- Cr. Chayanid (Mint) Kovavisarach
The opportunities provided by the global energy transition towards renewable energy are being seized by Thailand, and ASEAN at large. Within the past couple of years, Thailand has made important strides in creating opportunities within the renewable energy market with solar energy systems in the limelight. The adjustments in the country’s Power Development Plan, amongst other roadmaps at the heart of the transition, paves way for the exploration of not only solar energy development but also the development of innovative environment-oriented market mechanisms, such as green bonds.
In the early months of 2019, the cabinet approved the Power Development Plan 2018 -2037 (PDP 2018), an updated version of the PDP 2015-2030. There were several changes made: firstly, private output of power was expanded by reducing the proportion of power generated by the state-run Electricity Generating Authority of Thailand (EGAT) from 35% to 24%. Secondly, a new power capacity of over 56,000 MW was introduced with renewable power projects making up approximately 21,000 MW. Though the power capacity for biomass and biogas is set to be reduced, despite significant potential and abundance, the plan makes way for solar power to become the main source of renewable-generated power. According to the Alternative Energy Development Plan, solar PVs will achieve grid parity in the near future as a result of the decreasing production costs. In line with this pledge to renewables, Energy ministers have committed to reducing coal dependence to 12% by 2037.
The largely state-controlled electricity value chain, ironically, remains one of Thailand’s more secure businesses for private operators. This is primarily due to the long-term power purchase agreements (PPA) with state utilities. We can see this coming into play with solar energy which has, and will continue to have, a leading role in the drive for renewable energy development. Currently, Thailand’s solar energy accounts for approximately 3,3000 MW, which has more than doubled since 2014 and is halfway towards its 2036 target. In PDP 2018, the government has increased the quota for solar energy development, with the new quota expecting to account for half of the renewable power capacity in the plan. Several private sector players are already ‘reserving front row seats’ in this market to sell energy back to EGAT.
A number of projects in this market are underway. In May, the government launched a pilot program for household solar rooftops that require a power generation capacity of 5-10 kW with installation costs of THB 350,000 – 400,000. Citing high installation costs, the program failed to take flight and is expected to be converted to a community-owned power project in December, which utilizes both waste and solar resources.
EGAT has announced the development of a ‘floating solar system’ prototype in partnership with the Siam Cement Group (SCG), Thailand-owned Southeast Asia's largest construction material company, at Srinagarind Dam in Kanchanaburi province, and Sirindorn Dam in Ubon Ratchatani. The project aims to tackle several issues: first, as traditional solar installation occupies substantial amounts of land, the installation in EGAT dams allows a more efficient use of space. Secondly, the lower temperature in EGAT dams increases the efficiency of solar panels’ power generation. This is not the first of its kind; Asian Development Bank partnered with Da Mi Hydro Power Joint Stock Company in Vietnam for provision of funding to develop the country’s first large-scale floating solar PV facility.
With the solar energy market at the forefront of renewable energy markets in Thailand, opportunities rise for old and new players. Though moderately concentrated with some major players, there are opportunities in off-market solar farms and Thailand’s power grid, amongst others. Key players include Energy Absolute Public Companies, SPCG Pcl, Symbior Energy Limited, Thai Solar Energy Pcl, Trina Solar Co., Ltd., and Solaris Green Energy Co. Ltd.
There are two key avenues through which foreign investors can enter the market for solar energy farms. Under current legislative framework, government utilities have the monopoly to buy electricity; as such, a governmental PPA with any of the key utility enterprises (such as EGAT, MEA, PEA) would be required to develop new land-based solar energy farms subjected to a public tender procedure. However, there are also several solar energy projects that are realized off-market in which foreign investors would need close cooperation with a Thai partner in order to have a stake in these projects.
With respect to Thailand’s power grid, PDP 2018 is focused on opening up private participation and investments in local communities that not only includes the sharing of profit and revenue with locals but to also stimulate self-sufficiency. Opportunities for foreign solar companies also lie in these local developments through peer-to-peer (P2P) power trading in order to decentralise the power generation system with local Thai companies in small communities.
Despite the reduction in the quota for biomass and biogas in the PDP 2018, it is still expected that approximately 5,786MW of electricity generated from biomass energy sources will be fed into the national power grid. While a significant amount of agricultural waste produced after harvest and has the potential to be harnessed as an energy source, the adverse side-effects of burning biomass to generate power, such as air pollution, must be taken into consideration.
New developments in the cooperation between technological advances and environmental awareness have emerged in the economy in the form of blockchain technology and green bonds. In 2018, BCPG, alongside Perth-based blockchain developer Power Ledger, launched a P2P renewable energy trading trial in Bangkok in partnership with Thai Metropolitan Electricity Authority. This project relies on rooftop solar systems with a total capacity of 635kW alongside co-located battery storage, providing for 20% of the community’s overall electricity needs.
Partnering with a global energy blockchain non-profit, Energy Web Foundation, PTT Pcl is developing another blockchain-based renewable energy trading system for Thailand that supports renewable purchases compliant with the international REC standard. As of right now, less than 0.5% of the ASEAN region’s renewable purchases are certified for meeting I-REC standard, which demonstrates the untapped market for such certificates in the region.
Green bonds are kicking off in the ASEAN market, with the ADB investing in the first green bond for a wind power project in Thailand. ADB will invest 3 billion Thai baht in Energy Absolute’s green bond issuance which will support the long-term financing of the company’s Hanuman wind farm in Thailand; the bond will have a total issuance of 10 billion Thai baht. With this being only the second Climate Bonds Standard-certified bond issued by a Thai energy company, this market’s potential remains untapped with regards to the pivot towards renewable energy.