Southeast Asian Solar Power Set to Surge as Costs Drop Below Natural-Gas Generation

Southeast Asian nations are stepping up plans to invest in and deploy solar power as the cost has dropped below that for gas-fired power plants, according to analysts and government officials. The region, where power demand is expected to double by 2040, is striving to expand the share of renewable sources as developing nations seek affordable electricity while battling climate change.

ASEAN (Association of Southeast Asian Nations) members have forged themselves into leading industrial and export-driven manufacturing hubs in recent decades. They have been lagging behind when it comes to deploying solar and other emissions-free energy resources, however; that despite having committed to achieving UN renewable energy and climate change goals.

ASEAN Renewable Energy Targets by Country
Source: The ASEAN Post

Regionally, Southeast Asia’s cumulative solar photovoltaic (PV) capacity could nearly triple to 35.8 gigawatts (GW) in 2024 from an estimated 12.6 GW this year, according to consultancy Wood Mackenzie. Expected to have installed a cumulative solar power capacity of 5.5 GW by the end of this year, 44% of the total, region-wide capacity, highlighted Wood Mackenzie power and renewables analyst, Rishab ShresthaSolar Magazine Interviewee Avatar. That compares with 134 MW last year.

Solar power progresses across Southeast Asia

In addition, Malaysia recently completed a 500-megawatt (MW) solar power auction via which a bid for 365 MW of new solar capacity came in below the average cost of building natural gas-fired power plants, Minister of Energy, Science, Technology, Environment and Climate Change Yeo Bee Yin highlighted. The country intends to carry out at least one more-500 MW tender in next year’s second quarter, Yeo said.

More broadly, Malaysia intends to increase its renewable energy for electricity generation from 6% at present to 20% by 2025. The majority is expected to be solar power. “For the first time in the history of Malaysia we have a large-scale solar energy costs that is less than gas,” Yeo said at Singapore International Energy Week. “We now finally have an alternative energy that is cheaper than gas to replace our peak energy demand at midday.”

Another regional industrial and trading leader, Singapore set a goal of installing at least 2 GW of peak solar power capacity by 2030—more than 10% of current peak electricity. Natural-gas power generation supplies 95% of Singapore’s national generation capacity at present. Installing 2 GW of solar capacity could potentially replace that with emissions-free, solar power capacity, Wood Mackenzie Power & Renewables points out.

“This being presented by the (Singaporean) authorities is very interesting as this points towards firm political determination to go towards a low-carbon economy in a constrained world,” added Francesco La Camera, Director-General of International Renewable Energy Agency (IRENA). Furthermore, “There need to be some good measures to ensure that investors feel confident that their money could be returned in a relatively reasonable period,” said Keisuke Sadamori, the International Energy Agency (IEA) director for energy markets and security.

Varying solar power deployment and investment across Southeast Asia

Solar energy investment and deployment and potential varies widely across and within ASEAN members. Laos continues to boost its hydroelectric power capacity despite the ensuing degradation of water, fishing resources, community displacement and loss of traditional livelihoods. The Philippines continues to subsidize coal power and oil fuels for transportation despite their higher true costs and resulting damages to human and environmental health.

Leading industrialized ASEAN members, such as Thailand, have focused on supporting utility-scale solar, while deployment of smaller-scale solar-plus-storage home systems and microgrids have taken the lead in other, less industrialized countries, such as Indonesia and Myanmar. A mix of utility and small-scale solar-plus storage has and is being installed in the Philippines and Cambodia.

The 73-Megawatt Lopburi Solar Power Plant in Central Thailand
The 73-megawatt Lopburi solar power plant in central Thailand. Photo: Gerhard Joren/ADB

“Singapore’s energy policy is to not favor one form of energy over the other, but rather organize supply and demand through a market-based platform, the National Electricity Market of Singapore (NEMS),” Thomas ReindlSolar Magazine Interviewee Avatar, Deputy CEO of the Solar Energy Research Institute of Singapore (SERIS) at the National University of Singapore (NUS), explained in an interview. “Given Singapore’s land and water resource limitations, it has been taking pragmatic and measured steps in promoting solar energy as a sustainable renewable energy source,” Reindl said. A long road lies ahead before Singapore achieves its goals, however.

Singapore has zoomed in on becoming a leader in urban solar, demonstrating that solar power generation can make a major contribution to enhancing grid reliability, resilience and reduce electricity costs, as well greenhouse gas emissions and opening up substantial opportunities for sustainable, socio-economic development even in densely-built urban environments and despite the challenges presented in tropical conditions.

“The technologies and solutions developed here can then also benefit other megacities in the tropical sunbelt and beyond. Being a global leader in floating solar is one example for that,” Reindl said.

Solar in Singapore

Singapore is also concentrating on developing and deploying floating solar power. Singapore’s national water agency, the Public Utilities Board (PUB), in June announced it aims to seek out “private sector participation to deploy a 50-MWp floating solar PV system on a national reservoir by 2021,” Jasper WongSolar Magazine Interviewee Avatar, the head of Construction and Infrastructure, Sector Solutions Group for United Overseas Bank’s (UOB) Wholesale Banking Group, pointed out in an interview. “The floating solar energy system will eliminate the need to emit 28,000 metric tons of carbon dioxide every year it is in operation—the equivalent to removing 6,000 cars off Singapore’s roads,” he said.

Reindl also highlighted that concerns and commitments to reduce greenhouse gas (GHG) emissions and stem the tide of rising global mean temperatures prompted the Singapore government to introduce a carbon tax in January. The carbon tax rate has been set at S$5 (~USD3.68) per metric ton of equivalent carbon dioxide emissions (tCO2e) from 2019 to 2023. Government authorities intend to review the carbon tax rate by 2023 with an eye towards raising it to S$10–S$15 (~USD7.35–11.03). “This will contribute to leveling the playing field in the energy sector,” Reindl told Solar Magazine.

“Political economy plays out in every country. You have to make sure the oil and gas industry in Singapore supports [the carbon tax] effort—oil and gas industry players, including traders, distributors, suppliers, etc. With these types of struggles between interest groups you’re talking about serious shifts in people’s and industry interests,” Atem RamsundersinghSolar Magazine Interviewee Avatar, founder and CEO of regional distributed solar and clean energy investor and developer WEnergy Global, said in an interview.

Solar energy investment and capacity deployment could be growing faster, some Singapore solar industry participants say, however. “It’s true that Singapore doesn’t have lots of land for project development...The good thing is the government of Singapore is doing its best to drive ‘solarization’ and clean energy in a step by step manner, but if you consider Singapore has 2 GW of solar power potential and you look at the level and speed of activity—around 200 megawatts-peak (MWp) of installed capacity—progress hasn’t been all that impressive,” Ramsundersingh said.

Ongoing support for coal and natural gas power generation

Solar Magazine: Solar Industry News and Insights

As positive and encouraging as all this is, Southeast Asian nations need to guard against a solar energy boom that results in way more solar and renewable power generation deployed than is needed or economic. The “mushrooming of solar PV in Vietnam has exceeded its grid capacity by 18%,” Wood Mackenzie’s Shrestha said, underscoring the need for further investments across other facets of the power sector. “The approved capacity for the Ninh Thuan and Binh Thuan provinces amounts to 5 GW, more than double the grid usable capacity,” he pointed out.

The same is true in the Philippines, according to the International Institute for Energy Economics and Analysis (IEEFA). “The government is in a position to change the longstanding status quo, which disproportionately puts fuel-price and foreign-exchange risk on consumers, while utilities and power generators remain insulated from market changes,” IEEFA Energy Analyst Sarah Jane Ahmed wrote in IEEFA’s Unlocking Rooftop Solar in the Philippines. “As a result, power suppliers have no incentive to transition away from coal and diesel or to hedge against price-change and currency risks.”

Philippine Solar Companies Urge Distribution Utilities to Shift to Solar Energy
Photo: Solar Philippines

Electricity costs in the Philippines are the highest among the 10 ASEAN nation member countries at around 10 PhP/kWh (USD0.20/kWh). Much of that has to do with longstanding government fossil-fuel industry subsidies that transfer the fuel, currency and other socioeconomic and environmental risks and burdens of electricity generation, transmission and distribution from utilities and large independent power producers that have the ability to manage them to everyday Filipinos, many of whom live at marginal, subsistence levels, IEEFA highlights in a March 2019 research report.

The publicly released, contracted cost of coal and natural gas power generation is inaccurate and misrepresented as being significantly lower than it actually is due to the legally permitted ability of power producers to pass hidden costs on to consumers. “Regulators and the DOE (Department of Energy) assumed the growth and electrification agenda requires, and is premised on, cheap coal. That’s clearly not happening. Coal is extremely expensive,” Ahmed told Solar Magazine.

At Philippine peso (PhP) 2.50–5.30 (USD0.05–0.10) per kilowatt-hour (kWh) excluding financing costs, rooftop solar can deliver lower-cost energy than conventional coal-fired power plants and unlock as much as PhP1.5 trillion (US$2.8 billion) in new investment by 2030, Ahmed highlighted. Larger scale commercial-industrial and utility-scale solar power plants can produce electricity even more cheaply. comment↓


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