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Sunny Outlook for Filipino Solar Market as Technology Improves

Environment, geography and logistics all combine to make the Philippines hugely fertile terrain for the solar energy sector, with both local and international players now refining their individual offers in this lucrative – but still nascent – market.

Photo: REC Solar: Quality is important for a 25-year ROI.
REC Solar: Quality is important for a 25-year ROI.
Photo: REC Solar: Quality is important for a 25-year ROI.
REC Solar: Quality is important for a 25-year ROI.

Appropriately enough, there was something of sunny outlook at this year's Solar Show Philippines. This was largely on account of recent improvements to the available technology, but also because of the sheer compatibility of such systems with the country's ecoculture. Despite this predominantly positive sentiment, though, there remained concerns over both the government's stance on solar energy and the challenge of competing on price with cheap Chinese imports.

The Philippines is a rich market for the solar sector for many reasons. Firstly – and most obviously – it enjoys plenty of regular sunshine, inevitably boosting the output of any installed panel. Secondly, as an archipelago of some 2,000 inhabited islands, conventional large-scale centralised power generation and distribution face the twin problems of distance and water separation. This has made power stations prohibitively expensive on all but the largest islands.

By contrast, solar power generation can be scaled down to units as small as individual homes or businesses, removing the need for long distance power transmission infrastructure. With solar generation equipment prices falling and efficiencies rising, investing in solar, then, is seen as increasingly attractive in the Philippines.

Glenn Frazier, Vice President and Thermal Power Managing Director (Thailand) for SNC Lavalin, one of Canada's largest engineering groups, was one of the many international exhibitors positive about the Filipino solar sector. He said: "It's a wide open market. It was a bit quiet before the recent elections, but now they are over, a lot of companies are lining up to do business.

"We think there are huge opportunities here – not only for engineering, procurement and construction services, but also for large groups like us. We can draw on substantial experience in a wide range of power-related work here and overseas to help manage projects here."

Junrhey Castro, Sales Manager, Emerging Markets, for Trinasolar, one of China's largest solar panel module manufacturers was equally positive. He said: "Trinasolar is one of the big players here. We see the Philippines as a very important market for the obvious reason that the cost of electricity is very high. Solar energy just makes sense here, especially given the high irradiance and the geographic location of the country."

Pauw Chandra, Regional Sales Head of REC Solar, a Singapore-based manufacturer of solar panel modules, was another that agreed, saying: "The demand is definitely here and that's why everyone wants to invest in this market. I think, in the next three to five years, this market will be booming – assuming that the new President continues to support renewable energy.

"The Philippines has a lot of islands, and there are still black-outs everywhere. Solar is easy to implement and the sun shines everywhere."

REC Solar's main challenge in the market is dealing with the legacy of the Chinese manufacturers who have been selling into the Philippines for at least five years, many of whom set a low benchmark for solar panel pricing. While REC Solar modules are at the top end of the market, Chandra believes that the company can still compete on quality. despite its higher prices.

He said: "With a solar installation, you are looking at possibly a 25-year period over which to see the return on your investment. With that timeframe, quality becomes very important – you're stuck with what you've bought for a long time. Panels that last are, therefore, critical.

"There is also a lot of inexperience in this market, so we provide training for our clients' installers. This makes sure that, when they install our products, they follow all the instructions. We also provide an extra two years' support for product orientation, just to ensure that they will keep things running properly."

Photo: Seraphim: Customising for the Philippines’ market.
Seraphim: Customising for the Philippines' market.
Photo: Seraphim: Customising for the Philippines’ market.
Seraphim: Customising for the Philippines' market.
Photo: ET Solar: Sourcing investors.
ET Solar: Sourcing investors.
Photo: ET Solar: Sourcing investors.
ET Solar: Sourcing investors.

The relative lack of maturity of the industry in the Philippines is now providing opportunities for panel manufactures to extend their services into lucrative add-on areas, including project management, Engineering, Procurement, Construction (EPC) and even finance.

Highlighting this, Frazier said: "There's a lot of family companies that do things a certain way here, and that's part of the challenge. You are not dealing with a large, internationally-experienced company, but a family business that could be investing into a 20 or 50-megawatt solar farm.

"You have to be careful with that because, although they may have all the permits, the land and the contractors, it's still a new area for them. One of the ways in which we can help is in educating people in terms of what they actually need."

Global Energy Solutions (GES) is a Philippine consultancy that is looking to plug this knowledge gap, particularly at the smaller end of the market – around 5-megawatt projects, as well as residential projects and rooftop installations. Melanie Damian, an Architect with the firm, said: "Right now there is huge demand for EPC contractors and consultants to help develop solar projects. The country needs power and demand is likely to outpace supply for some time, keeping prices high.

"It's not just in Manila, all across the country solar projects are sprouting up. There are now solar projects in Visayas, Batangas, Pampanga, Bacolod, Negros and Northern Luzon. All of these areas need electricity. What we do at GES is help those people with suitable land to source panels, identify EPC contractors and take the project through to the final stages."

Naturally enough, Chinese solar panel producers, the dominant force in solar panel production globally, were among the big attendees at the show. A steady downward price pressure, as demand slackens in Europe, has resulted in a number of these Chinese firms adopting new strategies in order to improve their margins and boost sales.

A prime example here is the Nanjing-based ET Solar Group, one of the mainland's largest panel producers. It now not only offers a full suite of services in module production, EPC and project management, but also provides finance. Nicole Shu, a Key Account Manager with the company, said: "Our competitive advantage is that we have access to money – lots of it. And these projects need lots of money.

"We have a network of powerful investors with development funds in China that we can tap into. The number one requirement in any of our projects is that the land must come with all of the permits needed for its conversion for industrial use. We can then provide EPC services and the panels.

"As long as the project is viable and the land is fully approved for use, we will bring the investor here and then take the project forward, releasing funds when certain benchmarks have been met. The return on investment in these projects is very attractive to investors."

Seraphim, originally an Israeli outfit, is now Chinese-owned and is again based in Nanjing. It has customised a number of its modules specifically for the needs of the Philippines market. Explaining this strategy, Pavel Zheng, the company's Regional Sales Director, said: "Our focus is on providing customised solutions for the market, rather than just focusing on cost or scale. Humidity, for example, can be a problem in the Philippines compared with the drier climates of many solar power locations, so we tailor our panels to be more resistant to this particular problem.

"We have also created novel ways of connecting our panels together. This reduces wastage and speeds up the installation time."

Cyient, the India-based engineering giant, also provides power installations with sophisticated management systems. Dr Sukanta Kumar Jena is the company's Head of Operations in China, Hong Kong and South East Asia. Explaining the particular approach taken by his own company, he said: "Our service in the Philippines is different to that offered by most companies. We focus on solutions and consulting.

"There is a lot of competition when it comes to the building of plants, but our focus is on how to manage those installations optimally. It is an area where we don't have a lot of competition. We introduce monitoring technology into power installations and that allows for far more efficient control of plant operations, reducing problems and costs. You need a lot of staff when you provide power. Sending people to fix things – and managing those people – is very expensive, even in the Philippines. We can reduce those costs."

Photo: The 2016 Solar Show: Chinese and domestic companies jostling for market share.
The 2016 Solar Show: Chinese and domestic companies jostling for market share.
Photo: The 2016 Solar Show: Chinese and domestic companies jostling for market share.
The 2016 Solar Show: Chinese and domestic companies jostling for market share.

The Solar Show Philippines 2016 was held at the SMX Exhibition and Convention Center, Manila, from 17-19 May.

Geoff de Freitas, Special Correspondent, Manila

Content provided by Picture: HKTDC Research
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