236 G. JINDAL ET AL.
pricing strategy, though offered by most solar developers, has somehow
not gained much acceptance from consumers.
This lack of appeal of fixed price solar electricity comes from a bias
inherent in consumers’ decision-making process. As mentioned earlier,
most solar electricity consumers are commercial or industrial users, which
typically employ corporate finance metrics to make decisions on investments in projects. A percentage reduction model generally has a stronger
appeal, since it ensures a cost saving whereas a fixed price may not. Over
the years, as Singapore’s solar market has evolved and matured, variations of the fixed and floating pricing structures have emerged, including
mechanisms such as price ceilings and price floors. However, the fixed
price regime has not garnered much interest.
Domestic market dynamics adds another challenge to solar development in Singapore. The geographical potential for PV adoption in
Singapore is very small compared to its neighboring countries such
as Indonesia, Malaysia, and Thailand. Moreover, the types of projects
common in Singapore are almost entirely distributed rooftop PV,
compared to large-scale utility PV in other countries. Such small-scale
projects are relatively more expensive and require different financing
vehicles compared to utility PV systems.
Unlike large-scale projects that can tap project financing vehicles,
small-scale projects are typically funded with corporate loans. The nature
of the solar market’s development trajectory has therefore created a highly
competitive business environment for industry players. Without largescale projects that require big multinational players with strong financial
backgrounds, the market is dominated by smaller players with minimal
capital. Compounded by the fact the most business opportunities are
distributed PV installations, this creates a largely homogenous, highly
competitive, and fragmented local solar industry that competes on price.
Considering this, access to financing creates another challenge for the
local industry players. A typical bank loan in Singapore ranges between
US$35 and 70 million, which is equivalent to a solar project size of
30–60 MW. However, distributed PV projects in Singapore have not yet
exceeded even 5 MW. Consequently, solar projects are currently financed
through a combination of debt and equity.
Since most solar developers in Singapore are small and medium enterprises (SMEs), the most utilized forms of bank loans are SME loans,
which usually offers floating interest rates of 6–7%, and a loan term of
3–5 years. Such loans often come with a requirement to pledge certain
pricing strategy, though offered by most solar developers, has somehow
not gained much acceptance from consumers.
This lack of appeal of fixed price solar electricity comes from a bias
inherent in consumers’ decision-making process. As mentioned earlier,
most solar electricity consumers are commercial or industrial users, which
typically employ corporate finance metrics to make decisions on investments in projects. A percentage reduction model generally has a stronger
appeal, since it ensures a cost saving whereas a fixed price may not. Over
the years, as Singapore’s solar market has evolved and matured, variations of the fixed and floating pricing structures have emerged, including
mechanisms such as price ceilings and price floors. However, the fixed
price regime has not garnered much interest.
Domestic market dynamics adds another challenge to solar development in Singapore. The geographical potential for PV adoption in
Singapore is very small compared to its neighboring countries such
as Indonesia, Malaysia, and Thailand. Moreover, the types of projects
common in Singapore are almost entirely distributed rooftop PV,
compared to large-scale utility PV in other countries. Such small-scale
projects are relatively more expensive and require different financing
vehicles compared to utility PV systems.
Unlike large-scale projects that can tap project financing vehicles,
small-scale projects are typically funded with corporate loans. The nature
of the solar market’s development trajectory has therefore created a highly
competitive business environment for industry players. Without largescale projects that require big multinational players with strong financial
backgrounds, the market is dominated by smaller players with minimal
capital. Compounded by the fact the most business opportunities are
distributed PV installations, this creates a largely homogenous, highly
competitive, and fragmented local solar industry that competes on price.
Considering this, access to financing creates another challenge for the
local industry players. A typical bank loan in Singapore ranges between
US$35 and 70 million, which is equivalent to a solar project size of
30–60 MW. However, distributed PV projects in Singapore have not yet
exceeded even 5 MW. Consequently, solar projects are currently financed
through a combination of debt and equity.
Since most solar developers in Singapore are small and medium enterprises (SMEs), the most utilized forms of bank loans are SME loans,
which usually offers floating interest rates of 6–7%, and a loan term of
3–5 years. Such loans often come with a requirement to pledge certain