'In Thailand, 99% of the households that joined the solar feed-in tariff programme are from the high-income segment." This comment from Dr Dusit Krea-ngam is a bit of a shock to us.
"There has never been any inquiry or interest from customers in the middle-income household bracket," he explained.
One of the major obstacles to installing solar panels is the significantly high upfront cost, which is said to be 400,000 baht for a typical 5 kilowatt system for residential usage in Thailand.
However, a new business model can potentially fill this inaccessible gap — the roof-rental business. That is, a company, which installs solar systems on customers' roofs for free, earns the Feed-In-Tariffs (FIT) income from the generated electricity, while the customer benefits from the rental of their roofs through discounted electricity, free electricity or some actual income (this varies according to the company and the country).
The major global players in this roof-rental business appear to be the United Kingdom and Japan. Although there are several criteria to satisfy in advance to participate in the programme — such as climatic conditions and infrastructural design of buildings — the roof-rental business in both places does not involve a charge on the roof owner to have the system installed, through to maintenance. On top of that, the system is finally given to the roof owner in the two areas after a 20-25 year contract.
The roof-rental business in the UK provides free electricity, averaging around US$200 (6,400 baht) per year while the business developer receives FIT income from the generated electricity. In addition, the developer receives an "export tariff" for every kilowatt-hour they export to the grid. For the year 2014, the generation tariff in the UK for a solar system sized 4-10KW is 13.03 pence a kilowatt-hour (6.94 baht) and the export tariff is 4.50p per kWh (2.35 baht).
The Japanese roof-rental business appears to be slightly simpler; the roof owner literally earns the "rent" by renting out their roof to the developer. This rent would annually be $100 on average for a typical 5 kilowatt residential capacity while the developer can fully appreciate the full amount of FIT from the generated electricity. In addition, through the government-owned Development Bank of Japan, the developers can get low-interest loans to establish this business.
"The most appropriate business model for the residential sector in Thailand is the roof rental model," said an officer from a leading bank in Thailand in an interview with the Energy Research Institute.
Although he agreed that the low level of environmental awareness in Thai society remains a big challenge, a huge portion of the population is currently being left out on accessing solar power, which offers untapped and attractive business opportunities for roof rental for solar power generation.
The scene is set as Thailand's second generation FIT quotas are being handed out towards the end of 2014. For the residential scale, around 70 megawatts of PPA's will be up for grabs. The tariff rate at 6.85 baht per kilowatt-hour (for rooftop solar systems of 10 kilowatts) will be granted for 25 years for eligible projects.
The opportunity is opening up for businesses to offer a roof-rental scheme to homeowners who are reluctant to invest in solar power due to the high upfront cost. Homeowners not only can have solar power generation on their roof for free, but can also generate income from the unused space.
Despite the huge potential of this untapped market, many regulatory and legal issues remain. First, regulation limitations require that FIT revenue is paid only to the homeowners and not to a third party.
Second, there is a legal issue, as there are no roof-rental contracts in Thailand.
As promising as the roof rental model may be, without unlocking these limitations, it may be another great opportunity missed for homeowners and the PV market in Thailand.
Sopitsuda Tongsopit is a researcher at the Energy Research Institute, Chulalongkorn University; Aisa Sano and Tanai Potisat are research assistants at the institute.