Setting the right goals


  1. Global Warming of 1.5°C, IPCC
  2. Various sources and the media

Effectively mitigating climate change requires doing enough to solve the problem, not merely meeting self-declared national goals. As far as renewables are  concerned, the IPCC[1] calls for a global renewable energy mix of at least 48% by 2030 & 63% by 2050. This is the minimum pathway required to prevent an overshoot of global warming that might be irreversible once breached.

The IPCC targets are higher than policy targets of many Southeast Asian governments. It is still a widespread assumption that continued use of fossil fuel power plants are necessary to support GDP growth at reasonable cost.

Turning this mentality around requires a combination of innovation, civil activism, market development and private finance to tilt the equilibrium to our favor. Renewable energy in Southeast Asia must be pursued in collaboration with public stakeholders to maximize outcomes.

RE % targets of several
Southeast Asian countries[1]

We promote leveling the playing field for renewables

GHG emissions are a market failure; in the sense that industries that discharge GHGs impose a burden on society but are currently not made to pay for the consequences of their pollution.

Efficient markets require complete information, and the most important piece of information communicated between industries and consumers is price. If market prices of electricity include the negative externality of GHGs, then consumers of GHG-intensive electricity will be able to continue enjoying them while paying their fair dues. More importantly, divergent price signals between GHG-intensive and GHG-benign electricity will drive adoption of the later, encouraging suppliers to adapt.

To prevent one part of the economy from undoing the climate mitigation efforts of another, comprehensive carbon tax[3] policies are required. As of 2019, no country in Southeast Asia has implemented such policies yet.

The electricity market is the ideal testbed for experimenting with carbon tax policies. Since electricity is delivered via centralized grids, collection and administration of carbon taxes are relatively low, and it will expand the appeal of renewables to more than just environmentally-conscious consumers.

A market development model that mirrors the venture capital ecosystem

Renewable Energy (“RE”) projects differ from traditional infrastructure in that they requires a degree of experimentation before they can fully mature. On top of technology, site and construction risks, there is also a limited supply of proven companies in this industry within Southeast Asia.

From a capital allocation standpoint, it is best to treat RE the same way we treat the venture capital ecosystem, where a large population of small companies are seeded before passing through a value-chain of investors through market selection.

Market development model

A portion of these companies will fail, especially at early stages. Only those that survive the initial hurdles will be able to secure successively larger financing to scale up.

Once we have a pool of mature companies, the market can go through an agglomeration phase via M&A to produce entities of critical mass for an exit event (either trade sale or IPO).

This market development model is robust as it allows the investment community to bet on a multitude of companies at low commitments when they are still risky, then amplify commitments once they are more proven.

In an environment where operating and economic parameters are unknown, focus should be speed to market in order to start data collection.

Viewed through this lens, first-time projects which are modular; with small minimum viable enterprise (“MVE”) sizes are preferred over those with necessarily large MVEs. Since focus of MVEs are data collection, optimum capital structure is a secondary concern. MVEs can be financed 100% through equity which will improve speed to market.

Comparative project scaling roadmaps

Once reliable data is available, adjacent expansion can be financed with much higher leverage ratios to improve economics. This phased-based approach allows the investment community to systematically widen the capital pool available for RE projects.

The best instrument to promote the proliferation of MVEs are sufficiently large and focused private equity funds. The long-term outlook of private funds allow for flexibility in deal structuring and accumulation of sector-specific institutional knowledge, improving capital allocation efficiency over time.

Encouraging a community of foreign private-finance players to participate in the region

Meeting the IPCC minimum pathway requires pursuing renewable energy at significant scale within an aggressive timeline. This calls for infrastructure spending on an unprecedented scale – more than any government or investment firm can afford on their own.

It is imperative for us to produce a regional environment that is conducive to foreign investors[4]. This include having an enabling policy framework, low barriers to entry, minimized market risk and a wide array of maturing companies and assets to choose from.

Our firm manages sector-focused funds to invest in a multitude of  independent renewable energy projects throughout Southeast Asia, particularly at early or growth stages. Our goal is to facilitate sustained capital flow towards this cause whilst providing attractive risk-adjusted returns.