It’s mental: Why remote resorts are resisting renewable energy

April 3, 2019

Misool is a diving resort and conservation centre located in Raja Ampat, Indonesia. Misool was founded on the belief that sustainable tourism could safeguard the future of the surrounding reefs, which are some of the most biodiverse on Earth. Designed and managed by Canopy Power, a PV-Storage Hybrid system was installed and commissioned in March 2018.
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Daniel Rye devel­ops renew­able energy microgrids for remote applic­a­tions, includ­ing at hotels and resorts. In this “GT” Insight, Daniel dis­cusses the psy­cho­logy behind com­mon objec­tions decision makers have against an increas­ingly effi­cient and eco­nom­ic­al energy option.

Renew­able energy is here. By empir­ic­al met­rics this is undeni­able. For example, 2015 was the first year that saw renew­ables account for the major­ity of incre­ment­al glob­al power gen­er­a­tion capa­city — 134 GW, mak­ing up 53.6% of the total (new capa­city). And that doesn’t even include hydro power. 

In the sev­en years that I’ve spent devel­op­ing renew­able energy (RE) pro­jects in Asia, a lot has changed. RE used to be a ‘nice to have’ where the early adop­ters chose to ignore the shaky busi­ness case — and the oppor­tun­ist solu­tion pro­viders — in exchange for doing the right thing. Today it’s an entirely dif­fer­ent land­scape where the busi­ness case is almost always a ‘no-brain­er’ and the tech­no­logy and solu­tions are mature and well understood. 

With my cur­rent work at Can­opy Power in Singa­pore, I help devel­op and imple­ment renew­able energy microgrids for busi­nesses and com­munit­ies loc­ated in remote loc­a­tions across South­east Asia. These places tra­di­tion­ally rely on dies­el gen­er­a­tion or a poor-qual­ity grid for their electricity.

A microgrid is an autonomous power system that integrates multiple renewable energy (RE) sources with batteries and traditional power sources.
A microgrid is an autonom­ous power sys­tem that integ­rates mul­tiple renew­able energy (RE) sources with bat­ter­ies and tra­di­tion­al power sources. Image source: Daniel Rye

Inter­est­ingly, hos­pit­al­ity forms the vast major­ity of our pro­ject cli­ent base. So why are resorts appar­ently adopt­ing RE more than any oth­er remote industry?

  • Busi­ness is boom­ing and the industry is grow­ing rap­idly. These cli­ents are about as likely as any to be able to afford invest­ment in renew­able energy infrastructure. 
  • Trans­ition­ing to eco-resort status or gain­ing green cre­den­tials can jus­ti­fy an increase in room rates, enabling top-line growth. Oth­er indus­tries do not have this pos­it­ive feed­back mechanism. 

The industry seem­ingly has a con­science about its impact on the world. It is a large con­trib­ut­or to glob­al car­bon emis­sions but is self-reflect­ive enough to real­ise it and do some­thing about it — as evid­enced by the incred­ibly aggress­ive car­bon emis­sion tar­get it has set itself.

Per­haps this is not entirely altru­ist­ic, giv­en hos­pit­al­ity often relies heav­ily on things like islands not sink­ing, air being breath­able, and pristine envir­on­ments being preserved.

So, des­pite a clear busi­ness case, and hos­pit­al­ity hav­ing intrins­ic incent­ives, the rate of adop­tion is still at a snail’s pace. Is this a mys­tery or is it entirely pre­dict­able based on human psychology?

War­ren Buffet’s right-hand man, Charlie Mun­ger, framed 25 tend­en­cies of human mis­judge­ment in rela­tion to invest­ment decisions. When I stumbled upon this work, some of these tend­en­cies res­on­ated with what I have exper­i­enced while devel­op­ing renew­able energy pro­jects. I decided it’s time to high­light them and try to com­bat them head-on. 

Here I ana­lyse what I con­sider the five most power­ful tend­en­cies that I encounter and how they can be rationalised: 

The Liking / Loving Tendency

“We ignore the faults of people, products or com­pan­ies that we admire.”

Our elec­tri­city sup­ply enables so much con­veni­ence. It also brings to life much of what we find inter­est­ing while power­ing the growth of our busi­nesses. Ima­gine our life without it. It would be dev­ast­at­ing. While we might con­sciously com­plain about some aspects, be it the monthly bills or the con­stant noise, at the sub-con­scious, we are in love. 

What are we in love with exactly? The product or the means by which it is sup­plied? Some would say it is the product, but the real­ity does not sup­port this. People often res­ist the simple change to a dif­fer­ent util­ity pro­vider, even in the face of clear bene­fits. Should our tend­ency to love apply to sup­pli­er and tech­no­logy choice? Does this not inhib­it our abil­ity to make smart decisions when there are bet­ter options available? 

Your diesel generator isn’t your spouse, so you shouldn’t need to put up with it’s high-maintenance nature or all that smell and noise. Right?
Your dies­el gen­er­at­or isn’t your spouse, so you shouldn’t put up with it’s high-main­ten­ance, smell, and noise. Image source: Daniel Rye 

Can­opy Power’s exist­ing cli­ents used to put up with chal­lenges that most people would assume were arte­facts of the stone age. Logist­ics in get­ting fuel to site is one example. At island resorts, dies­el is often brought in by the bar­rel every week. Typ­ic­ally, the deliv­ery craft will anchor off­shore and the resort’s dinghy will make mul­tiple jour­neys to col­lect each bar­rel, before rolling each up the beach and onto trol­leys to take them to the gen­er­at­or room. They even risk envir­on­ment­al dam­age when bar­rels of dies­el fall into the sea. To give an idea of the quant­it­ies we are talk­ing here, a smallish resort with a mod­er­ate aver­age load of 100kW, needs to ship 24,000 litres of dies­el to their island per month. 

Anoth­er chal­lenge is cost. In cit­ies we are used to pay­ing 10 cents to 20 cents (USD) for a unit of elec­tri­city (a kWh). In remote loc­a­tions, the end-use cost of elec­tri­city, once fuel deliv­ery and gen­er­at­or main­ten­ance has been con­sidered, is nor­mally between 30 and 50 cents per unit. [1] A sol­ar photo­vol­ta­ic microgrid can offer lev­el­ised costs of energy (LCOE) in the region of 20 to 25 cents. [2]

On top of all of this, most resorts are try­ing to be pristine retreats for ulti­mate relax­a­tion, yet they are forced to run noisy gen­er­at­ors that chug out fumes 24/7. This doesn’t fit the pic­ture that most tour­ists have in their minds before visiting. 

Some­times a divorce makes sense. Renew­able energy sig­ni­fic­antly improves all of the con­di­tions dis­cussed. And the trans­ition isn’t even that painful!

As a his­tor­ic­al ana­logy, in the early 20th cen­tury, elec­tric light­ing was start­ing to be adop­ted. The hotels that stuck with oil and gas lamps while their com­pet­it­ors moved to elec­tric light­ing didn’t fare too well. The leap in safety that elec­tric light­ing brought, rel­at­ive to its pre­de­cessor, meant most of the tech­no­logy adop­tion cost was covered by the insur­ance sav­ings. But the main bene­fit was the health improve­ments for cus­tom­ers! In the end, people voted with their feet. They wanted to stay in safer, health­i­er and cheap­er hotels with the latest technology. 

The Availability-Misweighing Tendency

“We over­weigh what’s eas­ily available.”

This tend­ency might lead to busi­ness-wise decisions if what we believe is eas­ily avail­able, is actu­ally eas­ily avail­able. A grid con­nec­tion that effort­lessly powers everything in our home and busi­ness seems eas­ily avail­able. But the infra­struc­ture and costs involved in gen­er­at­ing and deliv­er­ing that power to us is mon­strous. And guess what? We pay for that. In remote places dies­el gen­er­at­ors seem like reli­able, trus­ted work horses that keep on churn­ing out all that lovely power right where it’s needed. But how avail­able are the thou­sands of litres of dies­el that must be shipped to site every month? And how avail­able is that main­ten­ance spe­cial­ist or spare part that’s needed when there’s a break down?

Diesel delivery day on Koh Rong Sanloem, Cambodia
Dies­el deliv­ery day on Koh Rong San­loem, Cam­bod­ia. Image source: Daniel Rye

This com­plex­ity and cost to ensure avail­ab­il­ity trans­lates to an energy secur­ity issue which is a sig­ni­fic­ant risk for any busi­ness that relies on a con­stant energy sup­ply. Rely­ing on pro­cesses and mar­kets out­side of our con­trol while hop­ing for good weath­er on fuel deliv­ery day, are all factors con­trib­ut­ing to the next out­age being a when, rather than an if. 

We can com­pare this situ­ation with renew­able energy sources like wind or sol­ar. The ‘fuel’ for these power sources is delivered to site by nature, for free every day of the year. Sol­ar and wind energy are the most widely avail­able free energy sources on the planet. 

Let’s start over­weigh­ing that fact next time we’re eval­u­at­ing a renew­able energy installation. 

The Doubt Avoidance Tendency

“If we are unsure about a decision we quickly remove any doubt by mak­ing an ill-informed, quick decision.“

I agree that doubt is to be avoided as much as pos­sible when mak­ing invest­ment decisions. But we need to be sure about why there is doubt. Is it because of object­ive evid­ence or because of inac­cur­ate per­cep­tion and misinformation? 

Nowadays, most cli­ents actu­ally have very few doubts on tech­no­logy risk. Most doubts arise from some know­ledge about the intrins­ic high cap­it­al expendit­ure that’s asso­ci­ated with most renew­able energy tech­no­logy. When we buy out­right a sol­ar or wind sys­tem, we are effect­ively pay­ing for 20 years of elec­tri­city (240 monthly bills) on day one. This is a big chal­lenge for most busi­nesses. Luck­ily, we live in a highly fin­an­cial­ised world, where nearly any asset can be paid for over time. 

It took a while for fin­an­cial insti­tu­tions to under­stand the (rel­at­ively low) risks asso­ci­ated with col­lat­er­al­isa­tion of renew­able energy assets, but today fin­anced solu­tions are the norm. For the off-taker (in our case, resort own­ers) this enables them to real­ise net energy cost sav­ings from day one while also allow­ing cer­tainty in cost fore­cast­ing, which is a major plus to a business. 

Remote microgrids are a bit dif­fer­ent though. They are often too small and too … well, remote, to attract the big fin­an­ci­ers. To fill this gap, Can­opy Power has developed a spe­cial­ist microgrid fin­an­cing product which allows cli­ents to over­come the cost hurdle. Here the fin­ance com­pany actu­ally pro­cures, owns and main­tains the microgrid and either sells elec­tri­city to the cli­ent on a long-term con­tract (known as a power pur­chase agree­ment), or leases the equip­ment to the cli­ent over some years until own­er­ship is transferred.

Because the investors’ niche is in fin­an­cing remote elec­tri­fic­a­tion pro­jects, they have the abil­ity to take on the risk that oth­er investors would reject (due to The Doubt-Avoid­ance Tendency). 

The key to min­im­ising the risk of these remote pro­jects lies in hav­ing a thor­ough due dili­gence pro­cess and high-qual­ity solu­tion design. A robust remote mon­it­or­ing and con­trol sys­tem is essen­tial as part of this. 

The Social Proof Tendency

“We tend to think and act like those around us. It’s the herd men­tal­ity.”

This one doesn’t need any explain­ing. We see it every­where. Until a crit­ic­al mass of people are doing some­thing, the main­stream will not fol­low. I think this tend­ency is one of the drivers behind the shape of Rogers tech­no­logy adop­tion bell curve. 

Rogers tech-adoption bell curve
Rogers tech-adop­tion bell curve. Image source: Daniel Rye 

As I alluded to in the open­ing, renew­able energy adop­tion is hap­pen­ing. But Can­opy Power’s cli­ents in far-flung places may not have this per­cep­tion. They still see every­one using dies­el for power. So it is our job to high­light that the early adop­ters are grow­ing even in these places. 

The pho­tos below show com­pleted install­a­tions at three of Can­opy Power’s cli­ents’ sites. Four more are cur­rently under con­struc­tion. That’s a total of sev­en remote resorts in just one region adopt­ing renew­able energy from a solu­tion pro­vider with only sev­en employ­ees. The social proof is here and it is growing. 

Clockwise from top-left: Misool (Raja Ampat, Indonesia), Telunas Private Island (Batam, Indonesia), Wa Ale (Southern Myanmar)
Top left: Misool (Raja Ampat, Indone­sia). Top right: Telunas Private Island (Batam, Indone­sia). Bot­tom two: Wa Ale (South­ern Myan­mar). Image source: Daniel Rye 

In my opin­ion we are now approach­ing the chasm between early adop­ters and the early major­ity and I am optim­ist­ic we will cross that and see sig­ni­fic­ant growth in the com­ing years. 

Reward & Punishment Super-response Tendency

“The power of incentives.”

This is a ‘super-response’ tend­ency, mean­ing that it has extra power over us. There­fore, instead of try­ing to com­bat it, we will attempt to work with it to encour­age adoption. 

Here we focus on the pos­it­ive incent­ives to adopt renew­able energy in busi­ness and life. For example, by decreas­ing energy costs a resort can increase its gross oper­at­ing profit per avail­able room (GOP PAR) — a key busi­ness per­form­ance met­ric in hospitality. 

Anoth­er huge incent­ive for resorts to adopt renew­able energy is that it increases cred­ib­il­ity with and expos­ure to the sus­tain­able hos­pit­al­ity mar­ket. Eco-resort status can increase top line rev­en­ue gen­er­a­tion through more premi­um rates and access to a new tour­ist demographic. 

The Glob­al Sus­tain­able Tour­ism Coun­cil (GSTC) helps to for­mu­late sus­tain­ab­il­ity cri­ter­ia for the industry. Today at least 31 sus­tain­able tour­ism cer­ti­fic­a­tions agen­cies base their cer­ti­fic­a­tions on GSTC cri­ter­ia. One of the key cri­ter­ia in attain­ing cer­ti­fic­a­tion is energy con­ser­va­tion (D1.3). All six of the sub-cri­ter­ia (a. — f.) can be addressed by imple­ment­ing a renew­able energy microgrid.

GSTC criteria for energy conservation
GSTC cri­ter­ia for energy con­ser­va­tion. Image source: Daniel Rye 

On top of these there are the incent­ives to alle­vi­ate or elim­in­ate some of the every­day issues that fly in the face of a resort’s para­dise image, such as air pol­lu­tion, noise, power unre­li­ab­il­ity and logist­ic­al pain.

Decision making is mental

Decision mak­ing is a men­tal pro­cess so it makes a lot of sense to under­stand some of the sig­ni­fic­ant tend­en­cies that may affect one’s cli­ents. In this blog post we have looked bey­ond the face-value objec­tions to the adop­tion of renew­able energy, to ana­lyse some of the fun­da­ment­al drivers behind those objec­tions. By har­mon­ising one’s offer­ings to these psy­cho­lo­gic­al tend­en­cies, we can, in the­ory, increase the chances of cli­ents mak­ing the decision to adopt. 

Fea­tured image: Misool is a diving resort and con­ser­va­tion centre loc­ated in Raja Ampat, Indone­sia. Misool was foun­ded on the belief that sus­tain­able tour­ism could safe­guard the future of the sur­round­ing reefs. Designed and man­aged by Can­opy Power, a PV-Stor­age Hybrid sys­tem was installed at Misool in March 2018. Imaged sourced from Can­opy Power.

Footnotes

[1] Assum­ing a dies­el price of USD 1 / litre – this var­ies slightly between coun­tries based on taxes and sub­sidies, but in the long run is always trend­ing upwards.

[2] One of the biggest factors affect­ing LCOE is renew­able energy pen­et­ra­tion (the % that RE con­trib­utes to total energy use). This is a design met­ric that the cus­tom­er can decide on themselves. 

About the author

Daniel Rye, Senior Manager of Business Development for Canopy Power, which develops renewable energy microgrids for remote applications, such as hotels and resorts.
Daniel Rye

Hav­ing trained in elec­tric­al & elec­tron­ic engin­eer­ing in Eng­land, Daniel Rye spent the best part of a dec­ade “engin­eer­ing the Inter­net” before mov­ing to Singa­pore. Here he decided to map his skills onto renew­able energy, ini­tially gain­ing exper­i­ence with a loc­al start-up in 2012. Since then he has been immersed in clean tech­no­logy, even­tu­ally found­ing advis­ory firm Ryn­ergy in 2017. He now spends much of his time help­ing to devel­op remote microgrid pro­jects in Asia with Can­opy Power.

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