Thai­land 4.0: Pow­ered by Re­new­able En­ergy?

Thai-American Business (T-AB) Magazine - - Content - Writ­ten by: Cyn­thia Por­navalai

Un­der Thai­land 4.0, re­new­able en­ergy is a key pri­or­ity for in­no­va­tion. Cog­nizant that de­pen­dence on im­ported fossil fu­els is not only eco­nom­i­cally and eco­log­i­cally un­sus­tain­able, but also ex­poses the coun­try to the un­pre­dictabil­ity of global com­mod­ity markets, the Thai gov­ern­ment em­barked on a power de­vel­op­ment plan in May 2015 ( PDP 2015).

The PDP 2015 is based on ecol­ogy, econ­omy, and se­cu­rity of the na­tional power sys­tem. Within this frame­work, the Al­ter­na­tive En­ergy De­vel­op­ment Plan 2015 ( AEDP) was de­vel­oped to re­duce de­pen­dency on im­ported en­ergy and in­crease al­ter­na­tive en­ergy ca­pac­ity from 7,279 MW in 2014 to 19,635 MW in 2036.

To meet this tar­get, the AEDP has adopted the fol­low­ing prin­ci­ples:

• Pri­or­i­tize power gen­er­a­tion from waste, biomass, and bio­gas. • Al­lo­cate re­new­able en­ergy gen­er­a­tion ca­pac­ity ac­cord­ing to de­mand and po­ten­tial in re­gions/ prov­inces. • Pro­mote cur­rent low- pri­or­ity so­lar and wind power projects at a later stage once cost be­comes com­pet­i­tive com­pared with power gen­er­a­tion from liq­ue­fied nat­u­ral gas. • Change the se­lec­tion process for feedin tar­iff grants from first- come, first­served to com­pet­i­tive bid­ding. • Pro­mote com­mu­nity en­ergy pro­duc

tion to re­duce fossil fuel us­age. • In­crease the share of re­new­able en­ergy con­sump­tion from the cur­rent 12% to 30% in 2036.


To sup­port power gen­er­a­tion from re­new­able en­ergy, the Thai gov­ern­ment adopted in Oc­to­ber 2014 a new feed- in tar­iff ( FIT), or pric­ing mech­a­nism to pay re­new­able en­ergy pro­duc­ers for each unit of en­ergy they con­trib­ute to the elec­tric­ity grid. This re­placed the for­mer ad­der pro­gram that had been in place for sev­eral years be­fore ex­pir­ing on De­cem­ber 31, 2015. The ad­der pro­gram of­fered re­new­ables de­vel­op­ers an ad­di­tional pre­mium to the whole­sale elec­tric­ity price.


In Au­gust 2014, the En­ergy Reg­u­la­tory Com­mis­sion ( ERC) launched the GroundMounted So­lar En­ergy Project for the Gov­ern­ment Sec­tor and Agricultural Co­op­er­a­tives Pro­gram, which aims to meet AEDP tar­gets for so­lar power gen­er­a­tion. The pro­gram has an over­all ca­pac­ity of 800 megawatt peak ( MWP) and a max­i­mum ca­pac­ity of 5 MWP per so­lar farm project. A FIT of THB 5.66/ kwh is granted for a 25- year power pur­chase agree­ment ( PPA), com­menc­ing from the com­mer­cial op­er­a­tion date, or the ac­tual op­er­a­tion date, which­ever comes first. The pro­gram is un­der a public- pri­vate part­ner­ship ( PPP) frame­work, whereby the gov­ern­ment or an agri­cul­ture co­op­er­a­tive is the public part­ner/ owner and the pri­vate sec­tor is the project sup­porter, pro­vid­ing know- how and tech­nol­ogy. There were prob­lems dur­ing the se­lec­tion process, prin­ci­pally con­cern­ing zon­ing re­stric­tions and the cri­te­ria for se­lect­ing el­i­gi­ble projects as the se­lec­tion process was car­ried out by lucky draw, as op­posed to com­pet­i­tive bid­ding. Projects were fi­nally awarded to agricultural co­op­er­a­tives on April 26, 2016, with com­mer­cial op­er­a­tion dates sched­uled be­fore De­cem­ber 30, 2016.

Sev­eral bid­ding pro­grammes for re­new­able en­ergy projects fol­lowed un­der the sup­port and di­rec­tion of the pol­icy of the Na­tional En­ergy Pol­icy Com­mit­tee, with the ERC an­nounc­ing win­ning bids for bio­gas on April 21, 2016; biomass on Au­gust 25, 2016; and in­dus­trial wasteto- en­ergy projects on Oc­to­ber 28, 2016. The PPP agree­ments for these projects are sched­uled to be signed by Fe­bru­ary 25, 2017.


A sec­ond round of li­cens­ing for groundmounted so­lar farm projects for gov­ern­ment agen­cies and agricultural co­op­er­a­tives with a to­tal quota of ap­prox­i­mately 118.68 MW ( with a max­i­mum of 5 MW per project) is ex­pected within this year, pend­ing reg­u­la­tory re­view. The ERC has yet to clar­ify whether li­censes will be granted to joint so­lar farm de­vel­op­ment be­tween pri­vate in­vestors and state agen­cies, as some reg­u­la­tions pro­hibit state agen­cies from in­vest­ing in such joint ven­tures.

The En­ergy Pol­icy and Plan­ning Of­fice has also pro­posed a change of method in award­ing con­tracts from draw­ing lots to com­pet­i­tive bid­ding. This change has been met with strong op­po­si­tion from agricultural co­op­er­a­tives who fear that they could be ex­cluded from the bid, as bid­ders must be own­ers and in­vestors of so­lar farm projects.

Other re­new­able en­ergy projects in de­vel­op­ment in­clude a com­mu­nity wasteto- en­ergy pro­gramme with a to­tal ca­pac­ity of ap­prox­i­mately 77.9 MW, sched­uled for bid­ding in the be­gin­ning of March 2017 and com­mer­cial op­er­a­tion be­fore De­cem­ber 31, 2019. The ERC is also ex­pected to launch bio­gas projects of 8 MW lo­cated in cer­tain south­ern prov­inces and a biomass pro­gramme with a to­tal ca­pac­ity of 400 MW.


While de­vel­op­ers still en­joy gov­ern­ment sup­port and sub­si­dies, is­sues con­cern­ing per­mit­ting and project own­er­ship struc­ture are par­tic­u­larly prob­lem­atic in Thai­land.

The le­gal frame­work for per­mit­ting— es­pe­cially with re­spect to the use of land— is not co­or­di­nated. Dif­fer­ent au­thor­i­ties some­times do not fol­low the same stan­dards or set of rules in is­su­ing per­mits and li­censes. A re­cent case in­volv­ing a wind en­ergy project in Chaiya­phum prov­ince demon­strated these con­flict­ing per­mit­ting rules, when a res­o­lu­tion by the Land Re­form Com­mit­tee of Chaiya­phum prov­ince to lease Sor Por Kor land, nor­mally re­served for dis­tri­bu­tion to lo­cal farm­ers, to Thep Sathit Wind Farm Co., Ltd. was ruled un­law­ful and or­dered to be re­voked by the Nakhon Ratchasima Ad­min­is­tra­tive Court, fol­low­ing a law­suit from lo­cal farm­ers. The rul­ing was also later up­held by the Supreme Ad­min­is­tra­tive Court.

In ad­di­tion, con­struc­tion of power plants is gov­erned by var­i­ous reg­u­la­tions that con­tra­dict each other and re­quire com­pre­hen­sive re­view. A case in point is the Na­tional Coun­cil for Peace and Or­der’s Or­der 4/ 2016, is­sued by Prime Min­is­ter Prayut Chan- o- cha, on Jan­uary 20, 2016, us­ing his au­thor­ity un­der Sec­tion 44 of the In­terim Con­sti­tu­tion, which gives him and se­cu­rity agen­cies ab­so­lute power to main­tain na­tional se­cu­rity. The or­der ex­empts all kinds of power plants, wa­ter treat­ment plants, garbage dis­posal and col­lec­tion plants, re­cy­cling plants, and gas pro­cess­ing plants from reg­u­la­tions un­der the Town and City Plan­ning Act. Build­ing a power plant based on this or­der could re­sult in le­gal chal­lenges from en­vi­ron­men­tal­ists and af­fected com­mu­ni­ties.

The ex­pe­ri­ence of the first round of li­cens­ing for the ground- mounted so­lar farm projects in 2016 also demon­strated de­fi­cien­cies in reg­u­la­tions with re­spect to the PPP process and re­stric­tions on project own­er­ship struc­tures. The rel­e­vant reg­u­la­tion has a three- year share­hold­ing lock- up pe­riod, and as­sign­ment of rights un­der the PPA is re­stricted.


De­spite chal­lenges in im­ple­ment­ing a vi­able and af­ford­able re­new­able en­ergy pro­gram, Thai­land ap­pears com­mit­ted to meet­ing its AEDP tar­gets. The ad­van­tages sim­ply out­weigh the chal­lenges as do­mes­ti­cally- pro­duced re­new­ables would re­duce the coun­try’s de­pen­dence on im­ported fossil fu­els, and re­duce im­pacts from the un­pre­dictable be­hav­ior of com­mod­ity markets. Re­new­ables also help re­duce emis­sions, demon­strat­ing Thai­land’s com­mit­ment, as a re­spon­si­ble global cit­i­zen, to en­vi­ron­men­tal con­ser­va­tion.

Nonethe­less, Thai­land needs to im­prove the over­all struc­ture of its re­new­able pro­gram from the le­gal/ reg­u­la­tory, eco­log­i­cal, and eco­nomic an­gles. Com­pre­hen­sive re­view and up­dates to the le­gal and reg­u­la­tory frame­work for re­new­ables will help to avoid con­flicts among state agen­cies. In or­der to at­tract pri­vate in­vestors, the reg­u­la­tions should al­low for more flex­i­bil­ity in di­vest­ing or re­struc­tur­ing investment port­fo­lios. And the li­cens­ing process should be re­viewed for more trans­parency and stream­lin­ing, es­pe­cially for smaller projects.

Pol­i­cy­mak­ers should be mind­ful of the proper bal­ance be­tween ag­gres­sive re­new­able en­ergy de­vel­op­ment and the wel­fare of peo­ple and com­mu­ni­ties. As Thai cit­i­zens seek in­creased par­tic­i­pa­tion in de­ci­sions about ur­ban and com­mu­nity de­vel­op­ment, re­new­able projects should en­deav­our to ac­tively in­volve them, as stud­ies show that projects that have broad public sup­port and lo­cal com­mu­nity con­sent are more likely to suc­ceed. Per­haps for this rea­son, many re­new­able projects in Ger­many and Den­mark are owned by com­mu­ni­ties through co­op­er­a­tive struc­tures.

Fi­nally, re­mu­ner­a­tions, such as the FIT rates, ought to be con­stantly re­viewed to en­sure that they are eco­nom­i­cally sus­tain­able. A high FIT rate may be at­trac­tive to pri­vate in­vestors, but may be eco­nom­i­cally un­sus­tain­able for the coun­try. The re­mu­ner­a­tion struc­ture should con­sider the con­tin­u­ing drop in the cost of re­new­able in­fra­struc­tures and sys­tems due to im­prove­ments in tech­nol­ogy and economies of scale.

At the same time, the cur­rent lure of cheap oil should not de­ter Thai­land from in­vest­ing in re­new­ables and meet­ing its AEDP tar­gets for fu­ture sus­tain­abil­ity, for while oil prices may fluc­tu­ate up or down, the cost of re­new­ables, only has one di­rec­tion to go: down.

Cyn­thia Por­navalai is a Part­ner in the Cor­po­rate and Com­mer­cial team at Tilleke & Gib­bins. She can be con­tacted at cyn­thia. p@ tilleke. com.

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