PHOTO CREDIT: ISTOCK.

COM
USAID CLEAN POWER ASIA

POLICIES AND INCENTIVES FOR SOLAR PV

IN ASEAN

Boonrod Yaowapruek
Investment Mobilization Lead
USAID Clean Power Asia
August 29, 2017

Prepared for the workshop on Developing, Financing, and Investing in Solar PV Projects in LM Countries,
Ho Chi Minh City,Vietnam
9/1/2017 1
 Policies and Incentives for Solar PV in ASEAN
• National level efforts to set targets and supportive policy
frameworks in ASEAN
• Impact of key elements of solar policies
• Thailand experience

9/1/2017 2
 USAID Clean Power Asia aims to increase deployment
in ‘grid-connected’ renewable energy in Asia

 5 years: June 2016 – June 2021

 Regional clean energy program
 Focus on Cambodia, Lao PDR,
Thailand, and Vietnam Provide
market signal Establish
 Goals:
 15 laws/policies/regulations market Scale up
 $750 M USD investment market
mobilization
 500 MW of installed RE
 3.5 M tCO2e reduction
 Implemented by Abt Associates
and partners
 Funded by USAID (United States
Agency for International
Development)

9/1/2017 3
 Summary of available RE targets, incentives (for grid-connected RE
power), and auctions in ASEAN

RE Tax Soft Capital Tradable

Country FIT Auction
Targets incentive loan subsidy RECs

BRUNEI x
INDONESIA x x x x x
MALAYSIA x x x x x
MYANMAR x x
PHILIPPINES x x x x
SINGAPORE x x x
x x
CAMBODIA

x x
LAO PDR
LM
Countries x x x x x x
THAILAND

x x x
VIETNAM

Source: USAID Clean Power Asia data collection

9/1/2017 4
 Status of RE installed capacity growth in ASEAN (2006-2014)

Vietnam
Thailand
Singapore
The Philippines
Myanmar
Total installed RE
Malaysia excluding large
hydro
Lao RE installed capacity in
Indonesia 2006 (MW)
RE installed capacity in
Cambodia
2014 (MW)
Brunei Darussalam

0 1,000 2,000 3,000 4,000 5,000 6,000

Source: IRENA renewable capacity statistics 2016 and team analysis

Excluding large hydro, Thailand had the largest increase in RE between 2006 and 2014.
9/1/2017 5
 Policies and incentives for solar PV in ASEAN
Remuneration
Realized projects
1. Feed-in Tariff (FIT) Non realized projects

defined
• Government sets price, tariff
market determines volume

Remuneration Awarded bids

2. Renewable Energy Non awarded bids
(RE) Auction clearing
price
• Government sets volume,
market determines price

defined volume
Capacity (kW), production (kWh), budget, grid
9/1/2017 capacity 6
 1.Feed-in Tariff (FIT)
• In the past decade, FIT is the world’s most commonly used measure to
promote renewable energy. This measure offers a guaranteed purchasing
price for a specified period of time.
• Two major options: a) Fixed Tariff and b) Premium.

a) Fixed Tariff b) Premium or Adder

is a purchase rate for electricity at a
certain constant level which is
independent from the fluctuation of
market price for electricity throughout
the support duration (e.g. 20 years)
is an additional rate on top of the
market price for electricity. Therefore,
the purchase price for electricity will
fluctuate in line with the market price.

9/1/2017 7
 Comparison of feed-in tariff schemes in ASEAN countries

Year PPA period

Country RE Technologies covered Rates/ Capacity limit
started (years)

6 RE: Biogas, Biomass, Small 20, -Rates vary by type, size,

Thailand 2007 25 (Solar) location
hydro, Solar PV, Waste, Wind

-Max capacity30 MW
5 RE: Biogas, Biomass (incl. 16 -Only local resources
waste), Geothermal, Small (Biomass/Biogas -Rates vary by type, size,
Malaysia 2011 21 (Geothermal/ bonus criteria
hydro, Solar PV(ending in
2017) Hydro/PV) -6-month capacity quota
for each RE

4 RE: Wind , Waste (2014), -Rates vary by type and

Vietnam 2011 Biomass (2016), Solar PV (2017)
20
size

4 RE: Biomass, Run-of-river hydro, -Rates vary by type and

Philippines 2012 Solar PV, Wind
25
size

4 RE: Biomass, Geothermal

B-to-B negotiation -Rates vary by type and
Indonesia 2012 Small hydro, Solar PV
25 (Solar) location
(Tidal/ocean under review)

9/1/2017 8
 2. Renewable Energy (RE) Auctions
• Also known as “demand auctions” or “Procurement auctions”
• The government issues a call for tenders to procure a certain capacity or
generation of renewables-based electricity.
• Project developers who participate in the auction typically submit a bid with a
price per unit of electricity (USD/kWh).
• The auctioneer evaluates the offers on the basis of the price and other criteria
and signs a power purchase agreement with the successful bidder.

Advantages
+ Price discovery
+ Competitive pressure incentivizes cost
reductions
+ RE targets can be reliably achieved: volume
can be controlled, e.g. grid capacity
constraints are considered
Drawbacks
- High level of participation required for
meaningful competition
- Timely realization not guaranteed
- New risks for bidders

9/1/2017 9
 Comparison of general design of RE auctions
Techno- Auctioneer Items Auction Project Ceiling Delay in
logies auction Volume size Price SCOD
ed (MW) (MW) (USD/ Penalty
kWh)

Purchase
Solar EBTKE of Min.
price
Indonesia farm/ of Energy and 140 for
1–6 0.25 reduction,
(2013) Geother Mineral Solar
PPA
mal resources
termination

NA
Capacity
(Reference
Malaysia Energy (MW)
Solar farm 300+460 1 – 50 price= 0.09
(2016) Commission
for Solar) Daily Fine,
PPA
Office of 36 for FIT fixed rate termination
Thailand Biomass Energy Biomass Not more biomass:
(2016) /biogas Regulatory 10 for than10 0.07-0.09
Commission Biogas biogas:0.11

– Singapore completed a pilot solar auction for a 76-MW capacity solar rooftop on pre-
determined government buildings in 2015
– Cambodia completed an auction for a pilot 10-MW capacity solar farm in 2016

9/1/2017 10
 Status of solar PV installed capacity (MW) in ASEAN
3,500

3,000

2,500

2,000

1,500

1,000

500

-
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Brunei Darussalam Cambodia Indonesia Lao Malaysia Myanmar The Philippines Singapore Thailand Vietnam

Country 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Brunei Darussalam - - - - 1 1 1 1 1 1 1
Cambodia 1 2 2 2 2 4 5 6 6 6 6
Indonesia - - - - - 1 3 6 9 12 12
Lao - - - - - - - - - 1 6
Malaysia 6 7 9 11 12 14 35 73 160 184 458
Myanmar - - - - - - - - 15 15 15
The Philippines 1 1 1 1 1 1 1 1 1 22 132
Singapore - 2 4 6 10 15 33 60 126
Thailand 31 33 34 44 50 243 388 829 1,299 1,679 2,446
Vietnam - - - - - - - 4 5 5 5
Total 39 43 46 60 70 270 443 935 1,528 1,984 3,207
Source: IRENA renewable capacity statistics 2016 and team analysis
9/1/2017 11
 Policies and incentives for RE in ASEAN
• A few ASEAN countries have successfully implemented RE incentives,
including feed-in tariffs (FIT) and tax incentives, to mobilize investment
and increase the share of RE in their nations’ fuel mix.
• FIT have been the key incentive, usually combined with soft loans and
tax incentives.
• Countries with a combination of incentives have seen the greatest
growth in renewable power (e.g., Malaysia’s RE annual growth rate of
22.9% between 2006 and 2016, Thailand: 12.7%, Indonesia: 7.6%)
• Market conditions have enabled a transitioning from FITs to an auction
mechanism for certain technologies (e.g., solar auction Indonesia and
Malaysia)
• Self-consumption scheme for distributed PV grows in some countries
(e.g., Philippines) due to the relative costs of production of electricity
from DPV versus retail electricity costs.

9/1/2017 12
 Case Study - Thailand

9/1/2017 13
 Development of solar policy in Thailand
• First country in ASEAN introduced FIT (under adder scheme (2007)

• FIT was supported by tax incentives and soft loan (by Energy Conservation Fund established in1992)

9/1/2017 Source: DEDE, Thailand 14

 Solar policy development vs. installed capacity of solar PV

Installed capacity of solar PV plants in Thailand

3,000

Installed Capacity (MW) Cummulative Installed Capacity (MW)

2,500

2,000
MW

1,500

1,000

500

-
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Adder FiT FiT

Adder (2,000 (3,000 (change community
(500 MW MW MW to government argi
Target) Target) target) program)

FiT
(3,800 MW
target)
9/1/2017 15
 Case study: Thailand – key findings

• The significant growth of solar PV in Thailand was enabled by financial and

fiscal incentives including:
• Attractive Adder/FIT rate structure: LCOE plus investment returns
premium that was sufficiently high to stimulate investment
• Attractive and competitive package of tax incentives from Board of
Investment (BOI)
• High quality PPA (e.g. with EGAT, PEA, MEA as an off-taker) with long
enough PPA duration: 20 years
• Funding supported from Energy Conservation Fund (Encon fund)
• Strong interests from local commercial banks in financing solar PV projects

• There is still room for improvement:

• A need for standardized and streamlined interconnection standards and
procedures
• An annual quota to stimulate continuous market expansion
9/1/2017 16
 Summary
• Key support schemes implemented to stimulate investment of solar
power generation in ASEAN include FIT scheme.

• Trends of incentives: seeing transition from FIT support scheme towards

market-based scheme with no or less subsidy and selling excess
electricity at market rate and auctioning

• In order to attract private sector investment in RE, risk-reward profile of

the projects must be well-balance providing sufficient risk-adjusted
return to investors.

• The key is to ensure stable policy and limit risks for investors.
Government can use various tools to support private sector (e.g., FIT,
tax incentive, revolving fund, soft loan, etc.).

9/1/2017 17
 PHOTO CREDIT: ISTOCK.COM
Mr. Boonrod Yaowapruek
USAID Clean Power Asia
Abdulrahim Place, Suite 501
990 Rama IV Road
Bangrak, Bangkok 10500
Tel: +66 2026 3065
Email: Boonrod_Yaowapruek@abtassoc.com

USAID CLEAN POWER ASIA

9/1/2017 18