NrgEdge interviews Sam who is the founder of Solar Horizon with its aim to harness Singapore’s solar potential. A passionate advocate of solar energy, Sam is considered among the top Solar PV leasing experts in Singapore.
1. Can you tell us about how Solar Horizon came about and the process of creating the team?
I’ve been in the solar industry for about 8 years, I started out at SolarWorld, the German panel manufacturer handling the Indian market for large scale power plants. A few years into the journey, I felt that the supply models were without any value-add in an extremely price competitive market such as India and general Asia – it was a losers’ business module. We had to really look at innovative channels to market. In those days, between 2012 – 2013, the solar leasing model in the US was growing, such as the solar city that was built by Elon Musk. When we looked at that, we thought, why can’t we do that here in Asia? Initially when I was with SolarWorld, I developed a business model with the sole intention of selling the panels as part of the business strategy and to create investment opportunities for the company. We managed to get a few projects in place but SolarWorld’s appetite was only in the business of selling modules and they were not interested in investing. I thought this was not going to work, because if suppliers wanted to create long term value-add and were not willing to budge on price, then this would not be a feasible long-term business model. If you look at today where the biggest solar companies are at, including SolarWorld, I believe that became true.
After I decided to leave SolarWorld, I joined a small startup in India to do this business model. But about a year in, I realized that the Indian market is an extremely challenging market in terms of regulation and contract enforcement and it is controlled by the various “big boys”, the existing giants in the industry. For this business model to work, we needed to work in great parity market where we have a stronger reach, a better enforcement structure and since Singapore was home for me for the last 20 years, I thought it would be wise to come back to Singapore. In late 2013, Singapore’s power prices was quite high. And it was the first big boom of solar where the government announced the Solar Nova program and so on. We, along with many other new entrants rode along this wave.
I was looking for guys who could help me sell and market to get some deals. I initially tied up with Kyle and Saagar who were the two original partners. We set up Solar Horizon with a focus on smaller projects with a 1kWp range but we quickly recognized that we were quite strong in business and project development, so we began our first projects in Roha, Kapoor and FT Group. At that time, my current partner and current co-founder Andrew Zhang came on board to Solar Horizon. We were childhood friends for over 20 years, and he had been in Keppel for the past few years. He saw the company’s progress he was excited about the business model, so he came in as a full-fledged partner. Essentially from that point onwards, it was Andrew and myself as the main partners, with Kyle and Saagar as co-founder and support staff. Our team formed organically over time and we were a sort of band of brothers and entrepreneurs who came together for a common passion and dream. Over the years, the team has evolved, Andrew and I are the main partners and the rest of the team are spread out in the region. We have built a pretty lean organization, where Solar Horizon Singapore is the nucleus, and we have built an extensive ecosystem of partners, suppliers, Engineering, Procurement, and Construction (EPC) contractors, clients, investors, etc. So our team has grown from a small group of entrepreneurs to a large ecosystem of partners from different parts of Singapore. The team has expanded laterally, and we work with 6-7 consortiums.
2. Since Solar Horizon’s inception in 2014, do you see a significant boom in the Renewables energy workforce? What skillsets and qualities do you look for in a team member?
There has already been a boom and bust cycle – as it’s an emerging industry, it is quite nascent. I think that the second boom is starting now. There was a huge boom when the Singapore government was promoting solar and oil prices were very high and the power prices were high as well, therefore the attractiveness to the solar market was there. But when the oil prices crashed, Singapore’s wholesale Power crashed, and the economic attractiveness of solar was decimated over 3-4 months. It’s quite tough and a number of our colleagues in the industry are no longer around. And now, what’s happened is that the developers who are still in play, including us, should enjoy a pretty good upturn within the next 12-18 months.
There is a huge amount of people looking to get into the renewable energy industry. As a recently graduated startup who’s now moving into SME business, we look at a few different things: we look for those who are hungry and eager to learn, self-starters who don’t need to be constantly hand-held – as the project development business is quite entrepreneurial and there’s a lot of late hours and traveling involved. There’s not necessarily a “corporate structure” because project development is quite a volatile business. We also look for those with an entrepreneurial mindset and those who like to take initiatives. I don’t expect these young professionals to have a fully trained solar background but what we do expect is that they are willing to learn and put in the hours so that we can train them to do the financial modeling, build marketing proposals and contracts and so on. We operate a little differently because we’re the “underdogs” in the industry. We’re a group of entrepreneurs who are taking on the “big boys” so we look for people who can put on a good fight and take rejection well because we do hear a lot of “No’s” in the industry. Those who can grow stronger and be resilient are those who will be successful in their careers.
3. What has been your greatest achievement – personally and from the company’s perspective?
To be honest, it’s not about the megawatts that we’ve built or the deals that we’ve got – for me, I don’t believe numbers define success. My personal biggest success was my learning and growth over the last several years of having established Solar Horizon from essentially nothing. From a one-dollar company to a multi-million dollar business, the growth pains and the learning curves that we’ve endured – my single biggest achievement has been the resilience, growth and learning that we have held on in the tough times and being able to establish ourselves as a meaningful brand in the rooftop space in the region.
For the company, I think we have had a couple of successes – one of the biggest achievements is winning a 4MW project in the Philippines as part of our diversification strategy. We kind of went in there without knowing anybody and within a year and a half, we managed to secure and win this large contract which we later sold to one of the investors. Another achievement for the company is our ability to repeat in scale in the region. Having learned the hard way on how to make this business work correctly, and make bankable and sustainable projects where our clients, investors, partners and ourselves benefit – this has certainly been one of our defining hallmarks.
4. Would you say that your previous working experiences helped you in getting where you are today? Did the relationships and connections you formed in those early years help you?
Absolutely 150 percent. With my four years of working hard as a salesperson in SolarWorld and being able to attend a 10-day course at MIT in Boston in creating greentech ventures, all of that groundwork was instrumental in helping me set up Solar Horizon. I developed the expertise and knowledge in my formative years. If you’ve heard of the 10,000 hour rule (the principle coined by Malcolm Gladwell that holds 10,000 hours of "deliberate practice" are needed to become world-class in any field), I probably clocked in seven or eight thousand hours in the last several years. The network and relationships I formed during those years also helped in building my business. Another thing that really motivated me was when people said “No you can’t do it!” for going into project development business in the industry. Every “No” and rejection made us stronger and more determined which helped us in setting up Solar Horizon and being successful in the business.
How we manage relationships? We focus on win-win-win. That is our philosophy. We focus on building eco-systems that can run on autopilot. We don’t think that any single party can do it alone. Our strength is bringing in specialist players who are very good at their individual piece of the value chain, which creates an eco-system where everybody around it benefits. We are looking to create long-term partnerships that create value in harnessing energy in underutilized space sitting on our rooftops. We also focus on empathy – putting ourselves in our clients’ shoes. We have learned to create a more systematic customer journey. Finally, when you bring in a consortium together, 1 plus 1 has to equal greater than 2 – this is where the value-add comes in. We pride ourselves on creating more value than the sum of parts, which is why our clients come to us.
5. In one of the talks you gave back in 2014, you mentioned the key risks in the industry which are 1) Technology risk, 2) Off-taker risk, and 3) Energy yield projection. Do you believe these risks still stand today, or are they any different? Can you elaborate?
Things have changed a lot since then. In any emerging industry, the rate of change is faster than others. Technology risk has now reduced significantly. Solar is now a proven technology and works in large scale. There have been installations that is working for almost 20 years and you can see its lifecycle. There’s been a huge efficiency in solar panels so you can put more power in the same space. And there has been a huge cost drop as the technology matures. With the low technology risk, it has affected the workmanship of panels. Since the solar industry has exploded, every Tom, Dick and Harry think they can easily go into business. I think quality control and EPC in installation is now a bigger risk than the actual technology.
On the other hand, off-taker risk has evolved but in the opposite direction. Previously, when Solar first boomed in Singapore, we were offering PPA to all kinds of clients without much KYC (Know Your Customer). What we learned is that most investors are not willing to take 20 years risk for anything more than double their company. Now we are more selective with our clients and focus more on the premium sector of the market such as MNC, corporate PPA, triple A-rated companies.
For the energy yield risk, this is tied to the first point. If you have a great panel but terrible EPC, your energy yield will be lower. Some of the players in the market are doing it “cookie cutter” style by integrating different contractors on different pieces of the value chain. When you do that, you improve your cost but you reduce your quality and therefore reduce your yield. At Solar Horizon, we have a different approach given that our business is to maximize and optimize rooftop space by generating the highest yield possible, we provide only high quality offering. We do not go for “mainstream”, quasi-branded products and we offer very high Performance Ratio (PR) guarantees and much higher yield guarantees than the market. By ensuring high quality control, by working with EPCs which we have long-term relationships, then we are able to offer a higher energy yield guarantee.
6. As Singapore is restricted in terms of space and land, how else do you think solar panels can be installed in the city? There are some studies being conducted to ‘hang’ the panels as well as installation on water surfaces such as the pilot test of 10 floating PV systems at Tengeh Reservoir.
There are a few points I’d like to raise. 1) There is actually a lot more rooftop space in Singapore than people imagined. We do have potential of over 1GW of installed capacity. And 2) companies are driven dollars and cents. I find that most companies will not take on solar unless it has an immediate economic benefit. With that in mind, hanging solar panels is not going to be efficient as you’ll only get half of the sunlight yield. In addition, the installation costs will be frightfully expensive and the technology put on the buildings will have much lower efficiency. And lastly 3) floating installation actually makes sense, from a theoretical perspective. However, the cost of installation is at least 50% higher than installing on a rooftop.
So these things may sound and look nice, but it is not practical. It’s more of a gimmick. What we at Solar Horizon think will work in Singapore is the mobilization of the electricity market and offsite PPA (Power Purchase Agreement) model where you generate power in Point X and pump it through the grid and sell it to a client in Point Y. For the next few years, I believe the rooftop installation of solar panels to supply energy directly to the customer, exporting the excess through the grid, perhaps having a bilateral contract to export elsewhere – these should work to sustain Singapore.
7. One of the key technical challenges of solar is the intermittency of electricity production. To address this, we need reliable and cheaper battery solutions that can be well integrated with solar systems. Do you a see gigafactory being built in Singapore or anywhere in Southeast Asia within the next decade?
Firstly, Singapore has 100% grid reliability. We actually have 13GW supply against the 6GW demand, which means we have 60% excess power in our grid supply system. There are very few rooftop systems that can supply more or all of the load to customers. I don’t believe that intermittency of solar power is an issue at all for Singapore.
Secondly, when you have such a massive over-capacity and low prices, why would you want batteries and go off the grid? We have such a good, robust system and we believe in working hand-in-hand with the grid. I don’t see us needing to build a gigafactory any time soon in Singapore.
Thirdly, when we’re talking about Southeast Asia, that’s where the market gets more interesting. We have done micro hybrid systems in the Maldives and we’re exploring larger scale in Philippines and Indonesia. In these markets where you may not have grid availability, then having a mixture of solar, diesel and storage makes a lot of sense. You can have continuous power on micro grid systems. As the price of storage increasingly lowers, for us, we have one very keen eye on it, we are monitoring the development and particularly the cost of technological advancements – we see that it will be appropriate for smaller systems initially in more flat land areas such as resorts in the Maldives, off-grid islands in Indonesia, etc. But in terms of a gigafactory, I don’t see that happening in SEA anytime soon because there is already a lack of raw materials and the big players like Tesla is already monopolizing the supply. I think it is an important development and can be useful for smaller systems in remote areas in the region. But it may take 4-5 years until there is enough demand to build one.
8. What major changes or developments do you foresee in the industry in the next 10 years?
I think the solar industry’s strategy will evolve in a more dynamic way in Singapore. I think Singapore will be more focused on integration of solar energy with blockchain, or integration of solar with offsite PPA, or bundling with retail offerings. I see solar integrating in a wider energy strategy, being hand in hand with energy efficiency, urban farming, etc. Singapore will be a showcase platform for regulatory advancement, technological innovation, testbeds and R&D. It is important that we in Singapore set an example to the region and export our expertise and knowledge.
9. How soon do you think that renewable energy industry will replace fossil fuels as the main energy source to power the economies in this region?
As the price of solar is currently so low (1.77 cents per kilowatt-hour), it is a no brainer for solar and renewables. If you look at the state arms at Norway, they are looking to divest $30 billion in fossil fuel shares and holdings. So the move is already starting. Over the next 20 years, renewable energy will become the dominant force. However there are technical and regulatory challenges. The utility players have spent billions over decades putting up the infrastructure and transmission lines on which they have made windfall profits because of their monopolies. When distributed generated energy is growing, that means that people will no longer need to depend on the central grid. When you introduce the blockchain, you no longer need the grid to account and transact which is a game-changer. So the revolution of energy will be digital, distributed and it will be smart. A company such as Solar Horizon who are lean, innovative and creative, are staying at the forefront by making sure that a number of our projects can accommodate the integration of technology, blockchain and energy efficiency. So when the industry explodes in that direction, we’ll be ready for it.
10. For an entrepreneur who is considering a business in Solar industry, what advice or tips can you provide him/her?
Figure out your niche and what you’re good at doing. Find out what kind of resources you have access to. If you want to go into large scale power plant development and construction, you’ll need a lot of capital. If you want to enter the solar operation and maintenance spaces and offer services, you need good engineers on board. Think about business model innovation – not every startup has to invent a new technology or invention, you can be creative and innovative. Talk to a lot of people to get a lot of ideas. Try to do something that has not been done or if it has been done, figure out how to make it different. Luck and timing are also important – get into the market at the right time.
11. Tell us more about Solar Horizon. What’s next in the pipeline for your company?
We’re going through a rebirth because it’s been a tough past year which shook us and our competitors. We almost got acquired early this year but we pulled out of the acquisition to maintain our independence, creativity and agility. What’s next for us? We are being very strategic and targeted, moving our focus away from mainstream to a niche, premium segment. We’re looking to repeat in scale a few key markets, and looking to stay focused on the PPA business but for now slowly but surely starting to put a concrete high on how we can integrate emerging technologies to make our offering more competitive. We are looking to scale the next 2-3 years and our project sizes are greatly expanding so this is the time for Solar Horizon to put into practice everything we’ve learned the hard way, to establish ourselves in a larger scale environment but still remaining niche and focused.
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In a few days, the bi-annual OPEC meeting will take place on November 30, leading into a wider OPEC+ meeting on December 30. This is what all the political jostling and negotiations currently taking place is leading up to, as the coalition of major oil producers under the OPEC+ banner decide on the next step of its historic and ambitious supply control plan. Designed to prop up global oil prices by managing supply, a postponement of the next phase in the supply deal is widely expected. But there are many cracks appearing beneath the headline.
A quick recap. After Saudi Arabia and Russia triggered a price war in March 2020 that led to a collapse in oil prices (with US crude prices briefly falling into negative territory due to the technical quirk), OPEC and its non-OPEC allies (known collectively as OPEC+) agreed to a massive supply quota deal that would throttle their production for 2 years. The initial figure was 10 mmb/d, until Mexico’s reticence brought that down to 9.7 mmb/d. This was due to fall to 7.7 mmb/d by July 2020, but soft demand forced a delay, while Saudi Arabia led the charge to ensure full compliance from laggards, which included Iraq, Nigeria and (unusually) the UAE. The next tranche will bring the supply control ceiling down to 5.7 mmb/d. But given that Covid-19 is still raging globally (despite promising vaccine results), this might be too much too soon. Yes, prices have recovered, but at US$40/b crude, this is still not sufficient to cover the oil-dependent budgets of many OPEC+ nations. So a delay is very likely.
But for how long? The OPEC+ Joint Technical Committee panel has suggested that the next step of the plan (which will effectively boost global supply by 2 mmb/d) be postponed by 3-6 months. This move, if adopted, will have been presaged by several public statements by OPEC+ leaders, including a pointed comment from OPEC Secretary General Mohammad Barkindo that producers must be ready to respond to ‘shifts in market fundamentals’.
On the surface, this is a necessary move. Crude prices have rallied recently – to as high as US$45/b – on positive news of Covid-19 vaccines. Treatments from Pfizer, Moderna and the Oxford University/AstraZeneca have touted 90%+ effectiveness in various forms, with countries such as the US, Germany and the UK ordering billions of doses and setting the stage for mass vaccinations beginning December. Life returning to a semblance of normality would lift demand, particularly in key products such as gasoline (as driving rates increase) and jet fuel (allowing a crippled aviation sector to return to life). Underpinning the rally is the understanding that OPEC+ will always act in the market’s favour, carefully supporting the price recovery. But there are already grouses among OPEC members that they are doing ‘too much’. Led by Saudi Arabia, the draconian dictates of meeting full compliance to previous quotas have ruffled feathers, although most members have reluctantly attempt to abide by them. But there is a wider existential issue that OPEC+ is merely allowing its rivals to resuscitate and leapfrog them once again; the US active oil rig count by Baker Hughes has reversed a chronic decline trend, as WTI prices are at levels above breakeven for US shale.
Complaints from Iran, Iraq and Nigeria are to be expected, as is from Libya as it seeks continued exemption from quotas due to the legacy of civil war even though it has recently returned to almost full production following a truce. But grievance is also coming from an unexpected quarter: the UAE. A major supporter in the Saudi Arabia faction of OPEC, reports suggest that the UAE (led by the largest emirate, Abu Dhabi) are privately questioning the benefit of remaining in OPEC. Beset by shrivelling oil revenue, the Emiratis have been grumbling about the fairness of their allocated quota as they seek to rebuild their trade-dependent economy. There has been suggestion that the Emiratis could even leave OPEC if decisions led to a net negative outcome for them. Unlike the Qatar exit, this will not just be a blow to OPEC as a whole, questioning its market relevance but to Saudi Arabia’s lead position, as it loses one of its main allies, reducing its negotiation power. And if the UAE leaves, Kuwait could follow, which would leave the Saudis even more isolated.
This could be a tactic to increase the volume of the UAE’s voice in OPEC+, which has been dominated by Saudi Arabia and Russia. But it could also be a genuine policy shift. Either way, it throws even more conundrums onto a delicate situation that could undermine an already fragile market. Despite the positive market news led by Covid-19 vaccines and demand recovery in Asia, American crude oil inventories in Cushing are now approaching similar high levels last seen in April (just before the WTI crash) while OPEC itself has lowered its global demand forecast for 2020 by 300,000 b/d. That’s dangerous territory to be treading in, especially if members of the OPEC+ club are threatening to exit and undermine the pack. A postponement of the plan seems inevitable on December 1 at this point, but it is what lies beyond the immediate horizon that is the true threat to OPEC+.
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In the U.S. Energy Information Administration’s (EIA) November Short-Term Energy Outlook (STEO), EIA forecasts that U.S. crude oil production will remain near its current level through the end of 2021.
A record 12.9 million barrels per day (b/d) of crude oil was produced in the United States in November 2019 and was at 12.7 million b/d in March 2020, when the President declared a national emergency concerning the COVID-19 outbreak. Crude oil production then fell to 10.0 million b/d in May 2020, the lowest level since January 2018.
By August, the latest monthly data available in EIA’s series, production of crude oil had risen to 10.6 million b/d in the United States, and the U.S. benchmark price of West Texas Intermediate (WTI) crude oil had increased from a monthly average of $17 per barrel (b) in April to $42/b in August. EIA forecasts that the WTI price will average $43/b in the first half of 2021, up from our forecast of $40/b during the second half of 2020.
The U.S. crude oil production forecast reflects EIA’s expectations that annual global petroleum demand will not recover to pre-pandemic levels (101.5 million b/d in 2019) through at least 2021. EIA forecasts that global consumption of petroleum will average 92.9 million b/d in 2020 and 98.8 million b/d in 2021.
The gradual recovery in global demand for petroleum contributes to EIA’s forecast of higher crude oil prices in 2021. EIA expects that the Brent crude oil price will increase from its 2020 average of $41/b to $47/b in 2021.
EIA’s crude oil price forecast depends on many factors, especially changes in global production of crude oil. As of early November, members of the Organization of the Petroleum Exporting Countries (OPEC) and partner countries (OPEC+) were considering plans to keep production at current levels, which could result in higher crude oil prices. OPEC+ had previously planned to ease production cuts in January 2021.
Other factors could result in lower-than-forecast prices, especially a slower recovery in global petroleum demand. As COVID-19 cases continue to increase, some parts of the United States are adding restrictions such as curfews and limitations on gatherings and some European countries are re-instituting lockdown measures.
EIA recently published a more detailed discussion of U.S. crude oil production in This Week in Petroleum.
The U.S. Energy Information Administration (EIA) forecasts that members of the Organization of the Petroleum Exporting Countries (OPEC) will earn about $323 billion in net oil export revenues in 2020. If realized, this forecast revenue would be the lowest in 18 years. Lower crude oil prices and lower export volumes drive this expected decrease in export revenues.
Crude oil prices have fallen as a result of lower global demand for petroleum products because of responses to COVID-19. Export volumes have also decreased under OPEC agreements limiting crude oil output that were made in response to low crude oil prices and record-high production disruptions in Libya, Iran, and to a lesser extent, Venezuela.
OPEC earned an estimated $595 billion in net oil export revenues in 2019, less than half of the estimated record high of $1.2 trillion, which was earned in 2012. Continued declines in revenue in 2020 could be detrimental to member countries’ fiscal budgets, which rely heavily on revenues from oil sales to import goods, fund social programs, and support public services. EIA expects a decline in net oil export revenue for OPEC in 2020 because of continued voluntary curtailments and low crude oil prices.
The benchmark Brent crude oil spot price fell from an annual average of $71 per barrel (b) in 2018 to $64/b in 2019. EIA expects Brent to average $41/b in 2020, based on forecasts in EIA’s October 2020 Short-Term Energy Outlook (STEO). OPEC petroleum production averaged 36.6 million barrels per day (b/d) in 2018 and fell to 34.5 million b/d in 2019; EIA expects OPEC production to decline a further 3.9 million b/d to average 30.7 million b/d in 2020.
EIA based its OPEC revenues estimate on forecast petroleum liquids production—including crude oil, condensate, and natural gas plant liquids—and forecast values of OPEC petroleum consumption and crude oil prices.
EIA recently published a more detailed discussion of OPEC revenue in This Week in Petroleum.