It has been a tumultuous decade for the solar industry, which in recent years has seen the bankruptcy of hundreds of solar firms and dramatic industry consolidation due to the glut of cheap solar panels from China.
Fuelled by low-interest loans from the Chinese Development Bank and inexpensive labour, the sheer volume of output of solar panels from China drove down prices by about 40 per cent per year between 2008 and 2012, according to American consultancy McKinsey.
While this led to what is regarded as the industry’s ‘bust’ period, falling PV prices also transformed solar energy from an expensive, niche energy option to one that made good economic sense.
As Krishna Sadashiv, leader of management consulting firm EY’s climate change and sustainability services discipline for Southeast Asia notes: “The potential for solar is clearly on the uptrend”.
The total installed capacity of solar projects worldwide multiplied six-fold from 22 gigawatts (GW) in 2009 to more than 135 GW in 2013, according to the International Renewable Energy Agency.
In Asia, solar grew twice as fast as the worldwide average, with installed capacity soaring from 3.5 GW in 2009 to 36 GW in 2013, a twelve-fold increase.
The region dominates global demand for solar energy today, with industry market research firm Solarbuzz estimating that five countries in the region - China, Japan, India, Thailand, and Australia - accounted for 60 per cent of global solar PV demand in 2014.
Southeast Asia, too, has aggressively pursued solar power, with many countries making ambitious pledges to scale up renewable energy.
The Philippines, for example, wants half of all its electricity to come from renewables by 2030, while Thailand plans for a quarter of its energy mix to come from clean sources by 2022.
Thailand has so far seen the most rapid growth in solar over the past few years, due in large part to a Feed-in-Tariff programme which pays companies to sell solar energy back to the grid.
But “the story going forward is going to be the Philippines,” says EY’s Sadashiv, adding that “solar will have a big impact on the country” due to its energy shortages and the high cost of electricity.
Strong financing support for clean energy projects also bolsters the outlook for solar markets in the region. A 2015 report by research group Clean Energy Pipeline found that investment in renewable energy projects in Southeast Asia has grown at an eight per cent compound annual growth rate between 2010 and 2014.
The report also found that last year, a total of US$1.83 billion was invested in clean energy projects in the region with Thailand and Philippines claiming 55 and 22 per cent of this money respectively. Solar was the largest renewable power sector for investment during this time, and accounted for 40 per cent of funding.
This strong policy and financial support for solar is much needed in Asia, which faces an unenviable ‘energy trilemma’. The region’s planners and policymakers must bring energy to some 600 million people who lack electricity today, do so in an affordable way, and ensure that growing energy supply does not come with a corresponding increase in greenhouse gas emissions.
A new dawn
One company whose story closely follows the rising and waning fortunes of the solar industry’s and its growing prominence in Asia, is German energy giant Conergy.
Alexander Lenz, president of Conergy Asia and Middle East, notes that “the strong growth of solar energy in the region is putting it on the path to energy independence”. Conergy, which has 16 years of experience in solar and offices in 14 countries, “is honoured to be a part of the journey, today stronger than ever,” he adds.
Indeed, the Hamburg-headquartered firm has gone from filing for insolvency in 2013 to becoming one of the most bankable and fastest growing downstream solar companies in Asia and the world today.
Founded in 1998 as a company specialising in sales of solar components, Conergy ventured into module manufacturing in 2007. But it fell victim to the industry bust of the late 2000’s, and filed for insolvency in mid-2013.
It was acquired by American private equity firm Kawa Capital Management soon after, and re-emerged with a management team headed by former Kawa Capital executive Andrew de Pass, and a new focus on downstream operations such as project engineering and operations.
The strong growth of solar energy in the region is putting it on the path to energy independence – and Conergy is honored to be part of the journey, today stronger than ever.
Alexander Lenz, president Asia & Middle East, Conergy
The company last year reported US$500 million in revenue, and a total of 300MW in installed utility-scale projects. This brought the company’s total installed capacity to nearly 1 GW - with an additional 4 GW of projects in the pipeline - making it one of the largest solar companies globally.
Following its return to profitability, the company also outlined aggressive goals to expand its stake in solar development, finance, engineering, procurement & construction (EPC), and operations & maintenance (O&M)”.
In a recent interview, Lenz tells Eco-Business that the company’s shareholders also have a significant interest in growing the business in Asia, where Conergy already enjoys a prime position in many markets.
The region’s proactive policy on solar and its high levels of sunlight make Asia a key growth market for Conergy, he adds.
Conergy entered Asia in 2006, and its consistently strong work in the region has played an important role in the company’s global success, says Lenz.
The company has built over 100 MW of solar farms in Thailand, and another 32 MW in the Philippines, including the country’s first 22 MW utility-scale solar farm in Negros Occidental province.
It has another 41 MW of projects going online in the Philippines in the next few months and a healthy pipeline that will be finalised soon. The company also has several smaller projects in Saudi Arabia, Japan, Malaysia, Korea, and India.
These achievements have positioned Conergy as the leading provider of EPC and O&M services in the Philippines, and one of the largest in this space in Thailand too.
Even while the global Conergy Group was filing for bankruptcy in 2013, Lenz tells Eco-Business that none of the group’s Asian entities were insolvent. It was during this time that Conergy Asia clinched the milestone project in Negros Occidental, Philippines.
Securing this project “was not only a huge success, but also a major vote of confidence which assured everyone that we were here to stay,” says Lenz.
But climbing to the top of the solar game in Asia hasn’t been without its challenges, says Lenz.
Not only was solar relatively slow to take off between 2009 and early 2013 - when Thailand was the only relevant market - but initially, Asian clients also demanded the cheapest possible solutions, he says.
“Conergy would not cater to (these demands) as our quality requirements would not be in line with this,” recalls Lenz. Eventually, the market learned its lesson, “and today, demand is geared towards the best value and not necessarily the lowest price”.
Conergy’s ability to deliver top quality and value to its clients goes back to its origins in Germany, which is globally renowned for its technical expertise and sophisticated engineering, and its years of experience as a module manufacturer, explains Lenz.
As a systems integrator, Conergy only uses modules from Germany or leading Asian manufacturers in its projects, he adds.
Going forward, Conergy plans to strengthen its position in Southeast Asia and expand in Japan; it also plans to move into commercial and industrial rooftop installations as soon as policy and market conditions make this possible.
These ambitions received yet another boost in March, when RWE Supply & Trading, the energy trading arm of Germany-headquartered RWE AG, one of Europe’s largest electricity and gas companies, announced an equity investment in Conergy.
All this has left Conergy debt-free, with “a very strong balance sheet”, says Lenz, adding that the company is in a “very comfortable position” to grow the business in Asia.
Conergy is also making the best of Kawa Capital’s investment expertise to go beyond engineering and operations to solar project development and financing. Adding these capabilities to the company’s portfolio will mean that Conergy has expertise in virtually every stage of the downstream solar supply chain.
“Our unique ability to handle all aspects of a project from development to financing to construction is a key differentiator for us,” says Lenz.
These new additions to Conergy’s skills portfolio have already been put to use in Japan, where Conergy has been active in carrying out project development and finance for large scale solar projects. The company has already developed and sold a project in Japan to Asian investors, and continues to pursue EPC opportunities there too.
The company has also harnessed solar to reduce a system operator’s reliance on diesel generators. The new Conergy Hybrid Energy Storage System, introduced in Australia and the Pacific region in April, seamlessly integrates solar energy into existing power supplies of facilities operating in remote or off-grid locations, such as mine sites, resorts and community developments.
Such a system represents huge savings for a diesel plant operator, shares Lenz.
With new projects in the pipeline, new markets to explore, and a secure supply of capital to power this growth, Lenz is excited about what the future holds for Conergy Asia and Middle East.
The group’s Asian unit has become increasingly important for Conergy’s global operations, and Asia “will be one of the Conergy Group’s most important growth regions moving forward,” he says.