POWER October 2013 - 60

POWER ASEAN
Global Business Reports
www.gbreports.com
due to changing system prices, which are then followed
by subsidy cuts. This situation can result in subsidies
that are either too high or too low which then influences
decision-making on the investor's side. As
such, the investors' decision criteria for system
selection will tend to favor satisfying short-term
objectives and sometimes jeopardizes overall
long-term goals, " comments Alexander Lenz,
president of Conergy Asia and Middle East.
Industry experts agree that in many cases,
renewable projects have been too small to have
a significant impact and to be considered attractive
investments by the finance sector. " Financing will
remain an issue as most local financial institutions are
unwilling to provide financing for the projects. In cases where
financing is provided, the costs of borrowings are high as these financial
institutions impose high interests to compensate for the risks
they foresee in an unfamiliar industry, " says Angie Koh, business development
director of Yingli Solar.
There are some positive signs for solar, particularly in Thailand, as
falling global PV prices leave the solar industry optimistic that grid
parity is achievable in transparent markets. However, the opaque
structures currently in place, despite some incentives, are making
grid parity more difficult to realize. " Electricity subsidies prevent consumers
from wanting to invest in solar systems; once governments
remove them, people will come to see solar as a cheaper alternative, "
says Koh.
Alexander
Lenz,
president
of Conergy
Asia and
Middle East
Despite the challenges, new projects are coming
into the region. Yingli Solar, the world's largest PV
manufacturer, has recently won a contract to
supply 10.27MW of panels to Amcorp Power
of Malaysia, which will be the largest solar
plant in the country upon completion. Thailand
is certainly the hottest area of activity,
as its Small Producer Program (SPP) has
created an environment where coexistence
with conventional generation is possible and
the government has raised its target to have
3 GW of solar capacity installed by 2021. In July,
Canadian Solar announced it will supply 91 MW
to seven projects for Soleq Solar in Thailand, while
Conergy has secured 80 MW of orders in Thailand.
Regional Collaboration and
Integration
The ten member states of ASEAN are increasingly exploring and implementing
programs toward regional integration. One such program
is the creation of an ASEAN grid, which was outlined in a 2007 memorandum
of understanding. However, there are physical and political
issues that must be overcome before such a grid becomes a reality.
Some see physically connecting the Philippines and Indonesia to a
broader grid as prohibitively expensive, especially considering these
countries run on separate grids around population centers, and infeasible.
On top of these physical challenges, expected capacity shortages
will disincentivize the creation of such a grid according to Klaus
Langnard of BCG: " All these countries [in ASEAN] with the exception
of Singapore, are capacity short. An international grid is useful when
one country has excess capacity that another country needs, but that
is not the case in Southeast Asia. The Indochina grid, however, exists
because there is a rationale behind it: Laos and Cambodia supply hydropower
to Thailand. This grid could expand to Vietnam, but I do not
see countries like Indonesia and the Philippines connecting with the
mainland anytime soon. "
Despite slow progress, Bambang Hermawanto, chairman of the
ASEAN Power Grid Consultative Committee, sees encouraging signs
that a grid will be pieced together: " Currently, there are 16 projects
in place that make up pieces of what will eventually become an ASEAN
grid. The first phase of the grid is based on bilateral agreements.
There are no institutions in the region that could control the grid, so
the success of the common grid depends on bilateral agreements
between neighboring countries. We have a long way to go, but these
agreements will make up the core of the ASEAN grid. "
The ASEAN grid is reflective of many of the trends surrounding
Southeast Asia's power industry. The borders of Southeast Asia's
jigsaw puzzle, the structure that will make up the cornerstone of
the industry, is, in many cases, still being defined, at a time when
a stronger framework would yield a clearer picture of the industry's
future. Despite this challenge, investment in the region remains bullish
because of the incredible economic transformation the region is
undergoing. Policymakers and decision makers need to catch up or
risk hindering the full potential of this transformation.
4 Glbl Bi R // POWER ASEAN
Ob 2013
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POWER October 2013

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