Nicolas Bivero, Director, Transnational Uyeno Solar Corporation (TUSC), Philippines
Nicolas Bivero, Director of Transnational Uyeno Solar Corporation (TUSC) Philippines, an exciting firm credited with producing the Philippines’ first ever solar photovoltaic car park and solar powered Starbucks store, speaks out about the key issues facing entrepreneurs in the local renewables sector. He articulates the challenges of a feed in tariff (FiT) where the winner takes all and considers the implications of the open-access rules for providers of rooftop solar installations.
How did TUSC arise from a joint venture between Uyeno Green Solutions and Transnational Renewable Energy Corporation?
The Transnational Group was previously highly involved with logistics, which amount to about one third of their revenue. Collectively they are one of the largest providers of logistics in the Philippines. Being a large logistics company, concerns understandably arose within management that the company did not have a very green image; moving into renewables, for this reason, as well as undertaking other projects such as planting trees and helping local communities, represented a good route for the company to reduce its environmental impact.
The Uyeno group is the second largest logistics company in Japan dealing with oil and petrochemical products and has around 100 tankers domestically, and approximately 1,200 tanker trucks and specialist ships to provide logistics for a wide array of industrial requirements. It has been a family owned company for over 100 years. Uyeno also prioritized entering the green business sector because this was deemed to be a way of counterbalancing the companies logistics operations, which release a great deal of CO2 into the atmosphere.
Both companies shared common values in this respect. Renewables were a logical choice because they provided clean power, were cheaper than other sources of power in the Philippines and they can provide access to rural communities located in areas the grid cannot economically reach.
What is the company’s current business strategy?
Currently we are focusing on the systems integration business across all sizes of project. One aspect of this includes providing power to rural locations (on-grid or off-grid) particularly to schools and other communal focal points. Without TUSC’s intervention these community buildings would be forced to buy expensive grid borne energy (where a connection exists). Lowering energy costs allows schools to buy more textbooks, sports facilities more equipment; hence, less money is unnecessarily wasted on energy.
Often communities away from the grid receive grants from governments (not necessarily from the Filipino government), or NGOs that help them afford distributed generation systems. It remains, however, more difficult to connect these communities.
A longer-term project includes a large solar array most likely in Visayas or Mindanao, but due to the feed in tariff (FiT) being an issue, slow progress is being made. TUSC considers solar to be an excellent option due to its low generation cost and ability to satisfy demand during periods of peak demand, but the FiT is currently causing problems.
Some in the industry are of the opinion the first come-first serve FiT should be undone as this is disadvantageous to small and medium sized enterprises. For us as investors, the main problem with the FiT is that the whole project must be nearly complete before any money is returned to you as an investor. This means that investments are subject to a nearly prohibitive level of risk. For example, if one does start construction, because of the FiT, one is in a race with competitors, and the FiT in this respect means winner takes all. It is therefore extremely difficult to obtain finance for a project.
A second problem with the FiT is that it delivers finance flat over approximately a 20-year period, and is supposed to be subject to indexation, but it is not clear how, over time, the package will benefit the investor. It would be better to seek some form of escalation that would make installing renewable energy systems more attractive.
In terms of TUSC’s Starbucks solar project, were your expectations achieved and do you think it will serve as a catalyst for other solar projects?
Absolutely. After the Starbucks project, TUSC has been approached by a wide variety of companies who are looking for means to stabilize and reduce electricity costs. We have a pipeline of projects, and many of these were initiated after companies approached TUSC having become aware of the Starbucks project. It was, for this reason, a very important milestone for us. Other projects have allowed us to demonstrate the feasibility of solar, and particularly our discreet means of installation, which means businesses do not need to pause trading for the solar installation to go ahead.
One of our largest projects is the third largest solar project in the Philippines and is sited at the NYK-TDG Maritime Academy. It is a 206.5-kilowatt peak solar car park and allows TUSC to demonstrate the value of solar to businesses as a tool to improve bottom lines—the project consists of three differing solar technologies and as such is an excellent ‘running experiment’ which allows comparisons of the strengths and weaknesses of these three technologies and their efficacy in Filipino weather patterns to be made. For example, poly crystalline systems work best in direct sunlight, high temperature conditions whereas ‘thinfilm,’ a technology from a Japanese company, works far better in indirect sunlight.
Our company is careful to design the systems to our customers tailored needs meaning our customers get the product that best suits them. Customers receive products to match their energy requirements and advice on which technology would best suit them, providing the best return on investment. Satisfied customers equal more referrals and more business for TUSC in the long-term. TUSC has been so successful in this end, to the best of our knowledge we have now installed around 25 percent of all the rooftop installations in the Philippines.
How do you convince potential customers that you are the best-qualified company for their proposed projects?
To be fair, along with many solar installers in the Philippines our objective is to conduct a professional service. TUSC’s technical team is highly proficient and well trained and prior to any installation, our technical team will fully research the customer’s own situation and their energy requirements. Again, as already mentioned, the tailored approach gives customers far more confidence in our services.
How do open-access rules affect solar rooftop installations, and specifically your company?
For many of our customers, open access rules have a detrimental effect. Some of our larger customers were, before open access rules, enjoying preferential prices from The Philippine Economic Zone Authority (PEZA). With open access, some of these companies have seen electricity rates rise 20-30 percent in the last six months and there are further indications this will continue to rise. To buy electricity independently, one must be able to consume a significant amount of power, as much as 2MW, and many companies are just not that large.
For TUSC, as a systems integrator, this increasing cost of power makes the products we offer more attractive. The increasing cost of grid-borne energy has drastically reduced the time taken to achieve a return on investment for solar technologies.
How do you assess the renewable energy industry in the Philippines and what, in your opinion, can be done to attract further investment?
There is scope to improve the implementation of renewable energy policy. Simplifying the application process for getting renewable energy projects submitted and approved. There is too much paperwork and too much bureaucracy. Adopting best practices from other countries is a good way to improve the regulatory framework, such methods have a proven record and their effects could be better predicted. Japan, following the nuclear disaster rapidly changed its solar regulations meaning that capacity could be installed quickly and effectively to compensate for lost nuclear generating capacity. Of course, regulation is necessary, but not to impede perfectly good projects for no reason.
The Philippines has been fortunate to be blessed with abundant geothermal resources. It has historically capitalized on this power source and is the leading country in South East Asia in terms of renewable energy because of this. Most of this geothermal energy was developed under market conditions—this did not happen because of government support. The reason that the Philippines is so advanced in this field is that this technology was commercially attractive. Reducing unnecessary bureaucracy is a means to reduce costs for all renewable energies and increases their commercial viability.
When it comes to Foreign Direct Investment (FDI), the Germans have been coming to the Philippines for a while. The first solar seminars and conferences were all arranged by the German Chambers of Commerce together with the German embassy and later the European Chambers of Commerce. ThomasLloyd are trying to bring finance into the industry. They have diversified their portfolio and are investing USD 500 million into the biomass industry, using Bronzeoak as their engineering client. They are one of the biggest investors in renewable energy technologies worldwide, and they are only one of many parties interested in the Philippines.
There is huge potential for fast growth, because this Philippines has a young, energetic population and this growth is being spurred on by significant FDI in a wide variety of sectors- not just the power sector. Many Chinese, Japanese and Korean companies are moving into the Philippines to benefit from low costs and a populace that can speak English. The influx of companies alone guarantees a future rise in electricity demand. One must differentiate, however, between the large investments, such as those made by ThomasLloyd in big, monolithic projects and the smaller, more diffuse developments that will characterize the solar industry.
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