Corporate PPAs in Southeast Asia: Opportunities & Challenges for … · 2021. 8. 11. · 1 / 17. Across Asia, rooftop solar is increasingly offering a competitive alternative to grid-tied

Corporate PPAs in Southeast Asia: Opportunities & Challenges for C&I SolarChris Starling, The Lantau GroupPresented at PowerGen Asia, 19th September 2018

Across Asia, rooftop solar is increasingly offering a competitive alternative to

grid-tied supply – particularly for the commercial and industrial sectors

1

8.99.4

10.110.6

11.7 11.7 11.7 11.9 11.912.4

13.1

17.8 17.9

19.3

0

5

10

15

20

25

7.5 7.5 7.98.7

9.6 9.810.2

10.9 11.1 11.1 11.2

13.0

17.9

18.9

0

5

10

15

20

25

US¢/kWh

Typical Commercial end-user tariff (August 2018) Typical Industrial end-user tariff (August 2018)

Note: Assumed typical commercial customer consumes 480,000kWh per month, with contract demand of 850kW;

assumed typical industrial customer consumes 2,000,000kWh per month, with contract demand of 3,000kW

Source: TLG analysis

Rooftop

solar

LCOE

For end-users, solar PV adoption is guided by ‘socket parity’ rather than ‘grid parity’

US¢/kWh

Rooftop

solar

LCOE

The existing C&I solar market has grown hugely since 2016, with over half of

installed capacity located in Luzon

2

Luzon

35.8 TWh total C&I demand

31.8 MWp of solar PV, 109 sites

Visayas


21.4 MWp of solar PV, 44 sites

Mindanao


3.7 MWp, 8 sites

Other regions

2.7 MWp, 5 sites

5

13

89

1

3

4

7

7

26

4

4

4

40%

27%

12%

10%

5%

2%

77%

10%

8%

66%7%

5%

19%

Shopping Mall

University / College

Manufacturing Plant

Office Tower

Other

Hospital / Medical Centre

Unclassified

Resort / Hotel

Note: Data is not comprehensive as there are small rooftop solar projects that

are not publicly announced. Data excludes the 41.5 MW Majestic project

Source: TLG analysis and research

Philippines example

4,150

4,209

34,258

10,896

3,411

-

100

200

300

400

500

600

700

800

900

1,000

0 10 20 30 40

Ave

rag

e i

ns

talla

tio

n s

ize

(k

Wp

)

No. Installations

as of Q1-16

Certain markets (and types of customer) are seeing rapid growth in market size

3 Note: Data is not comprehensive as there are small rooftop solar projects that are not publicly announced. Data excludes the 41.5 MW Majestic project


Trend in C&I rooftop solar by segment

Size of bubble represents net capacity (Opex & Capex)

Growth in the overall C&I rooftop solar market has

been led by the shopping mall segment, which

accounts for a 58% share of total C&I capacity

Shopping

Malls

Shopping Malls

Universities

/ Colleges

Other

Manufacturing

as of Q1-18

Some segments (e.g. shopping

malls) are commercially savvy –

mall owners such as Robinsons

Land actively tender out projects

810 2,762

875

444 752

/ 746

4

1,030

-

2,500

5,000

7,500

10,000

12,500

15,000

- 5 10 15 20In

sta

lle

d c

ap

ac

ity (

kW

p)

No. Installations

Trend in C&I rooftop solar by participant

size of bubble represents average project size

Solar

Philippines

PNOC-RC

/ Phoenix

Solar

The four largest Opex players now account for 61%

of the total C&I solar market

Solar

Philippines

Solenergy

Green

Heat

EDC

Philippines example

With few exceptions, economics is invariably driving rooftop solar uptake

across Asia – four key factors drive the value of C&I solar

Description Factors that increase the value of solar PV

Competing retail tariff

and/or cost of on-site

generation

• Represents the cost of the existing / default option for

potential customers

• Depends on location and tariff type (segment) of

potential customers, as well as multiple extrinsic

factors such as fuel prices

• Higher retail tariffs

• Volumetric (per kWh) transmission & distribution charges

• High and volatile fuel prices

Customer demand

profile

• Determines (i) the ability of solar PV to reduce peak

demand charges (per kW), as well as (ii) the potential

exports back to the grid of surplus generation

• Strong alignment of load profile with solar generation

• Stable daily average load across the year

Policy and regulation• Influences the value of solar PV installations (e.g.

subsidies), as well as the cost of competing options

(e.g. through tariff design)

• Tax credit/rebate/waiver on equipment costs

• FIT and net metering policies to monetise generation

Cost of solar

installation• Determines the competitive position of solar PV

• Lower overnight capital cost

• Lower financing cost

• Higher technical lifetime

4

1

2

3

4

For end-users, the value of rooftop solar is principally derived from energy

displacement and the reduction of demand charges

Cost of purchasing ALL electricity from the DU

• Energy charge (kWh): energy demand is 19.5 MWh per day

• Capacity charge (kW): based on peak demand of 1,200 kW

Option 1 Option 2

Value of the rooftop solar to the customer

• Energy displacement

• Peak demand reduction

• Solar export to grid (remuneratory benefit varies)

5

Cost of purchasing electricity from the DU with rooftop solar

• Cost of the rooftop solar system

• Electricity purchase from the DU:

• Energy charge (kWh): energy demand is 7.7 MWh per day

• Capacity charge (kW): based on peak demand of 787 kW

Generation Transmission Distribution Supply charge Metering charge SL UC-ME UC-EC UC-SCC UC-SDper kWh per kWh per kW per kWh per kW per kWh per cust/mo per kWh per cust/mo per kWh per kWh per kWh per kWh

GSA-200kWh 4.6045 0.7375 - 1.0012 - 0.5085 16.73 0.3377 5 0.4369 0.1561 0.0025 0.1938 0.0265

GSA-300kWh 4.6045 0.7375 - 1.3183 - 0.5085 16.73 0.3377 5 0.4369 0.1561 0.0025 0.1938 0.0265

GSA-400kWh 4.6045 0.7375 - 1.6175 - 0.5085 16.73 0.3377 5 0.4369 0.1561 0.0025 0.1938 0.0265

GSA-401kWh 4.6045 0.7375 - 2.1387 - 0.5085 16.73 0.3377 5 0.4369 0.1561 0.0025 0.1938 0.0265

GSB 4.6045 - 217.15 0.1368 237.15 - 371.48 - 362.34 0.4369 0.1561 0.0025 0.1938 0.0265

GP-Medium 4.6045 - 246.62 0.1368 237.15 - 845.17 - 849.44 0.4369 0.1561 0.0025 0.1938 0.0265

GP-Large 4.6045 - 246.62 0.1368 237.15 - 3,505.46 - 3,525.12 0.4369 0.1561 0.0025 0.1938 0.0265

GP-VLarge 4.6045 - 246.62 0.1368 237.15 - 12,726.30 - 12,075.11 0.4369 0.1561 0.0025 0.1938 0.0265

GP13.8kV-

Medium 4.6045 - 270.85 0.0513 182.66 - 845.17 - 849.44 0.1846 0.1561 0.0025 0.1938 0.0265

GP13.8kV-Large 4.6045 - 270.85 0.0513 182.66 - 3,505.46 - 3,525.12 0.1846 0.1561 0.0025 0.1938 0.0265

GP13.8kV-VLarge 4.6045 - 270.85 0.0513 182.66 - 12,726.30 - 12,075.11 0.1846 0.1561 0.0025 0.1938 0.0265

GP34.5kV-

Medium 4.6045 - 308.56 0.0513 182.66 - 845.17 - 849.44 0.1846 0.1561 0.0025 0.1938 0.0265

GP34.5kV-Large 4.6045 - 308.56 0.0513 182.66 - 3,505.46 - 3,525.12 0.1846 0.1561 0.0025 0.1938 0.0265

GP34.5kV-Vlarge 4.6045 - 308.56 0.0513 182.66 - 12,726.30 - 12,075.11 0.1846 0.1561 0.0025 0.1938 0.0265

GP115kV-Large 4.6045 - 225.7 0.0513 143.32 - 3,505.46 - 3,525.12 0.0522 0.1561 0.0025 0.1938 0.0265

GP115kV-VLarge 4.6045 - 225.7 0.0513 143.32 - 12,726.30 - 12,075.11 0.0522 0.1561 0.0025 0.1938 0.0265

GHMSCI* 4.6045 0.8218 - 0.8667 - - 278.59 - 278.46 0.4369 0.1561 0.0025 0.1938 0.0265

Tariff structure extent to which end-users can use solar PV to avoid variable

and fixed charges – is determined by tariff structure

6 Source: Meralco; TLG analysis

Meralco monthly tariff table (December 2017)

T&D tariff design: Residential and

GHMSCI are volumetric based; other

users are mostly demand based

^ GSA – General service A (demand < 5 kW); GSB – General service B (demand >5 kW, < 40 kW); GP (General Power) – Medium (demand <200 kW); GP – Large (demand <750 kW); GP – VLarge

(<10,000 kW). Note: There are other charges or levies (including Feed-in Tariff Allowance charges (0.183/kWh) lifeline rate subsidy (0.0859/kWh), Senior citizen subsidy (0.0001/kWh), and various taxes

(as of Dec-17: Gen – 11.49%, Trans – 0.58%, System loss (SL) – 9.99%, UC – 0%,others – 12%). * GHMSCI = Government Hospitals, Metered Street Lighting and Charitable Institutions

Most of the T&D charges are fully variable on a kWh basis for residential, small commercial and public hospitals, but not for

larger customers

Volumetric base

Residential

T&D is per kWh

Commercial & Industrial

T&D is per kW

All customer classes

Generation is per kWh

Philippines example

0

500

1,000

1,500

2,000

2,500

15 Jan 15 Jan 15 Jan 15 Jan 15 Jan 16 Jan

kW

/kW

h

Load Solar Load shedding/Grid imports

‘Volume savings and peak shavings’

… alignment of solar’s diurnal generation with end-user’s load profile matters

7

0

50

100

150

200

250

300

350

400

450


kW

/kW

h


0

200

400

600

800

1,000

1,200

1,400

1,600

1,800


kW

/kW

h


University Shopping Mall

0

200

400

600

800

1,000

1,200

1,400


kW

/kW

h


Office Tower

Manufacturing Plant

0

50

100

150

200

250

300

350


kW

/kW

h


Hospitals / Medical Centre

0

50

100

150

200

250

300

350


kW

/kW

hLoad Solar Load shedding/Grid imports

Hotels / Resorts


WD

WD

WD WD

WD

WD

LCOE analysis assumptions for shopping malls

8

Tariff class and related information

Comments

Parameter Value

Facility type Shopping mall

Facility peak demand (kW) 1,592

Solar capex (USD/kW) 850

Solar opex (USD/kW/year) 8.5

Lifetime (years) 25

Solar capacity factor (%) 13.7%

Installable solar capacity (kW) 1,056

WACC (%) 9.64%

Cost of Equity (%) 12.07%

• Demand profile is based on data of shopping malls from the Philippines.

• The peakiness of the load profile of shopping malls during the day time aligns well with solar generation (both weekday and

weekend), though it clearly is not suitable during the evening peak hours (until about 8 or 9pm).

0

200

400

600

800

1000

1200

1400

1600

1800

1 2 3 4 5 6 7 8 9 101112131415161718192021222324

kW

Average demand and solar generation

Demand

Net demand

Solar

generation

TariffGeneration Transmission Distribution Supply charge Metering charge SL UC-ME UC-EC UC-SCC UC-SD

per kWh per kWh per kW per kWh per kW per kWh per cust/mo per kWh per cust/mo per kWh per kWh per kWh per kWh

GP-VLarge 5.024 - 246.62 0.1368 237.15 - 12,726.30 - 12,075.11 0.4369 0.1561 0.0025 0.1938 0.0265

Note: the LCOE analysis has been undertaken using the WACC.

Generation charge increased to account for higher tariffs of DUs

and ECs seen across the Philippines

Philippines example

Universities/colleges, shopping malls, and manufacturing plants typically see

the greatest benefit from installing rooftop solar

9

0.1650.151

0.010

0.000

0.020

0.040

0.060

0.080

0.100

0.120

0.140

0.160

0.180

LCOE w/o solar Total LCOE

0.157

0.123

0.024

0.000

0.020

0.040

0.060

0.080

0.100

0.120

0.140

0.160

0.180


0.168

0.124

0.031

0.000

0.020

0.040

0.060

0.080

0.100

0.120

0.140

0.160

0.180


0.170

0.144

0.018

0.000

0.020

0.040

0.060

0.080

0.100

0.120

0.140

0.160

0.180


0.172

0.099

0.047

0.000

0.020

0.040

0.060

0.080

0.100

0.120

0.140

0.160

0.180


0.1540.144

0.008

0.000

0.020

0.040

0.060

0.080

0.100

0.120

0.140

0.160

0.180


Offices Resorts/HotelsManufacturing plants

-8.1%-5.1% -14.8%

-5.7%-2.6% -1.6%

USD/kWh USD/kWh USD/kWh

Shopping malls Universities/CollegesHospitalsUSD/kWh USD/kWh USD/kWh


% of cost from solar PPA

% of cost from grid

In the near-term, growth in the C&I market is likely to continue to be, by triangulating segments that have (i) high energy

usage and (ii) ‘peakier’ daytime loads that increase the propensity to avoid fixed charges, and which are (iii) situated in

geographic locales where DU and EC tariffs are particularly high, such as the Visayas

Philippines example

1,023

154 207

560

60 38 3

4,651

206

552

2,977

643

204 69

-

1,000

2,000

3,000

4,000

5,000

Universities,Colleges, &

Schools

Shopping Malls ManufacturingPlants

Office Towers Hospital /MedicalCentres

Resorts / Hotels Total

How do you translate favourable economics into commercially addressable

opportunities in the market?

10

MWp

Addressable size of total C&I rooftop solar market in the Philippines^

• In the Philippines, we conservatively

estimate the addressable size of the

C&I rooftop solar market to be in the

region of 1 GWp, but with significant

variation across C&I segments.

• Shopping malls and universities /

colleges are segments of the C&I

market where a generally higher

proportion of the technical market

size is commercially addressable.

Technically addressable market

Commercially addressable market

^ After accounting for existing identified C&I rooftop solar projects


• Note that, owing to the structural

integrity of roofs, developers we

engaged with in the Philippines cited

a figure of 10-15% of identified

opportunities stalling due to the

quality of roofs

Philippines example

Consumer-owned

Solarleasing

Corporate

PPA

Owner uses electricity from owned system

Fixed monthly paymentLinked to solar production with unit charge per kWh

Upfront cost for the systemFixed

monthly payment

Electricity cost / rate(fixed or variable or linked

to competing offers)

Solar power with no additional payment

Solar power

at a fixed payment

Solar power

at a an electricity rate

- Panel Panel

- Fixed paymentsVariable payments

(depending on rate agreedand production)

Consumer Varied Varied

Consumer Varied Varied

In theory, firms can access the market through a number of business models -

each determines how risks are allocated between parties

11

2 3

‘Capex model’ ‘Opex models’

Customers

Pay

Receive

Sellers

Pay

Receive

Who owns the panel?

Who gets the right of surplus

solar power?

1

Let’s focus a bit more on corporate PPAs in the Asian context…

PPA models also provide flexibility for sellers to use different kinds of contractual

pricing (i.e. indexation) to cater to the need of different customer segments

12

DU-linked Fuel-linked WESM linked Fixed/kWh Declining

Precedents /

competitor focuses

Solar Philippines,

GreenHeat

RE developers for

geothermal and wind

projects

Developer with a

portfolio of renewables

Developer with a

portfolio of renewables

Utility-scale solar

developer

Key advantages

for SellerEasy to sell

(simple proposition)

Competitive with key

competing fuels such as

coal and gas(inter-fuel competition)

Remain competitive

with market

Known per

kWh income

Remain competitive if

panel price drop(intra-solar competition)

Key risks

to Seller(such as market risks

and competitiveness)

No control over

DU tariff(expected to decline in the

near- and medium-term)

Price volatility

• Price volatility

inherent in WESM (expected to decline

considerably)

• More difficult to

explain/sell to

customers

• FX risk(if not fully US$ linked)

• Outcompeted(newer solar & other

options)

• Headline price shock

of initial tariff

Targeted customer

groups

Moderately sized non-

sophisticated customers (such as schools /

universities / hospitals and

even shopping malls)

Large sophisticated

customers(such as shopping malls)

Very large directly

connected*

sophisticated customers(large shopping malls /

industrial etc)

Customers adverse to

fuel & other price risks(such as schools /

universities / hospitals)

Customers who worry

about solar panel getting

cheaper(such as some DUs)

Type of power purchase agreement (PPA)

The PPA model benefits from flexibility of pricing design similar to a power retail contract to attract customers, making it

more attractive than the fixed leasing model to both sellers and customers

Note: ** Directly connected customers are those most likely to view purchasing from the WESM as an option

Philippines example

As a result, the competitive landscape is shifting

13

Rooftop FIT Players (own/operate)

EPC Solar leasing

Majestic Energy Corp.

41.3

MWp

1.5

MWp

Existing competition

(solar PPA providers)Sample existing Solar PPA

customers

Competition from potential

future providers of PPAs

Local connections and project referrals

are a key driver of business development

Philippines example

The extent to which different rooftop business models are allowed across Asian

markets varies considerably (1 of 2)

14

Consumer-owned

Solar leasing Corporate PPA Solar + Retail Net Metering


Fixed monthly paymentLinked to solar production with unit charge per kWh

Bundle solar production with retail contract to

serve customers’ need

Ability to monetise surplus solar generation

Philippines YesYes

Orix Metro, OrionGroup

> 500kW by end-2018

Solar Philippines; EDC; GreenHeat

Emerging

Not yet being used in the Philippines

Yes

<=100kW (remunerated as credit on electricity bill)

Thailand YesYes

e.g. SPCG

Yes

Cleantech Solar, Constant Energy, and Impact Solar with

Big C Supercenter

Not permitted

Pending approval

Purchase rate is likely to be at THB 2.6/kWh or less

Malaysia Yes

Yes

e.g. Plus Solar, Helios, REC, Sun Power

Not permitted Not permitted

Yes

75% of the end user’s peak demand

Indonesia Yes Only domestic firms

Partly permitted

Outside of PLN franchise(e.g. Cikarang)

Not permittedResidential only

30kW limit


The ‘corporate PPA Model’ is emerging but is still limited by the idiosyncrasies and regulatory context

within each Asian market

The extent to which different rooftop business models are allowed across Asian

markets varies considerably (2 of 2)

15

Consumer-owned

Solar leasing Corporate PPA Solar + Retail Net Metering


Fixed monthly paymentLinked to solar

production with unit charge per kWh

Bundle solar production with retail contract to

serve customers’ need

Ability to monetise surplus solar

generation

Vietnam YesPotentially

Under discussion

Potentially by end-2018

Being evaluated by ERA

Not permitted Yes

Paid at same rate as the FIT (adjusted for forex)

Cambodia YesYes

Kamworks

Yes

Cleantech SolarNot permitted

Potentially

Regulations appear to be open to net metering

China YesYes

GCL and CHINT

Yes

Via Energy Performance Contracting scheme (e.g.

GCL)

Potentially

After distributed energy trading scheme is officially launched

Yes

<=6MW

Japan Yes

Yes

DMM Solar, SB Energy Corp, Ecosystem Japan Co, Aqura

Home Co,

Yes

Partly permitted

Retail contract with renewable energy is allowed

Phased out

Singapore YesYes

Solareo, Helios, Sun Electric

Yes

Sunleap and MicrosoftYes

Yes

Cap is not specified

The ‘corporate PPA Model’ is emerging but is still limited by the idiosyncrasies and regulatory context within

each Asian market


Thank you

16

Chris Starling, [email protected]

By phone+852 2521 5501 (Hong Kong office)

+65 6818 6011 (Singapore office)

By mailThe Lantau Group (HK) Limited

4602-4606 Tower 1, Metroplaza

223 Hing Fong Road,

Kwai Fong, Hong Kong

The Lantau Group (Singapore) Pte Ltd

Level 39, Marina Bay Financial Centre Tower 2

10 Marina Boulevard

Singapore 018983

Onlinewww.lantaugroup.com

Rigour

Value

Insight

NetworksElectricity Gas

mailto:[email protected]

http://www.lantaugroup.com/

Documents

Corporate PPAs in Southeast Asia: Opportunities & Challenges for … · 2021. 8. 11. · 1 / 17. Across Asia, rooftop solar is increasingly offering a competitive alternative to grid-tied