SOUTHEAST ASIA PRESENTS PATCHWORK OF PV POTENTIAL

SOUTHEAST ASIA PRESENTS PATCHWORK OF PV POTENTIAL

Solar investors are increasingly looking toward the young and promising PV
markets of Southeast Asia for new opportunities. The region's key solar
markets - Thailand, the Philippines, Malaysia, Singapore, Indonesia, Vietnam
and Myanmar - had a big year in 2016, collectively installing about 1.58 GW
of new PV capacity, according to statistics from the International Renewable
Energy Agency (IRENA). Including Cambodia and Laos, the region's cumulative
installed PV capacity hit roughly 3.48 GW by the end of December.

Each country varies significantly in terms of development. However, Ben
Attia, analyst for GTM Research, believes the rapid shift throughout the
region toward competitive procurement will contribute to growth. He expects
the Philippines to install 7,006.4 MW by 2022, followed by 6,079.1 MW in
Thailand and 4,174.1 MW in Vietnam. With 13.3 GW (DC) of new solar capacity
expected in those three countries over the next five years, GTM sees the
region's cumulative installed capacity reaching 23.6 GW.

"However, this level of high growth is dependent on policy transparency and
reform around feed-in tariff (FIT) rates," Attia cautions.
Thailand

Thailand added 729 MW of capacity in 2016, according to IRENA, bringing
cumulative capacity to 2,149 MW by the end of December. But the outlook for
ground-mount PV deployment remains uncertain, as the government continues to
reshape its policies. And competition among developers to build new
ground-mount PV projects is fierce, as new players are increasingly moving
into solar, such as coal-mining giant Banpu, which recently announced plans
to develop 300 MW of capacity.

The government planned to award 518 MW this year under its
agricultural-cooperative PV scheme. IHS analyst Josefin Berg says this will
provide "a bit of room" for ground-mount developers.

However, just 172 MW of capacity was awarded under the program this summer.
Those projects will be built through the end of 2018, but plans for the
remaining 346 MW are currently unclear.

"The ground-mount segment is going to be quite slow now," laments Berg, who
expects about 350 MW of new capacity in Thailand this year, down sharply
from 2016.

While the authorities have yet to unveil a specific program to support
rooftop development, a growing number of Thai companies are installing PV
arrays for self consumption. And a new net-metering policy - expected in
September - could help unlock more opportunities in the C&I rooftop space,
where companies such as Conergy see "significant potential."

Malaysia

Malaysia - which installed 70 MW last year, according to IRENA - was
overwhelmed by the response to its recent 460 MW solar tender. The auction -
its second competitive tender for large-scale PV - received roughly 1.6 GW
of submissions. Backed by a strong regulatory environment, Malaysia now
appears poised to rapidly scale up PV development.

In a recent report, BMI Research acknowledges that in terms of scale, the
potential for renewables deployment in Malaysia remains small in comparison
to Thailand and Indonesia. However, the London-based firm it also says that
the overwhelming response to the 460 MW auction positions the country as one
of the "most attractive" renewables investments in Southeast Asia.

Philippines

The Philippines installed about 633.1 MW in 2016, according to IRENA,
cementing its status as one of the region's strongest solar markets.
However, the policy outlook appears to be stalled at the moment, as the
government charts its next step forward.

In May, the Department of Energy (DoE) said that it would not proceed with a
third round of FIT-backed solar projects. And although the DoE issued draft
guidelines for a new Renewable Portfolio Standard (RFP) earlier this summer,
policy momentum for solar remains stalled at the moment.

"The Philippines would in theory be best positioned for the highest
short-term potential," says Alexander Lenz, CEO of Conergy. "But
discontinuing the FIT program without a transparent and working bilateral
PPA market has left solar progress hanging."

For now - without any supportive government policies in place for solar -
Lenz expects that developers will increasingly build new projects via
bilaterally negotiated PPAs.

Vietnam

PV investors are increasingly looking at Vietnam. A series of projects have
been unveiled since the government's announcement of a new FIT system
earlier this year, including a 100 MW plan announced by India's Tata Solar
in April.

"Vietnam has significant immediate potential," says Lenz.

The country's framework to support PV deployment is almost complete, with a
full PPA template expected by the end of this year. However, Dr. Oliver
Massmann - co-general director of Duane Morris Vietnam LLC in Hanoi - is
concerned because a recent draft included "mistakes" that could render the
agreements unbankable.

Nonetheless, Massmann expects solar to develop rapidly. The involvement of
multilateral lenders such as the Asian Development Bank, for example, is
starting to attract the interest of local commercial lenders, although
access to finance remains an issue. And a number of supportive policies are
drawing in unprecedented numbers of prospective foreign investors.

Massmann says investors should consider a build-operate-transfer (BOT)
approach in Vietnam, but notes that there are also growing opportunities for
equipment suppliers. "Vietnam is an untapped market for solar," he says.

Indonesia

Indonesia is moving forward with auctions, following roughly 70 MW of
capacity additions in 2016, according to IRENA. But the way forward remains
treacherous due to policy instability.

"It's one of those markets where there is a lot of potential for PV and
renewables, but then policy is so unpredictable," says Berg.

In June, utility PT PLN launched its first regional tender for 168 MW of
solar in Sumatra. Winners will be selected by the end of this year. However,
there are feasibility concerns, as projects will be awarded to developers
that can bid below average local generation prices. That will be difficult
in some parts of the country. In addition, issues related to domestic
content requirements need to be clarified.

"It's not a very transparent market," concludes Berg. "There is definitely a
way forward but it's not straight."

Some developers are directly negotiating PPAs with PT PLN. Most recently,
Equis Energy finalized a 42 MW PPA with the utility. But the Singapore-based
developer is tightlipped about how it secured a deal, beyond saying it is
"excited" about the country's 23% renewables target and plan to bring 35,000
MW of new generating capacity online by 2019.

Myanmar

A number of developers announced big projects in Myanmar last year,
including a 220 MW installation by Bangkok-based Green Earth Power. However,
a range of issues, including the country's creaky grid network, could thwart
such ambitions.

"The problem is multifaceted in Myanmar," says Lenz. "For the short-term,
the grid challenges and missing regulations relating to PV development and
revenue streams will strongly limit implementation."

In the short term, he sees potential to pair PV systems with storage
batteries to address grid concerns and expand rural access to electricity.
Direct consumption of rooftop-generated electricity, as well as diesel
displacement systems, microgrids and other small installations are the most
likely opportunities over the short term.

But given the country's formidable solar resource, the future looks bright.

"It's only a matter of time until the dam breaks," Lenz argues. "Myanmar
will certainly come into the focus in the long-term."

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John Diecker
APT Consulting Group Co., Ltd.

www.aptthailand.com