Changes and challenges for solar PV in South East Asia

NARRATOR Welcome to the DNV GL Talks Energy podcast series. Electrification, rise of renewables and new technologies supported by more data and IT systems are transforming the power system. Join us each week as we discuss these changes with guests from around the industry.

MATHIAS STECK Welcome to another episode in our podcast series. Our guest today is Hendrik Bohne, VP EPC Asia-Pacific from Conergy. We want to talk about chances and challenges for solar PV in Southeast Asia. Welcome to this podcast, Hendrik. Could you briefly introduce yourself before we start?

HENDRIK BOHNE Thank you, Mathias. Yes, Conergy is one of the world’s leading downstream companies in solar PV. We are focussing mainly on three business areas which is, one, the development of solar PV projects, then the EPC which is the turnkey construction as well as the operation and maintenance of solar power plants. Our company, originally founded in Germany in 1998 has a substantial amount of experience in solar PV, with over 1.3 gigawatt installed to date. In Asia alone where we are present since 2005 already we constructed till date over 470 megawatt. Within Conergy I’m myself as you mentioned am the VP for the EP business unit, so I’m responsible for the whole Asia-Pacific region when it comes to the turnkey construction of solar PV power plants. I’m with the company since 2007, so for quite a while and also the whole time here in Asia.

MATHIAS STECK Chances and challenges for solar PV in Southeast Asia is our topic and just to lead into this a bit, like climate change is one of this region’s greatest challenges as flooding starts, rising sea levels caused by global warming and set to impact millions of lives. The ASEAN Joint Statement on Climate Change at the COP21 was consequently, and I will read this out now, is “[we are] greatly concerned that climate change has already caused major loss and damage throughout the ASEAN region, disproportionately affecting developing countries in particular the least developed countries, and impacting agriculture, energy supply, livelihoods; water availability, land use and biodiversity.” And then not a big surprise, the Philippines for example they state in their Intended Nationally Determined Contributions, the INDC, to undertake CO2 emission reduction of about 70% by 2030 relative to the 2030 scenario. And that should mean we have quite great business for renewables ahead. So, Hendrik, is it great times for solar in this region?

HENDRIK BOHNE I would say in general, yes. However, from my point of view not so much because of the challenging, maybe sometimes even unrealistic goals that government set themselves, but fact simply is that with increasing experience of EPC and developers in the region here, we have very high irradiation and we have further reduced system cost. Solar PV today is already a real alternative for many countries and grid parity already exist in several markets. This counts for example the Philippines but also any other country with remote regions or island nations, also like Indonesia.

MATHIAS STECK So, there is certainly a big chance there, but also looking at Southeast Asia which has very different levels of infrastructure, electrification rates, but also business culture, like you as the company Conergy, what challenges are you facing for the development of your solar projects in the region?

HENDRIK BOHNE Well as you mentioned, each country in Southeast Asia is different and so are the challenges that come with it for us as a developer of EPC. So, in Philippines I think many people from the industry would agree that bureaucracy is a very big hurdle, as well as in part unclear allocation process or consensus. So when we look at the Philippines we counted over 130 signatures from authorities that are required to be obtained in order to develop and connect a solar power plant. So that means the development process takes several years while the actual construction can take less than half a year. In addition very often announcements made by authorities have caused more confusion or concern rather than clarity for developers.

Other challenges in the region can be as simple as language barriers. And a good example here is Vietnam for example, but it’s also local protection by the government when it comes to the economy. So, foreign ownership restrictions can be a hindrance, can make financing for international players less attractive. But it’s also lack of know-how, either on the utility side because solar PV is intermittent, but also on the local contractor or even the local partner side, because they’re simply not used to this kind of technology, and with that they have the wrong expectations what this technology can deliver and how it integrates to the grid.

MATHIAS STECK So, you mentioned issues of course very individual to different the countries, but I think a common theme is definitely that local knowledge and local language is something what you need to have a successful project. How is Conergy addressing that? Are you doing everything from Singapore or are you reaching out into other countries?

HENDRIK BOHNE We of course have gone also through our own learning curve in the past I think it’s now nine years already. We do a mix of both. So we make sure that we have a very good pool of expertise here in Singapore. This is where we have our engineering centre where all the design is taking place. We bring in project managers that have global experience, so most of our project managers have worked before in the big solar markets in Europe, for example like Spain, UK, and we combine them with local teams. So, we always have a local partner and I say here partner and not sub-contractor, because we treat our local partners really as such, and we combine the local know-how they have when it comes to implementation, when it comes to regulation, grid codes and similar along with our international solar experience.

MATHIAS STECK You mentioned earlier that the prices for solar have come down, in many countries, grid parity has been reached already. Not in our region, but for example in California, in Dubai, we have recently seen that projects were awarded with tariffs as low as US$ 3 cent per kilowatt hour. For the Southeast Asian region what do you see in the foreseeable future as a realistic price point for solar energy?

HENDRIK BOHNE I think that’s very difficult to say. I think firstly we should point out that this 3 cents that we heard are very specific to these regions and should not be seen as a new norm. These are really, really big solar plants in regions which are very experienced in solar PV. You probably have to look very detailed at the financing structure below it, which simply is not available and will not be available in Asia for some time. At the bottom, I don’t think we are there yet. We’re seeing very competitive PPAs in the market. They’re still around the 10 to 12/13 dollar cent mark. Some could be even lower, we have to see. But we believe that we will see further costs savings even in the future that can be through further cost improvements, not only the module. The solar module in the past has been always a great focus, but in general on the overall system, but also through higher efficiencies. It can be that the system cost itself, that it can simply produce more power. And with all these countries going through learning curves I think specific to these regions we will see further cost improvements, so we have not seen the end of the recent developments yet.

MATHIAS STECK I think you mentioned an interesting point. We definitely have resource, we have technology, but we also have experience. And some countries who have a big need for energy and have increase in demand might not have this experience yet. This goes together with the panels which are deployed to project how the farms are built and then later also how they are maintained and operated. So, how do you do this, when you operate in these countries who do not have experience, how do you make sure you get the best possible project there you can have?

HENDRIK BOHNE On the component side it’s very simple because Conergy is following a global purchasing approach. So, any component that we use, be it in the US, be it in the UK, Germany or Indonesia or Philippines, they are going through our quality checks. And we have a limited portfolio of suppliers for which they have to qualify. There’s quality checks in the factories, and only if these are passed on a regular basis, they’re either yearly or biannually, then they’re allowed to supply to Conergy projects. So, this way we already on the component side ensure, that no matter where in the world you buy from us, you get the same amount of quality. And of course we try to transfer the know-how also to developers, to investors in these regions. So, for quite some time we’ve done so, called roadshows where we invite banks, companies, any potential investor in these kind of systems or projects and we explain to them how to develop a solar system, what you should be looking out for in a solar system, simply to create awareness and to educate. We’ve done this in the Philippines for example since 2008, so if you calculate that was six years before the actual first power plant had been built.

MATHIAS STECK And what about the local teams? I think you mentioned that you work with sub-contractors and you really treat them as partners in these projects. Capability building there – how does that work?

HENDRIK BOHNE Capability building there is mainly because at the beginning, we deploy a bigger team from our side, and the main purpose is for training. We have mock up systems or example systems prior to the construction start, where they are trained on how to install the system and it’s really just learning by doing. So, they’re installing a mock up system of three or four modules with cables, they take it down, put it up again. And we have a bigger team that trains all the different installation teams. And then throughout the project, when they get more and more confident, we slowly reduce that number.

MATHIAS STECK Let’s look a little bit in what’s to come. I think we talked about the cost coming down already. There is another big opportunity out there addressing the intermittency of renewables which is obviously storage. And I at least picked up somewhere that maybe even in the solar PV technology there might be advancements in the future. So, if you look at this, how do you think the deployment of solar PV will benefit from these new technologies coming in?

HENDRIK BOHNE I think as in any other industry or sector, any advancement in technology, new technologies coming up, they provide a great potential. I don’t think it would be correct to say where we are now, this is where it ends. But as you said, it’s not only so much about the solar PV technology itself, but also combination with other technologies. And storage for us plays a very important role here. We’re already building a project not in Southeast Asia but in the APAC region in Australia where we combine solar PV with storage, and one big benefit can be that you can address the issue of intermittency.

So, for example, in the Philippines lately, there’ve been news about curtailment. That means that while a company that owns a PV project they’re not allowed to fully export all the power to the grid because of the intermittency, and you can go around this by combining it with storage. So making the solar power supply more stable and hence reducing any impact on the grid. So, there’s great benefits here when it comes to that, especially in as I said before island nations but also where the grid is very weak and cannot deal with intermittency very well.

MATHIAS STECK And that might be a bit off the hip, but I remember a couple of years back we were discussing internally what do we think will go ahead; is it solar PV or is it solar CSP and then at some point it turned out that solar CSP couldn’t really compete on price. Do you have any opinion about this going forward? Will we see any solar CSP coming up in greater still?

HENDRIK BOHNE I think solar CSP is still a viable technology. The reason they fell behind was of course a dramatic decrease in the price of solar panels. That, again, was driven by a big over supply in 2008. I think each has its own application. Solar PV can be very decentral, while CSP is normally used for very large centralised power plant applications. The benefit we have in PV is that we can deal with what we call indirect light, so even if we have a cloudy sky, we can produce power. This is more difficult for CSP which performs best under direct sunlight. And this in the region or for example the Middle East where we are also active causes a big concern because we have a lot of dust development, a lot of cloud cover and humidity which leads to diffuse irradiation basically. But, yes, CSP I think is still a viable option, but in terms of deployment it is a bit more limited in terms of location.

MATHIAS STECK So, last question. You need to be visionary now. We are looking at year 2030. What percentage of energy generation in Southeast Asia would you think is possible at 2030?

HENDRIK BOHNE I think anything is possible. I think the question first of all is how the installed capacity will increase from country to country because there’s very challenging plans out there which they are pursuing and depends how much of that they can realise. I of course hope that solar will play a big portion in, that and in turn that Conergy will be building a big portion of that solar in Southeast Asia. But putting a number I think it’s very difficult. I’d rather not guess.

MATHIAS STECK Thank you very much, Hendrik. This was Hendrik, VP EPC Asia-Pacific from Conergy, talking about chances and challenges for solar PV in Southeast Asia. Thanks Hendrik for your time and I hope everyone else will join us next week for the next episode in our podcast series.

NARRATOR Thank you for listening to this DNV Talks Energy podcast. To hear more podcasts in the series, please visit dnv.com/talksenergy.