Q&A: Sunlabob Myanmar

 

 

Sunlabob is a Laos based private company licensed specializing in renewable energy and clean water, with a focus on decentralised applications. It opened its Myanmar office in 2014, and has since pursued a number of projects in difficult environments.

 

Myanmar Energy Monitor sat down with managing director Evan Scandling and U Valentino Soe Myint senior project manager of Sunlabob Renewable Energy Myanmar to discuss the company’s move to Myanmar, and its take on the solar energy market.

 

 

 

Sunlabob has been in the region starting in 2000 in Laos.  This grounding means that we feel we understand the region, particularly in terms of tough geographies. We registered in Myanmar in 2014.

 

We saw the opportunity to come in and be the first professional, international engineering solar company in Myanmar.  It’s ten times the size of Laos, and there is a lack of international experts with a strong track record.  

 

Laos was an interesting market and a good experience, but it is pretty saturated now.  

 

 

 

By mid-2015 there were lots of off grid solar projects that we could take part in – most of them donor, development agency or government funded. 

 

The biggest project we have completed is a mini-grid project funded by the Japanese Government in partnership with the Myanmar Department of Rural Development.  Eight grids were in Chin State and three in Shan State, a total of roughly 1000 households. 

 

For such small villages, this is commercially hard to justify.  These villages are also very remote and for the most part low-income.  This is a good reason for a donor to add their support, because a commercial provider is unlikely to come in, and the main government grid is unlikely to show up for many years.  

 

For these projects, the villages received a solar battery mini-grid, with a connection to each household and a central minigrid. We had 20 5kW panels connected to batteries and distributing to households and street lights.

 

 

These projects are not developed because of its logistical ease. To move equipment, we could use heavy trucks to Mandalay, but then into smaller lighter trucks, before in some cases as far as 5 miles away, breaking it down into motorbikes, and for a couple of villages, simply humans carrying them along small dirt tracks.  

 

Our role was to implement the project, and we were able to complete it in May of 2017, before the rainy season.  It is an important cause, but trying to build a purely business case is very difficult.  

 

Sunlabob was not involved in the commercial side of things. Our revenue came from the donor partners and Myanmar government through the bid.

 

There have been a handful of other international funded projects throughout Myanmar.  ADB for example did something similar, with the slight difference that the vendors collecting payments.  This is a step up as it did actually show there is a business model case to be made.  

 

Additionally, the World Bank is currently in the process of supporting around 500,000 homes, with small (30-80w) solar panels.

 

We also do projects that we develop on our own, where we foster a relationship with a donor, or someone that needs an off-grid electrification solution. For example, a resort or a fishery, which would be a commercially viable solution where we are working on a b to b basis.  We haven’t done that yet, but we believe there are a handful of opportunities. 

 

There are companies that do want to test out the mini-grid market, who will put some money behind it and try and make some returns on it.  At this point, no-one has proven a business model in a village mini-grid context.  

 

To the credit of the Department of Rural Development and GIZ, processes are being put in place to help support this. A recent example of this is the 60-20-20 plan. This involves the Myanmar Government providing 60% of the CAPEX funding, the village will provide 20% (manual labour, site preparation and getting the project going), and then 20% would come from the private sector (like Sunlabob) which is encouraging people to invest their own money.

 

 

 

Number one is access.  Grid connected plants are centralised energy solutions.  For example, these large 100MW plants currently under development are going into the main government grid, and will then be distributed along the government grid lines.  So this does not help anyone off grid. 

 

In terms of how the mini-grids compare to the solar home systems, mini-grids are useful in terms of the versatility of the electricity produced.  A solar home is going to be great in terms of giving you light, maybe a fan or a radio, but that is it.  Where a mini grid comes in is in terms of how a community can start to change their livelihoods, and increase their output of production.

 

 

 

There is a long list of challenges, particularly from a commercial perspective. If you look at the global environment, there has not yet been a proven business model in terms of a full scale mini-grid focused company. 

 

To be clear, I am positive of mini-grids as an electrification solution, but there a very few, if any, cases of a business that is profitable on a full business scale.  

 

In terms of on the ground in Myanmar, the big issue is uncertainty on when will the central grid arrive to the area.  On one hand, it should be complimentary - if you are building a technically sound, AC, mini-grid it should be able to interact with the grid in a complimentary system.  However, mini-grid developers do not know when the grid will show up, so they can’t plan for that from a financial perspective.

 

Additionally, there is no clarity from the government in terms of will they allow that interconnection to happen. 

 

In general, mini-grid developers are looking at villages that are 10 miles or more away from the planned transmission lines.  But let’s say the grid might arrive sooner than expected. We need some real policies written on paper, as that would allow mini-grid developers to know that if the grid shows up, we will know what will happen from an interconnection standpoint.

 

 

 

 

 

We have completed the first and the second ever grid connected, roof top commercial application solar projects in Myanmar.  Junction City was the first, completed December 2016.  Anita Asia was the second, which has been in operation two months.  

 

This is great momentum; we now have proof of concept.  Typically I don’t like that term, because it is not a new technology, and this has been done all over the world, including every neighbouring country in Myanmar.  However, this awareness was one of our biggest hurdles. Now that we have gotten over that hurdle, we can show you the systems generating kW’s and working fine, regardless if it is raining, or if it is a cloudy day, or if it is the hot and difficult Yangon environment.  

 

It is still very early days. Two projects in the grand scheme of things isn’t a lot, but it is something that us, and the other service providers can follow.

 

 

 

To begin with, solar panels can be mounted on most roofs. They can also be land mounted, but in downtown Yangon, you are unlikely to find ground space where solar panels can be mounted.  

 

The electricity is generated as DC electricity, it goes through the inverter to convert it into AC electricity, which means it can be used by any appliances or machines that are in the building.  

 

Solar can be used across your commercial or industrial site.  For example in Junction City, the solar electricity is injected at their sole distribution board, and then gets spread across their entire retail space.  It synchronizes and cooperates with your existing electricity supply.  

 

In the early days many land owners believed solar could only be used for a narrow range of appliances, so we would need to educate our customers to show that with proper design and engineering, it can be used for everything.  

 

Another important point is that we do not use batteries, just from a cost standpoint. Batteries become a lot more attractive once the grid electricity becomes a lot more expensive than solar. 

 

We design the systems so they cooperate with your incoming grid supply, and then if there is a blackout, there can be a switchover and the solar can cooperate with the backup diesel generators.  

 

Solar needs to cooperate with another source.  In the case of a blackout, you could do batteries, but in Myanmar, people already have diesel generators purchased and operating onsite.

 

These are systems that are built to last for 25 years or more.  People in Myanmar’s experience with solar is being out in the village visiting their auntie, and they see a small 50W solar panel, which breaks down after a year.  We really have to change that perception.  Explaining 25 year systems becomes very important when it comes to the business case.

 

Another point which is unique to Myanmar, is that we are designing these systems for self-consumption.  There is currently no incentive to feed electricity back into the Government grid.  So we ensure that 100% of the solar electricity stays on site, and doesn’t cross the meter and go into the main government grid.  

 

 

 

You will save a lot of money, particularly as the government grid price rises.  

 

The higher the government’s fee the more returns you will see.  It is the grid price that dictates everything in terms of savings.

 

There are various ways it can be financed.  On one end of the spectrum is the CAPEX approach, where the customer purchases the equipment and owns it immediately.  That is what took place with Junction City and also Anita Asia. They purchased it up front and owned the assets.

 

For the CAPEX approach, a typical customer will see a payback period of 7-8 years, and then you will have a system that is operating for in total 25 years. Therefore you have 18 years of essentially free electricity.  

 

Over the 25 year period you are looking at a solar solution with a levelized cost of around 6-7c. Where you look at the levelized cost of the grid for the next 25 years is unknown, but the expectation is a lot higher. Solar will still win out even if the price stayed exactly the same as now.

 

This pitch will change as the grid price increases. Cambodia is a good comparison and their grid prices are roughly 17-18c.  People that pay for solar assets are seeing a payback of 4-5 years and then 20 plus years of free electricity.  At that point, it is an impossible case to ignore.  

 

For a 500kw system, we are looking at a couple of million dollars worth of savings overtime on your operating expenses.  

 

The other financing option that Sunlabob offers is the power purchase agreement (PPA), which is a full OPEX approach for the customer. Sunlabob invests, owns and operates the solar asset, while the customer invests nothing and simply is obligated to purchase solar electricity from Sunlabob for the life of the PPA contract which is typically 20-25 years.

 

Solar is also great if you have a sustainability objective or an environmental objective.  That is important, and though we don’t typically lead with that because decisions are typically made through economics, it can be part of the equation.  

 

 

 

The main issue is still the demand side.  Solar power is attractive when you are comparing it against expensive electricity prices.  Right now, the electricity prices are heavily subsidized, but it appears that the subsidies will be reduced, so the price will go up at some stage this year. This will mean industrial and commercial users will be looking for cheaper electricity solutions. This can be solar.  

 

Additionally, awareness can be a barrier. We need to create more awareness with the local industry people.  Our two examples can now show tangible results.  Getting started was the most difficult thing to overcome.  However, it will be another five years of building out awareness, until in general, people know that solar is an option.  There are very few examples where solar cannot be applied. It is not a new technology.

 

The policy side is limiting us to some degree, though there is still an ocean of opportunity for these self-consumption sites.  But at some point this may become saturated, so we will want much larger sites that will want to interact with the grid.  

 

We need to have policies ensuring that we can feed into the grid, with a net metering scheme where you can get credited for electricity you have put into the grid.

 

The next step is getting a larger project, where a few industrial sites can come together for a 1 MW system. At that level, financiers start to become really interested.  

 

 

 

Not every building and not every client makes sense for solar.

• There is no point at looking at a factory that might shutdown in a couple of years.  So we ask will this structure be in use for at least the next 15 years.  

• Is the roof suitable and structurally sound

• In the northern hemisphere, we are looking, ideally, for a south facing roof, however we have done roofs that are east/ west, as we can mount the panels in a way that still allows for the best catchment.

• Shading can be an issue, so we make sure a building is not going to be obstructed by buildings or trees.

• We are looking at solid businesses, which are typically international.  

• Ideally that site needs electricity every single day of the year.  Solar generates every single day of the year, and if you are not using that, you are not utilizing your investment to the best of your ability  

 

Understanding what the base load of their demand is also key.  Junction City for example has quite a large and stable base line demand.  At any given point, they will be using 1.5MW throughout the day.  So we know solar can cooperate with that very easily.  We don’t want to be designing a system that is overproducing solar.  

 

Part of our process is we go to the site, look and energy consumption and take measurement of their demand over at least a week, so we can understand their load profile.