Interview: Wandee Khunchornyakong
To what extent can Thailand’s solar power industry benefit from investment opportunities abroad?
WANDEE KHUNCHORNYAKONG: Thailand is one of the most advanced locations for solar development in the ASEAN region. The strength of the solar industry in this country has led to the development of expertise that can successfully be applied regionally and internationally. As such, a number of solar power companies are now actively pursuing opportunities across South-east Asia. Myanmar and Cambodia represent investment destinations of particular interest. The countries are still developing their economies and infrastructures, and have yet to construct proper national grids. In the case of solar farms, any project would be an independent system designed to support local demand for the area in which it is developed. Similarly, both Myanmar and Cambodia do not have a standardised power purchase agreement, so a bilateral agreement with the local government is necessary to carry out a project. They are trying to come up with a more standardised approach, but it will take some time. Alongside these two countries, some solar companies – including SPCG – are looking into the Japanese market. After the Fukushima disaster, Japan is scaling up its investment in solar farms. The cost structure is vastly different there: in Thailand, land is only 10% of the cost, whereas in Japan it is closer to 40%. However, this dynamic works both ways. Currently Thailand receives lots of investor interest from Europe, the US and China in particular. The strength of the industry here, coupled with a relatively stable regulatory regime, is attracting strong investor interest.
How has the appetite for financing solar projects changed in recent years?
WANDEE: Until recently, the solar industry in Thailand had to look at the off-grid market. This included areas that could not be connected to the main grid for geographical reasons, such as remote rural areas and islands. Solar power helped improve the quality of life for these communities by providing basic lighting, solar water pumping systems, telecommunications and education facilities, but it was never well regarded as a commercial exercise. For this reason, the industry had never caught the attention of the finance and investment community. SPCG was the first company to develop a solar power plant in the Thailand and ASEAN markets. This experience was tremendously difficult purely because it was so challenging to secure the needed financing. The banks and wider investment community were very suspicious and lacked belief in the project because it was a greenfield initiative.
Once we were able to secure funding from both domestic and international financial institutions, the project proved 20% more successful than forecasted. Now, there is a ferocious appetite among investors and financial institutions to provide lending support for solar power. These days, with a power purchasing agreement, you can sell a solar farm’s shares on the equity market before the project has even been completed.
How would you characterise the development potential of rooftop solar technology in Thailand?
WANDEE: Thailand is only just now making strides into the solar roofing business, but the potential is huge. In other countries around the world, the solar roofing industry is three times larger than the traditional solar farm or solar plant sector. In September 2013, the government opened the tender for 200 MW of rooftop installations in the country, with total capacity split 50/50 between residential and commercial structures.
The case for installing solar panels for residences or businesses is strong. A 10-KW panel on a house, for example, is likely to make a return on the initial investment around seven or eight years after installation. In market terms, we expect extremely high growth in the medium term, with total market size growing to around BT10bn ($327m) in 2014. This will be an important development for Thailand’s broader energy sector – particularly as the energy ministry has increased its 2020 target for solar power from 2000 MW to 3000 MW.
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