April 9, 2025 • 25 mins
Global supply chains have reconfigured since the 2018-19 trade war, leading to a surge in renewable-energy demand in countries such as Vietnam, Indonesia and Malaysia as Nike and Samsung set up operations. This trend, coupled with population growth and the proliferation of AI-driven data centers, is projected to triple the demand for power in the next five years, according to Gavin Adda, CEO of Peak Energy.
The subsidiary of Stonepeak, an infrastructure investment firm which manages more than $70 billion in assets, expects a big chunk of this energy demand will be met with renewable sources. Adda also sees Asian countries deregulating energy markets, opening up avenues for investments in solar and wind. He joins John Lee and Katia Dmitrieva on the Asia Centric podcast.
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Speaker 1 (00:00):
Artificial intelligence and cloud computing is sparking a rush to
build data centers around the world, and some of the
biggest areas of growth are in Asia. Earlier this year,
Ali Baba announced it will spend over fifty billion dollars
on data centers and other AI infrastructure. That's over the
next three years. It's creating an insiciable demand for electricity.
Speaker 2 (00:23):
And here in Asia, countries from Japan to Vietnam are
increasingly deregulating those energy markets, creating opportunities for renewable energy
like solar and wind. You're listening to Asia Centric from
Bloomberg Intelligence. I'm John Lee in.
Speaker 1 (00:39):
Hong Kong, and I'm Kadidmitrieva, also in Hong Kong.
Speaker 2 (00:43):
Here to discuss the renewable energy scene in Asia is
Gavin Adda. He's the CEO of Peak Energy. It's a
portfolio company under Stone, Peak the infrastructure giant with over
seventy billion dollars in assets under management. Gavin, Welcome to
the show.
Speaker 3 (00:59):
Thank you to be here now.
Speaker 1 (01:01):
Gavin, you're joining us from Singapore. One question I had,
and this is for the lay listener who might not
know a lot about this industry, but could you tell
us you know what do you do?
Speaker 4 (01:11):
Yeah, okay, So I develop solar, wind and battery projects
and sell renewable energy.
Speaker 3 (01:18):
To corporates across Asia.
Speaker 4 (01:20):
So that could either be building a system on top
of their roof, on their facility or something like that.
Or I'm taking a large solar farm or wind farm,
constructing it and then pushing the electricity through the grid
to large corporates.
Speaker 1 (01:35):
And this isn't sort of your solar panels on the
roof of your house. Can you tell us about the
size of these projects, like how big are these projects?
Speaker 5 (01:43):
Who are the players involved?
Speaker 4 (01:45):
So maybe a good example would be someone like Nike, Right,
So Nike has about two million people working for them
across Asia. You know, particularly in Indonesia and Vietnam, they
have these big flat roofs with thousands of people inside.
And you're taking those big flat roofs and basically covering
them in solar panels, for example, and pushing that power
(02:07):
directly into the building. That building is then using that
electricity for their machines, for their air conditioning, for whatever
they're using, and then any excess power ideal is being
sent to a grid and being used by residential customers
or whatever. But that's kind of the model for on
site solar projects.
Speaker 2 (02:24):
And govin just how big is this industry? Just give
us some numbers and tell us how fast it's growing.
Speaker 4 (02:31):
Yes, So if I just deal with the on site side,
if you look at a mature market, somewhere like the
US is doing about ten billion dollars a year of
on site solar projects, and we're starting to see that
business building up now in Asia. So somewhere like Singapore,
which is quite frankly, very small land mass, not much rooftop,
(02:52):
they have a target to do about two billion dollars
of solar rooftop. And then if you think about somewhere
like Indonesia or Philippines, they could do many multiples of that,
but todate have done very little.
Speaker 3 (03:03):
So it's a very new market that's just taking off.
Speaker 2 (03:06):
And I'm assuming that here in Asia it's growing much
faster than the rest of the world.
Speaker 3 (03:10):
Yeah, I think that's true.
Speaker 4 (03:11):
I mean I think if you look at the forecasts
for an analysts, they'd say that power demand in Asia
expected to triple over the next five years, which is
really an extraordinary growth rate, and at least fifty to
sixty percent of that to come from renewables, and that
kind of mirrors what we're seeing all across the world.
Speaker 1 (03:31):
So why renewables in Asia? Like, what is happening here
that's really driving that demand? We talked about about data
centers AI is it that? Is it something more?
Speaker 4 (03:42):
Yeah, there's a lot to unpack in there. So the
situation is you've got massive increases in the demand side,
and then you've got certain constraints on the supply side
that have pushed us towards renewables. So if I start
on the demand side, you've got your base growth, You've
got you know, populations become wealthier and moving into cities
using air conditioning TVs.
Speaker 3 (04:03):
The normal expectation.
Speaker 4 (04:05):
I think the second big driver is the move of
the world's supply chains from China to Southeast Asia. So
China is no longer as competitive as it was, and
so you're seeing people moving into Vietnam and Indonesia and Philippines,
And that's the second driver. Nike used to be in
China now in Southeast Asia, and many of these global
(04:26):
brands as they move out of China are looking for
inneable energy. They've made commitments to anewable energine, so they're
looking for which market can I go into and get
that kind of supply. I think then the third driver
is data centers and AI that's just starting to come
online now in most markets as a broad range of
different maturity. So somewhere like Singapore, seventeen percent of the
(04:49):
entire country's power is going into data centers and so
that's driven up grid prices very significantly, and it's starting
to reach maximum capacity. So that's really on the outside.
Then on the supply side, the base growth was already
too much for the utilities. Right, most of these countries
are having regular brandouse, regular blackouts. If you think about Philippines, Indonesia,
(05:10):
et cetera, constantly having problems getting enough power in to
the demand side. And the structure is monolithic, right, if
you go to Indonesia, there's one company that manages transmission,
the grid, the generation. They have a very significant monopoly
on the supply side, and they are regulated markets, so
the government basically controls the price and it's a sensitive
(05:34):
voting topic. There are in examples of riots as grid
prices get increased. So that's made it very very difficult
for utilities to increase the tariffs, increase the power prices.
So we're now in a situation where the cost of
power is actually higher than the revenue that they're getting
from selling that power.
Speaker 2 (05:54):
So they're loss making.
Speaker 4 (05:55):
So they're loss making, massively loss making, and they've got
to subsidize that loss. We're taxpayers money. So if you
look at somewhere again like Indonesia is a good example,
about five billion dollars a year of taxpayers money is
going into the utility to keep it alife. This was
all then exacerbated significantly by the conflict in Ukraine by COVID.
Speaker 3 (06:16):
You've seen commodity prices spike, You've seen.
Speaker 4 (06:19):
LNGG prices go up, and that's made it even more
difficult for the utilities to survive. And meanwhile, they were
really not able to invest into their infrastructure, they were
not able to install renewables, and so that's really been
the straw that broke the camel's back. And the reaction
is government's saying, okay, I have to deregulate. Prices are
going up. I can see that there's a way to
(06:39):
bring in new power from someone else, from foreign investors.
So I'm going to deregulate and allow independent power producers
to come on board. So that's really been the big driver.
That's been the really exciting thing that we're starting to
see is all these different markets opening up and allowing
independent power producers to come in.
Speaker 5 (06:56):
How competitive is it?
Speaker 4 (06:58):
Like?
Speaker 1 (06:58):
Can you paint us an image of what that looks
like when you as a company go in and you
want to supply that power? Is there an RFP like
a bidding process? Are you in there like taking these
governments out for meetings?
Speaker 5 (07:12):
Maybe like a beer? What does that look like?
Speaker 4 (07:16):
So? What I like about this is that it's a
point to point discussion. Right, So it's me talking to
a company. The company is running a tender. The company
is then going through a process of evaluating all the
different suppliers. How much power can you provide? What's your
price of power? And Asia is really a grid parity market.
We're not like Europe or the US where there are
(07:37):
large substy is helping renewables. We need to be cheaper
than the grid otherwise we struggle to install large volumes.
What I like as a foreign investor is I'm not
having to spend as much time with utilities and finding
ways to.
Speaker 3 (07:51):
Build relationships there.
Speaker 4 (07:53):
It's a pure performance kind of conversation price and volumes.
Speaker 2 (07:57):
So you said you mentioned grid parody. Are you saying
that if you source your energy or you're from solar
or wind, it's actually cheaper than traditional sort of fossil fuels.
Speaker 3 (08:09):
Yeah.
Speaker 4 (08:10):
I mean that's been the really exciting point that I
think is not that well known in the region. So
if I install a solar system for a customer in Thailand,
I'm going to be fifty percent cheaper than the grid.
Speaker 5 (08:22):
Wow, fifty five zero.
Speaker 4 (08:24):
Fifty percent, right, So we have customers who are saving
two million dollars a year by installing solar systems on
their facilities. And then even in Indonesia, where taxpayers money
is being used to subsidize the price of the grid
and keep it low, even there we're thirty percent cheaper
than the grid. So when you look at that, you think, well,
hold on a second, why isn't there more renewables coming
(08:44):
into these markets?
Speaker 3 (08:45):
And that's really been about regulation and deregulation.
Speaker 2 (08:48):
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(09:11):
If you like what you're here, don't forget to subscribe
and share. Yeavin, I'm going to ask a really stupid
question here, like how reliable is solar Like, for example,
if you've got solar panels and it suddenly rains days
on end. You sometimes see that in Southeast Asia. Does
that mean that you don't get the solar or is there.
Speaker 4 (09:30):
Just that's the key point, right, So you've got your
solar system on your roof, you're sending the power into
that building. You know, you're forecasting what the power is
going to look like for the next ten or twenty years.
Retake the risk. And this has been the problem historically
is you need an investor, an expert who's willing to
take the risk of that weather. And that has been
something that has stopped the market from taking off in
(09:52):
the past. But generally speaking, and I'm sitting in Singapore
and it's been raining NonStop for three days, non stop
right day and night, and your solar system gets less sunlight,
but it gets better performance. It's cleaner, it's cooler, and
it performs better in that situation. So you might see
a thirty percent drop in performance or a forty percent
(10:14):
drop in performance, But the quality of the technology means
now that there's not that much of a difference.
Speaker 3 (10:21):
I think that's one point.
Speaker 4 (10:22):
Then the second point is you're still connected to the grid,
so it just means that you take less power from
the grid than you would from the solar system. And
then I think the third point is that batteries are
coming in, and batteries change the complete sort of scheme
of this because we now install larger solar systems, especially
if you can do a solar farm, large batteries, and
(10:44):
then you're able to provide power right the way through
the night and it's firm.
Speaker 3 (10:47):
It behaves just like a guest clut.
Speaker 1 (10:49):
And you said you're willing to take the risk because
there's not a lot of companies, the investors who would
be willing to take that risk. Why are you guys able.
Speaker 4 (10:56):
To do that? I think that we have the engineering team,
we have the data sources, so we basically are connecting
into people like NASA and downloading multiple decades of data
to know exactly how well a solar system is going
to perform in any given scenario. So rather than trusting someone,
(11:17):
we have our own ground up, you know, prime research
that we're doing to understand exactly what a solar system
is going to do. First part, and then the second
part is the team and I have run billions of
dollars of solar plants in Asia, so we would be
one of the more experienced. So we're quite comfortable that
we know how to operate and maintain that system. So
(11:38):
can we get out there clean it? Can we make
sure the cabling is working?
Speaker 3 (11:41):
Okay?
Speaker 4 (11:41):
Do we see the problem before it happens. These kind
of things are really important in terms of actually running. It's
a very simple system, but it's still a.
Speaker 3 (11:49):
Power plant and you need somebody who knows what they're doing.
Speaker 2 (11:52):
So Gavin Asia is pretty diverse. You know, what are
the most hottest areas in your world? In Asia? Which
countries are they?
Speaker 4 (12:00):
Yeah, that's a good question. The challenges that it changes
year to year, and I would like to say that
I'm able to forecast what's going to happen next year.
But the one thing I've learned in the last twenty
years in Asia, you can't, so I would say, you know,
we've added maybe half a billion dollars worth of projects
in Korea. There's a huge amount of demand there. There's
(12:20):
a lot of manufacturing, a lot of export, and so
a lot of the corporates there are looking to buy
renewable energy in order to be able to fulfill some
of the sustainability requirements that you get from Europe.
Speaker 3 (12:33):
So that's really sustainability driven at the moment.
Speaker 4 (12:36):
I'd say a lot is happening in Japan, so we're
seeing a similar model, and Japan is very aggressively deregulating
to encourage more foreign investors into their market. Then go
across to Malaysia, and Malaysia is exploded. It's come from
a very monolithic, very monopolized market where it was really
difficult to get into even on the rooftop side, and
(12:57):
now with the spillover of data center is from Singapore,
you're seeing very significant demand and we're looking at sort
of multi hundred million dollars solar farms in Malaysia.
Speaker 3 (13:08):
But it moves all the time.
Speaker 4 (13:10):
If you'd ask me last year I think Philippines would
have been probably the most interesting market last year.
Speaker 3 (13:15):
Yeah, oh wow.
Speaker 5 (13:16):
So it really does change year t year.
Speaker 4 (13:18):
It changes year to year so very rapid because what's
happening is the governments are all fighting against each other
deregulating to try and make their country more attractive for
the investment, not just for people to come in on
the infrastructure side, but then on the customer side. So
you've seen very interesting sort of geopolitical wrangling. Singapore is
(13:39):
a good example because you've got the data center sort
of explosion. Now seventeen percent of the country's energy supply
going into data centers. It's getting to the stage where
its difficult to see that being sustainble on the long term.
Speaker 3 (13:52):
Singapore was then trying.
Speaker 4 (13:54):
To pull in renewable energy for its neighbors, and you
saw Malaysia and Indonesia basically come out and say we
are flat out banning any supply of renewable energy to Singapore.
And I was in meetings with senior officials in those
countries and saying, then why don't you sell power from
your country to Singapore at a higher price.
Speaker 3 (14:16):
You're going to make a lot of money.
Speaker 4 (14:17):
And the response was we know that those data centers
manufacturers are in Singapore. We want to bring them to
our country and we will do whatever we can to
get the jobs and the investments of those manufacturing sites here.
If that means strangling renewable supply for Singapore, that's what
we're going to do. So you've definitely seen those kind
of geopolitical battles going on.
Speaker 2 (14:37):
Oh well, and that's quite interesting.
Speaker 4 (14:39):
You know.
Speaker 2 (14:39):
I know that energy security is a big issue in Europe,
especially with the Russia Ukraine war, but it sounds like
energy security and geopolitics is becoming a big factor in
Southeast Asia as well.
Speaker 3 (14:51):
Yeah.
Speaker 4 (14:52):
Absolutely, I think that the last few years of commodity
spikes has rocked a lot of the region. Like Philippines
is an energy importer, Indonesia's becoming more and more of
an energy importer. So you have no choice but to
take your energy or energy from whoever's supplying and solar
and wing the batteries. It's pretty exciting because once you've
(15:14):
installed your system, it just sits there. It's more expensive
to turn a solar system off than to have it
just running. The costs of solar systems are reducing so
fast that you've now got to a stage where you know,
like for like there as I say, for fifty percent cheaper.
And I think that where you had some resistance from
(15:34):
the incumbent utilities historically, the governments are now cutting through
that because the costs of subsized utilities is too much.
So a lot of these countries are thinking, I build
large solar farms or wind farms or whatever resource you've got,
and I reduce and I hedged my exposure to the
global commodity markets.
Speaker 2 (15:55):
And you mentioned earlier that there's a lot of global companies.
I think you mentioned Nike, but maybe it's like companies
like Samsung that are moving out of mainland China to
Southeast Asia. How influential are these companies in driving the
agenda for renewable energy.
Speaker 4 (16:12):
Yeah, that's definitely a huge, huge topic, and it's much
more driven by them than by the developers. So you know,
I've again had those meetings with regulators, et cetera, where
they're complaining and saying, please get these Western American or European.
Speaker 3 (16:30):
Companies out of my office.
Speaker 4 (16:31):
They're in every day saying I'm going to leave your
country if I don't get renewable energy.
Speaker 3 (16:37):
You have a regulated market.
Speaker 4 (16:38):
You know, there's no way for independent power producers to
come in, and your local utility is not giving me
the renewables I need. So there's huge influence. I mean,
Samsung is twenty percent of Vietnam's.
Speaker 3 (16:49):
Energy production.
Speaker 4 (16:51):
One fifth, yes, yes, and Samsung has moved a lot
of their sensitive technology out of China into Vietnam, specifically
to reduce the potential exposure.
Speaker 3 (17:05):
On technology transfer. So it's a huge factor.
Speaker 4 (17:09):
And the amount of money that's going in around data centers,
and then some of the regulations whereby countries are requiring
their data to be kept in their country, it means
that you then have to spread of data centers into
markets like Indonesia, et cetera. So there's a lot of
influence that they have.
Speaker 1 (17:26):
Well, it seems like a long term trend, like as
you see more companies pulling out of China, I don't
think it's going to change anytime in the next four years,
at least with tariffs, but it does kind of leave
you with the question of what happens if these companies leave, right,
Like all these companies that have moved to Malaysia, Vietnam,
Thailand to diversify or do a China plus one strategy.
(17:50):
There are reciprocal tariffs that are in the books, and
we know that President Trump is looking to target a
lot more countries than just China. So is there like,
how do you think about the risk of these companies
who are driving the agenda right now kind of pulling
back or pulling out.
Speaker 4 (18:07):
Yeah, it's something that I'm watching very closely. And we
definitely needed sustainability support to get the business, to get
the industry going. When I first started developing solar projects
in Asia, I was previously developing projects in the US
and Europe sort of twenty years ago, and you could
(18:29):
see even back then that with the cost curve on
solar so twenty percent per year reducing over the last
twenty five years and very significant drops every now and then.
So we had a fifty percent drop in the last
twelve months, you could see that it was going to
come under the grid. I meanwhile, the grid is going up.
So for me, the important part is we as an
(18:50):
industry need to behave like mature energy players, not always
looking for the subsidy. So and sustainability is I think
going to get hit. We've also seen CSRD regulations in Europe.
So the regulations around how you report who needs to
report on their sustainability and carbon footprint reduced very significantly
(19:12):
in the last two three weeks. So I'm watching it
very closely. But I believe and I'm driving the team
to focus on cost as the main driver, and that's
perfectly viable.
Speaker 3 (19:23):
We do need some more regulation reduction in orders for
us to do that.
Speaker 2 (19:27):
You brought up some interesting points, so it's more cost
focus rather than sustainability goals. Cat did mention President Trump.
Now since he's become the president, there's been a big
backlash against ESG. Trump has got a really famous policy
like you know, drill, baby drill. How is this change as.
Speaker 1 (19:48):
Opposed to sun baby son or wind baby wind?
Speaker 2 (19:52):
This is changing at ordinarrative for renewable energy.
Speaker 3 (19:56):
I don't see it yet.
Speaker 4 (19:57):
So what I'm seeing at the moment is is if
you think about Amazon, it's very interesting. So Amazon was
one of the first people that went into sustainability. It
was primarily driven by the employees, right. The employees pushed,
consumers have pushed, and that has pushed the regulation right,
and so that that fundamental driver.
Speaker 3 (20:17):
I don't think it changed.
Speaker 4 (20:18):
So We're definitely going to see fluctuations towards and away
from sustainability. That's been the case for the last twenty years.
This is a particularly relevant one, but I think that
we just need to stay the course, focus on the
cost differences, and quite frankly, I don't see any change
from our customers right so Amazon or Microsoft or Google
(20:41):
or Nike or Samsung, they're all very actively looking for
renewable procurement from us. So I haven't seen any of
that kind of But you know, no, right a year
down the line, you want to watch Abe Kefley.
Speaker 1 (20:54):
So no pullback yet, is what you're saying. It hasn't
been like the past couple months you're suddenly getting a
drop in demand.
Speaker 3 (21:00):
Definitely not, Definitely not, Gavin.
Speaker 2 (21:03):
I love to talk about renewables as an asset class.
So can you tell us who are the big investors
in renewable energy from your point of view?
Speaker 4 (21:12):
Yes, So I've started two companies. One I sold to
Shell and Keppel and the second one I sold to Total.
So the oil and gas companies for the last five
ten years have been very hungry, and I think about
the investor bases. Really, strategics are strategic large companies and
then financial investors. The strategics think about this as a
(21:33):
new business model that is going to be inevitably growing
over the next ten, twenty thirty years, and so they
are looking for how do I take my employee base
move them into that, what are the different business models
that I can drive, how can I drive returns, et cetera.
And the financial investors are more focused on the results.
I think that it's like a golden goose and golden eggs. Generally,
(21:56):
financial investors like the golden eggs. These are long days
did very stable infrastructure returns. We have twenty year contracts
or twenty five year contracts. As long as the sun
comes up, it's going to generate. That's very stable. Sometimes
their inflation linkedins, and so you've seen a lot of
interest from pension funds, softign wealth funds, infrastructure funds. There's
(22:18):
definitely been a pendulum shift from the strategics more towards
the financial investors in the last year or so. I
think that's good because there was a bit of distortion
before where some of the investors that were coming in
weren't coming in for necessarily the returns. They were coming
in for other aspects, and that distorted the market. That
(22:38):
meant they were willing to take risk return profiles that
might not make a lot of sense in order to
gain volume, whereas the financial investors are a bit more stable,
a bit more return focused.
Speaker 1 (22:51):
You mentioned inflation linked assets. There does a federal reserve
and the pace of inflation price growth does that impact
the business at all.
Speaker 4 (23:00):
So a renewable project, generally speaking, will be twenty to
thirty percent equity, twenty to thirty percent my cash going
into a project, and seventy to eighty percent debt that
I'm going to be taking from a big, regional or
local bank. And so the interest rates are a big factor.
So what is the interest rate on that debt has
a big impact on the weighted average cost of capital
(23:23):
of that project, So I track it very closely. The
reason that relatively constable is usually an increase in interest
rates is going to increase is going to have an
inflationary impact, and so you're going to see grid prices
go up, which makes it easier for me to then
put in a price that everybody is happy with as
a discount to that grid price.
Speaker 2 (23:44):
Gavin, before I let you go, I wanted to ask
a question like I saw your LinkedIn page, and you've
got a lot of experiences in a lot of different countries.
I think I saw obviously the UK, the US, Korea, Singapore, India,
maybe Finland. But like, tell us your background. How did
you get into this space?
Speaker 3 (24:04):
Oh? Wow, okay?
Speaker 4 (24:05):
So I was originally doing it tech so twenty or
thireny years ago and thought, well, you know, Asia is
the exciting part of the world.
Speaker 3 (24:17):
I want to come over to Asia and be part
of that growth.
Speaker 4 (24:20):
And did an MBA and join Samsung and had the
chance to run various different businesses for Samsung. We did
about a billion dollars of investments in the US and
you could see then that renewable energy was taking off.
So that really very run the numbers and you could
see that if if it's making sense in the US,
I should be able to replicate that business in Asia
(24:40):
and build a viable business without necessarily relying on subsidies.
Speaker 1 (24:46):
There is I think a podcast that referred to as
the Indiana Jones.
Speaker 3 (24:52):
Oh God, what was.
Speaker 2 (24:54):
That about Indiana Jones A renewable investing.
Speaker 3 (24:59):
Yeah, that doesn't come up very often.
Speaker 4 (25:01):
I have to admit, No, I did an archaeology and
a topology degree in Cambridge at some point allegedly and
so apparently that has some connection with renewable ERI, but
I have not worked out what the connection is yet.
Speaker 1 (25:14):
All Right, we'll think of a segue. We'll think of
a yeah between those two. Thanks so much for joining
us today.
Speaker 3 (25:21):
Thank you for your time.
Speaker 2 (25:22):
Thank you, Kevin, really good fun.
Speaker 1 (25:25):
You've been listening to asia Centric from Blueberg Intelligence. My
name is Katy Dmitrieva. I'm here in Hong Kong.
Speaker 2 (25:31):
And I'm John Lee, also in Hong Kong.
Speaker 1 (25:33):
You can find other episodes of asia Centric on Apple Podcasts, Spotify,
or wherever you listen.
Speaker 2 (25:39):
And this podcast was produced and edited by Clara Chen
And thanks for listening.
Speaker 5 (25:43):
I'll see you next time.
Artificial intelligence and cloud computing is sparking a rush to
build data centers around the world, and some of the
biggest areas of growth are in Asia. Earlier this year,
Ali Baba announced it will spend over fifty billion dollars
on data centers and other AI infrastructure. That's over the
next three years. It's creating an insiciable demand for electricity.
Speaker 2 (00:23):
And here in Asia, countries from Japan to Vietnam are
increasingly deregulating those energy markets, creating opportunities for renewable energy
like solar and wind. You're listening to Asia Centric from
Bloomberg Intelligence. I'm John Lee in.
Speaker 1 (00:39):
Hong Kong, and I'm Kadidmitrieva, also in Hong Kong.
Speaker 2 (00:43):
Here to discuss the renewable energy scene in Asia is
Gavin Adda. He's the CEO of Peak Energy. It's a
portfolio company under Stone, Peak the infrastructure giant with over
seventy billion dollars in assets under management. Gavin, Welcome to
the show.
Speaker 3 (00:59):
Thank you to be here now.
Speaker 1 (01:01):
Gavin, you're joining us from Singapore. One question I had,
and this is for the lay listener who might not
know a lot about this industry, but could you tell
us you know what do you do?
Speaker 4 (01:11):
Yeah, okay, So I develop solar, wind and battery projects
and sell renewable energy.
Speaker 3 (01:18):
To corporates across Asia.
Speaker 4 (01:20):
So that could either be building a system on top
of their roof, on their facility or something like that.
Or I'm taking a large solar farm or wind farm,
constructing it and then pushing the electricity through the grid
to large corporates.
Speaker 1 (01:35):
And this isn't sort of your solar panels on the
roof of your house. Can you tell us about the
size of these projects, like how big are these projects?
Speaker 5 (01:43):
Who are the players involved?
Speaker 4 (01:45):
So maybe a good example would be someone like Nike, Right,
So Nike has about two million people working for them
across Asia. You know, particularly in Indonesia and Vietnam, they
have these big flat roofs with thousands of people inside.
And you're taking those big flat roofs and basically covering
them in solar panels, for example, and pushing that power
(02:07):
directly into the building. That building is then using that
electricity for their machines, for their air conditioning, for whatever
they're using, and then any excess power ideal is being
sent to a grid and being used by residential customers
or whatever. But that's kind of the model for on
site solar projects.
Speaker 2 (02:24):
And govin just how big is this industry? Just give
us some numbers and tell us how fast it's growing.
Speaker 4 (02:31):
Yes, So if I just deal with the on site side,
if you look at a mature market, somewhere like the
US is doing about ten billion dollars a year of
on site solar projects, and we're starting to see that
business building up now in Asia. So somewhere like Singapore,
which is quite frankly, very small land mass, not much rooftop,
(02:52):
they have a target to do about two billion dollars
of solar rooftop. And then if you think about somewhere
like Indonesia or Philippines, they could do many multiples of that,
but todate have done very little.
Speaker 3 (03:03):
So it's a very new market that's just taking off.
Speaker 2 (03:06):
And I'm assuming that here in Asia it's growing much
faster than the rest of the world.
Speaker 3 (03:10):
Yeah, I think that's true.
Speaker 4 (03:11):
I mean I think if you look at the forecasts
for an analysts, they'd say that power demand in Asia
expected to triple over the next five years, which is
really an extraordinary growth rate, and at least fifty to
sixty percent of that to come from renewables, and that
kind of mirrors what we're seeing all across the world.
Speaker 1 (03:31):
So why renewables in Asia? Like, what is happening here
that's really driving that demand? We talked about about data
centers AI is it that? Is it something more?
Speaker 4 (03:42):
Yeah, there's a lot to unpack in there. So the
situation is you've got massive increases in the demand side,
and then you've got certain constraints on the supply side
that have pushed us towards renewables. So if I start
on the demand side, you've got your base growth, You've
got you know, populations become wealthier and moving into cities
using air conditioning TVs.
Speaker 3 (04:03):
The normal expectation.
Speaker 4 (04:05):
I think the second big driver is the move of
the world's supply chains from China to Southeast Asia. So
China is no longer as competitive as it was, and
so you're seeing people moving into Vietnam and Indonesia and Philippines,
And that's the second driver. Nike used to be in
China now in Southeast Asia, and many of these global
(04:26):
brands as they move out of China are looking for
inneable energy. They've made commitments to anewable energine, so they're
looking for which market can I go into and get
that kind of supply. I think then the third driver
is data centers and AI that's just starting to come
online now in most markets as a broad range of
different maturity. So somewhere like Singapore, seventeen percent of the
(04:49):
entire country's power is going into data centers and so
that's driven up grid prices very significantly, and it's starting
to reach maximum capacity. So that's really on the outside.
Then on the supply side, the base growth was already
too much for the utilities. Right, most of these countries
are having regular brandouse, regular blackouts. If you think about Philippines, Indonesia,
(05:10):
et cetera, constantly having problems getting enough power in to
the demand side. And the structure is monolithic, right, if
you go to Indonesia, there's one company that manages transmission,
the grid, the generation. They have a very significant monopoly
on the supply side, and they are regulated markets, so
the government basically controls the price and it's a sensitive
(05:34):
voting topic. There are in examples of riots as grid
prices get increased. So that's made it very very difficult
for utilities to increase the tariffs, increase the power prices.
So we're now in a situation where the cost of
power is actually higher than the revenue that they're getting
from selling that power.
Speaker 2 (05:54):
So they're loss making.
Speaker 4 (05:55):
So they're loss making, massively loss making, and they've got
to subsidize that loss. We're taxpayers money. So if you
look at somewhere again like Indonesia is a good example,
about five billion dollars a year of taxpayers money is
going into the utility to keep it alife. This was
all then exacerbated significantly by the conflict in Ukraine by COVID.
Speaker 3 (06:16):
You've seen commodity prices spike, You've seen.
Speaker 4 (06:19):
LNGG prices go up, and that's made it even more
difficult for the utilities to survive. And meanwhile, they were
really not able to invest into their infrastructure, they were
not able to install renewables, and so that's really been
the straw that broke the camel's back. And the reaction
is government's saying, okay, I have to deregulate. Prices are
going up. I can see that there's a way to
(06:39):
bring in new power from someone else, from foreign investors.
So I'm going to deregulate and allow independent power producers
to come on board. So that's really been the big driver.
That's been the really exciting thing that we're starting to
see is all these different markets opening up and allowing
independent power producers to come in.
Speaker 5 (06:56):
How competitive is it?
Speaker 4 (06:58):
Like?
Speaker 1 (06:58):
Can you paint us an image of what that looks
like when you as a company go in and you
want to supply that power? Is there an RFP like
a bidding process? Are you in there like taking these
governments out for meetings?
Speaker 5 (07:12):
Maybe like a beer? What does that look like?
Speaker 4 (07:16):
So? What I like about this is that it's a
point to point discussion. Right, So it's me talking to
a company. The company is running a tender. The company
is then going through a process of evaluating all the
different suppliers. How much power can you provide? What's your
price of power? And Asia is really a grid parity market.
We're not like Europe or the US where there are
(07:37):
large substy is helping renewables. We need to be cheaper
than the grid otherwise we struggle to install large volumes.
What I like as a foreign investor is I'm not
having to spend as much time with utilities and finding
ways to.
Speaker 3 (07:51):
Build relationships there.
Speaker 4 (07:53):
It's a pure performance kind of conversation price and volumes.
Speaker 2 (07:57):
So you said you mentioned grid parody. Are you saying
that if you source your energy or you're from solar
or wind, it's actually cheaper than traditional sort of fossil fuels.
Speaker 3 (08:09):
Yeah.
Speaker 4 (08:10):
I mean that's been the really exciting point that I
think is not that well known in the region. So
if I install a solar system for a customer in Thailand,
I'm going to be fifty percent cheaper than the grid.
Speaker 5 (08:22):
Wow, fifty five zero.
Speaker 4 (08:24):
Fifty percent, right, So we have customers who are saving
two million dollars a year by installing solar systems on
their facilities. And then even in Indonesia, where taxpayers money
is being used to subsidize the price of the grid
and keep it low, even there we're thirty percent cheaper
than the grid. So when you look at that, you think, well,
hold on a second, why isn't there more renewables coming
(08:44):
into these markets?
Speaker 3 (08:45):
And that's really been about regulation and deregulation.
Speaker 2 (08:48):
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(09:11):
If you like what you're here, don't forget to subscribe
and share. Yeavin, I'm going to ask a really stupid
question here, like how reliable is solar Like, for example,
if you've got solar panels and it suddenly rains days
on end. You sometimes see that in Southeast Asia. Does
that mean that you don't get the solar or is there.
Speaker 4 (09:30):
Just that's the key point, right, So you've got your
solar system on your roof, you're sending the power into
that building. You know, you're forecasting what the power is
going to look like for the next ten or twenty years.
Retake the risk. And this has been the problem historically
is you need an investor, an expert who's willing to
take the risk of that weather. And that has been
something that has stopped the market from taking off in
(09:52):
the past. But generally speaking, and I'm sitting in Singapore
and it's been raining NonStop for three days, non stop
right day and night, and your solar system gets less sunlight,
but it gets better performance. It's cleaner, it's cooler, and
it performs better in that situation. So you might see
a thirty percent drop in performance or a forty percent
(10:14):
drop in performance, But the quality of the technology means
now that there's not that much of a difference.
Speaker 3 (10:21):
I think that's one point.
Speaker 4 (10:22):
Then the second point is you're still connected to the grid,
so it just means that you take less power from
the grid than you would from the solar system. And
then I think the third point is that batteries are
coming in, and batteries change the complete sort of scheme
of this because we now install larger solar systems, especially
if you can do a solar farm, large batteries, and
(10:44):
then you're able to provide power right the way through
the night and it's firm.
Speaker 3 (10:47):
It behaves just like a guest clut.
Speaker 1 (10:49):
And you said you're willing to take the risk because
there's not a lot of companies, the investors who would
be willing to take that risk. Why are you guys able.
Speaker 4 (10:56):
To do that? I think that we have the engineering team,
we have the data sources, so we basically are connecting
into people like NASA and downloading multiple decades of data
to know exactly how well a solar system is going
to perform in any given scenario. So rather than trusting someone,
(11:17):
we have our own ground up, you know, prime research
that we're doing to understand exactly what a solar system
is going to do. First part, and then the second
part is the team and I have run billions of
dollars of solar plants in Asia, so we would be
one of the more experienced. So we're quite comfortable that
we know how to operate and maintain that system. So
(11:38):
can we get out there clean it? Can we make
sure the cabling is working?
Speaker 3 (11:41):
Okay?
Speaker 4 (11:41):
Do we see the problem before it happens. These kind
of things are really important in terms of actually running. It's
a very simple system, but it's still a.
Speaker 3 (11:49):
Power plant and you need somebody who knows what they're doing.
Speaker 2 (11:52):
So Gavin Asia is pretty diverse. You know, what are
the most hottest areas in your world? In Asia? Which
countries are they?
Speaker 4 (12:00):
Yeah, that's a good question. The challenges that it changes
year to year, and I would like to say that
I'm able to forecast what's going to happen next year.
But the one thing I've learned in the last twenty
years in Asia, you can't, so I would say, you know,
we've added maybe half a billion dollars worth of projects
in Korea. There's a huge amount of demand there. There's
(12:20):
a lot of manufacturing, a lot of export, and so
a lot of the corporates there are looking to buy
renewable energy in order to be able to fulfill some
of the sustainability requirements that you get from Europe.
Speaker 3 (12:33):
So that's really sustainability driven at the moment.
Speaker 4 (12:36):
I'd say a lot is happening in Japan, so we're
seeing a similar model, and Japan is very aggressively deregulating
to encourage more foreign investors into their market. Then go
across to Malaysia, and Malaysia is exploded. It's come from
a very monolithic, very monopolized market where it was really
difficult to get into even on the rooftop side, and
(12:57):
now with the spillover of data center is from Singapore,
you're seeing very significant demand and we're looking at sort
of multi hundred million dollars solar farms in Malaysia.
Speaker 3 (13:08):
But it moves all the time.
Speaker 4 (13:10):
If you'd ask me last year I think Philippines would
have been probably the most interesting market last year.
Speaker 3 (13:15):
Yeah, oh wow.
Speaker 5 (13:16):
So it really does change year t year.
Speaker 4 (13:18):
It changes year to year so very rapid because what's
happening is the governments are all fighting against each other
deregulating to try and make their country more attractive for
the investment, not just for people to come in on
the infrastructure side, but then on the customer side. So
you've seen very interesting sort of geopolitical wrangling. Singapore is
(13:39):
a good example because you've got the data center sort
of explosion. Now seventeen percent of the country's energy supply
going into data centers. It's getting to the stage where
its difficult to see that being sustainble on the long term.
Speaker 3 (13:52):
Singapore was then trying.
Speaker 4 (13:54):
To pull in renewable energy for its neighbors, and you
saw Malaysia and Indonesia basically come out and say we
are flat out banning any supply of renewable energy to Singapore.
And I was in meetings with senior officials in those
countries and saying, then why don't you sell power from
your country to Singapore at a higher price.
Speaker 3 (14:16):
You're going to make a lot of money.
Speaker 4 (14:17):
And the response was we know that those data centers
manufacturers are in Singapore. We want to bring them to
our country and we will do whatever we can to
get the jobs and the investments of those manufacturing sites here.
If that means strangling renewable supply for Singapore, that's what
we're going to do. So you've definitely seen those kind
of geopolitical battles going on.
Speaker 2 (14:37):
Oh well, and that's quite interesting.
Speaker 4 (14:39):
You know.
Speaker 2 (14:39):
I know that energy security is a big issue in Europe,
especially with the Russia Ukraine war, but it sounds like
energy security and geopolitics is becoming a big factor in
Southeast Asia as well.
Speaker 3 (14:51):
Yeah.
Speaker 4 (14:52):
Absolutely, I think that the last few years of commodity
spikes has rocked a lot of the region. Like Philippines
is an energy importer, Indonesia's becoming more and more of
an energy importer. So you have no choice but to
take your energy or energy from whoever's supplying and solar
and wing the batteries. It's pretty exciting because once you've
(15:14):
installed your system, it just sits there. It's more expensive
to turn a solar system off than to have it
just running. The costs of solar systems are reducing so
fast that you've now got to a stage where you know,
like for like there as I say, for fifty percent cheaper.
And I think that where you had some resistance from
(15:34):
the incumbent utilities historically, the governments are now cutting through
that because the costs of subsized utilities is too much.
So a lot of these countries are thinking, I build
large solar farms or wind farms or whatever resource you've got,
and I reduce and I hedged my exposure to the
global commodity markets.
Speaker 2 (15:55):
And you mentioned earlier that there's a lot of global companies.
I think you mentioned Nike, but maybe it's like companies
like Samsung that are moving out of mainland China to
Southeast Asia. How influential are these companies in driving the
agenda for renewable energy.
Speaker 4 (16:12):
Yeah, that's definitely a huge, huge topic, and it's much
more driven by them than by the developers. So you know,
I've again had those meetings with regulators, et cetera, where
they're complaining and saying, please get these Western American or European.
Speaker 3 (16:30):
Companies out of my office.
Speaker 4 (16:31):
They're in every day saying I'm going to leave your
country if I don't get renewable energy.
Speaker 3 (16:37):
You have a regulated market.
Speaker 4 (16:38):
You know, there's no way for independent power producers to
come in, and your local utility is not giving me
the renewables I need. So there's huge influence. I mean,
Samsung is twenty percent of Vietnam's.
Speaker 3 (16:49):
Energy production.
Speaker 4 (16:51):
One fifth, yes, yes, and Samsung has moved a lot
of their sensitive technology out of China into Vietnam, specifically
to reduce the potential exposure.
Speaker 3 (17:05):
On technology transfer. So it's a huge factor.
Speaker 4 (17:09):
And the amount of money that's going in around data centers,
and then some of the regulations whereby countries are requiring
their data to be kept in their country, it means
that you then have to spread of data centers into
markets like Indonesia, et cetera. So there's a lot of
influence that they have.
Speaker 1 (17:26):
Well, it seems like a long term trend, like as
you see more companies pulling out of China, I don't
think it's going to change anytime in the next four years,
at least with tariffs, but it does kind of leave
you with the question of what happens if these companies leave, right,
Like all these companies that have moved to Malaysia, Vietnam,
Thailand to diversify or do a China plus one strategy.
(17:50):
There are reciprocal tariffs that are in the books, and
we know that President Trump is looking to target a
lot more countries than just China. So is there like,
how do you think about the risk of these companies
who are driving the agenda right now kind of pulling
back or pulling out.
Speaker 4 (18:07):
Yeah, it's something that I'm watching very closely. And we
definitely needed sustainability support to get the business, to get
the industry going. When I first started developing solar projects
in Asia, I was previously developing projects in the US
and Europe sort of twenty years ago, and you could
(18:29):
see even back then that with the cost curve on
solar so twenty percent per year reducing over the last
twenty five years and very significant drops every now and then.
So we had a fifty percent drop in the last
twelve months, you could see that it was going to
come under the grid. I meanwhile, the grid is going up.
So for me, the important part is we as an
(18:50):
industry need to behave like mature energy players, not always
looking for the subsidy. So and sustainability is I think
going to get hit. We've also seen CSRD regulations in Europe.
So the regulations around how you report who needs to
report on their sustainability and carbon footprint reduced very significantly
(19:12):
in the last two three weeks. So I'm watching it
very closely. But I believe and I'm driving the team
to focus on cost as the main driver, and that's
perfectly viable.
Speaker 3 (19:23):
We do need some more regulation reduction in orders for
us to do that.
Speaker 2 (19:27):
You brought up some interesting points, so it's more cost
focus rather than sustainability goals. Cat did mention President Trump.
Now since he's become the president, there's been a big
backlash against ESG. Trump has got a really famous policy
like you know, drill, baby drill. How is this change as.
Speaker 1 (19:48):
Opposed to sun baby son or wind baby wind?
Speaker 2 (19:52):
This is changing at ordinarrative for renewable energy.
Speaker 3 (19:56):
I don't see it yet.
Speaker 4 (19:57):
So what I'm seeing at the moment is is if
you think about Amazon, it's very interesting. So Amazon was
one of the first people that went into sustainability. It
was primarily driven by the employees, right. The employees pushed,
consumers have pushed, and that has pushed the regulation right,
and so that that fundamental driver.
Speaker 3 (20:17):
I don't think it changed.
Speaker 4 (20:18):
So We're definitely going to see fluctuations towards and away
from sustainability. That's been the case for the last twenty years.
This is a particularly relevant one, but I think that
we just need to stay the course, focus on the
cost differences, and quite frankly, I don't see any change
from our customers right so Amazon or Microsoft or Google
(20:41):
or Nike or Samsung, they're all very actively looking for
renewable procurement from us. So I haven't seen any of
that kind of But you know, no, right a year
down the line, you want to watch Abe Kefley.
Speaker 1 (20:54):
So no pullback yet, is what you're saying. It hasn't
been like the past couple months you're suddenly getting a
drop in demand.
Speaker 3 (21:00):
Definitely not, Definitely not, Gavin.
Speaker 2 (21:03):
I love to talk about renewables as an asset class.
So can you tell us who are the big investors
in renewable energy from your point of view?
Speaker 4 (21:12):
Yes, So I've started two companies. One I sold to
Shell and Keppel and the second one I sold to Total.
So the oil and gas companies for the last five
ten years have been very hungry, and I think about
the investor bases. Really, strategics are strategic large companies and
then financial investors. The strategics think about this as a
(21:33):
new business model that is going to be inevitably growing
over the next ten, twenty thirty years, and so they
are looking for how do I take my employee base
move them into that, what are the different business models
that I can drive, how can I drive returns, et cetera.
And the financial investors are more focused on the results.
I think that it's like a golden goose and golden eggs. Generally,
(21:56):
financial investors like the golden eggs. These are long days
did very stable infrastructure returns. We have twenty year contracts
or twenty five year contracts. As long as the sun
comes up, it's going to generate. That's very stable. Sometimes
their inflation linkedins, and so you've seen a lot of
interest from pension funds, softign wealth funds, infrastructure funds. There's
(22:18):
definitely been a pendulum shift from the strategics more towards
the financial investors in the last year or so. I
think that's good because there was a bit of distortion
before where some of the investors that were coming in
weren't coming in for necessarily the returns. They were coming
in for other aspects, and that distorted the market. That
(22:38):
meant they were willing to take risk return profiles that
might not make a lot of sense in order to
gain volume, whereas the financial investors are a bit more stable,
a bit more return focused.
Speaker 1 (22:51):
You mentioned inflation linked assets. There does a federal reserve
and the pace of inflation price growth does that impact
the business at all.
Speaker 4 (23:00):
So a renewable project, generally speaking, will be twenty to
thirty percent equity, twenty to thirty percent my cash going
into a project, and seventy to eighty percent debt that
I'm going to be taking from a big, regional or
local bank. And so the interest rates are a big factor.
So what is the interest rate on that debt has
a big impact on the weighted average cost of capital
(23:23):
of that project, So I track it very closely. The
reason that relatively constable is usually an increase in interest
rates is going to increase is going to have an
inflationary impact, and so you're going to see grid prices
go up, which makes it easier for me to then
put in a price that everybody is happy with as
a discount to that grid price.
Speaker 2 (23:44):
Gavin, before I let you go, I wanted to ask
a question like I saw your LinkedIn page, and you've
got a lot of experiences in a lot of different countries.
I think I saw obviously the UK, the US, Korea, Singapore, India,
maybe Finland. But like, tell us your background. How did
you get into this space?
Speaker 3 (24:04):
Oh? Wow, okay?
Speaker 4 (24:05):
So I was originally doing it tech so twenty or
thireny years ago and thought, well, you know, Asia is
the exciting part of the world.
Speaker 3 (24:17):
I want to come over to Asia and be part
of that growth.
Speaker 4 (24:20):
And did an MBA and join Samsung and had the
chance to run various different businesses for Samsung. We did
about a billion dollars of investments in the US and
you could see then that renewable energy was taking off.
So that really very run the numbers and you could
see that if if it's making sense in the US,
I should be able to replicate that business in Asia
(24:40):
and build a viable business without necessarily relying on subsidies.
Speaker 1 (24:46):
There is I think a podcast that referred to as
the Indiana Jones.
Speaker 3 (24:52):
Oh God, what was.
Speaker 2 (24:54):
That about Indiana Jones A renewable investing.
Speaker 3 (24:59):
Yeah, that doesn't come up very often.
Speaker 4 (25:01):
I have to admit, No, I did an archaeology and
a topology degree in Cambridge at some point allegedly and
so apparently that has some connection with renewable ERI, but
I have not worked out what the connection is yet.
Speaker 1 (25:14):
All Right, we'll think of a segue. We'll think of
a yeah between those two. Thanks so much for joining
us today.
Speaker 3 (25:21):
Thank you for your time.
Speaker 2 (25:22):
Thank you, Kevin, really good fun.
Speaker 1 (25:25):
You've been listening to asia Centric from Blueberg Intelligence. My
name is Katy Dmitrieva. I'm here in Hong Kong.
Speaker 2 (25:31):
And I'm John Lee, also in Hong Kong.
Speaker 1 (25:33):
You can find other episodes of asia Centric on Apple Podcasts, Spotify,
or wherever you listen.
Speaker 2 (25:39):
And this podcast was produced and edited by Clara Chen
And thanks for listening.
Speaker 5 (25:43):
I'll see you next time.
Hosts And Creators
John Lee
Tom Corbett
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