Here comes the sun: Thailand needs to think deeper about solar (Opinion)

Here comes the sun: Thailand needs to think deeper about solar (Opinion)

As Thailand looks for sunrise industries to target, it should look more
closely at the booming solar photovoltaics (PV) manufacturing industry.
Global new investment in solar installations totalled US$161 billion in
2015, according to Bloomberg New Energy Finance. That figure will grow
dramatically in the years to come, judging from capacity demand forecasts.
Bloomberg projects that annual demand for photovoltaic modules will reach
170 gigawatts by 2030, far above the 64GW of solar modules being produced in
2016.

To be sure, the photovoltaic equipment manufacturing industry is volatile
and fiercely competitive, dominated by big companies in China that have
large economies of scale and benefit from supportive government policies.
Chinese makers now have a massive 51GW of annual module production capacity.

Unfortunately, Thailand lacks competitive advantage in the key PV module
production processes, namely manufacturing solar-grade silicon and solar
silicon wafers, which are capital-intensive, energy-intensive businesses
that require low-cost electricity supply. But Thailand still has
opportunities to capture more of the PV industry's huge overall value chain
by attracting more foreign direct investment and developing local players.
By sharpening their strategies, both the government and private sector can
help Thailand increase its solar success.

Where does the country's photovoltaic production industry now stand? Using
imported silicon wafers, factories in Thailand will produce some 1.2GW of
modules in 2016, six times the amount in 2014. Most of this growth comes
from plants owned by Chinese companies, which have been investing overseas
to avoid anti-dumping tariffs and countervailing duties imposed by the
United States and European Union. In 2015 and the first half of 2016, the
Board of Investment (BoI) approved over 7 billion baht in investment in
solar panel manufacturing.

This figure might seem impressive, but Malaysia is well ahead of Thailand in
photovoltaics manufacturing. It is currently the third-largest producer in
the world, with 3GW of PV module production capacity as of 2016. It aims to
overtake Taiwan as the world's second largest producer by 2020. Meanwhile,
Vietnam has attracted big-name solar manufacturers and developed a thriving
foreign-invested original equipment manufacturer (OEM) business.

If Thailand wants to keep pace in this important manufacturing industry, the
government and local companies should undertake six broad efforts.

First, we need to ensure that we attract quality technologies. Solar is a
fast-changing industry, so the BoI's investment programmes should be
adjusted to target companies that make high-quality, high-efficiency
products. This will help Thailand avoid getting stuck with plants that
become stranded by technological progress.

To attract top manufacturers, Thailand's foreign direct investment (FDI)
policies need to be competitive relative to those of neighbouring countries,
particularly Malaysia. Unlike Thailand, Malaysia includes renewables
manufacturing companies in its strong investment incentives targeting high
technology.

Second, we need to look beyond PV panels. As the market for solar PV
expands, so will demand for the components and equipment that are integrated
with panels, such as solar inverters, mounting systems and sun trackers.
This so-called balance of system (BOS) comprises 20% of the cost of a
typical solar installation project.

The BoI should offer incentives for investment in BOS components to broaden
the solar supply chain here. This would take advantage of a variety of
Thailand's existing production capabilities, such as for wiring and
electronic components, and help develop new capabilities in adjacent
industries, such as smart grid and energy storage systems.

Third, we need to expand opportunities downstream, such as in PV-related
services to the power generation industry, where Thailand is already
competing well in solar. With 2.4GW of PV power generation capacity already
installed, Thailand is far ahead of Malaysia where installed capacity is
only 275 megawatts. Impressively, Thailand ranks fifth in Asia behind China,
Japan, India and South Korea in terms of solar's share of nationwide
electricity production.

The upshot is that Thai companies have already accumulated substantial
project development experience at home, and are starting to lead projects
overseas. Thailand should expand this business, exporting solar project
development services and system integration services to neighbouring
countries. Partnerships with manufacturers will help to ensure that project
developers and energy management businesses are on top of the latest
technological trends and customer needs.

Fourth, the government should ramp up its modest targets for solar power
installations, which would bolster the local PV manufacturing industry. The
latest Alternative Energy Development Plan (AEDP 2015) calls for just six
gigawatts of solar generation capacity by 2036. This is low compared with
other Asian countries. Vietnam, with negligible capacity today, targets 12GW
by 2030. India aims for 100GW, while Indonesia targets 8GW. These countries
will attract the lion's share of solar manufacturing investment.

Fifth, Thailand should strengthen PV research and development. R&D here
should focus on two objectives. First, improve cell and module manufacturing
processes to increase factory efficiency. Second, promote basic research on
improving cell efficiency, with a focus on PV in high- temperature climates.

R&D should look beyond solar panels to include balance-of-system components.
For example, sun-tracking technology has improved the performance of solar
farms in sunny regions. The BoI can further promote solar R&D by offering
incentives to foreign investors to undertake research locally, as Malaysia
does.

Sixth, we need to increase the electricity grid's flexibility to better
accommodate solar and other renewable energy. This calls for investment in
technologies, infrastructure and personnel that can manage the more dynamic
grid. Capacity building in grid improvement should focus on the general goal
of better integrating renewable energy into the grid and more flexibly
managing energy production and consumption. It's too early to focus on
selecting the right specific technologies, since smart grid systems are
still emerging and evolving.

If Thailand fails to fully develop its potential in the photovoltaic
manufacturing value chain, the lost opportunities will be large. Annual
worldwide investment in renewable power capacity exceeded non-renewables for
the first time in 2015, with solar taking the largest share.

The prices of solar PV systems are falling each year, nearing the point
where clean, solar-generated electricity is cost-competitive with power from
fossil fuels. When this point, known as grid parity, is reached, demand for
PV equipment will surge among homeowners and businesses. The future of
photovoltaics looks bright indeed, and is soon to arrive.

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Link to Original Article:
http://www.bangkokpost.com/business/news/1151917/here-comes-the-sun-thailand
-needs-to-think-deeper-about-solar

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John Diecker
APT Consulting Group Co., Ltd.

www.aptthailand.com