Seven opportunities in Thailand’s Solar Energy 2020
Walking on sunshine in the pandemic: Foreign investments in Thailand’s solar gold rush
Private energy investments: Thailand’s electricity generating sector is considered to be one of the most secure businesses in Thailand for private operators given the long-term power purchase agreement with the three state utilities EGAT, MEA, and PEA. Due to its low staffing level, spacious grounds without social distancing issues, and its necessity even under a lock-down scenario, it can be deemed to be largely pandemic-unaffected as well.
Renewable power plant businesses are for many years promoted by Thailand’s government to reduce the heavy reliance on fossil fuel in Thailand, especially for gas, and to reduce the environmental impact. While the whole value chain from generation to transmission and distribution is and will remain largely a state-controlled industry, ongoing liberalization opens the door to new business opportunities for foreign companies, technologies, and concepts.
Solar milestones – from 3 GW to 3.4 GW: Thailand looks back to nine tumultuous years of mostly favorable solar energy developments and a few failures. While 2010 saw the first significant installations of solar panels, the year 2017 marked the achievement of a significant milestone, a total of 3 GW of solar installations in the land of smile. This amounts to 50% of the 2036 target under the current 20-year roadmap (AEDP 2015). The total solar power capacity of roughly 3,500 MW can be predicted for the end of 2019.
FRIDAYS FOR RENEWABLE ENERGY FUTURE IN THAILAND
Join the weekly event, (nearly) each Friday at 14.00 ICT (Bangkok time) to discuss Thailand’s regulatory framework on solar energy, wind energy, biomass, biogas, the influence of the pandemic on renewable energy projects, and upcoming developments, projects, and business opportunities. Free, PWYC, and VIP tickets are available through renewable.eventbrite.com.
An increase of renewable energy: Thailand’s >3 GW share exceeds 60% of total installed capacity in the ASEAN region, followed by the Philippines, Malaysia, and Singapore. To put this into perspective, Shady Germany installed already 40+ GW solar power. Thailand’s renewable energy quota (solar, wind, biomass) will be increased to 30% by 2030. Solar power from households will be the main source of power under the AEDP (Alternative Energy Development Plan).
Regulations, reports, roadmaps: Thailand is continuing its integrated energy blueprint, consisting of a gas plan, oil plan, the Energy Efficiency Plan (EEP), the Alternative Energy Development Plan (AEDP) and the Power Development Plan (PDP) with the Smart Grid Plan (SGP). The “IRENA” report, published in November 2017 by the International Renewable Energy Agency in cooperation with the Thai Ministry of Energy, showed new plans for expansions and further developments. According to the IRENA report, the share of renewable energy should increase from 12% in 2017 to 37%. Under such a new roadmap (REmap 2036), solar power alone would reach in 2036 a total capacity of 17 GW instead of the previously targeted 6 GW. Such a new target could be easily achieved taken into consideration the decreased solar panel costs, almost grid-parity conditions, and Thailands abundant solar energy resource potential. The average solar radiation in Thailand is 5 kWh/m2/year.
Milestones of Thailand’s solar energy
The overall development of Thailand’s legislation and governmental policy can be summarized at fast-forward speed as follows: In the year 1993, a solar off-grid program for rural non-electrified areas for villages, schools, health care clinics, and water pumping had been put in place. It included a 100% governmental support with regular maintenance, 30 MWp in total.
2007: An “Adder (Feed-in Premium)” policy for the VSPP and SPP for all renewable energy generation up to 90MWp had been introduced in 2007. (Solar PV target: 500 MWp, Adder: 8 baht/kWh for 10 years). In 2019, the solar target has been set under a 15-year plan (REDP) to a capacity of 500 WM till 2022.
2010: Solar PV target had been increased in 2010 to 2,000 MWp. Since there were a huge amount of applications, the Adder decreased to 6.5 baht/kWh (or 18.6 US cent/kWh) for 10 years and an application moratorium had been introduced since June 2010. Under the 10-year plan (AEDP) of 2011, the solar target has been set to a capacity of 2 GW till 2021. 2011 marks the policy change from the Adder scheme to the FIT scheme.
2013: Under a regulation of the Energy Regulation Commission in 2013, solar rooftop energy of up to 10 MW could be sold to the governmental utilities PEA and MEA. The regulation defines the criteria, procedures, and conditions of power purchase. The allowed total capacity of 200 MW has commenced commercial operation. The solar PV target increased to 3,000 MWp. This had been split up into solar farm for 2,000 MWp with Adder for 10 years, solar Rooftop of 200 MWp with FiT 6-6.84 baht/kWh for 25 years, and solar for community of 800 MWp with a decreasing FiT for 25 years
In 2014, solar PV target increased to 3,800 MWp, separated into solar farm 1,800 MWp with Adder for 10 years, solar farm 1,000 MWp-applied before June 2010, changed from Adder for 10 years to FiT 5.66 baht/kWh for 25 years, solar rooftop 200 MWp with FiT 6-6.84 baht/kWh for 25 years and solar for community 800 MWp – changed to solar for governmental agencies and agricultural cooperatives – with FiT 5.66 baht/kWh for 25 years
2015 saw Phase 1 of the Agency and Agricultural Cooperatives Program (Agro-Solar). Under the AEDP 2015 plan, the target solar capacity has been set to 6 GW till 2035. A pilot project for Solar PV rooftop (for self-consumption) in 2016 of 100 MWp. In the same year, phase 2 of the solar for government agencies and agricultural cooperatives started. 67 projects have won the right to sell a combined 281.32 megawatts (MW) of solar power to the national electricity grid for 25 years. Under the 2016 pilot project, the Energy Policy Management Committee divided in a resolution as of February 24, 2016, the 100 MW into 10 MWp for households (below 10 kWp) and 40 MWp for commercial use for EGAT and PEA each.
2017: Semi-firm and non-firm PPAs have been introduced in 2017 which require hybrid renewable energy facilities. A new roadmap increased the 2036 target from 6 GW to 17 GW. The first “SPP hybrid firm” tender, launched in 2017, had a combined power-generating capacity of 300 MW with a FIT of THB 3.66 for the whole 20 year period. The ERC announced that they received applications from 85 firms with a combined capacity of 2,464 MW and that most shortlisted firms offered a FIT below THB 2.50.
2018: A public tender for solar farms of totaling 269 MW had been announced in January 2018, basing on semi-firm power purchase agreements. This project has been abandoned. Under a Statement by Thailand’s Minister of Energy as of June 2018, Private, as well as commercial and industrial rooftops, have to be “accepted” (licensed?) to sell solar power to the grid. The FIT will be “up to” 2.44 THB/kWh. This FIT is explained by the fact that the costs to develop rooftop solar photovoltaic panels have declined. According to that statement by the Ministry of Energy, “households are allowed to participate in the power generation from their own rooftops and to receive revenue from selling the surplus electricity.” Whether this includes private PPAs for solar panels installed on foreign rooftops and selling 100% of the generated energy has not yet been explicitly declared.
2018: The government aimed in 2018 to increase the country’s total renewable energy power generation from now 10% to 30% in 2036. Current policies may be accelerated to increase the proportion of renewable energy and meet the target sooner than projected. Also, in July 2018, Thailand’s Ministry of Energy proposes to introduce nonsubsidized solar rooftop power, which does not rely on the Thai feed-in tariff (FIT) regime. Under such economics, electricity will be sold at a discount to the price of electricity purchased from the fossil fuel-dominated national grid, thereby achieving solar power production at parity with the grid.
2019: The pilot program for 100 MW of household solar rooftops had been launched in May 2019. It requires a power generation capacity of 5-10 kW, which results in installation costs of THB 350,000-400,000. 15,000 participants had been expected by the Energy Ministry until the end of 2019, selling up to 100 MW this year at a FIT of THB 1.68 per kilowatt-hour. Power capacity under the scheme started at 100 MW per year during 2019-27 for households and increases solar power generation to 1,000MW per year from 2028 on, ultimately reaching 10,000 MW by 2037. The execution has been delayed until August 2020.
2019: Thailand’s Ministry of Energy has amended its Alternative Energy Development Plan (AEDP) 2018. Under the 2019 version of the AEDP 2018, electricity generated from renewable energy sources will be fed into the national power grid as follows: (i) solar power generating 15,574 MW, (ii) biomass generating 5,786 MW, (iii) wind turbines generating 2,989 MW, (iv) hydroelectric power from domestic generators and from Laos generating 3,000 MW, and (v) waste to energy generating from previously 500 MW to now 900 MW. Renewable power sources shall contribute a total of 29,358 MW or 33 percent of the national electricity generating capacity. The cost of electricity generated from renewable energy will be approximately THB 2.44 per unit. The Ministry of Energy anticipates that this will not affect the general public’s electricity bills.
2019: Due to a lack of acceptance of the 100 MW household solar rooftop scheme, the program had been announced in October 2019 to be converted in December into the community-owned power project „Energy for All“ as a hybrid power scheme utilizing both waste and solar resources. “The sunny prospects and hazy risks of Thailand’s next stage of solar growth” Also, Thailand Solar Energy Profile is featured in the March 2019 issue of the Solar Magazine.
2020: Thailand’s Energy Ministry has announced in 2020 ten urgent action plans for 2020 to support living expenses for Thais, maintain the country’s energy security and become a regional leader in the sector. This 10-point list covers the licensing for petroleum exploration and production (E&P), the 700 MW Energy for All scheme with new operating licenses for private / community-owned power projects, and the project to develop Thailand into the super power-hub for Southeast Asia. During the reshuffle of the cabinet, the energy minister has resigned and the future developments of Thailand’s solar energy developments are uncertain. End of July 2020, the governmental solar rooftop purchase scheme has been revived.
Seven business opportunities for solar projects in 2020/21: From new solar farm biddings to the blockchain-driven Internet of Energy
Opportunity #1 – New land-based solar farms: Under the current legislative framework, governmental utilities have the monopoly to buy electricity. Therefore, a governmental power purchase agreement with EGAT, MEA, or PEA would be required to develop new land-based solar energy farms. This sector of renewable energy is typically subject to a public tender procedure. It has to follow pre-defined steps and offers a certain degree of transparency and fairness.
Tender procedures might request a firm or semi-firm PPA with the legal obligation to supply electricity to the governmental utility even during peak hours. This requires the combination of solar panels with biomass, biogas or similar energy generating facility backup, which results in its classification as a hybrid. Typical quota are (i) 100% output at peak time +/- 2% and (ii) 65% output at off-peak. While “firm” means throughout the year, the “semi-firm” is defined as “firm” for six months of the year (including March till June) and non-firm for the remaining six months. Underperformance might require the power producer to pay (liquidated?) damages. Future public tender procedures will have further regulatory requirements concerning location, capacity, PPA conditions, and overall feasibility.
Currently announced projects: None (This section will be updated, depending on future developments).
Opportunity #2 – Off-market solar farms: It is not a secret that several solar energy projects are realized off-market and outside of a formal public tender process. Foreign investors will need a close connection and cooperation with a Thai partner and may have to adjust their business policies to local standards. As a general aspect of investments in Thailand, the political risk of a (retrospective) cancellation of renewable energy incentives is small, but not non-existing. Section 44 of the Interim Constitution (“S44IC”) will be still in place till the elections in 2019+ and gives the army manned NCPO (National Committee for Peace and Order) full and uncontrolled authority to reshape the energy legislation and regulatory framework without grandfathering, loss compensation, legal or court protection.
Opportunity #3 – Acquisition of existing solar farms: While the last few years saw a pretty flourishing trade of electricity production licenses and power purchase agreements, several semi-finished or already established and electricity-producing solar farms are for sale. Such projects can be acquired through an asset acquisition or the transfer of the shares in the solar farm company.
Opportunity #4 – Self-consumption schemes: As a cost-effective way to leverage solar energy, commercial and industrial property owners are allowed to install solar panels onto their own roofs and to produce electricity “behind-the-meter” for self-consumption. Such investments can be delivered, financed and maintained by third parties under EPC (Engineering, Procurement, and Construction), O&M (Operating & Maintenance) and finance agreements.
Opportunity #5 – Solar rooftop investments: Under international solar rooftop legislation, (foreign) investors and developers are allowed (i) to cooperate with commercial and industrial rooftop owners, (ii) to generate electricity, (iii) to sell the electricity to the grid (net metering) and (iv) to enter into power purchase agreements with commercial and industrial parties (C&I PPA). Meanwhile, Thailand’s regulatory framework lacks these full scope of opportunities. Details can be found at “Thailand’s new solar rooftop developments“.
Opportunity #6 – Floating solar farms: As the Third Way, the development of floating solar arrays (floatovoltaics) should be the next big thing. Nine new projects are on the way and details can be found at “Floating solar farms in Thailand“.
Opportunity #7 – Thailand’s power grid: The revised version of the power development plan (PDP) for 2018-37 is focused on new investments in renewable power by opening private participation and investment with local communities in order to share profit and revenue with locals. This new regulatory framework opens new business opportunities for foreign solar companies in a peer-to-peer (P2P) power trading model to decentralize the power generation system in the land of smile. This will require to set-up a Thai company to enter into a joint-venture with small communities.
P2P power trading will include biomass, biogas, waste and solar energy, depending on the potential in each province. Existing and new power-distributing infrastructure and transmission lines will be the key factor when designing the venture. Thailand’s new Energy Minister is quoted in the local press “The project will be open for participation from businesses of all sizes that are interested in the electricity value chain, so peer-to-peer power trade can combine blockchain, smart power meters and a new sandbox for the power business.”
Internet of Energy (IoE) means the implementation of the Internet of Things (IoT) technology with distributed energy systems to optimize the efficiency of the generation, transmission, and utilization of electricity. As soon as Thailand and its regulatory framework are ready for a peer-to-peer energy trading community, every person can trade their energy directly, using blockchain technology without any middleman.
Professional service offer on solar energy projects
PUGNATORIUS Ltd. is the Bangkok-based specialist provider of legal services and tax advice on foreign investments in Thailand’s manufacturing and service industries as well as property acquisitions and developments. Solar energy and other forms of renewable energy are one of the law firm’s areas of proven competence, long-standing experience, and unique market reputation.
Solar energy advisory: Based on an unprecedented scope of hands-on experiences in Thailand’s solar energy sector, PUGNATORIUS Ltd. advises foreign solar companies and solar investors on business opportunities in this special sector. The law firm evaluates how the investor’s intentions and project ideas can be realized under Thailand’s current legal framework taking into account the foreseeable regulatory changes in Thailand’s energy markets.
Legal services: PUGNATORIUS Ltd. has proven experience in the successful implementation of solar projects. This includes, for example, the purchase and sale of solar farms, the structuring and construction of solar rooftop developments, and the drafting of PPA, EPC contracts, and other arrangements.
Legal opinions: PUGNATORIUS Ltd. has particular expertise in the independent preparation of legal opinions on legal, subsidy, or tax issues in the renewable energy sector. This concerns, for example, the eligibility of solar plants for promotion by the Board of Investment, the suitability of land for renewable energy plants and the legal characterization of PPAs.
Business matchmaking: Not being a broker or agent, the law firm offers transaction support services to identify solar energy targets, to prepare for public tender procedures and to assist in a wide spectrum of solar energy tasks
Details on the law firm’s activities on the renewable energy markets are described at “Legal advice, tax structuring, transaction support services and business matchmaking on Thailand’s renewable energy markets.”
Disclaimer: A little knowledge is a dangerous thing. This low-resolution high-level outlook constitutes neither legal advice nor an attorney-client relationship.
EGAT (Electricity Generating Authority of Thailand), MEA (Metropolitan Electricity Authority) and PEA (Provincial Electricity Authority)