projects – arrays of 1 MW or larger. A number of homegrown PV companies have found success developing these projects. The biggest is SPCG, which has installed 260 MW of capacity across 36 sites. “SPCG is an entrepreneurial company which took advantage of the licensing system for the adder system in 2010,” says IHS senior analyst Josefin Berg. “It then was able to put together financing with multilateral funding, and really bring the projects to life.” Project developers certainly stand to profit if arrays are completed in time to qualify for the adder. According to Reuters, one of SPCG’s largest PV power plants is generating a profit of THB 10 million/MW (US$311/MW), which the business publication calculates as being at least four times more than fossil-fuel power plant operators receive in the country.
As a result of this profitability, a number of companies with a history of traditional industry in Thailand are moving into PV. Bangchak Petroleum PLC, a subsidiary of a state owned company, has plans to increase its PV assets from 94 MW in 2013 to 169 MW this year. Long term, it has plans to further boost that to 500 MW in 2020. Managed funds are investing in Thai PV, demonstrated by Singapore’s Armstrong Asset Management’s stake in Symbior Solar Siam’s approximately 60 MW of Thai PV power projects.
Thailand’s oldest independent power generator EGCO, with 4.5 GW in generating assets in the ASEAN region, is becoming increasingly active in PV. EGCO developed, in joint venture, the 73.16 MW Lopburi Solar Farm in central Thailand – which it expanded to 84 MW in May. The Asian Development Bank played a role in financing the plant, providing a THB 2 billion loan. EGCO and a local utility will provide the offtake for the project. Sharp supplied the power plant with 540,000 of its a-Si modules. Reuters reports that EGCO, through an affiliate, won licenses to develop rooftop projects this year and is looking to purchase existing PV power plant licenses.
While returns under the ‘adder’ program and subsequent FIT regime are locked in, there is considerable country risk – as is evident by the political instability that rocked the Thai capital late last year. A solar conference held in Bangkok early last month was disrupted by political protests with many attendees – even those based in the city – unable to attend.

Thai module supply

In terms of supply deals, in the earlier stages of the Thai PV market, thin film producers gained significant market share, through Sharp, DuPont Apollo and also First Solar. First Solar estab
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lished an office in Bangkok in early 2013, however c-Si producers have risen to the top more recently, with a mix of Chinese, Japanese and European companies supplying projects. SPCG has a module supply deal for both its utility-scale and rooftop businesses with manufacturer Kyocera, meaning that the Japanese firm supplies a big chunk of the Thai market. “There are Chinese suppliers in Thailand, but they don’t get as big a share of the market as they do in other markets, like Europe,” said IHS’ Berg.
Norway’s REC is also supplying Thailand with over 80 MW of modules from its manufacturing base in Singapore, and is also acting as system integrator on some projects.
Canadian Solar announced a 91 MW supply deal with local developer Soleq Solar in July.
And Phono Solar has signed an agreement to supply 40 MW of modules to Thai developer Symbior.
Beyond REC, First Solar, Hanwha Q Cells and SunPower all have significant manufacturing operations in southeast Asia. Despite this, domestic content provisions or bonuses play a minor role in demand-side PV programs in the region. That isn’t to say that government support for manufacturing hasn’t been forthcoming. Most recently, REC announced that it was able to cancel a credit facility, in part because of access to capital provided by the Singaporean government through grants. REC expects to realize two grants from the Singaporean government of $159 million and $27 million over three years.

Foreign integrators

With the push to realize projects that had been granted licenses, a number of foreign EPC and project development firms have built considerable pipelines in Thailand. For some time, Conergy has been very active. In October last year the company claimed that it had captured a 20% market share, having developed 70 MW with a further 100 MW pipeline. Conergy has developed projects in Thailand in a joint venture with local company Annex Power and in partnership with construction company Ensys. Germany’s juwi has a strong presence in Thailand and is currently developing seven projects worth 61 MW. Phoenix Solar is also active in Thailand and southeast Asia and is currently building Singapore’s biggest PV plant, a 1.2 MW rooftop installation – an indication of the small size of the Singaporean market that was expected to hit 20 MW of cumulative capacity at the end of last year.

Beyond Thailand

Despite its growing economy and electricity requirements, Indonesia is similar to Malaysia in being slow to adopt PV in large volumes, largely due to public policy limitations. Kai Klingenhagen, juwi’s Asia-Pacific business development manager, notes Indonesia is understood to be considering introducing a FIT – around $0.25/kWh – but that growth in the interim will likely be through diesel systems.
In Malaysia, juwi is developing a 10 MW solar carport, yet the country’s FIT program is having limited effect in fostering the market. “Malaysia has a well-structured FIT, but limited projects,” said Klingenhagen.
IHS analyst Berg agrees that island off-grid systems could become “a rather big market” in Indonesia, but adds that a tender for PV has been announced. “Indonesia has plans to tender 140 MW in total, and the first tranche of that has been opened up,” says Berg. Indonesia will remain a policy-driven market as electricity supply remains a state-run enterprise.
The Philippines’ FIT regime has been painfully slow in developing since its launch in 2011. IHS reports a pipeline of around 80 MW, with another 1 GW in early stages of development. Uncertainty reigns when it comes to the country’s FIT regime, causing a major bottleneck. However the industry appears to be skipping that hurdle, with PPA activity picking up, although demand volumes remain small. “Developers are taking another approach to the Philippines, working with bilateral contracts with local energy co-operatives,” says Berg. IHS revised up its projections for the Philippines for next year to 89.9 MW.
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