- Thailand has become Asean’s leader in solar and wind power, and the government is targeting 40 per cent of electricity generation from renewables by 2036.
- New regulations are expected to permit the sale of excess solar power back to the grid, making solar installations economically viable.
- Government policy is supportive but regulations are holding back an eager private sector.
Thailand has emerged as Asean’s leader in solar and wind power, and arguably in the overall shift to renewable electricity. The government boldly aims to increase the share of renewable power to 40 per cent of total electricity generation capacity by 2036. This is ambitious but achievable, and even faster adoption is possible — but only if the authorities can strike the right balance between support and getting out of the way.
The country draws about one-fifth of its total electricity from renewable sources. In 2017, renewables accounted for 22 per cent of actual electricity generation, and 17 per cent of installed production capacity, according to the Electricity Generation Authority of Thailand (EGAT). Domestic generation of renewable power increased 19 per cent last year and has averaged 24 per cent annual growth over the past five years, albeit from a low base.
As of 2016, Thailand virtually tied much larger Indonesia in total renewable energy capacity, and led Malaysia and the Philippines. It also beat all three countries in solar and wind.
Not all of Thailand’s renewable energy comes from solar and wind, however. In 2016, slightly over 3 gigawatts — 35 per cent of renewable electricity generated that year — came from biomass, which involves the combustion of feedstocks, which are generally agricultural by-products such as rice husks.
In addition, much of Thailand’s renewable energy is imported from controversial hydroelectric dams in Laos and Myanmar. These projects have been criticised for destroying natural habitats and displacing many thousands of local people. The amount of imported hydropower exceeds Thailand’s total domestically produced renewable energy.
New legislation means bright outlook for solar
Solar and wind power are the fastest growing sources of domestic renewable energy, however. In 2016, new solar and wind capacity each exceeded that of biomass, the first time that wind had done so. Unofficial estimates indicate that in 2017, total solar capacity exceeded 3GW, roughly 7 per cent of total electricity generation, while wind may breach 1GW this year.
Solar power is especially promising in Thailand because there is high photovoltaic potential throughout most of the country. It is not unrealistic that Thailand could eventually generate a majority of its electricity from solar energy alone. Germany, which is only two-thirds the land area of Thailand and much less sunny, has already exceeded 41GW of solar capacity — roughly as much electricity as Thailand currently uses.
The military government is expected to pass legislation in the coming months that will permit the sale of excess solar power back to the grid. Normally, unless solar is paired with storage batteries, which add significant cost and complexity, excess power ends up being given back to the grid for free. Compensating residential and factory producers for this electricity is key to making solar cost-effective and a central part of Thailand’s power generation mix.
Enthusiasm among private Thai companies shows that solar and wind are becoming more attractive as investments. KPN Group recently ordered three 90MW wind turbines from GE Renewable Energy for a wind farm in Nakhon Ratchasima province. B Grimm Power, one of Thailand’s oldest independent power producers, has added solar farms to its portfolio. Meanwhile, petrochemical giant Siam Cement Group has developed solar panel installations that can float on reservoirs.
Government ambition vs government regulation
Last year, the Energy Policy and Planning Office made a bold revision to its long-term 2015-2036 power development plan, changing the target for renewable electricity generation from 25 per cent of total capacity to 40 per cent. Yet the greatest obstacles facing the government’s renewable ambitions have been put there by the government itself.
EGAT and the Provincial Energy Authorities retain a monopoly over the grid, stifling the market-driven shift to renewable energy in two ways. First, Thailand has neither a legal nor economic framework to facilitate the sale and redistribution of renewable energy. While the expected regulation for solar energy will help, it does not cover other forms of power. Initial details also suggest the solar programme will involve unnecessary layers of bureaucracy, and set fixed prices and cap total repurchase amounts.
In other words, it will not yet allow the market to establish “net metering”, by which households and businesses can freely buy and sell power to and from the grid as needed. This is the model generally used in the developed countries leading the shift to renewable power, and the Philippines has successfully adopted it.
Second, the authorities have transplanted to renewables the same stubborn, top-down management style imposed on traditional power sources. Each new project that will sell to the grid — even tiny solar farms or individual wind turbines — must apply for a long-term power purchase agreement for the resulting electricity. This is cumbersome and inflexible, particularly for highly distributed methods of electricity generation such as solar power, and as technology improves and renewables become cheaper sources of power than fossil fuels.
Hitting the 2036 target
The Thai government also aims to limit its dependence on imported electricity, which is capped at 15 per cent under the 2036 plan. Due to massive imports of fossil fuels to power vehicles and generate electricity, net energy imports made up 40 per cent of the country’s total energy use in 2015. The security implications of this dependency are especially significant because Thailand only has enough proven oil and gas reserves in its own territory to last a few years at current usage rates.
The 2036 goal is ambitious but achievable. A joint study conducted by the International Renewable Energy Agency and EGAT found that 37 per cent of electricity consumption could be generated from renewable sources based on Thailand’s existing energy road map. The report implies that higher levels could be reached if technological and economic trends permit upward revision of the 2036 target.
MK Balaji, an expert on renewable energy in south-east Asia, told FTCR that 40 per cent capacity will be difficult to reach by 2036 but could be attainable. He says that while Thailand has the best overall record for managing electricity generation and renewable energy in the Asean region, further liberalisation and deregulation of transmission would accelerate renewable deployment. He sees the recent efforts towards net-metering for solar as steps in the right direction.
Thailand deserves credit for its adoption of renewables, and the government praise for reasonable policies that have laid the groundwork. The country is on track to become a model for renewable electricity generation in developing economies, but deregulation could help it achieve much more.
|FT Confidential Research is an independent research service from the Financial Times, providing in-depth analysis of and statistical insight into China and south-east Asia. Our team of researchers in these key markets combine findings from our proprietary surveys with on-the-ground research to provide predictive analysis for investors.|