Thailand is the solar success story of Southeast Asia. Its 3GW of installed solar are more than the rest of the region combined. How did this happen? Why hasn’t Thailand’s solar fever infected its neighbors?

We first talked with Unchisa Thongtiamporn, a manager at the Bangkok branch of a Mumbai-based private solar developer, Poonnavich Suppanich, a sales manager for the Chinese panel manufacturer LONGI Solar, and Arm Wibulpolprasert, a research fellow at the Thailand Development Research Institute.

They pointed to the 2013 creation of a feed-in tariff (FIT), a type of subsidy for solar projects, as the tipping point for the solar industry. Since then, the industry has taken off and remained strong even after the subsidies were removed in 2016. The initial push allowed for the private sector to establish itself, and they are proud to say that it’s now strong on its own.

Part of the reason the industry remains strong, according to Lim and Suppanich, is that Thai companies have an advantage for local projects. Technology and investment are often foreign (and often Chinese), but it’s Thai project development and construction companies that know the market and regulations best.

The Thai private sector is still expanding, too, emboldened by its self-sufficiency. It has even begun testing new technologies (ex. blockchain energy trading) in step with more developed western countries.

The interviewees did concede that ideally there would be more government support; solar is currently treated like any other energy generation type, and is thus subject to some difficult requirements. The policy is no policy, Suppanich told us, but it’s clear. This is the silver lining: even if the project development path isn’t particularly friendly towards solar, at least it’s established and trustworthy—something you definitely can’t take for granted when it comes to renewables (and something we didn’t hear in Cambodia or Indonesia).

As for the sector’s capacity to extend beyond Thailand’s borders, our interviewees told us that a couple Thai companies are helping develop projects in Vietnam, but that the financial returns aren’t great. The problem boils down to increased financial risk— what happens if a local contractor suddenly pulls out of a deal? This is where they need government support. Government-to-government cooperation and third party verification are necessary to attract investors.

Lastly, we asked about public perception towards renewable energy and climate change. Wibulpolprasert told us that there isn’t much concern about climate change itself, but renewables are seen positively as clean and non-polluting—public sensitivity to pollution resulted in protests when new coal plants were proposed in the south. TDRI is also currently investigating how to address common misconceptions about what solar means for consumers and the grid.

Cambodia has a completely different energy story. The least developed of the three, Cambodia is struggling to increase its energy supply and drive down electricity prices (the highest in the region). Of course, with this early stage of development comes the opportunity to embrace solar and wind, sources that don’t seem to currently be on the country’s radar. How likely are they to embrace renewables?

Most of our time in Phnom Penh was spent with Courtney Weatherby and Brian Eyler of the Stimson Center, a US-based, nonprofit, nonpartisan policy research center. Their project, Mekong Basin Connect, is centered on facilitating sustainable water and energy planning in the Mekong basin (which encompasses most of mainland Southeast Asia and part of Southern China).

The Mekong River is the ecological and agricultural lifeline of the region. This is especially true in Cambodia where it feeds Lake Tonle Sap, where the fishing industry provides around 90% of the country’s protein. Unfortunately, the hydropower projects being proposed by the government have the potential of drastically reducing nutrient flow to the lake and devastating fish populations, according to the Weatherby and Eyler.

We followed Weatherby, Eyler, and Jake Brunner of the IUCN around for a day of meetings and workshops. They met with a group of local NGO leaders, the Ministry of Economy and Finance, the EU ambassador to Cambodia, and a student organization at the Royal University. Their message: Cambodia needs to be careful about its energy planning before it’s too late. The way to do this, they claim, is by developing hydro to maximize nutrient flow and incorporating solar power.

In a sense, their presentations were like interactive sales pitches. They kept their arguments jargon-free and relatable—solar is the iPhone and hydro the (outdated) Nokia, for example—and put forth a hopeful vision for the future, one in which Cambodia’s people, economy, and environment all come out winning.

At the NGO event, local organizers seemed generally receptive to the presentation and echoed the importance of the Mekong to their communities, though many remained skeptical about the cost and scalability of solar. Weatherby and Eyler hypothesized that this skepticism partially stems from an unfamiliarity with what large-scale solar actually looks like—most of the them had probably only encountered small rooftop systems.

The people we met at Ministry of Economy and Finance also responded positively, albeit somewhat cryptically. Unsurprisingly, their primary concerns revolved around getting high-quality solar cheaply and quickly. Cambodia is still mostly thinking in the short-term and that means questions of price and liability take priority.

The ministry said they hope to introduce solar into the utility master plan, but that adds the additional challenge of dealing with the state utility—what do they say when the utility tells them it’s too difficult to support solar?

Eyler and Weatherby were generally happy with the outcomes of the workshops. Educating policymakers is a slow and deliberate process, they explained; it might take several workshops with the same ministry to reach someone with any decision-making power, and several ministries need to be on-board before any substantial change can happen. So they’re patient, but also aware of the ever-present pressure of time. They hope to sway some opinions before the next dam is built.

Indonesia is an energy wild card that is surprisingly off the radar of many in the West (ourselves included, prior to this project). It’s the fourth most populous country on the planet, Southeast Asia’s largest economy, and rapidly growing its electricity demand. So, to say that Indonesia’s energy development is important regionally and globally would be an understatement.

So far, things aren’t great, environmentally speaking. There was a promising streak of geothermal in the past decade but current momentum heavily favors coal and there’s practically no solar or wind installed.

We do see some progress. Indonesia has set some conservative renewable energy goals and is slowly developing regulatory support for commercial solar. Yet, most of the government’s attention on renewables is in the context of microgrids and improving rural access to electricity—unsurprising given the political importance of the issue and the challenge of being a nation of more than 17,000 islands.

While in Jakarta, we met with some microgrid experts: Electric Vine Industries, a successful start-up focused on optimizing their business plan for modular development, and Andre Susanto, the founder of an energy consulting company that uses its proceeds to develop microgrids and community projects.

Electrification of rural communities in a sustainable and ethical way is an important responsibility of the government (and has a complexity that warrants an article of its own). Yet, a completely renewable rural electrification process will only account for a minuscule fraction of the country’s entire electricity generation. Why isn’t the rest of the country on a renewables-friendly track? When will solar be successful on the macrogrid?

We posed these questions to the team at Electric Vine and Susanto, as well as to World Resources Institute (WRI) Indonesia, the Jakarta-based branch of the international environmental NGO.

The picture they painted wasn’t pretty—none were optimistic that the country would reverse its carbon-centric course in the near future. This skepticism is mostly a result of the unfavorable policies in place, ineffective planning, and the tenuous relationship between the government and the state utility, PLN.

The policy problems are on three fronts. First, there are the subsidies. Gasoline and electricity are heavily subsidized in Indonesia and, while this doesn’t directly compete with solar, it uses up a large chunk of money that could be used for more sustainable energy development. Our interviewees understood the benefit of these subsidies for consumers, but stressed that continuing to subsidize oil at all costs is not a long-term solution.

Next, there are the policies and regulations in place for utility-scale solar. These policies don’t ease the development process at all, leaving developers on their own to acquire land, survey it, etc. Given that Indonesia has complicated land regulations and solar needs a lot of land, this fact alone would turn away most investors from such a new market.

As for commercial and domestic rooftop solar, a regulation was finally passed in late 2018, making it legally possible for grid-connected consumers to install rooftop systems. While this is a start, it includes a lengthy bureaucratic process, seriously limits the amount that can be installed, and only pays system owners two-thirds of the value of excess electricity that is fed back into the grid.

Third, import policies are quite restrictive to solar development—they require that 30% of the technology for any given project be Indonesian-made. This means that developers can’t take advantage of cheap Chinese panels, which seriously affects the financial viability of solar.

When it comes to government planning, Susanto and WRI lamented about the lack of transparency and poor coordination between the central and regional governments. Susanto told us that the government mandated that each region create an energy plan, but that only 10 of 34 have actually completed one. And the plans that have been made have many discrepancies with the national energy plan, according to WRI.

This doesn’t bode well for the completion of the country’s renewable energy targets. Although, as WRI pointed out, even if the targets are reached, the lack of transparency surrounding the plans and data from the state utility will make it difficult for anyone to verify.

PLN, the state utility, is perhaps the messiest of Indonesia’s challenges. The main issue is that it’s running out of money. Susanto told us that it has been operating at a loss for years, and WRI cited a recent study showing that five years from now it won’t even be able to cover the electricity subsidy. It’s continued investments in long-term coal don’t give any of the interviewees much hope for a financial turnaround.

As a result of this debt, PLN is unable to implement many of the new policies that the government has set. For example, according to WRI, PLN claims that the new rooftop solar policy can’t be implemented in Jakarta, arguing that solar is only viable in rural areas. It also rejected the government’s push to reimburse rooftop producers for 100% of excess energy, rather than just two-thirds.

PLN also claims the grid can only support 10% renewables, although WRI says some independent studies have put the limit closer to 30%. An explanation for this discrepancy, according to Susanto, is that PLN has “take-or-pay” agreements with fossil fuel power plants. This means that PLN always pays the plants even if it doesn’t use their electricity. As a result, PLN can’t use these plants as flexible “reserve” power, which is necessary to counter the daily fluctuations of a variable energy source like solar. Why PLN continues to sign take-or-pay agreements is a good question without a clear answer.

PLN needs quite a bit of help if it’s going to reach financial stability at this point, according to Susanto. He pointed out that the government determines PLN’s budget and sets the gas and electricity subsidies. So it doesn’t make much sense for the government to set new renewable energy targets and policies if they don’t do anything to help PLN’s ability to finance them. As long as the subsidies and budget remain as they are, PLN will be handcuffed.

That’s not to say the subsidies and budget are all that’s keeping PLN out of shape, however. There certainly needs to be a major slow-down in fossil fuel investments if they’re going to avoid being ruined by a future hike in coal prices. (Check out this article by IEEFA's Melissa Brown for more on these investments)

It’s hard to say exactly why higher-up officials in the government and PLN don’t support renewables. Sustanto lamented that there is so much rhetoric about the need for energy security but no one considers renewables as a solution. If the higher-ups just spent a week talking to experts, he’s confident that they’d figure it out. WRI pointed out that there are experts in the government that understand the importance of renewables, but they’re trapped in low-level positions and unable to influence the decision makers.

Cumulatively, all of these issues present a daunting barrier to solar development. According to Susanto, this barrier makes Indonesia one of the worst “fairly-developed” developing countries for foreign investment. And so, with no real support from the government or foreign investment, there seems to be little hope that Indonesia’s solar market will mature in the near future. It’s a long road ahead.

It’s clear that we have three countries in very different positions. Where’s the overlap?

There were several barriers to solar present in multiple countries, albeit to different extents. Pushback from utilities, skeptical policy makers, immature markets and regulations, geographical challenges, and underdeveloped grids were the most prominent in our eyes. We can extrapolate that the other countries in the region would tell similarly unique stories with some of these common challenges.

We were also constantly reminded that renewable energy is not independent from the influence of sociopolitical factors. We heard cases of it being ignored by politicians because it didn’t carry enough political weight, as well as cases of it being used in campaign promises that turned out to be empty. Many of our interviewees also mentioned difficulties with corruption—every potential change in policy or regulation has to go through officials asking for their cut.

Like many other parts of the world, Southeast Asian countries seem to place a lot of emphasis on energy independence and energy security. While this mindset generally helps renewables (you don’t need to import any fuel), it limits the efficiency of the grid.

The Stimson Center’s Mekong River Connect report cites an Asia Development Bank (ADB) study that found that a regional grid would reduce the total energy supply needed by 20% (in mainland Southeast Asia). According to the report, this would allow, “Mekong countries to meet occasional peak demand and power reserve needs through energy trade instead of building excess capacity.”

There’s already a precedent for cross-border transmission in the region—Thailand and Vietnam import hydropower from Laos. What’s needed, therefore, is to reassure policymakers in those countries that this is a good thing, and convince policymakers in countries like Cambodia that it’s central to cost-effective and sustainable energy development.

This is a central part of the argument that Eyler and Weatherby make in their workshops. In Cambodia, they stressed that the power lies with the purchaser—Cambodia can hold Laos to high sustainability standards for further hydro development on the Mekong if they’re the ones buying the electricity. Cambodia could also benefit from regional connection by taking advantage of good solar and hydro resources in the eastern part of the country and selling the electricity to Vietnam (to meet the growing demand around Ho Chi Minh City).

Of course, there is a lot of work to be done on synchronizing transmission regulations and grid policies, and developing a shared system operator. While in Bangkok, we also met with Thanawat Keereepart, a policy expert for the USAID Clean Power Asia program, who’s working on several of these issues.

According to Keereepart, renewables could complicate a regional grid because different countries are at different stages of development. On the other hand, however, a regional grid could encourage faster development of renewables in countries that are lagging behind, and lessen the risk of investment for regional developers. It might also give more weight to the regional goal of 23% renewable energy by 2025, agreed upon by ASEAN member countries in 2016.

It will take a while for a regional grid to come together. In the meantime, Keereepart thinks Thailand is the key country for facilitating other countries’ renewable development. He believes Thailand has enough experience to help Laos and Cambodia grow solar even faster than they grew their own market. Something to watch, he told us, is what comes out of the January 2019 Energy 4.0 conference hosted by Thailand and the ADB.

[After the conference Thailand announced its latest power development plan, expanding its solar rooftop program to allow the purchase of 100 MW per year for the next 10 years]

As for the financial risk mentioned by Lim and Suppanavich, Keereepart agreed that it’s a major barrier. He explained that USAID Clean Power Asia is working with both the private sector and lenders to develop programs and financial structures that would reduce the risk on both sides.

In all, Keereepart had a hopeful message: the region is ready for new renewable energy and interconnection and collaboration will help.

We saw many ways is which western organizations were players in the regional energy development. There are foreign aid organizations, private companies, ambassadors and diplomats, NGOs working mostly remotely (Stimson Center), and NGOs with permanent offices and local staff (WRI), among others.

While in Bangkok, we also met Mark Dunn, a former employee of the USTDA. Dunn explained that the focus of USTDA is supporting US exports—they primarily finance feasibility studies for potential infrastructure projects. Dunn figured that energy has accounted for over half of the projects in the past five years, with renewables making up a growing proportion. Solar is particularly hard because there’s less money involved in development and US solar panel prices can’t compete with the Chinese.

The USTDA also seems to have more consistent funding than USAID, which doesn’t have a commercial focus. According to Keereepart, USAID's funding difficulties remain dependent on the direction from the current administration.

We can assume that support for climate-related aid programs isn’t going to get better in the next year. The New York Times reports that the Trump administration is now considering rescinding an Obama executive order which, “required diplomats making funding decisions about development aid to account for helping those most vulnerable to the effects of climate change.”

So, while USAID has the programs more explicitly focused on sustainable development, its ability to execute these programs is more sensitive to changes on Capitol Hill.

At a quick lunch with the EU Ambassador to Cambodia we asked how the EU could support solar initiatives in Cambodia. He said that he was aware of a central fund for climate-related projects, but that the path to using it for energy projects was unclear—the one certainty was that there had to be an EU organization involved.

What about the UN’s Green Climate Fund (GCF)? Rhea Tsao of EnergyTrend in Taiwan was the only one to mention the GCF specifically, saying that many countries in the region had received some funding for some sort of project. The Cambodian MEF also mentioned the UN Development Program (along with the ADB) as a potential partner to get the ball rolling on solar.

It’s unclear to us where in the development process the GCF is best equipped to help—their website highlights a few projects in the region, but the one relating to solar energy seems to be a broader program operating mostly in Africa. It also seems the fund itself has had some ups and downs, not to mention the Trump administration canceling $2 billion of $3 billion promised donation.

What about China? Where do they fit in? Our interviewees described a wide range of relationships to China within the region. Cambodia and Indonesia were the two extremes, with Thailand falling somewhere in the middle.

Dunn explained that China views Cambodia and Laos as a strategic gateway to the rest of Southeast Asia, including ports in Cambodia and ultimately Singapore. These two countries are the most receptive to Chinese funding because they are often overlooked by the private sector and other donors due to their small population sizes. Indonesia, the Philippines, and Malaysia, on the other hand, have more options and are much more cautious of accepting funds from China because of maritime territory disputes.

For USAID’s Keereepart, the issue with Chinese projects is that they come prepackaged. Dunn echoed this, saying that China designs projects such that they are entirely Chinese technology, services, and labor. It’s usually an attractive package, but countries are becoming more wary of the long-term contracts and their connection to the Belt and Road initiative.

In contrast, Dunn says that the US follows international standards and bidding, meaning that it’s not always US companies who get the contracts. The US cares about its influence too, of course—there’s a new Asia Edge program, created to counter Belt and Road—but US programs are about education, not material promises, according to Keereepart. The message is, “listen to us, it’s better for you,” he added, like teaching you how to build a garage versus building a garage for you.

Tsao expressed hope that China would also be able to productively share its energy expertise with other countries in the region, as well as grow its green investment programs. However, she noted that China’s most important contribution foreign solar development will likely continue to be in supplying of cheap panels.

For Dunn, the central question is: how will countries respond to multiple offers from both Western and Eastern powers? He used Myanmar and Vietnam as two examples. In Myanmar, the government accepted offers from everyone and ended up with a mess of conflicting projects. Vietnam, on the other hand, has a much more measured approach, rotating through funders and making sure the offers are compatible with their 5-year plan.

Is there a general formula we can extract from all this? What’s needed for a solar industry to develop in any given country?

According to Dunn, it’s a simple: first a regulatory environment, then financing, then infrastructure and development.

All projects need investment, and investors need assurance that a project is low risk. Regulations provide this assurance. Therefore, without a regulatory baseline that allows for the possibility of solar projects, there won’t be investment in the industry.

The absence of this regulatory environment is what we see in Cambodia, where foreign involvement is restricted to lobbying and educating policymakers in an attempt to catalyze a regulatory baseline—this is all that can be done until the regulations are there.

These basic regulations don’t exist in a vacuum, of course. The attractiveness of the market is still determined by other policies—Thailand’s feed-in-tariff versus Indonesia’s import requirements, for example.

Lastly, regulations and financing don’t do much for project development if there isn’t infrastructure to support it. It doesn’t help to build a solar power plant if there isn’t adequate transmission to get the electricity to demand centers.

Having answered “What?” the next question is “Who?” Thailand showed us the importance of both local policymakers and a local private sector; we saw that capable local companies can increase the feasibility of local projects.

Regional leadership and cooperation also certainly have a role to play. So do foreign governments, corporations, aid programs, and NGOs. Although, the appropriate size of their role differs depending on who you ask and it seems that the self-interest of foreign actors inevitably complicates things.

It also seems that money will often help. The initial cost of coal is still slightly cheaper in some places, but foreign funding can make up for that gap. Yet, there still seems to be some disagreement about the role of the GCF and how efficient it is. This isn’t something we’ve looked into specifically, but surely there are many people who better understand the fund and have written about it.

What remains is the difficult question of responsibility: how should the responsibility of sustainable development be distributed? It’s clear that developed countries have a continued obligation. Yet, no matter the will of the foreign investor, the initial steps required for sustainable development remain largely in the hands of local policymakers. And the question of how foreign actors should influence those decisionmakers takes us into political theory, international relations, etc.—another area in which we are far from experts.