6 Upcoming Developments to Watch in Thailand’s PV Sector

Vertech Capital
Apr 25, 2019 · 8 min read

As part of the latest Power Development Plan (PDP), Thailand is set to implement new policy changes to increase the share of renewables in its energy mix. With a focus on accelerating PV uptake, the new initiatives include energy trading, wheeling charges, FiT schemes, and a new building energy code system. This complements the government’s Thailand 4.0 campaign to boost innovation and research, and positions Thailand as a key market for distributed renewable energy.

Photo Credits: Scott Webb

2019 will be a pivotal year for Thailand to accelerate PV adoption and meet the market’s increasing energy demand, which is predicted to rise almost 78% by 2036. In June 2018, authorities announced that Thailand’s Power Development Plan (PDP), a 20-year roadmap guiding the market’s energy policies and framework, will be amended to diversify the country’s energy mix as local oil and natural gas resources deplete. Expected to be in effect by Q3 2019, the new modifications are the first major update to the document since 2015.

The energy sector in Thailand is largely controlled by the state, with generation, transmission and distribution dominated by three state utilities: Electricity Generating Authority of Thailand (EGAT), Metropolitan Electricity Authority (MEA), and Provincial Electricity Authority (PEA). According to the latest PDP, state control of the energy value chain will continue into the future, however there will be new structural changes to encourage distributed energy resources (DER) and new technologies. A major change is the pivot towards renewable energy and natural gas, decreasing the share contribution of coal in generation capacity over the next 20 years.

A comparison of the change in the share of energy sources in new generation capacity over the next 2 decades. (Source: Thailand Ministry of Energy and Thai Photovoltaic Industries Association)

Renewable Energy Policy Developments Through the 2018 PDP

As Thailand’s energy priorities change, there are 6 key developments that are poised to transform the energy landscape for DER investors and technology players:

The six developments aim to increase renewable energy generation through new areas of innovation, promoting investment and cross-sector collaboration in the PV industry, and liberalizing the market to increase competition.
  1. Diversifying Solar Energy Portfolio

To meet its renewable energy generation targets, Thailand is diversifying its solar energy portfolio by betting big on floating solar. In March 2019, state-owned EGAT revealed plans to build the world’s largest floating solar farm. In line with the current PDP, 16 floating solar farms will be built on 9 hydroelectric dam reservoirs by 2037 with a combined capacity of over 2.7GW. If built successfully, floating solar will account for almost one-tenth of Thailand’s renewable energy source by 2037.

The country will join the likes of China, India, South Korea and Japan in exploring floating photovoltaics which is predicted to be a game changers for global clean energy production as they are more cost-effective and efficient than rooftop solar and solar farms. Floating solar is a logical next step for the Thailand market, given that there are currently 26 hydropower plants that offer ideal staging waters for floating solar and land resources can be channeled towards a more optimal use for agricultural needs.

2. Hardware Commercialization

Thailand has ambitious EV plans, with a target of 1.2 million EVs on the road by 2036. It is expected that boosting the EV car market will further decrease the price of energy storage systems (ESS), which in turn supports the PV market by addressing solar intermittency. Solar-powered EV charging stations are also a key focus for utilities, with solar panels on EV charging stations being tested on both the EGAT and MEA campuses. Thai utilities are therefore preparing to meet the extra energy demand that EV charging will place on the grid, signalling an urgent need to accelerate DER proliferation as the EV market matures.

As the number of PV installations increase across the country, Thailand is also betting big on stationary ESS with two projects of 22MWh and 16MWh capacity launched to test frequency regulation and system flexibility. A bullish attitude towards the importance of ESS is particularly driven by the increasing market share of Chinese manufacturers such as Huawei, as well as the declining price of storage from local manufacturers. ESS is seen as another opportunity to further encourage IPPs and SPPs to meet their base load production requirements during peak demand.

3. Individual Power Supply and Self-Consumption

The new PDP promotes rooftop solar for individual power supply (IPS) and self consumption in residential and commercial buildings. While these solar plants will not be allowed to sell surplus electricity back to the grid, end users will benefit from lower electricity bills. This will significantly lower peak demand and base load power requirements.To encourage IPS and behind-the-meter solar installations, Thai authorities will continue rolling out innovative financing models such as third-party ownership, which allows facility and building owners to use electricity cost savings to finance installations.

IPS is particularly gaining momentum in the commercial & industrial (C&I) sector under corporate power purchase agreements (PPAs). For example, Thai conglomerate Charoen Pokphand Foods (CPF) signed an agreement to install a 40MW rooftop solar project at its manufacturing plants for self-consumption, the largest collective rooftop project to date in the country. Earlier this month, Siam Cement Group (SCG) revealed a project installing 50MW of C&I solar PV plants for several factories. These large corporations are the first movers in this space due to the high resources and capital expenditure required for large rooftop solar farms. As PV costs further decline, small and medium enterprises (SMEs) will also be encouraged to install rooftop solar farms and decrease their power consumption from the grid.

4. Building Energy Code & License

The latest PDP will implement a new Building Energy Code (BEC) that aims to reduce power consumption of the built environment and promote energy efficiency in new properties. This initiative allows energy businesses to collaborate and expand their solutions to the construction and real estate sectors. The BEC would position Thailand as the third leading market in Southeast Asia, following Singapore and Malaysia, to enforce building energy standards.

The new BEC will regulate building materials, HVAC systems, lighting, and the installation of DERS such as rooftop solar. Thailand will also begin to reform the process of obtaining licenses and permits for rooftop PV installations. BEC and new permit regulations are set to be rolled out over a 3 year timeline for different area requirements, and aim to cut power consumption by 13.8 billion kWh. Energy control licenses and factory licenses for more than 1MWp are set to be abolished in the future to encourage private sector involvement in energy planning.

5. Feed-in-Tariff & Wheeling Charges

Thailand will also be liberalizing its energy sector by modifying the current enhanced single buyer (ESB) model. Under this policy, the state mandated that independent power producers (IPPs) and small power producers (SPPs) sell electricity to the three public entities. This model will be liberalized in the second half of 2019, by allowing energy trading between the grid and residential buildings with rooftop solar.

While EGAT will continue to produce the majority of Thailand’s generating capacity, this policy is expected to promote the concept of ‘prosumers’, which are buildings that produce and consume their own electricity and are able to sell excess electricity to the grid or other consumers. Private electricity trading provides a financial incentive for users to invest in rooftop solar as prosumers are compensated for the energy they sell to the grid, which can proliferate solar energy.

Residential buildings will be encouraged to install solar panels with a capacity of up to 10kWp or 15% of the transformer capacity. While selling electricity back to the grid, prosumers would be charged a transmission fee for retail power trading. To promote competition in private power producers, Thailand will also leverage wheeling from 2020 onwards, which is the transfer of electricity from a grid to loads outside the grid boundaries. This will allow utilities and prosumers to address power shortages in specific areas of the country through over-the-grid trading.

Thailand’s Energy Regulatory Commission (ERC) launched a PV scheme earlier this month to offer a feed-in-tariff (FiT) of 1.68 baht/kWh for household rooftops for 10 years, with an initial pilot of 100MW capacity. While this FiT rate is lower than the retail price of electricity from the grid, this initiative signals that Thailand’s energy sector is slowly liberalizing to include smaller power producers.

6. Private PPAs

The revised PDP also launches private power purchase agreements (PPAs) to address the concern that high energy prices in a non-competitive market could adversely affect manufacturing and industrial operations.These will allow businesses to develop and install land-based solar farms. Previously, “non-firm” PPAs allowed SPPs to delivery electricity below the installed capacity of the power plant. In 2017, however, a hybrid “firm” PPA scheme was launched that required a continuous baseline production of energy to address issues with generation intermittency. This scheme promotes a competitive bidding process to ensure that PPAs promote lower cost renewables.

In light of the increasing adoption of rooftop solar in C&I estates, the new PDP will also open new pathways for innovation. Blockchain is expected to be a key area of technology focus to enable and scale energy trading. The interest in business-to-business energy trading is supported by the launch of ASEAN’s first behind-the-meter energy trading project at the T77 Precinct in Bangkok. The project, deployed by Power Ledger in partnership with MEA and Thai renewable energy company BCPG, is the first such project in the market enabling peer-to-peer energy trading between 4 commercial buildings.

Thailand as an Energy Innovation Hub

As the government promotes technology and innovation as part of its 4.0 campaign, the shift in prioritizing renewables over coal will position Thailand as a global player in energy innovation. Thailand is set to be a strategic market for solar generation and O&M technologies.

However, industry stakeholders need to be aware that despite these signals pointing towards decentralization, the energy market still remains tightly regulated by the state authorities. Therefore, public-private partnerships remain as the vehicle of growth for the PV market.

Vertech Capital partners with innovative companies to help them scale in new markets. We curate and manage a global portfolio of cutting-edge technologies and investments, with traditional expertise in the energy sector.

Based in Singapore, our advisory arm focuses on the commercial translation of innovation, including disruptive technologies like blockchain and artificial intelligence. We are committed to building a global innovation ecosystem to accelerate access to the 4th Industrial Revolution.

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