ENERGY TRANSITION: ENABLING SINGAPORE SMALL AND MEDIUM
ENTERPRISES TO GO SOLAR CASE STUDY SOLUTION
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SYNOPSIS
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Amid Singapore’s transition to a renewable-energy economy,1 solar energy had been particularly attractive
to small and medium enterprises (SMEs) prior to 2023, given its relatively low entry barrier and installation
costs relative to other forms of renewable energy.2
n
The case focused on the challenge of Thomas Ang, a green finance analyst at Singapore-based
tio
environmental consulting firm Green Consultant, who, in January 2023, had to prepare a business proposal
for Chang & Lee Manufacturing (CLM), also in Singapore, on the most economically feasible solar solution
for the SME. As more clients were approaching Green Consultant for similar advice, Ang also thought of
lu
creating a general decision-making framework to help all Singaporean SMEs transition to solar energy.
So
OBJECTIVES
• Compare the major business models for solar energy adoption and quantitatively evaluate the benefits
and costs of each model.
• Understand the financing options for solar energy adoption in Singapore.
• Apply financial valuation models to solar energy projects.
• Set up a general decision tree for solar energy adoption.
The Case Solution Starts From page 7
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ASSIGNMENT QUESTIONS
1. Identify the most financially viable solar business model for CLM by estimating the net present value
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(NPV) of each of the four models given.
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2. Compute the social return on investment (SROI) based on the NPV and the carbon cost savings for the
direct ownership model.
3. Propose a solar financing plan for CLM.
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4. Identify other stakeholders that CLM should approach for help with the solar energy adoption decision.
5. Develop a general decision tree to help any SME make the solar energy adoption decision.
So
The Case Solution Starts From page 7
,ANALYSIS
1. Identify the most financially viable solar business model for CLM by estimating the NPV of
each of the four models given.
The case discussed four solar business models (see Case Exhibit 7): direct ownership, solar leasing, roof
leasing, and the offsite power purchase agreement (PPA).
Electricity price was central to evaluating these models or the alternative option of conventional electricity tariffs,
which could be used to buy renewable-energy certificates (RECs). For example, Case Exhibit 8 presented a
tariff offered by Singapore Power Limited. However, assuming a constant inflation rate, the future electricity
price could significantly exceed the historical electricity price, and the primary energy cost for electricity
generation could change drastically under different renewable-energy transition scenarios for meeting
Singapore’s net-zero emissions target. 3As a result, electricity rate per megawatt hour (MWh) would likely rise
from S$226.80 4to $588.70. The electricity price forecasts were provided in Exhibit -1.
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Step 1: Analyze the incremental cash flows of the four models.
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Direct ownership. This model would feature cash inflows and outflows because CLM would install and
own the solar equipment (see Exhibit TN-2).5 Cash flows at 𝑡 could be simply expressed as
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𝐶𝐹𝑡 = 𝑆𝑎𝑙𝑒𝑠 𝑜𝑓 𝐸𝑙𝑒𝑐𝑡𝑟𝑖𝑐𝑖𝑡𝑦 + 𝑆𝑎𝑙𝑒𝑠 𝑜𝑓 𝑅𝐸𝐶 − 𝐼𝑛𝑠𝑡𝑎𝑙𝑙𝑎𝑡𝑖𝑜𝑛 − 𝐵𝑎𝑡𝑡𝑒𝑟𝑦 𝑃𝑢𝑟𝑐ℎ𝑎𝑠𝑒 − 𝐼𝑛𝑠𝑢𝑟𝑎𝑛𝑐𝑒
− 𝑀𝑎𝑖𝑛𝑡𝑒𝑛𝑎𝑛𝑐𝑒 − 𝑇𝑎𝑥 𝐸𝑥𝑝𝑒𝑛𝑠𝑒.
Information on two available locations for a rooftop solar photovoltaic (PV) installation was provided in
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The Case Solution Starts From page 7
, EXHIBIT -1: ELECTRICITY PRICE AND POWER RATE FORECAST IN SINGAPORE
Year Electricity price (S$) Deflator Power rate (MWh)
2010 36.67 1.03 178.71
2011 36.47 1.05 182.32
2012 36.27 1.08 186.00
2013 36.08 1.11 189.74
2014 35.88 1.14 193.56
2015 35.69 1.16 197.45
2016 34.98 1.19 198.51
2017 34.27 1.23 199.49
2018 33.56 1.26 200.39
2019 32.85 1.29 201.20
2020
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The Case Solution Starts From page 7
, EXHIBIT -2: PRO-FORMA CASH FLOW ANALYSIS FOR DIRECT OWNERSHIP) ($S)
Installation year Forecast years
Account
2022 2023 2024 … 2049 2050
Revenue
Sales of electricity:
Generated electricity
(Location 1) - 150.11 150.11 … 150.11 150.11
Generated electricity
(Location 2) - 100.71 100.71 … 100.71 100.71
Total electricity generation
(MWh) - 250.82 250.82 … 250.82 250.82
Electricity consumption
(MWh) 78.72 74.78 71.04 … 67.49 67.49
Sales volume
- 176.04 179.77 … 183.33 183.33
Cost saving:
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Usage of electricity (MWh)
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The Case Solution Starts From page 7
, EXHIBIT -4: PRO-FORMA CASH FLOW ANALYSIS FOR SOLAR LEASING ($S)
Installation
Forecast years
Account year
2022 2023 2024 … 2049 2050
Revenue
Sales of electricity:
Productivity (Rooftop 1)
- 141.93 141.93 … 141.93 141.93
Productivity (Rooftop 2)
- 98.78 98.78 … 98.78 98.78
Usage (MWh)
78.72 74.78 71.04 … 67.49 67.49
Cost saving ($):
- - - … - -
Production (MWh)
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The Case Solution Starts From page 7
ENTERPRISES TO GO SOLAR CASE STUDY SOLUTION
e
pl
SYNOPSIS
m
Sa
Amid Singapore’s transition to a renewable-energy economy,1 solar energy had been particularly attractive
to small and medium enterprises (SMEs) prior to 2023, given its relatively low entry barrier and installation
costs relative to other forms of renewable energy.2
n
The case focused on the challenge of Thomas Ang, a green finance analyst at Singapore-based
tio
environmental consulting firm Green Consultant, who, in January 2023, had to prepare a business proposal
for Chang & Lee Manufacturing (CLM), also in Singapore, on the most economically feasible solar solution
for the SME. As more clients were approaching Green Consultant for similar advice, Ang also thought of
lu
creating a general decision-making framework to help all Singaporean SMEs transition to solar energy.
So
OBJECTIVES
• Compare the major business models for solar energy adoption and quantitatively evaluate the benefits
and costs of each model.
• Understand the financing options for solar energy adoption in Singapore.
• Apply financial valuation models to solar energy projects.
• Set up a general decision tree for solar energy adoption.
The Case Solution Starts From page 7
, e
pl
m
Sa
ASSIGNMENT QUESTIONS
1. Identify the most financially viable solar business model for CLM by estimating the net present value
n
(NPV) of each of the four models given.
tio
2. Compute the social return on investment (SROI) based on the NPV and the carbon cost savings for the
direct ownership model.
3. Propose a solar financing plan for CLM.
lu
4. Identify other stakeholders that CLM should approach for help with the solar energy adoption decision.
5. Develop a general decision tree to help any SME make the solar energy adoption decision.
So
The Case Solution Starts From page 7
,ANALYSIS
1. Identify the most financially viable solar business model for CLM by estimating the NPV of
each of the four models given.
The case discussed four solar business models (see Case Exhibit 7): direct ownership, solar leasing, roof
leasing, and the offsite power purchase agreement (PPA).
Electricity price was central to evaluating these models or the alternative option of conventional electricity tariffs,
which could be used to buy renewable-energy certificates (RECs). For example, Case Exhibit 8 presented a
tariff offered by Singapore Power Limited. However, assuming a constant inflation rate, the future electricity
price could significantly exceed the historical electricity price, and the primary energy cost for electricity
generation could change drastically under different renewable-energy transition scenarios for meeting
Singapore’s net-zero emissions target. 3As a result, electricity rate per megawatt hour (MWh) would likely rise
from S$226.80 4to $588.70. The electricity price forecasts were provided in Exhibit -1.
e
pl
Step 1: Analyze the incremental cash flows of the four models.
m
Direct ownership. This model would feature cash inflows and outflows because CLM would install and
own the solar equipment (see Exhibit TN-2).5 Cash flows at 𝑡 could be simply expressed as
Sa
𝐶𝐹𝑡 = 𝑆𝑎𝑙𝑒𝑠 𝑜𝑓 𝐸𝑙𝑒𝑐𝑡𝑟𝑖𝑐𝑖𝑡𝑦 + 𝑆𝑎𝑙𝑒𝑠 𝑜𝑓 𝑅𝐸𝐶 − 𝐼𝑛𝑠𝑡𝑎𝑙𝑙𝑎𝑡𝑖𝑜𝑛 − 𝐵𝑎𝑡𝑡𝑒𝑟𝑦 𝑃𝑢𝑟𝑐ℎ𝑎𝑠𝑒 − 𝐼𝑛𝑠𝑢𝑟𝑎𝑛𝑐𝑒
− 𝑀𝑎𝑖𝑛𝑡𝑒𝑛𝑎𝑛𝑐𝑒 − 𝑇𝑎𝑥 𝐸𝑥𝑝𝑒𝑛𝑠𝑒.
Information on two available locations for a rooftop solar photovoltaic (PV) installation was provided in
n
tio
lu
So
The Case Solution Starts From page 7
, EXHIBIT -1: ELECTRICITY PRICE AND POWER RATE FORECAST IN SINGAPORE
Year Electricity price (S$) Deflator Power rate (MWh)
2010 36.67 1.03 178.71
2011 36.47 1.05 182.32
2012 36.27 1.08 186.00
2013 36.08 1.11 189.74
2014 35.88 1.14 193.56
2015 35.69 1.16 197.45
2016 34.98 1.19 198.51
2017 34.27 1.23 199.49
2018 33.56 1.26 200.39
2019 32.85 1.29 201.20
2020
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The Case Solution Starts From page 7
, EXHIBIT -2: PRO-FORMA CASH FLOW ANALYSIS FOR DIRECT OWNERSHIP) ($S)
Installation year Forecast years
Account
2022 2023 2024 … 2049 2050
Revenue
Sales of electricity:
Generated electricity
(Location 1) - 150.11 150.11 … 150.11 150.11
Generated electricity
(Location 2) - 100.71 100.71 … 100.71 100.71
Total electricity generation
(MWh) - 250.82 250.82 … 250.82 250.82
Electricity consumption
(MWh) 78.72 74.78 71.04 … 67.49 67.49
Sales volume
- 176.04 179.77 … 183.33 183.33
Cost saving:
e
Usage of electricity (MWh)
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The Case Solution Starts From page 7
, EXHIBIT -4: PRO-FORMA CASH FLOW ANALYSIS FOR SOLAR LEASING ($S)
Installation
Forecast years
Account year
2022 2023 2024 … 2049 2050
Revenue
Sales of electricity:
Productivity (Rooftop 1)
- 141.93 141.93 … 141.93 141.93
Productivity (Rooftop 2)
- 98.78 98.78 … 98.78 98.78
Usage (MWh)
78.72 74.78 71.04 … 67.49 67.49
Cost saving ($):
- - - … - -
Production (MWh)
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The Case Solution Starts From page 7
