Stakeholders in the Southeast Asian solar energy market on Nov. 29 gathered in Bangkok to discuss the state of the sector in the region. Delegates from all stakeholder groups were present, allowing for a multi-pronged discussion on the successes and challenges that solar currently faces. Panels and presentations covered the necessary investment, technology, and policies to implement projects of all scale in the focal markets: Cambodia, Laos, Indonesia, the Philippines, Thailand, and Myanmar.
From the onset of the Solar & Off-Grid Renewables Southeast Asia conference, there was a consensus amongst participants that there is an enormous potential for solar in the region that is largely untapped. With over 100 million people living without reliable energy access in Southeast Asia, there is a large market in need of well-executed off-grid solutions. As the price of solar has dropped to prices competitive with conventional generation, it has become an increasingly attractive option for those looking to electrify underserved populations.
Sound Regulatory Framework Critical for Market Growth
The conference, hosted by Solar Media, began with a regional update on the policy and regulations in place, setting the stage for the conversation that would develop over two days. The keynote discussion speakers shared their experiences in their focal countries and drew attention to the need for more reliable and inviting policy for private investors and independent power producers (IPP).
Credit: Natasha Allen
Private sector investment is critical to growing the industry as projects are capital intensive. In 2011, the International Energy Agency projected that US$49 billion was needed per annum to achieve universal energy access by 2030. These funds cannot come only from the public sector and donor funds. The panel posed the challenge of building a better investment environment in Southeast Asia to mobilize the industry—a challenge faced by all of the represented countries. This call to action emphasized the need for strong policies with the structures to uphold them but are also contestable through a transparent judicial process.
Lack of consistent and transparent regulations has slowed the growth of the solar industry in many of the markets. In a panel focusing on Cambodia, developers and investors agreed that the opacity of laws around IPPs and grid-interactive projects has limited the size of potential projects, making them less commercially viable and less attractive to private investment. Additionally, regulation stating that you cannot be a stakeholder in more than one IPP prevents bundling of smaller projects into one larger, more commercially viable, project.
This strategy has been successful in other countries, such as India, where regulations are less strict. To circumnavigate this barrier, special economic zones are being used as test-beds for megawatt-sized power plants in Cambodia with the hopes that regulations will become more favorable for future solar development. Similar challenges with either limiting or unclear regulations and policies were prevalent across the region.
The keynote speaker, Wandee Khunchornyakong Juljarern, chairwoman and CEO of SPCG Public Company, shared her success in Thailand and further emphasized the importance of sound regulatory framework. Thailand’s solar market, with 2.7 GW of installed capacity, has historically benefited from clear regulations and established feed-in-tariffs; however, political uncertainty from the passing of their late king is projected to cause a decrease in installation activity. Moving forward, there is greater uncertainty in the Thai solar market, but the government and financial institutions have established familiarity with solar, so optimism remains high.
Prioritizing Quality to Ensure Sustainability
Another theme that emerged from the conference was the importance of ensuring the quality of hardware and services across all stakeholders. While the discussion of quality indicates a maturing of the market, streamlined operation and maintenance (O&M) planning has yet to become a well-established practice in the industry. With the current donor-driven model, especially prevalent in off-grid solar, committed budgeting to O&M is often neglected by both the donor and the receiving institution.
In addition to integrating O&M funding into the project planning process, delegates called for greater enforcement of quality standards and the prioritization of quality over cost in technology designers and international financial institutions. By enforcing it on a policy and development level, quality standards will naturally flow up the value chain to the design process, which is where Anthony Watanabe, CEO of Asia Clean Innovations, cited as the root of project sustainability.
Development Finance Institutions’ Role Change
With access to finance functioning as a bottleneck in the industry, delegates also called for a restructuring of the role of development finance institutions (DFI) to break down barriers. Due to the greater risk and operational costs associated with smaller off-grid projects, DFIs could have a significant influence in opening up the industry by de-risking the local markets and building capacity at local banks. One attractive suggestion that arose in the discussion was the use of DFI capital to fund activities and reports that ease perceived risk to investors, such as feasibility studies. By empowering smaller projects and developers to attract private investment to smaller, off-grid projects, DFIs can help build the proof of success needed for the market to take off.