EXCLUSIVE: The Business Case For Solar In Land Scarce Singapore

EXCLUSIVE: The Business Case For Solar In Land Scarce Singapore
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Mark Johnston from Industrial Automation Asia, spoke with Alexander Lenz, CEO, Conergy on the state of the solar energy market and the business case for solar in land scarce Singapore.

Alexander Lenz, CEO, Conergy
Alexander Lenz, CEO, Conergy

Q: What ROI should a company expect when investing in solar cells?

AL: ROI is usually the metric used for utility-scale (or megawatt scale) solar farms. Solar farms cost less to build per installed kilowatt because they are mounted on the ground and their size brings about economies of scale, which is usually not realised in smaller rooftop systems.

It is difficult to give a precise ROI figure for solar farm investments because ROI is dependent on the returns received by the owner which varies country by country as they depend on the Feed In Tariff received or the Power Purchase Agreement Rate negotiated. But on average, the ROI for large solar farms in Southeast Asia, are conservatively in the low double digit range.

But the reduction in solar PV costs now makes it possible for a solar rooftop owner to generate electricity at a fraction of the cost of the power that comes from the socket. With utility rates on the rise, investing in a solar system locks in the owner’s electricity costs today, making him realise savings for the next 25 years.

So for solar rooftop system, self-consumption is the guiding principle behind owning a solar rooftop system and the key metric considered is the electricity savings. By installing a rooftop system, the commercial or industrial players with a large rooftop space and high electricity demand during the daytime, stand to save money on their electricity bill every month because they lock in their costs for the electricity they produce, reduce the amount of electricity they purchase from the grid and protect themselves from future electricity tariff increases.

Q: How green is solar as an energy source once manufacturing and installation are factored in?

AL: This primarily depends on the power generation mix and CO2 levels emitted by the electricity used to manufacture the solar components. If the energy generation mix used in manufacturing is already low on carbon emissions, the greener the component gets.

During installation, energy will also be used by tractors, drills, piling machines and these equipment will emit CO2. The degree by which the installation process is green is similar to the point made above, except that most of the machines and on-site power supply in the remote areas at a solar construction site will tend to be diesel -based which will most likely limit the ‘greenness’ of the process.

There have been many studies on this subject using the ‘Life cycle CO2 equivalent’ concept for various generation technologies. The value considered is the average amount of CO2 emissions per generated kWh based on the lifetime of the power plant. Those studies incorporate all CO2 emissions from manufacturing, construction and operation of the plant.

The IPCC reported in 2014: While coal power generation has about 740 – 910 gCO2eq/kWh (read: grams of CO2 equivalents per generated kilowatt-hour), Solar PV for utility scale projects has only 18 – 180 gCO2eq/kWh. The huge spread comes from the fact stated above: If the generation mix is purely based on coal power, that will negatively affect that CO2 balance for everything manufactured using that energy.

So on average one can say that Solar PV is about 17x less emissive that coal power and can become up to 40x less emissive. It usually takes a PV panel less than three years to amortise its negative carbon footprint. And If you consider the lifetime of a solar system of 25 years, this is a very good ratio.

However, we need to acknowledge the fact that solar PV is not completely CO2 neutral. Unless all of the energy used to manufacture, build and operate those plants come from pure non-CO2 emissive generation technologies, solar systems will never be completely CO2 neutral.

Q: How viable is solar energy in Singapore’s context given the country’s land

A 145kWp solar system was designed and installed by the company for the Marina Bay Sands development in Singapore
A 145kWp solar system was designed and installed by the company for the Marina Bay Sands development in Singapore.

scarcity?

AL: While the opportunities for installing solar systems in Singapore is limited, due to the scarcity and cost of land in the country, installing a solar rooftop is still a commercially viable proposition as explained earlier.  

But when it comes to solar investment and development activities in Asia, Singapore unequivocally represents a key market for solar, in many different respects.

Solar has become so much more cost competitive, and we see it as only a question of time until grid parity is reached across all markets in Asia. Rooftop solar has already approached grid parity in many parts of Southeast Asia.  

But one of the most immediate and tangible attractions for solar developers is Singapore’s legal and commercial environment. Structuring capital investments for solar projects across the various markets in the region out of Singapore provides substantial benefit to the many solar players operating out of Singapore – with respect to the availability of funding, strong professional services, technical and commercial talent pools or the strong legal framework governing holding companies, JVs, shareholder agreements. Singapore is the ideal platform to channel solar investment and development activities across the region, especially for some of the more risky ASEAN markets.

Q: With Singapore’s ambition to be a smart nation, how versatile is solar as an intelligent energy source?

AL: Singapore faces one special challenge with respect to PV generation: Spatial limitation. Land is expensive and very much needed for residential, commercial and industrial applications. And it will become more expensive in the future.

Solar PV is unfortunately a technology which requires space: currently about 1 ha for an 1 MWp installation. That said, the potential for ground mounted solar PV is limited. But there are promising alternatives, which Singapore is already exploring: Floating PV system on water reservoirs or building integrated and rooftop PV installations. Industrial warehouses and storage facilities, official buildings with accessible and flat roof space, car parks and even certain sections beside the freeways offer significant potential to realise solar PV. These spaces are often not used but can be utilised to generate value by installing PV.

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