Look above for the answer

Figure 1. Total Lubricants’ on-site solar photovoltaic (PV) system in Singapore.

Lorenzo Mancini, Total Solar Distributed Generation, Singapore, sheds light on the important role of rooftop solar and how it is helping corporates reach their renewable energy goals in Asia Pacific.

The RE100 is a global initiative bringing together multinational companies which have committed to sourcing their operations exclusively by renewable energy (thus RE100) by a given target deadline. The average target deadline across all RE100 is 100% renewable energy by 2028 – which in corporate terms, is the day after tomorrow. It currently has 260+ members (new companies sign up every year), spanning all industries and business.

The initiative originated in the US, successively expanded to Europe, and progressively to the rest of the world, since most if not all the member companies have a global footprint and are eager to align their sustainability targets across the world.

However, this proved to be easier said than done. In Europe or the US, the electricity market is liberalised and it is possible for a corporate buyer of electricity to sign an agreement with a renewable energy developer (either private or public) which will sell it the green energy generated by its solar or wind farm, utilising the existing electricity grid infrastructure to effectively deliver the electrons, and paying the electricity company a set fee for transmission and distribution charges.

The agreement utilises a power purchase agreement (PPA) type contract, which has become increasingly standard and commonplace.

In some cases – as is the case of large internet giants – corporates have sought to have solar or wind farms specifically built to cater for their energy needs, thus fulfilling a further additionality requirement, i.e. their actions have increased the overall pool of green energy generated.

As more and larger solar and wind farms were built across the US and Europe, this mechanism has allowed many corporate giants to already declare their US or European operations 100% renewable. Target achieved, then? Not quite.

Renewable energy sourcing in APAC

While many of the RE100 companies are financial institutions or telephone and internet companies which do indeed have the bulk of their operations in the

Western hemisphere, many more are manufacturing companies whose operations are spread worldwide, and who produce and commercialise a large (and increasing) share of their goods in Asia. According to the RE100 2020 Global Progress Report published in December 2020, 42% of RE100 new members in 2020 are from the Asia-Pacific region.

The problem they face is that, apart from several exceptions (Singapore), the electricity markets in Asia are typically still government-owned monopolies which control both electricity generation and transmission and distribution (T&D).

Historically, the same was also the case in Europe or the US – building the electricity generation, transmission, and distribution infrastructure of a country is an inherently uneconomical proposition, as it must guarantee the same level of service at the same price to all corners of the country, that only a state-owned enterprise can tackle and accomplish.

Once the infrastructure is in place however, most if not all Western countries have seen the advantage of breaking down the electricity monopoly (much in the same way most countries have broken down the telephone monopoly and allowed private companies to compete), retaining the ownership and control of the grid only as a market enabler while allowing private generating companies (gencos) to compete on price to supply electricity to the grid company and to private companies.

This liberalisation process is not a fast one, as it requires not only a sleuth of legislative and regulatory framework to be put in place, but also a substantial change in mentality on the part of the government-owned generating companies, which have never had to face the market before.

How do you determine which percentage of the cost of electricity in US$/kWh is generation cost, due to the generating company, and how much is T&D cost, and should be attributed to the T&D grid?

Several Asian countries have embarked on this process, or at the very least have acknowledged they will need to do so at some point in the future, but very few – most notably Singapore, as mentioned – have made headway.

When building an economic industrial powerhouse, as China has acheived in the past decades and Indonesia and Vietnam are doing now, with GDP growth rates of 7 - 8%/yr, the priority is keeping up with the increased demand imposed on the T&D grid which require upgrades to avoid blackouts and brownouts, not liberalising the electricity market.

That is the case even in countries such as Vietnam where international agencies such as the US Agency for Economic Development (USAID) are lobbying strongly for the government to liberalise the electricity market.

In this situation, it is not surprising that the RE100 members have identified Argentina, Australia, China, Indonesia, Japan, New Zealand, Russia, Singapore, South Korea, and the Taiwanese market as the most challenging markets for achieving 100% renewable electricity.

Does that mean the ever-growing number of RE100 will have to shelve their sustainability ambitions in the Asia-Pacific region indefinitely? No, there is another possibility.

The answer is on the roof

What if corporate ABC, keen on greening its operations, could generate its own green energy to power its manufacturing plant on-site, without going through the T&D grid? It would not be putting any additional burden on the grid, so there is no reason why the regulator should not allow it.

Figure 2. Danone Aqua’s on-site solar PV system operations in Indonesia.

But what if corporate ABC does not have a free plot of land to install a solar photovoltaic (PV) system on? Well, what it most certainly has is a roof, and odds are that it is just sitting there empty, waiting to be colonised by solar PV modules.

Finally, what if corporate ABC does not have the faintest clue on how to build and efficiently operate a solar PV system? Well, there is also an answer also for that – get an expert to do it.

As corporate electricity consumers are committing more and more to renewable energy sourcing, global energy players are refocusing their operations and expanding their solar and wind energy investments to address the customer requirement.

Rooftop solar (RTS) is an important part of this capability. The energy company will commit the full investment and install a PV system on the roof of corporate ABC.

The energy company will operate the PV system (including any operation and maintenance which might be required) and will recover its investment and its profit margin selling electricity to corporate ABC at a price cheaper than the grid electricity price, on a long-term contract. Given the low price of electricity in SouthEast Asia, this has only become possible in the last couple of years thanks to the declining price of PV modules and inverters. The advantage of an on-site PPA model vs corporate ABC installing and operating its own PV system are several but the main one is strategic, i.e. corporate focus – it makes more sense for corporate ABC to keep focusing all its resources on its core business than dispersing them on a solar PV project.

Case study

Danone Aqua, one of the largest manufacturers of bottled water in Indonesia, has taken numerous initiatives to reach clean energy and green environment goals. Along with Total Solar, Danone has completed the solarisation of three plants in Java, Indonesia.

The first building of the Klaten plant was completed with Commercial Operation Date (COD) reached on 28 August 2020. The project size is 2900 kWp, with 8340 Canadian 350 Wp panels and 23 SMA 100 kW inverters installed. The estimated annual energy production of the project is 3.9 GWh, saving 3081 tpy of CO2. The second building of the Banyuwangi plant was completed and COD reached on 8 September 2020. The project size is 378 kWp with 1080 Canadian 350 Wp panels and six 50 kW SMA inverters installed. The estimated annual energy production of the project is 572.68 MWh, saving 452 tpy of CO2. The third building of the Mekarsari plant was completed and COD reached in May 2021. The project size is 2112 kWp with 5216 Trina 405 Wp panels and 33 Sungrow 50 kW inverters installed. The estimated annual energy production of the project is 2.7 GWh, saving 2133 tpy of CO2.

A solar boom

Rooftop solar is seeing an unprecedented boom in SouthEast Asia in recent years as an important step towards the sustainability of manufacturing operations of multinational companies without imposing additional requirement on the grid operator.

The on-site solar PV system is not intended in any way to replace the grid electricity supply but rather to complement it, thus to some extent also relieving the demand on the T&D.

The regulator has also seen the advantages deriving from rooftop solar as a fast and easy way to allow for corporates to have access to green energy, and has sought to incentivise its development typically by putting in place a net metering or feed-in tariff mechanism, whereby the grid operator agrees to buy from corporate ABC any excess solar energy generated on Sundays or Public Holidays and not consumed on-site.

This is technically easily achievable by replacing the traditional electricity meter at corporate ABC’s site with a bi-directional meter capable of measuring incoming and outgoing energy flows.

While the technical side of things is relatively simple – the PV technology is proven and tested, technical improvements are incremental in terms of efficiency and have already likely reached a plateau – the financial and business side of managing long-term (20 years is the typical duration for a corporate PPA project) is not straightforward and requires deep pockets and a long-term view.

In practical terms, this means that although currently in many developing markets such as Indonesia, Vietnam, or the Philippines amongst the main on-site PPA solar developers are local engineering, procurement, and construction (EPC) companies funded by local banks, over time they will likely be edged out by energy majors which have decades-long experience of long-term, low rate of return project management.

After all, who would be better to commit a roof on a 20-year contract; a company founded a couple of years before or an energy major which has been around a century, through thick and thin, revolutions, war, earthquakes, and tornadoes?

Figure 3. Construction of rooftop system in the Philippines.

Figure 4. On-site solar PV with excess energy export capability.