Solar Guys tap Islamic finance for 50MW Indonesia project

Queensland solar company The Solar Guys has tapped into the huge Islamic finance market to fund a 50MW solar PV project in Indonesia, the first in a series of projects under an agreement struck with the Indonesian government.

The Solar Guys are proposing to build 250MW of solar PV under a plan it has dubbed the “One Solar Watt Per Person” campaign. The target of 250MW translates into 250 million watts, which roughly equates to Indonesia’s population.

Dane Muldoon, the director of The Solar Guys international said the company will act as a EPC contractor to build the $120 million project – system design, procurement, installation supervision, project management and assistance with the ongoing operation over its life.

Mitabu Australia is handling the finance and the most significant part of the project may be the use of Islamic finance, or Sukuk, which is a form of long-term bond often used for infrastructure projects that are judged to be in the community’s best interest. Most of the investment is coming via the Middle East and Malaysia.

The companies say solar PV offers the lowest levelised cost of energy in many south-east asian countries, particularly when the cost of fossil fuels and associated infrastructure is taken into account.

Muldoon said each project had been guaranteed a power purchase agreement and would either displace dirty and expensive fossil fuel power generation (Indonesia faces high diesel costs which is why it also offers generous tariffs for geothermal installations) or bring reliable power to remote communities for the first time.”

Muldoon says the One Solar Watt per Person target was produced after meetings with Indonesia officials at an energy conference in Jakarta in July. Indonesia needs 25,000MW of new power sources in coming years, and vice president Boediono recently said he wants all of it to come from renewable energy. One quarter of its population current has no access to electricity.

“Ideally we’d like to do the same across Thailand, Malaysia, Vietnam, and (other South-East Asian countries),” Muldoon told RenewEconomy. “The One Solar Watt idea could end up being a very significant and beneficial program across Asia. It’s a simple yet big idea.”

Mitabu director Dr M Rusydi said the Sukuk financing mechanism treated the solar plant like an infrastructure project such as a toll road or water pipeline. “Many financiers view solar power as just a ‘green’ product,” he said in a statement. “We see solar power as being the fastest way to deliver the crucial clean energy infrastructure needed in countries like Indonesia.”