The pandemic has shaken industries around the world, and the energy industry is no exception. In Southeast Asia, the question about the extent of its influence on the shift to a cleaner energy future remains. Industry leaders from Malakoff Corporation, SP Group, Total Solar Distributed Generation, and Positive Energy share the perspective that corporate buyers play a vital role in driving the energy transition despite the perceived challenges posed by COVID-19.
Investor appetite for renewable projects had been reasonably low during the first few months of shock from the health crisis. However, Ashwin Naranayan, Head of Special Projects (Renewable Energy) at Malakoff, observes that it is returning to normal because of two reasons. First, most corporate buyers still pursue corporate sustainability practices, therefore, the interest in renewables still holds momentum. Second, investors foresee governments loosening policies to accommodate renewable energy targets, which supports organisations to attract investment in solar and other renewable energy options.
Another positive sign is the market’s recognition of the investment potential of renewables. Vincent Bakker, Co-Founder and CFO of Positive Energy, points out that investors are still keen to earmark resources on renewable solutions as they see these as perfect investment opportunities at a time when oil stocks are falling. Renewables offer a 10 to 15% return, making it more attractive to investors and financiers. Plus, the payback period of investing in renewables is remarkable and could take as little as five years.
Similarly, Gavin Addi, CEO of Total Solar (Asia), highlights that corporations today are shifting to renewables in line with cost reduction efforts which also support sustainability measures. Google, Nike, and Apple, along with other RE100 companies, for instance, are being compelled to make their supply chains and manufacturing operations more sustainable. Likewise, he observes a decreasing price in battery costs, which is ideal to fill the gap prompted by the intermittency of solar and wind power.
The rise of digitisation contributes to an optimistic investor appetite as well. Bakker believes that even when the situation settles down, embracing digital tools will endure. As it slowly becomes the new normal for the industry, efficiency in using digital has been acknowledged. For example, SP Group has been developing its digital footprint in the utility industry in Singapore through its advanced electricity meters, utility apps, and even a digital platform for selling Renewable Energy Certificates (RECs).
Still an attractive tool to advance renewables, RECs remain an interesting option for corporate buyers especially the RE100. According to May Liew, Head of Sustainability & Open Innovation at SP Group, the development of digital tools in trading RECs allows for more access and convenience, thus, improving the market interest in cleaner energy solutions as used by corporations.
Even with this growing confidence, impediments are found along the way, particularly on government and financial restrictions. In many countries, electricity remains the exclusive terrain of the national utility, hence, discouraging corporate buyers as they want to have their own facility without paying for it. Further, the ability to sell back power is difficult, especially in markets such as the Philippines and Indonesia. Still, these may be overcome. For instance, the Philippines has recently approved a 100% foreign ownership of power utilities. Also, when corporate buyers demand other utilities for more accountability with regards to sustainable energy sources, things can look even brighter.
Indeed, corporate buyers have a huge potential to impact the energy transition in Southeast Asia. While it’s true that the pandemic has wobbled the region, it also presented an opportunity for the energy industry to forward its goal for a lower-carbon future. As Liew of SP shares, “it is an opportunity for us as a society to reset and recognize that healthcare, economy, and climate incidents are interlinked”.
The pandemic may have rattled the industry, but the role of corporate buyers in making the ASEAN energy transition a possibility has become more relevant. Together with governments and industry leaders, these organisations can steer the wheel and drive the region’s energy future.
To hear a full recording of the webinar “The rise of the C&I buyer in supporting ASEAN’s energy transition”, click here.
- Ashwin Narayanan – Head of Special Projects (Renewable Energy), Malakoff Corporation Berhad
- Gavin Adda – CEO Asia (ex-China), Total Solar Distributed Generation
- May Liew – Head of Sustainability & Open Innovation, SP Group
- Vincent Bakker – Co-Founder & CFO/Project Finance, Positive Energy Ltd
- Adrian Wong – Partner, CMS