The Kingdom of the Sun

As abnormal weather conditions decimate communities across the globe, the climate change debate wages on. While oil apologists and environmental campaigners dispute the impact of greenhouse gas emissions, business people are seizing advantage of government subsidies to profit from an explosion of renewable energy. In ASEAN, nowhere is this more so than in Thailand. Words by Mark Bibby Jackson.

By the second half of the 21^st Century, the sun could become the planet’s new oil. With depleting oil, coal and gas reserves, producers are increasingly turning towards renewable sources to meet the world’s ever-increasing energy demands. Over the last 20 years, green technologies have become a multi-billion dollar global market, with the European Forum on Eco-Innovation predicting the market might reach US$2,300 billion by 2020.

Renewable energy has traditionally been seen as a preserve of developed countries, but this is no longer the case. Developing countries are jumping on the green bandwagon. “As a result of their improving investment climate and huge consumer base, developing countries are increasingly becoming major players in the manufacture of clean technologies,” states a World Bank report entitled International Trade and Climate Change.

Trade in such green technologies opens up new export opportunities and could act as a catalyst for the creation of green jobs. It also shows no sign of diminishing, so long as the sun keeps on shining.

A joint report prepared by The Organisation for Economic Co-operation and Development (OECD) and the International Energy Agency (IEA) states that “solar energy could provide a third of the global final energy demand after 2060” – good news for developing countries in the southern hemisphere that are blessed with copious sunlight. “Its availability is greater in warm and sunny countries – those countries that will experience most of the world’s population and economic growth over the next decades,” the report adds.

Cheap, Clean Energy

A clean limitless energy, offering great employment and trade possibilities for developing countries in the South – what’s the catch?

Traditionally, the major obstacles preventing the widespread proliferation of solar energy – apart from those long, dark northern winters – have been cost and financing. Renewable energy in general, and solar in particular, has in the past been deemed to be too expensive.

This is no longer the case. The cost of manufacturing solar cells has reduced considerably over the past five years, says Dr Piyasvasti Amranand, the Chair of Energy for Environment (EFE), a Thai NGO that supports projects promoting the use of renewable energy. “People think that solar is expensive, I don’t think that is the case anymore.”

Reduced expense has driven demand, with the global solar photovoltaic – or solar panels – energy sector doubling in size every two years, according to both the IEA and renewable energy research company Clean Edge.

In an interview with The Guardian newspaper in March 2013, Clean Edge founder Ron Pernick claimed that the cost of solar energy to the end user has already fallen from $7.50 per watt to $2.50 in recent years, and is projected to reach $1.50 within five years.

“We always knew each doubling of [solar photovoltaic] installation would reduce prices by about 18 percent,” he told the English daily. “$1.50 really is the holy grail.” The IEA envisages a scenario where the cost of solar energy and that derived from traditional fossil fuels achieves parity as soon as 2030.

Thailand’s Green Future

Within ASEAN, Thailand is treading a green path for others to follow. The country was one of the first in Asia to introduce a comprehensive feed-in tariff programme. It was called the Adder Programme because independent renewable power producers became entitled to receive a top-up payment from the government for the electricity they produced – added to that paid to them by the power utility companies.

“Feed-in tariffs (FiT) are the most widely used national renewable energy policy worldwide, and are recognised as one of the most effective and efficient drivers of renewable energy scale-up by creating investor security,” state researchers Sopitsuda Tongsopit and Chris Greacen in a research paper published in the international journal Renewable Energy.

Thailand’s feed-in tariff programme was adopted by the cabinet in 2002, with further technology-specific renewable energy tariffs added in 2006. The government’s 15-Year Renewable Energy Development Plan (REDP) set a renewable energy target of 20 percent of total energy consumption by 2020.

Seasoned experts, such as Professor Chumnong Sorapipatana of the Joint Graduate School of Energy and Environment (JGSEE) at King Mongkut’s University of Technology in Bangkok, feel that such targets are easily achievable. Currently, he estimates that only 8 percent of total energy in Thailand comes from renewable sources.

Indeed, when the Ministry of Energy first introduced its feeder programme at the end of 2008, there were 471 applications in total exceeding the planned 2,000MW electricity target outlined in the REDP, according to Tongsopit and Greacen.

The Solar Queen

The woman most responsible for this Thai “solar gold rush” is Dr Wandee Khunchornyakong, the Chief Executive Officer of SPCG. Thailand’s largest solar farm developer has 23 solar farms currently online, with a further 13 due for completion by the end of March.

With net monthly profit (from the first 22 farms) running at 45.5 per cent, according to company data, the solar market is clearing booming. Yet, when Dr Khunchornyakong first visited the Provincial Electricity Authority to purchase a solar farm licence, most people thought she was crazy.

“At that time nobody believed grid-connected solar systems could work commercially,” she says. Instead of ending up with one licence, she walked out with 34 – two further licences were added at a later date. It was then that her troubles really started. She needed finance.

It took her three months just to get the banks to listen to her, and then she received the stock response that “we have no policy on this”. This only served to steel the resolve of the Woman Entrepreneur of the Year 2013, as voted by the Asia Pacific Entrepreneurship Awards. “I believed it was my duty, that it was possible, so I had to prove to people that I could do it,” she says.

Eventually, she knocked on the doors of Kasikorn Bank in January 2003. “If I can not borrow money from you, then you will have to change [the colour of your logo] from green to another colour,” she says. Kasikorn means green in Thai and, fortunately for both SPCG and solar energy in Thailand, its logo remains that colour.

The woman dubbed “the solar queen of ASEAN” is now driven by a desire to lead her country out of the “energy crisis” that she says will engulf ASEAN over forthcoming years.

Estimating that the Gulf of Thailand’s natural gas reserves will be exhausted within the next five years, Dr Khunchornyakong believes that renewable energy will become ever more vital for Thailand’s continuing development, as the cost of energy from imported fossil fuels rises.

“Every country in this region is going to face an energy crisis in the next three to five years. The price of imported energy is already double what it is from the Gulf of Thailand,” she says, elaborating that she believes the price of gas will rise from around 5 baht/kw to 7 baht/kw in the next few years.

A man who arguably played as key a role as Dr Khunchornyakong in the evolution of renewable energy in the Kingdom is Dr Piyasvasti Amranand. As Minister of Energy from October 2006 to February 2008, he was responsible for implementing policies to promote renewable energy, such as the 2006 Adder programme and the first Renewable Energy Development Plan.

Dr Amranand agrees that bankers were initially reluctant to invest in renewable energy, which was then perceived as small scale and high risk. “It took a long time to convince Kasikorn Bank,” he says. “Our [EFE] role was important, because we were able to convince the banks that this sort of project was viable. Other banks followed.”

The first class honours graduate in mathematics from Oxford University feels that by guaranteeing the price independent renewable power producers received for the energy they produced, the 2006 Adder programme was key to changing the attitude of financial institutions towards renewable energy. Now, he says it is widely recognised that renewable energy “can be big business.”

The Solar Advantage

Professor Sorapipatana of JGSEE believes that – unlike wind for example which by its nature is site specific – the potential for solar energy is pretty much limitless. You just need a place with access to direct sunlight, with an estimated 75 percent of Thailand suitable, he says.

Dr Amranand is more sweeping. “You can have a solar farm anywhere in Thailand. You can put a solar panel on any roof of any building in Thailand,” he says. “That’s why I agree with the professor that the biggest potential is solar.”

Another advantage is that the panels are at their most productive during the day, when the sun is at its strongest. In Thailand, this coincides with peak electricity demand, which creates a symbiotic relationship between independent power producers and the national grid. “Solar panels can work very well when peak demand is very high, which is the opposite to temperate climates,” says Professor Sorapipatana.

All this makes solar energy increasingly good business, and one in which Thailand is leading the way in ASEAN, Dr Amranand claims. Malaysia might be the greatest producer of photovoltaic panels, but Thailand has the greatest demand.

But the problem that Dr Khunchornyakong first encountered with bankers has now been transferred to households looking to place some solar panels on their roofs. The cost of installing a solar unit has reduced from 100,000 baht/kw to 70,000 baht/kw in the last year, estimates Dr Amranand. However, as installations still cost up to 400,000 baht per household, people have to wait “12 to 15” years in order to make a return on their investment.

Although this still represents good long-term planning, as quality solar panels have a life-expectancy of 25 years, he says that it is “quite cumbersome” for banks to lend the comparatively small amounts of money needed for household solar units. “Banks are quite unwilling because of the cost of financing the loan,” he says.

A potential solution could be leasing equipment – something that the Department of Alternative Energy Development (DEDE) offers in its ESCO Revolving Fund, managed by EFE.

Under this scheme, potential solar entrepreneurs can borrow up to 10 million baht, which is then repaid over a period of five to seven years at an interest rate of four percent per annum. “If you could get leasing [for solar panels] as easily as a car loan, you would have a lot more interest in people putting up a solar rooftop,” says Dr Amranand.

Powering the Future

Globally, power derived from fossil fuels still far outweighs that from renewable sources, but if the OECD, IEA and some energy industry professionals are proved correct, this will not be the case come the latter half of this century. As technology – and hopefully financing – advances, the cost of renewable energy will further reduce, while its increasing scarcity will drive the price of fossil fuels ever higher.

Whether solar energy does replace fossil fuels as the main global source of energy by 2060 remains to be seen, but Thailand stands in pole position within ASEAN to benefit from such a scenario. What is without doubt, unless you are the most hard-nosed oil apologist, is that the solution to our future energy demands will have a drastic impact not only on business within the region, but upon the future of our planet.

“We have to save our environment,” says Professor Sorapipatana. “In the past, investors tended to give their priority to GDP growth rather than environmental preservation, but now we have to balance this. If we do nothing in the next 30 years, we reach the point of no return. This is our responsibility for the next generation.”