Financing for solar projects in Asia Pacific
(Picture credit: EMA)
Advocates of solar technology have pointed to its increasing cost competitiveness and predict that grid parity for solar energy will occur in the near future. In simple terms, this refers to the belief that the unsubsidised cost of producing each unit of solar energy will soon be on par with that of traditional fuel types, including fossil fuels such as coal and gas.
This is expected to be largely driven by R&D efforts aiming at technological improvements and increasing economies of scale in the manufacturing process. Yet, people sometimes neglect the additional dimension of reducing the cost of financing for solar projects to drive down the overall cost.
The topic was much debated by the panel during Session 3 of the Solar Leaders Summit under the PV ASIA PACIFIC EXPO, held during the Singapore International Week.
Lack of guaranteed long-term financing
Financing for solar projects in the Asia-Pacific region has proven tricky thus far, according to panel discussions, with problems ranging from regulatory complications to the relative unfamiliarity of financing organisations with solar projects. These, in turn, has contributed to the major issue of a lack of guaranteed long-term financing (i.e. 10-15 years). In some cases, financing to the solar farm developer has been indirectly provided by the solar module manufacturers themselves, either by facilitating introductions to financing organisations or through taking an equity stake in the project itself.
Varying interest rates
Another issue affecting the take-up of solar energy has been the wide range of interest rates across different countries in the Asia-Pacific region. This can be most clearly seen in India, where despite its ambitious target of deploying 20,000MW of solar energy by the year 2022, solar farm developers have been known to face high project interest rates of 14-15 percentas opposed to the typical level of 6-7 percent.
One possible way to overcome this could be sourcing from organisations such as the Asian Development Bank (ADB), which has access to a blended low cost of funds from member countries and financial institutions owing to their triple-A credit rating.
However, the ADB is only able to provide funding for projects of a certain scale. Ostensibly, this does not include small-scale rooftop solar projects, for which there still exists a paucity of pre-arranged fund pools for installers to tap into, unlike in Western countries such as the US, Germany or Canada.
Virgin solar territory
On the whole, the Asia-Pacific region remains comparably new to solar energy. Nevertheless, with China emerging as a world leader in the manufacture of solar modules, and India's optimism towards the development of solar energy, it may be only a matter of time before we see significant growth in solar energy around the region. For this to be possible, the availability of guaranteed long-term financing at a non-prohibitive rate will surely have an important role to play.
Disclaimer: Commentaries in this section reflect the views and opinions of the authors, and are not necessarily those of the Energy Market Authority. Any comments posted here are solely the opinions of the posters. Libellous comments, profanity or advertisements will be removed.