With offshore wind farms making inroads in Japan and attracting huge investments from overseas sponsors, promoters and lenders in Taiwan, another asset class – floating solar energy – is gaining ground as a number of Asian countries add renewables to their energy mix.
Chenya Energy Company, a Taiwanese company focused on medium-scale photovoltaic power plants, is building a 180-megawatt (MW) floating solar project, which is scheduled for completion by the end of 2020.
The project, which is located in the Changhua coastal industrial park and will supply electricity to the Taiwan Power Company under a 20-year power purchase agreement, reached financial close in early April and will be funded through non-recourse financing with a total debt size of NT$7.2 billion (US$240 million).
The financing was provided by a consortium of seven international and Taiwanese banks, including DBS, Societe Generale, Sumitomo Mitsui Banking Corporation, KGI Bank, First Commercial Bank, Bank SinoPac and E.SUN Bank. “This is an optimal outcome and the deal should serve as a good platform for future floating solar power deals,” Daniel Mallo, managing director and head of natural resources and infrastructure in Asia-Pacific at Societe Generale, tells The Asset.
Floating solar project is an emerging asset class in the region, and there will be more similar projects going forward as it offers advantages over ground-mounted solar farm power plants.
For instance, floating solar projects provide better energy yield because water has a cooling effect on the panels, says Mallo. They also eliminate land acquisition and site preparation issues associated with the traditional solar power plant installations. Indeed, floating solar projects open up a new avenue for the scaling up of solar power globally, particularly in countries confronted by land constraints.
Chenya Energy was previously owned by I Squared Capital, an independent global infrastructure firm, which acquired the company in 2017. In February of this year, I Squared Capital entered into a sales and purchase agreement with Marubeni Corporation of Japan to sell 100% of Chenya Energy. The deal represents Marubeni’s first investment in the renewable energy sector in Taiwan and through Chenya, it plans to expand the floating solar power business in Taiwan and other countries.
Elsewhere in the region, overseas sponsors are looking to Indonesia for opportunities in floating solar projects. The Abu Dhabi-based renewable energy group Masdar, part of the state-owned Mubadala investment fund, has entered into partnership with the Indonesian state-owned electricity company Perusahaan Listrik Negara to build the country’s first floating solar power project. “We are increasingly seeing more Middle Eastern companies looking for opportunities in the power sector in Southeast Asia,” says Mallo.
The 145-MW project will be built in the Cirata reservoir in West Java. Due diligence on the project has started, according to Mallo, and financial close is targeted for late summer or early September.
Laos will also build a floating solar power project on the Nam Ngum 1 dam reservoir. The project is a joint venture between the Lao government, which will hold a 20% stake, and Hangzhou Safefound Technology Company of China, which will own 80% over a 25-year concession.
Vietnam is likewise embracing floating solar energy with the Asian Development Bank signing an agreement with Da Mi Hydro Power in October of last year to provide funding to develop the country’s first large-scale floating photovoltaic solar energy facility, which will help increase the share of renewables in the country’s energy mix.
In the first report on floating solar technologies published by the World Bank in 2018, it notes that floating solar capacity is growing exponentially. At the end of 2014, total global installed capacity stood at only 10MW. By September 2018, that figure had surged more than 100-fold to 1.1 gigawatts (GW). The report estimates that the global potential capacity of floating solar energy, even under conservative assumptions, to be 400GW. That was roughly the total capacity of solar photovoltaic energy, floating and ground-mounted, installed worldwide by the end of 2017.