Unsubsidised rooftop PV markets in Singapore: when do we get grid parity back? Monika BIERI Solar Energy Research Institute of Singapore (SERIS) National University of Singapore (NUS) IEA-PVPS Workshop 2016, PVSEC-26, Singapore 27 October 2016 1
Singapore s policy approach No direct subsidies government private sector 2
Public tenders: HDB, SolarNova HDB evolves from test-bedding to commercialisation through the solar leasing concept, latest tender awarded in October 2014: 42 MWp on ~680 HDB residential blocks, awarded to Sunseap Leasing Pte Ltd (7 tenderers were involved) in October 2014 based on discount on grid tariff Quality conditions: guaranteed energy output at 75% performance ratio within 1 st year and assurance of a degradation not more than 1% p.a. SolarNova program: Aim to install 350 MW p on government buildings by 2020 First tender of 76 MW p awarded in December 2015 to Sunseap Pte Ltd. on 831 HDB blocks and 8 other government agencies sites (second tender of 40 MW p announced some days ago) 9 bidders involved with discount levels up to 99% for HDB and 65% for other government agencies on prevailing grid tariffs 3
Selected PV news: private sector* REC inks a 187 kwp PPA deal with Stolthaven Singapore Phoenix Solar awarded to build the 1.96 MWp PV system on two train depots from 2016 onwards for LTA REC announces completion of 172 kwp solar PV installation at Bugis Junction LYS Energy announces it has 15 MW p contracted capacity and 12 power plants running by October. REC announces a 25-year PPA with Asia Pacific Breweries based on a 2.2 MW p rooftop installation. Sun Electric introduces its new business model by renting rooftop space and sell green power under off-site PPAs to local SMEs (JTC test-bed, 0.5 MWp, 7 SME s) Partnership between SMRT and Sunseap to run train depots on solar energy, up to 5 MWp is planned Sunseap completed 9.5 MWp system on Jurong Port *April 2015 to June 2016 4
System size: 1 MWp, System price: 1,400 SGD/kW p * Total investment: SGD ~1.4 million (of which equity ~0.6 million) 60% debt finance, 2% over risk-free rate, 10 years at 4% 10% equity cost, 6% discount rate, accelerated depreciation 3 years 80% performance ratio, average irradiance of ~1,608 kwh/m 2 (P75) First year energy yield: ~1,286 kwh/kwp 0.8% degradation rate p.a., 20 years operational life 0.3% insurance cost p.a. (in % of total investment cost) 17% tax rate implication factored in (100% self-consumed at average contestable client rate based on 31-Aug-2016 HSFO forward curve) Annual operating and maintenance expense: 10 SGD/kW p LCOE example: 1MWp industrial roof 15-year inverter warranty extension investment in year 5: 95 SGD/kW p LCOE = 12 SGD ce ts per kwh *based on a 265W module, 166 W/m 2, area factor, ~7,500 m 2 usage (20% margin for spacing) 5
Sensitivity analysis (+/- 15%) Most critical LCOE parameters are energy yield and system price 6
Sensitivity analysis (individual ranges) Most critical LCOE parameters are discount rate and durability 7
Solar PV competitiveness Dependent on project size (economies of scale) and future electricity prices Data source: EMA, SP Services, EMC, LCOE range SERIS estimates 8
NPV of 1MW p PV system self-owned Assumption: base year 0 = 2015, future prices in line with SERIS contestable client price scenarios* Equity IRR: Maximum: 14.2% Most-likely: 11.9% Minimum: 6.8% Project IRR: Maximum: 10.2% Most-likely: 8.8% Minimum: 5.6% Discounted payback period can be shortened by five years in case loan maturity is extended to 20 years instead of 10 years. *As per 31-Aug-2016 HSFO forward price curve, Spot Brent oil price: 47 USD/barrel 9
NPV of 1MW p PV system PPA Assumption: base year 0 = 2015, industrial customer receives 10% discount on its own contestable client tariff* Self-owning model results in higher NPVs with the exception under the minimum price scenario, break-even discount rate under the most-likely scenario is ~26% *As per 31-Aug-2016 HSFO forward price curve, Spot Brent oil price: 47 USD/barrel 10
Promising PV adoption growth Despite falling electricity prices and discounted pay back period > 10 years Majorly driven by government demand aggregation projects Data source: EMA 11
Electricity Industry Structure of Today 3.4 GW Conventional capacity: 13.3 GW Solar PV capacity: 0.10 GWp Peak demand: 7.1 GW Grid Operator 2.6 GW 7.3 GW Data source: EMC, EMA, as of June-Aug 2016 Non-contestable clients at electricity tariff (supplied by SP Services) Contestable clients at liberalised prices (supplied by different retailers) 12
Future solar PV potential ~3-4 GW by 2030, ~4-6% of electricity demand, ~5-7% annual CO 2 reduction Data source: Solar PV Roadmap, https://www.nccs.gov.sg/sites/nccs/files/roadmap_solar_20140729.pdf, Annual Data source:q2015 electricity demand growth assumption: 2% 13
Example of Possible Structure by 2030 3.4 GW Conventional capacity: ~13.3 GW Solar PV capacity: ~ 4 GWp Peak demand: ~7.5 GW Grid Operator 2.6 GW 7.3 GW Fully liberalised market Consumers become prosumers Storage and demand side management balance variability Increased energy efficiency and solar energy limit demand growth 14
Grid parity for Industrial 1MWp system Soon reached again, compared to average contestable price scenarios* Historic LCOE based on Chinese module price decline (www.solarserver.com) *As per 31-Aug-2016 HSFO forward price curve, Spot Brent oil price: 47 USD/barrel 15
Barriers for a faster adoption Overcapacity of conventional generation Full retail contestability will lessen the importance of the electricity tariff as a comparison Floating-priced PPAs where a discount is given to prevailing electricity prices makes bankability more difficult Tendency to focus on discounted payback back period (DPBP) than on internal rate of return (IRR) Limited access to debt financing Regulatory uncertainties about future reserve charges, intermittent generation threshold set at 600 MW ac which does not reflect the multiple GW potential Export remuneration at wholesale power prices for contestable clients is currently too low to maximize roof space 16
Opportunity 1: Voluntary REC 1) market? Should increase opportunities for solar energy deployment APX forms the central platform where each 1 MWh produced green attributes are tracked via individual serial numbers until retirement Interested client virtual off-site commercial PPA agreed quantity and price per TIGR 2) (1 TIGR = 1 MWh green attributes) Renewable generator verified MWh retirement account TIGRs 2) Registry (APX) asset owner account QRE account verified generation APX verifies assets 1) Renewable Energy Certificates 2) Tradable Instruments for Global Renewables, www.tigrs.apx.com 3) Qualified Reporting Entity 3 rd Party Verifier (QRE) 3) 17
Opportunity 2: PPP 1) financing? Effect of more favourable financing on the discounted payback period 2) Base case: 10 year loan 4.5% interest 60% financial leverage 1) Public-Private Partnership 2) Base case as per 29-May-2016 HSFO forward price curve, Spot Brent oil price: 49 USD/barrel 18
Thank you for your attention! More information www.seris.sg www.solar-repository.sg monika.bieri@nus.edu.sg 19