Demand for solar investments rising in Southeast Asia

Solar investments have shining prospects in Southeast Asia, including the Philippines, due to the need for electrification and the continued drop in the prices of solar photovoltaic cells.

But in order to unlock the potential and opportunities in the industry, targets and regulatory frameworks are necessary, according to a study by German consultancy Roland Berger.

According to the study, Southeast Asia is expected to become one of the fastest-growing regions in the world in terms of power demand.

The International Energy Agency has estimated an average annual power demand growth of 3.2 percent in Southeast Asia from 2016-2040.

Apart from economic development, demand for power is expected to rise further due to governments’ campaign to provide universal access to power.

In particular, Indonesia, the Philippines, Cambodia and Myanmar are “still not fully electrified, but have ambitious targets to provide universal access to power in the next decade,” the study said.

The region can take advantage of solar developments, since it “is blessed by long hours and intense sunshine, and the fall in cost of solar equipment and batteries adds to the power source’s appeal,” it said.

But despite Southeast Asia’s attractive sunlight conditions, installed capacity of solar in the region amounts to a mere 5 GW, with most projects below the 50 MW size.

The region has irradiation averages of 17.2 megajoules per square meter per day, compared to 12.6 MJ/m2/day in Germany which has 43 GW of solar capacity, and 16.2 MJ/ m2/day in China which has 126 GW of solar capacity.

According to the study, solar transition may happen in the Philippines and Thailand in the next two years since these two countries have good solar conditions and needs imported coal.

Solar PV, the study said, may also play a fundamental role in ensuring rapid electrification of off-grid areas through micro- and mini-grids, and solar home systems.

“This is because equipment can be deployed quickly, it is cheaper than current off-grid diesel power generation and there is high potential for supplying isolated residential and non-residential loads such as remote villages and telecom towers,” it said.

To unleash solar power’s potential in the region, Roland Berger has formulated five approaches.

It said countries in the region need to pursue an appropriate mix of project sizes “which will help to attract large investors.”

The region must also increase the auction and capacity targets for the next three to five years and communicate these plans transparently to investors.

There must also be enablers to support capability and infrastructure development, including pursuing partnerships with international players.

The report also said that the region must develop standardized power purchase agreement templates “that meet international standards and that are suitable for a mix of projects.”

Governments must also address predevelopment risks, “for example by supporting regulation of third party access to power grids.”