The Asian Development Bank (ADB) is spurring investment in solar energy in the developing world with the Asia Solar Energy Initiative (ASEI), but significant barriers remain.
ADB introduced the initiative in May and has already lent $3 billion to developing countries, including China, Thailand, the Philippines, and India. Experts at the Clean Energy Expo in Singapore explain the challenges of countering the private sector’s prevailing perception of solar energy expansion as financially risky in developing countries.
One of the goals of ASEI is to help attract commercial banks and the private sector to invest in solar energy, despite remaining long-term funding issues. The commercial sector has encountered problems in the past and consequently considers the risks too high, according to Mr. Don Purka, delegate of the ADB and one of today’s panelists on a discussion on solar energy.
Mr Purka predicts that commercial money will eventually pour into India and other developing nations once these risks are mitigated. ADB hopes to achieve this by partially guaranteeing the risks and providing capital grants.
Mr. Paul Curnow, a partner at Baker & McKenzie, also admits that the risks are far too high for banks to ignore. “Loans need to be sustainable in the long run,” stated Mr Curnow as a member of today’s panel on the Best Practices in Funding Models for Research and Development. He notes that publicly backed guarantees for equities, loans and performances would be especially helpful in generating funds.
With need in the developing world increasing and commercialisation making slow progress, the ADB continues to be involved in numerous projects such as the Thailand Bangchak Solar Project, which received a loan of billions of dollars to build two solar power plants in central Thailand. ADB financing to reduce overall costs of production will continue to be crucial until financial risks are mitigated.
Also speaking on the solar energy sector, managing director Christophe Inglin of Singapore-based Phoenix Solar said he believes solar in the region will take off in a big way in three to five years.
The costs of installing solar systems are approaching grid parity – where the costs per unit of energy generated by solar is competitive with fossil fuel-generated energy – due to the combined effects of scale, cheaper modules and lower installation costs, he said.
“PV will soon be commonplace in Singapore, for example… there is scope to reduce costs further throughout the system, from modules to inverters, cabling and structures,” he noted.
Eco-Business.com’s coverage of the Clean Energy Expo Asia 2010 is brought to you by Conchubar Capital Management.
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