CEO INTERVIEW
Direct PPAs should be scaled up: Asia Clean Energy But doing so poses financial risks to the operator due to the longevity of contracts.
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he lack of feed-in tariffs or regular competitive auctions serves as a barrier to the clean energy transition in the region, and this can be at least partially addressed through a direct power purchase agreement (PPA). Asian Power spoke with Asia Clean Energy Partners’ Managing Partner Peter du Pont on how DPPAs are done and why these should be scaled up in Southeast Asia in response to the lack of open access to grid generators. Du Pont has over 30 years of experience in sustainable energy and efficiency both in the US and Asia. He is Southeast Asia Regional Coordinator for the Private Financing Advisory Network and has previously served as Senior Climate Change Advisor for the US Agency for International Development in Asia. In a May report, Asia Clean Energy Partners found that the AsiaPacific region is amongst the most challenging markets in the world for businesses seeking to shift to renewable energy. Is this still the case in the region and what are the remaining challenges for businesses switching to renewables? Yes, there are continued barriers to the scale-up of renewable energy in Southeast Asia. It’s not easy to get renewable energy installed in a way that you can use it on-site and also sell it to the grid. You can install solar rooftops in most countries in Southeast Asia, but you cannot always sell the excess of the solar capacity onto the grid, and this creates a problem. In Thailand, where there’s not a feed-in tariff in place for large commercial and industrial customers, there’s a huge market—the “behind-the-meter” market, where solar companies come in, and they install systems, with say 300 kilowatts (KW) or 500KW of solar panels on the rooftop, and they cannot export to the grid because regulations don’t allow that. They have to undersize the system, so the amount of electricity that they are producing, even at the peak time, will not be more than what they are using in the factory. If it’s more than the use of the factory, they have no place to put it, so you have sub-optimal systems. The fundamental problem is the lack of a feedin tariff or net-metering mechanism, which can allow facilities to sell electricity to the grid at a good price; and also the lack of open access to the grid for third-party solar project developers. In Vietnam, the government is testing out something called a direct PPA, which could really unlock a lot of activity in the region. A direct PPA would allow a renewable energy developer to put in a small solar farm, sell it to the grid and wheel the power over the grid, and then somebody else could raise their hand and say, I want to buy that power. So that ability to enter into a contract with a producer of renewable energy, and to buy that power through the grid, having it wheeled through the grid, does not exist in most Southeast Asian markets. So you have a very closed market. And that’s a fundamental problem—the lack of open access to the grid for generators, and therefore consumers pay higher prices for electricity. If they can’t feed into the grid, at what point would it be economic to store excess power in batteries? Let’s say the average price that a factory in Thailand would pay for electricity is about four baht. That’s about 13 cents a KW-hour. There are many project developers who can go in and put a solar rooftop onto a factory. And there are thousands of megawatts (MW) of solar rooftop PV being installed across Thailand. They put solar PV 28 ASIAN POWER
Peter du Pont, Managing Partner, Asia Clean Energy Partners
With the lack of open access to the grid for generators, consumers pay higher prices for electricity
on the rooftop of a factory, shopping centre, or building. The solar electricity that the owner of the factory or the store will buy from the solar company is about two baht, which is about eight US cents a KW-hour. Meanwhile, the factory owner is paying about 4 baht per KW-hour—which is about 13 US cents per KW-hour—to the electric utility. So a solar project developer is coming in to put on a solar rooftop and the electricity that this provides is about one-third cheaper than the electricity they are getting from the grid. That’s a great deal. Does it make sense to put a battery in? Generally, no. I am not aware of companies coming in and saying we’re going to make a bigger system and make it twice as big and put a battery in because the economics are not there for that. One of the biggest problems in this whole dilemma is how the Thai utilities, PEA and MEA, can continue to pay for the upgrading and maintenance of the grid, whilst they are losing load from customers who are putting in solar rooftops. The best thing that could happen is, instead of putting a battery at the site, you can allow the export of power from the solar rooftop to the grid and use the grid as a battery. So if you have that excess power from your solar rooftop, then that just goes into the grid, a feed-in tariff, or net metering process. But the reason that the Thai utilities are not accepting power exports into the grid is that they have an oversupply in most regions of the country, and they do not have a way of being compensated by customers for the value of using the grid as a battery. What other policies should be implemented by governments in Southeast Asia to attract more investments to clean energy? For utility-scale solar power, there’s a trend away from feed-in tariffs
