Thailand’s electricity sector is very interesting. I found a great Thailand case study report by the International Institute for Sustainable Development which outlines the overall market, and the renewable incentives that were put in place. It’s an easy read, but is from 2013 and most of the data is up until 2011 (so is a bit dated).
What it does do is outline how the market works, who the main role-players are, and what kind of incentives have been available for renewables project. In this post I have tried to distill some of the main points of the report. If you are interested in this at all, I suggest giving the full report a read.
Thailand’s electricity has a total installed capacity of nearly 32GW. Most of this is made up of natural gas and coal based facilities. What is interesting is that the Thai government made the decision to go for private sector investment in the electricity sector after the reserve margin fell “from 43 per cent in 1985 to 13 per cent in 1989.” They therefore opted to engage with Independent Power Producers (IPPs), Small Power Producers (SPPs) and Very Small Power Producers (VSPPs). As at 2011, the total capacity from these three independent sources was over 28GW. Nearly 90% of their total capacity was from independent generators.
These generators sell electricity to a single buyer. IPPs and SPPs sell to the Electricity Generating Authority of Thailand (EGAT) who sells on to the distributors. VSPP’s sell directly to the distributors.
In the context of all this, Thailand established renewable energy targets through their Power Development Plan. The 2010 version of this plan has overall targets set at 10GW of renewables capacity by 2030. Installed capacity as at 2011 was just over 2GW. Made up mostly of Biomass facilities (1.79GW).
Feed in tariffs
To achieve this target, several financial or fiscal incentives have been put in place. The most notable of which is the Adder Feed in Tariff. Each type of technology has its own rate. This rate is then added to the base rate payable for electricity (i.e. that would be paid to an IPP if they were using non-renewable fuels), and the total amount payable is then determined. The most generous rate was for solar (THB8/kWh = USD0.27/kWh in 2011). This, reportedly, resulted in a massive uptake of solar projects, which was unexpected. They have since announced a drop in the rate for solar to THB6.5/kWh and subsequently temporarily stopped procuring solar power.
The adder rate seems to be fairly generous, and there have been concerns expressed over the additional cost to the end consumer that has resulted. Because the rates are fixed these facilities are naturally not competing on price. Projects seem to be incredibly profitable, which is a bit concerning for government.
To address this, the nature of the FiT incentive will be changing going forward. I have seen it written that they will be changing the scheme away from adder incentives to a standard feed in tariff or will be moving to model the system on the European FiT structure.
Other financial incentives
Feed in tariffs don’t seem to be the only financial option available to renewable energy developers. A dedicated fun (ENCON) has been established to provide capital, grants or other mechanisms. The main ones referenced in the report are:
- ESCO funds set up – which have made equity or saving funds available. “Under the first phase, nine projects were awarded financial support amounting to THB 235.2 million [±USD7.8m]. This has stimulated more than THB3,388 million [±USD113m] in renewable energy investment.”
- Tax incentives/exemptions
- Investment grants – “The maximum investment grant is about 20–50 per cent for capital investment, 25–100 per cent for MSW and 30 per cent for solar hot water, with a maximum capital grant of THB 50 million [±USD1.67m] per project.“
- Revolving debt facilities (with the engagement of private banks)
- Access to carbon credits
Overall, the extent of planning and support for renewables in Thailand is significantly more advanced than what has been observed in other countries in the region (with the exception of Singapore). While they may be adjusting their policies and mechanisms in response to the uptake from developers and the available funding, it is encouraging to see the level of support for renewable energy developers. The report indicates that there are limited wind reserves in Thailand. While the PDP indicates targets for wind totalling nearly 2GW of the total 10GW, it is therefore expected that biomass and solar will dominate the renewable energy scene. Particularly if they address the tariff concerns relating to solar projects.