Philippines: New solar power deals hinge on PPAs, Conergy says

Philippines: New solar power deals hinge on PPAs, Conergy says

ENERGY COMPANIES in the Philippines remain keen on putting up solar power
plants, and some are in talks with distribution utilities for power purchase
agreements (PPAs), said a representative of Conergy Asia & ME Pte. Ltd.

"They are still very much interested but it depends on the timing," said
Michelle Gozum, Conergy's Asia-Pacific marketing director, in an interview
on the sidelines of a cogeneration forum at Astoria Plaza in Pasig City on
Monday.

Conergy, through its local unit Conergy Solar Philippines, Inc., claims to
be the biggest engineering, procurement and construction (EPC) services
contractor for solar technology in the country with a total installed
capacity of 274 megawatts (MW) or more than half of the 500-MW target of the
Energy department.

"Our customers are looking at PPAs, arranging direct PPAs with different DUs
[distribution utilities]," Mr. Gozum said.

She said securing guaranteed offtake for power output has become the new
approach for would-be owners of solar power plants, in the absence of any
guidance from the Department of Energy (DoE) of a new installation target
for the renewable energy.

Ms. Gozum said the company is in talks with possible EPC clients, which she
described as "existing and new sets of customers" that are negotiating PPAs
with distribution utilities.

"We're behind the scenes," she said. "The PPA has to be in place, financing
has to be in place, land has to be secured."

Conergy, which has been doing business in the Philippines since 2013, has so
far completed eight solar farms in Luzon and the Visayas as of last year,
most of which were able to qualify for the guaranteed feed-in-tariff (FiT)
offered by the DoE under its 500-MW target.

The "first to build, first to FiT" scheme ended in March 2016, with about
300 MW "stranded capacity" or without a fixed rate to assure a steady stream
of revenue.

Ms. Gozum said companies should be wary of the risks of putting up a solar
plant, which she said include demand and regulatory concerns.

"One of the considerations in building large-scale solar is market demand
and the regulatory environment," she said, citing the company's experience
when it had to build several plants at the same time to take advantage of
the FiT.

"All pieces of the project should be in place," she said, citing one project
that failed to secure the required permit, land or financing, leaving it
dependent on the fluctuating rate offered at the wholesale electricity spot
market (WESM) which is much lower than the guaranteed FiT of P8.69 per
kilowatt-hour.

She said new project proponents should secure at least a five-year bilateral
PPAs "otherwise you pretty much look at WESM, where prices fluctuate and
just throw up your business case."

Companies that secured Conergy's services as EPC contractor also learned to
look for the suitable land to build a solar farm under a secure lease
agreement.

"One of the most important aspects that developers look at in a site is a
grid connection. If you are far, you have to spend extra to connect your
solar plant to the grid connect point," she said.

A project might be stuck if it is not able to hurdle right-of-way issues to
bring its output to the grid, she added.

"We always encourage solar [developers] to go with an experienced contractor
who knows local conditions, has best practices," she said. "Then you also
minimize delays and cost overruns."

She said these "critical considerations" are key for power developers who
want to recoup their investment, which she placed at $1.5 million at most
per MW for solar farms and around $1.6 million to $1.8 million per MW for
solar rooftops.

Ms. Gozum said Conergy is also looking at expanding its business to include
operation and maintenance of wind farms. She also said the company is
constructing a solar farm with a battery storage component, which it plans
to duplicate in the Philippines.

--- --- --- --- --- --- --- --- --- --- --- --- --- --- ---

Link to Original Article:
http://www.bworldonline.com/content.php?section=Economy&title=new-solar-powe
r-deals-hinge-on-ppas-conergy-says&id=140601

--- --- --- --- --- --- --- --- --- --- --- --- --- --- ---

John Diecker
APT Consulting Group Co., Ltd.

www.aptthailand.com