Banking on solar energy

(Picture credit: EMA)

The Asian Development Bank's (ADB) Solar Energy Initiative is contending with the challenges and risks inherent in today's economic and energy environments, but is still moving forward with 3,000MW of solar power projects, costing approximately US$2.25 billion, over the next three years.

Jo Yamagata, the ADB's Deputy Director General, Private Sector, Operations Department, outlined the issues--and the way forward--when he gave the keynote address on the "Status of Solar Project Bankability Question in Asia" at the PVAP Financial Summit. This is the first such financial summit under the PV Asia Pacific Expo & Conference under SIEW.

He said the ADB's main focus is on knowledge management and the lowering of risks to be considered when assessing projects for financing. These include technology risks when ensuring delivery of results and promised capacity by new technology, as well as timely completion of projects. He added that offtaker risks relating to future cashflows as well as the regulatory environment also have to be taken into consideration.

Yamagata touched on the importance of guarantees provided by project promoters as well as the issues inherent in an unstable and seasonal solar energy source. The cautious note was, however, complemented by one of optimism based on the fact that despite capex of solar power projects being much higher than that of gas-fired projects in the first two years, the operating costs for the following 25 years are minimal by comparison

Yamagata's presentation ended with a "sunny outlook" as he underscored the ADB's optimism for solar projects based on the simple reality that the region enjoys some of the most intense solar rays in the world. He said the ADB itself has installed 567Kw solar power panels on the roof of its headquarters in Manila.

Following was a panel discussion addressing "Project Bankability Question in Asia" moderated by Murray Cameron of Phoenix Solar AG. The panellists included Yamagata; Simon Cheah, Global Head of Structured Finance at Canadian Solar, a solar panel producer; and Sunil Gupta, Global Head of Technology and Clean Technology at Standard Chartered Bank.

The discussion also focused on the importance of guarantees such as credibility of the offtaker or government support and tariffs regulation necessary for the long-term success of solar projects. Overall country risk and affordability also must be taken into consideration as policy shifts can dramatically change the industry landscape.

By :Karim Chamas, INSEAD