Sunday, May 12, 2013

Upon visiting Sarawak, investors will inevitably get an earful of a few certain sellable characteristics of the state. "Come to Sarawak," some investment evangelist will gush, "because we are strategically located, have abundant natural resources and suffer from no catastrophic weather."

It must be said that this talking brochure has a pounding, if not throbbing, point. But, unrightfully, the location of this speech has focused primarily on the South China Sea, the natural resources on rivers and forests, the weather on the coastal regions.

There is, however, another more overlooked opportunity hidden within these sizeable attributes that is overdue for greater attention - the sun. Solar power plants are suitable for Sarawak's equatorial location on Borneo, and the low frequency of debilitating storms make the energy source especially viable.

Moreover, a major hurdle credited for Malaysia's slow adoption of the energy has since been removed. By some industry measures, over the past four years, the prices for photovoltaic cells have dropped by four to six times, making the technology increasingly more accessible and efficient.

Lower costs have also made the renewable energy more profitable, turning erstwhile naysayers into solar advocates and even investors. Unfortunately, Sarawak still lags behind its neighbours in solar power development, choosing instead to focus on large-scale hydropower projects and substantial reservoirs of hydrocarbons.

For 2013, the Indonesian government has earmarked US$103 million for the development of 36 solar energy projects, which it plans to develop with private partners through BKPM, its investment arm.

The proposed pipeline will make the total active solar plants across Indonesia come to 153, up from 117 in 2012, back when the government spent US$71.8 million investing in 17 new solar plants.

Even Myanmar, the poorest country in Asean, has come onto the solar scene. In early May, the former pariah state welcomed Thailand's Earth Power to develop a large solar field, which is slated to be brought online in 21 months and provide an extra 210 megawatts of power to the electricity-strapped country. Not only will it be Myanmar's first solar power plant, but also the world's third largest.

Renewable-promoting laws are also largely absent in Malaysia compared with neighbouring Asean nations. In the Philippines, for example, a green energy incentives scheme is due to finally surface in 2014 after making its way through the country's byzantine bureaucracy.

Under the proposed feed-in tariff, a popular policy mechanism, investors in renewable energy - namely solar, wind, geothermal and biomass - will be eligible for power-provider contracts offered above the market rate, measured per every kilowatt-hour sold.

Though previously proposed, Peninsular Malaysia has never constructed a major solar power plant, and energy generation derived from the sun remains negligibly low at approximately 0.007 per cent of the total energy produced on the peninsula.

In Sarawak, only pet projects have been completed, such as that in Baram, when Curtin University set up a few solar panels in a remote rural community.

Malaysia instead chooses to produce the inputs necessary to manufacture solar panels. At the end of April (the most recent example), the branch of Chinese solar wafer producer Comtec Solar International solidified its commitment to invest in a solar wafer plant at the Sama Jaya Free Industrial Zone.

With a US$400 million investment, the company plans to make the solar wafer plant the world's biggest N-type mono wafer manufacturing hub.

The contrarian may now say: This is where Sarawak's competitive advantage lies, so why move into solar energy production? Continuing: Sarawak provided the bedrock from which Petronas emerged, today ranked among the contemporary 'Seven Sisters' of giant oil producers.

But in a state where plans are still on the table to dam up hinterland rivers with up to 12 more hydroelectric facilities, the tropical expanse and sun that shines down upon it seem vastly underutilised and under appreciated. Sarawak needs to brighten up to solar, and its long overdue.

By Justin Calderon