Thailand

Thailand’s Energy Transition

INTRODUCTION

The energy transition is disrupting markets around the world, and Thailand is no exception. The move from energy based on fossil fuels to renewable sources will reshape energy markets over the coming decades. The disruption this will cause will give rise to plentiful opportunities for climate-tech businesses. The Thai government has already announced a number of measures it will implement in order to facilitate the transition.

CURRENT SITUATION

Before looking at the measures the Thai government is taking to support the energy transition, it is worth examining the status quo. Thailand’s energy needs are currently met by fossil fuels such as refined petroleum products and natural gas, as well as a mix of renewable sources such as solar, wind, biomass, and hydroelectricity.

Petroleum

Thailand is a net importer of both crude oil and refined oil products. Natural gas is sourced both domestically and through imports, which arrive through pipelines from Myanmar and as liquefied natural gas (LNG). With domestic gas supplies being depleted and limited opportunities for new investment in the upstream sector, LNG looks likely to play an increasingly important role in supplying Thailand’s energy needs in the coming decades. Earlier this year, the Department of Mineral Fuels, Ministry of Energy (DMF) announced the 24th bidding round for offshore exploration and production blocks; bids are due between 5 – 16 September 2022.

Electricity Generation

As of May 2022, Thailand’s installed grid capacity was approximately 46.8 GW.1 This does not include very small power producers (VSPPs), which are defined as power projects with an installed capacity of less than 10 MW. The figure also does not include so-called “behind the meter” distributed generation, such as power supplied from natural gas fired cogeneration plants on industrial estates or rooftop solar installations.

Peak demand for electricity in 2021 was 30,135 MW.2 The discrepancy between installed capacity and peak demand is welcome, though it should be noted that the most recent version of the Power Development Plan (PDP) contemplates the retirement and decommissioning of 25,310 MW of existing installed capacity by 2037. Given that Thailand’s electricity consumption is likely to continue to grow, additional capacity will need to come online. Indeed, the PDP envisions a further 56,431 MW of new installed capacity being built by 2037.3

Thailand consumed 190.5 TWh of electricity in 2021; overall electricity consumption rose 25% from 2010 to 2020.4 The global energy transition will likely involve a greater dependence on electrification of other sectors, such as transport, manufacturing, heating and cooling, etc. Thailand is no exception, and Thailand’s electricity demands will certainly continue to rise.

As of March 2022, approximately 57% of Thailand’s electricity was being generated from natural gas, followed by lignite and coal combined at 14.5%, renewables at 9%, domestic hydroelectricity at 3.5%, and fuel oil and diesel at 0.2%. Imported electricity is responsible for approximately 15% of Thailand’s total electricity supply

DECARBONISING THE GRID

The Thai government has announced various ways in which it intends to direct decarbonisation of the electricity grid, including increased reliance on non-carbon emitting sources of electricity and relying on carbon capture, utilisation and storage (CCUS) technology.

Solar

The current PDP envisions solar capacity to increase from approximately 4,000 MW at present to 14, 754 MW by 2037. From the additional 10.7 GW of installed capacity, 2,725 MW will come from floating solar projects on hydroelectric dams owned and operated by the Electricity Generating Authority of Thailand (EGAT). The remaining portions will presumably come from a combination of rooftop and ground-mounted installations.

As for future development, floating solar projects have begun to make inroads in inland waters, particularly artificial ponds on industrial estates. Offshore solar is a nascent technology, though it shows a great deal of promise since it avoids concerns relating to land use. Unlike offshore wind, offshore solar installations are invisible or barely visible on the horizon, thus minimising any potential negative impact of sight pollution. New regulatory frameworks would be needed to develop the offshore solar (and wind) sectors.

Wind

The Department of Alternative Energy Development and Efficiency has conducted a number of studies on the potential of wind power in Thailand. With current technologies, Thailand’s wind profile is less promising than that for solar. However, technological advances may improve the prospects for wind in Thailand in the coming decades. Further, offshore wind could potentially present an additional growth opportunity, though as mentioned above, new legal and regulatory frameworks would need to be devised. Currently, Thailand has 34 wind projects with capacity of 1,523.21 MW (as of March 2022) that have reached commercial operations. Most projects that are currently in operation are located in the northeast of Thailand.

Energy Storage

Solar and wind energy do have a few drawbacks, including the intermittent nature of electricity generation; however, storage technologies are available that can ensure a continuous flow of electricity. To date, there has been limited deployment of grid-scale energy storage in Thailand, though there are several projects in the pipeline. The primary technology being considered is typically lithium-ion batteries, which have proven effective in facilitating the deployment of electric vehicles due to their high energy density. Thai policy makers have encouraged storage technology being coupled with variable renewable sources (like solar and wind) by utilising semi-firm power purchase agreements.

CCUS

CCUS is an emissions reduction technology that captures CO2 and either stores it underground or diverts it for further use in other production processes. CCUS is considered an important tool in achieving decarbonisation. Although direct air capture (DAC) has gained attention recently due to reports of initial projects coming online, DAC technology is still a relatively expensive method of removing carbon from the atmosphere given the low concentrations of CO2 in ambient conditions. Bioenergy with carbon capture and storage, or “BECCS”, which involves the generation of electricity from biomass or biogas, alongside the capture of carbon dioxide emissions at the source where concentrations of CO2 are significantly higher, is also promising, as it has the potential to result in negative CO2 emissions.

Since the majority of Thailand’s electricity generation is still derived from burning fossil fuels, it is likely that deploying CCUS in the near- to mid-term will be needed in order to achieve full decarbonisation. Given the abundant quantities of agricultural waste, electricity generation from biomass and biogas plants is likely to increase. By coupling CCUS technology, these power plants may have a negative emissions profile, thus assisting Thailand in meeting its CO2 reduction targets.

ELECTRICITY MARKET LIBERALISATION

Thailand’s power markets have traditionally been structured as an enhanced single buyer model, where publicly owned utilities have dominated transmission and distribution. However, recent steps taken by regulators have the potential to open up the power sector, which could result in a speedier transition to a decarbonised grid.

In order to support the energy transition, the Energy Regulatory Commission (the ERC) has recently issued the Notification Re: Criteria and Guidelines on Preparation of the ThirdParty Access Code for the Electricity Network Systems (the TPA Codes Notification). The TPA Codes Notification discusses third-party access codes (the TPA Codes) for the electricity transmission and distribution systems.

The TPA Codes Notification requires EGAT, the Metropolitan Electricity Authority (MEA) and the Provincial Electricity Authority (PEA) to each issue TPA Codes prepared in accordance with the Third-Party Access Framework Guidelines attached to the TPA Codes Notification (the TPA Code Guidelines). Once the TPA Codes are adopted and further regulations relating to usage and utilisation of the electricity network systems are implemented, the issuers of the TPA Codes generally would have to allow certain third parties to utilise or connect to the issuers’ electricity network systems. Under the TPA Codes Notification, third parties are specified as private power business operators or licensees under the Energy Industry Act B.E. 2550 (2007) other than the issuers themselves. The issuers would be entitled to service fees, which would be subject to the further supervision by the ERC.

The enactment of TPA Codes should increase competition in Thailand’s power markets and, ultimately, lower retail electricity costs. A key issue to watch going forward will be wheeling charges imposed by the TPA Code issuers, since this will be a driving factor in determining the economic viability of private electricity trading. The primary beneficiaries of a liberalised market would be consumers, who should be able to benefit from lower power prices. Another key motivator will be the ability to procure electricity entirely or mainly from renewable sources. As many companies have adopted commitments to achieve net zero carbon emissions by a specified date, allowing the purchase of power that has been generated entirely from renewable sources will facilitate the achievement of these commitments and provide opportunities for renewable energy developers.

Hydrogen has been touted as a means of decarbonising various sectors.

FUTURE TRENDS – HYDROGEN

Hydrogen has been touted as a means of decarbonising various sectors. However, since hydrogen does not exist at scale in ambient conditions, it must be produced with energy inputs. There are several methods of producing hydrogen where CO2 is not emitted to the atmosphere. Given the variety of its potential applications, including in steel manufacturing, fertiliser production, and long-haul shipping and aviation, it is generally believed that hydrogen will have a key role to play in facilitating decarbonisation globally in the coming decades.

With Thailand’s abundant solar radiation, relatively inexpensive land, ample coastlines and proximity to major markets, it is well-situated to be a leader in the deployment of green hydrogen. The technology deployed in producing green hydrogen involves splitting water molecules into their component parts of oxygen and hydrogen through electrolysis. When the electricity is generated from non-carbon emitting sources of energy, such as solar, wind or hydroelectricity, it is generally classified as “green” hydrogen.

Thailand does not currently have a substantial hydrogen industry, but it has the potential to develop low carbon hydrogen for domestic use and for export. Under the Alternative Energy Development Plan (AEDP), one of Thailand’s five master plans relating to energy development, hydrogen is included as part of the “alternative fuels” category with a set target goal of 10 Kilotons of oil equivalent (KTOE) in total by 2036.

The ERC has included hydrogen in the definition of “renewable energy” to be purchased by the PEA or MEA (for VSPP projects) and EGAT (for small power producers, or “SPP” projects), pursuant to the ERC Notification Re: Purchase of Power from SPP Operators of Renewable Energy by Feed-in Tariff B.E. 2560 and the ERC Notification Re: Purchase of Power from VSPP Operators of Renewable Energy B.E. 2561.

While there is still no overarching hydrogen regulatory framework in Thailand, general regulations would apply to hydrogen projects similarly to other power projects. For instance, for green hydrogen projects, an electricity generation licence under the Energy Industry Act may be required. The operating site may also be subject to requirements under the Factory Act, depending on the activities being carried out.

CONCLUSION

The energy transition has already given rise to numerous success stories. Given the pace of change, companies that stay apprised of legal and regulatory developments will be well-situated to take advantage of new opportunities.

Chandler_MHM_Square_Logo

David Beckstead

David Beckstead

is a Partner at Chandler MHM Limited. He has vast experience representing lenders and project sponsors in the oil & gas, mining, renewable energy, and manufacturing sectors.


 

  1. Energy Policy and Planning Office, Ministry of Energy. Electricity statistics (http://www.eppo.go.th/index.php/en/ en-energystatistics/electricity-statistic).
  2. Ibid.
  3. International Trade Administration, Department of Commerce (United State of America). Thailand – Country Commercial Guide, Energy, 15 August 2021 (https://www.trade.gov/country-commercial-guides/thailand-energy).
  4. Supra note 1.

 

This article was published in the September, 22 issue of the IHC Magazine. To read the fill magazine, please click here

Inhouse community magazine

Tags: Energy, Energy Transition, Fossil Fuels, Liquefied Natural Gas, Thailand
Related Articles by Firm
New regulation on the prohibition of sales of alcoholic beverages online
In line with evolving trends in technology, certain entrepreneurs and retailers have started using online channels to sell alcoholic beverages, which makes it difficult to ensure the sale of such beverages is in accordance with existing laws ...
Nok Air Rehabilitation Proceedings – Updates for Creditors and Lessors
As the global travel industry continues to grapple with the effects of COVID-19, many companies are now beginning to seek protections under various insolvency regimes ...
Thai data privacy act exemptions
A cabinet resolution has approved a draft Royal Decree on temporary exemption of PDPA enforcement for some organisations and businesses.
Procurement of power from community-based power projects
These projects are intended to help generate and distribute income to local communities and promote their participation in local power projects.
Updated standards for e-meeting security
The Emergency Decree requires that electronic meetings follow the security protocols set forth under a notification from the Ministry of Information and Communication Technology.
Waste to energy projects in Thailand
A brief overview of the legal issues related to the development of a municipal solid waste to energy project.
Scrutinising CP Group’s acquisition of Tesco
The decision of Thailand’s competition authorities will set a precedent regarding merger control and provide clarity on market definitions.
PPP projects in Thailand’s EEC
Thailand will continue to aggressively move forward with legislation that streamlines implementation of important PPP projects. This legislative trend presents new opportunities for foreign and local investors alike, with a focus particularly in Thailand’s infrastructure sector ...
Community-based power projects in Thailand
A feed-in tariff scheme for power generated by community-based projects has been approved.
Thailand Plus incentives under BOI
The two new incentives encourage companies to move from overseas to Thailand.
Thailand’s OTCC issues first industry-specific conduct guidelines
Guidelines on the conduct between wholesale and retail business operators and their trade partners announced by the Office of Trade Competition Commission.
Amendment to the Consumer Protection Act 
The Act strengthens the law relating to the safety of products and services.
Personal Data Protection Act published in the Government Gazette
Business operators should ensure that their businesses comply with the PDPA.
Amendment to Thai Arbitration Act
The Amendment expands the ability of foreign arbitrators and representatives to act in arbitral proceedings.
Update on Stamp Duty regulating electronic transactions
A new notification requires parties who enter certain electronic transactions to pay stamp duty in cash.
Ministerial Regulation removing back office services from the Foreign Business Operations Act announced
Certain back office service businesses will no longer require a foreign business licence.
Developments in Thai M&A
Corrupt practices, environmental breaches and merger filing are becoming more significant priorities for clients ...
Thailand: Projects and Energy
Commentary on the latest developments in the Thai projects and energy sector ...
Secondary laws under the Trade Competition Act BE 2560
The enactment of these five Notifications represents a significant leap of progress.
Thailand Update: Amendment to Work Permit Law
In response to criticism, the government decided to amend the Emergency Decree on Managing of Foreigners with relaxed penalties ...
Leasing of residential buildings − A contract-controlled business
The Contract Committee of The Consumer Protection Board recently announced a new Notification which designates the lease of residential property as a “contract-controlled business”.
New Mining Regulations for Thailand
On 30th January 2018, the Ministry of Industry issued a new notification regarding prohibited actions for foreigners ...
Mergers and acquisitions in Thailand
A number of factors are making Thailand a target of choice for international and regional investment ...
Thailand Anti-Corruption Update
National Anti-Corruption Commission Guidelines to Supplement Section 123/5 of the Organic Act on Counter Corruption ...
Amendment to the Thai Civil and Commercial Code
Part IX: Combination of Limited Companies ...
Thailand: Amendment to the Public Company Act
The National Council for Peace and Order has considered the lack of clarity on conditions, procedures and time limitations related to the laws governing business operations ...
Thailand: The Act on the Amendment to the Civil Procedure Code (No. 30) B.E. 2560 (2017)
There are a number of amendments to the current Civil Procedure Code (CPC) as part of its legal execution ...
Projects & Energy Special Report: Thailand: New Minerals Act
A new Minerals Act (BE 2560 (2017) was published on March 2, 2017 and took effect on August 30, 2017 (180 days after the publication date) ...
Thailand: ERC Announcement - Purchase of Electricity From Hybrid-Renewable Energy Small Power Producers
The Energy Regulatory Commission (ERC) issued an invitation to bid for the sale of electricity from Hybrid-Renewable Energy Small Power Producers (SPP) on 4 August 2017 ...
Thailand: New Amendment to the Labor Law
The Labor Protection Act B.E. 2541 (“LPA”) was first enacted in February 1998; the LPA has been amended several times ...
Thailand: Extension of the Reduced VAT Rate
Value added tax (VAT) is an indirect, non-cumulative, consumption tax levied on the supply of goods or provision of services in Thailand ...
Thailand: Ten year visa extension
Due to the rapidly increasing number of foreign senior-citizens seeking Thailand as a retirement destination, Thailand’s Cabinet recently approved the ten-year retirement visa extension ...
Thailand: The New Trade Competition Act
On 24 March 2017, the National Legislative Assembly (the “NLA”) in Thailand passed the final reading of the draft Trade Competition Act ...
Thailand: Amendment to BOI Act to create new BOI benefits
The Thai government has recently been promoting “Thailand 4.0”, which refers to creative and innovative industries ... as a master plan to pull Thailand out of the middle-income trap and toward becoming a high-income country ...
Energising Thailand’s M&A sector
With a focus on the energy and natural resources sector, Chandler & Thong-ek Partner Ratana Poonsombudlert answers our questions on Thailand’s M&A present and future
Related Articles
Related Articles by Jurisdiction
Thailand’s OTCC issues first industry-specific conduct guidelines
Guidelines on the conduct between wholesale and retail business operators and their trade partners announced by the Office of Trade Competition Commission.
Full steam ahead in the Mekong Region: a look at projects in the pipeline
In this month's edition of ASIAN-MENA COUNSEL, we provide you with a Mekong Region Update. Industry experts from Gide Loyrette Nouel offer up a comprehensive overview on the current status of infrastructure in these largely underdeveloped countries bound ...
Latest Articles