INTERVIEW: SE Asia Drives Renewables Market: Peak Energy CEO
Opportunities abound in Southeast Asia’s nascent solar market but quality still trumps quantity when it comes to project development, according to Peak Energy’s CEO, Gavin Adda, undoubtedly drawing from his decades-long experience of navigating solar markets around the world.
Adda might have long left the archaeology field that he majored in during college but his illustrious career in the solar industry is no less Indiana Jones-esque.
He left Samsung in 2013 as the managing director of its utility-sale renewable business in the U.S. following a six-year stint, moved to Singapore where he engineered the sale of REC to ChemChina, helped found renewable energy developer CleanTech Solar, then took over as CEO of French oil majorTotalEnergies’ utility-scale and distributed generation business in Asia.
Developing and nurturing nascent markets was his trade, a forte that took him from one pioneering deal to the next across Asia, the Middle East and Africa.
Now Adda finds himself building yet another business – regional solar developer Peak Energy, which is backed by $70 billion investment fund Stonepeak, one of the world’s largest infrastructure funds.
“A lot of the value (in solar projects) comes from early-stage development but there are not many players out there focused on that stage – in Asia generally and in Southeast Asia especially. I wanted to bring more funding in at that stage,” Adda said of his move to Peak Energy a year ago.
Peak Energy inherited from Stonepeak a solar investment portfolio of less than 30 MW in Japan and 99 MW in South Korea. Over the past year, Peak Energy has added an under-construction 291 MWh battery energy storage system in South Australia, around 300 MW of projects in Korea and 100 MW in Taiwan. Another 600-700 MW of projects is under development, the bulk of it in Southeast Asia.
“If you look at where global renewables growth is coming – a lot of the future growth is coming from Southeast Asia. That is where the opportunity is,” Adda said.
On paper, the argument might seem obvious. Southeast Asia is expected to account for 25% of global energy demand growth between now and 2035, second only to India, according to the International Energy Agency (IEA) last month. The region however currently receives only 2% of global clean energy fundingdespite representing 6% of the global gross domestic product (GDP) and 5% of global energy demand.
But to actually navigate the region’s labyrinth of solar policies requires as much guile and finesse as finding the lost Ark, and this is where Adda’s globetrotting experience comes in handy.
“What’s interesting for me is when I look at Southeast Asia or Asia generally, I can draw parallels between them and what happened in various states across the U.S. – 15- 20 years ago. Arizona and California are particularly good examples of the wide range of reactions you might see. This history gives us aframework and sense of what could happen next and the problems we can expect to see,” Adda said.
Countries across Southeast Asia have announced a slew of policy changes over the past year aimed at driving renewable energy growth. Malaysia, Thailand and Vietnam now allow, each to a different degree, renewable energy developers to sell electricity directly to consumers. Indonesia halved in August the minimum local content requirement for solar power plants to 20%.
Adda highlighted a key driver behind this liberalization trend in Southeast Asia that mirrors the decoupling dynamics seen in the PV manufacturing space.
“The big driver behind all this is that large industrials and corporates are moving out of China and into Southeast Asia. They have carbon targets. If it is difficult to get renewable energy in one country, they will just move to another one,” Adda said.
The crash in solar module prices might seem like another apparent boost to solar developers — the China Module Marker, OPIS’s benchmark for solar modules loading from China, has plunged by over 66% to $0.087/wp as of Nov. 12.
Thanks partly to this price crash, solar is indeed already outperforming grid parity for behind-the-meter (BTM) projects, Adda said. Indonesia charges electricity tariffs of around $0.07 per kWh for businesses, which is among the lowest in Asia. Solar can do lower at $0.05 to $0.06 per kWh, Adda pointed out.
But like all high-growth markets, renewable energy project development in Asia space has been attracting a deluge of new entrants. The Department of Energy in the Philippines, for example, has awarded around 510 solar projects to at least 274 different entities so far as of August 2024. It announced in October that it could terminate over 50 of these projects for not complying with agreed timelines.
“We’re always going to see irrational players come into the market, maybe with not a lot of experience in power or renewables and doing deals at unsustainable prices,” Adda said.
In the absence of a liquid spot electricity market, which is the case in most of Asia, solar power is typically sold via government feed-in tariffs schemes, negotiated power purchase agreements (PPAs) or auctions. Given the long lifespan and capital-intensive nature of solar projects, competing on price alone is a risk for both the developer and the off-taker.
The shortcomings of such an approach will be laid bare as funding slows, Adda pointed out.
This is already happening. Globally, fundraising by infrastructure funds tallied around $98 bn in 2023, sharply lower than the $173 bn raised in 2022, with 2024 appearing to lag 2023, according to data provider Preqin in May.
Developers that rushed into project development using equity have to turn to debt financing as funding dries up. But some would be stuck because badly built projects and badly structured contracts are unlikely to attract lenders, Adda said.
“It is really difficult to generalize across the region but I think generally you are seeing a pause and you are seeing a lot of developers tap out,” he added.
Unsurprisingly, Adda notes that this “debt chasm” phenomenon is a replay of what had happened in the U.S. 15 years ago.
Not that it fazes him. “The key has always been to steer your ship without getting too distracted by everybody else,” Adda said.
“If they want to be irrational, then let them go ahead. We will pick up their portfolios after they are gone. There’s no magic here – it’s infrastructure.”
Reporting by Hanwei Wu, hwu@opisnet.com
Editing by Lujia Wang, lwang@opisnet.com
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