Thailand sharpens focus on alternative energy

Thailand sharpens focus on alternative energy

On the back of improved technology and lower costs, the government in
Thailand could soon boost the renewable energy segment further by revising
upwards the long-term target for its contribution to the electricity
generation mix.

In early March, during cabinet discussions on energy requirements and
long-term supply targets, Prime Minister Prayut Chan-o-cha proposed raising
the target contribution from renewables to 40% - a significant increase on
the 33% set out in the Power Development Plan 2015-36 (PDP2015), the
country's blueprint for developing its electricity segment over the next two
decades.

This objective could be feasible due to reductions in production and
installation costs and increased generational efficiencies, which will make
investing in new photovoltaic (PV) capacity more appealing, according to
Poyry, an energy consultancy and engineering firm.

In a report issued in late March, Poyry said Thailand will achieve "grid
parity" - the point at which production costs for solar energy fall to the
same level as those for conventional sources feeding the grid - by the
mid-2020s.

This parity, which does not factor in existing subsidies and will apply to
customers across the industrial, retail and consumer segments, will make PV
more appealing, the study concluded, "potentially leading to a drastic
increase in solar deployment".

Revisiting renewables

An improved bottom line for the solar energy sector, combined with a rise in
private sector demand, could prompt an overhaul of Thailand's energy
roadmap, with a greater emphasis placed on renewable energy.

According to PDP2015, the country's installed capacity requirements will
reach 59,300 MW by 2036.

Under the plan, the government aims to have 33% (19,634 MW) of this capacity
provided through renewable generation sources, in line with its bid to drive
cleaner and better power generation. However, officials have now indicated
that this percentage could be increased.

Speaking at a sustainable energy technology fair on March 8, Areepong
Bhoocha-oom, the chairman of the Electricity Generating Authority of
Thailand (EGAT) and permanent secretary at the Energy Ministry, said that
with building costs down, it made sense to revisit the PDP2015.

"We have met half the renewable power target within only two years and if
the government wants us to increase the proportion of renewable energy it
will not be that hard," Areepong said.

This case for revisiting Thailand's power development plan is supported by
technological advances in the segment which, he added, were reducing the
costs associated with renewable energy.

Longer-term benefits

Any realigning of PDP2015 in favour of renewables will increase investment
opportunities for private sector companies, while encouraging economies of
scale, lowering costs and raising returns. This could boost the prospects
for service providers up and down the sector's development and operational
chain.

"Energy and utilities, in particular, lend themselves well to using business
models to enhance supply, especially given that they are critical
infrastructures for manufacturers and other investors," Areepong told OBG.

Development of the electricity sector, he added, remained closely linked to
that of the broader economy, with higher demand for power fuelled by
economic growth, investments and forward planning, based on extended
estimates of requirements.

"Long-term projections in 20-year cycles are necessary in the power
generation sector because investments in expanding capacity take time to
actualise," he said.

Shifts in demand and improvements in technology and costs will, however,
likely see further revisions to PDP2015 over its lifetime, as Thailand
continues to adapt its utilities provision to meet the country's economic
needs.

More options for investors

It is not only solar PV that is generating more heat among investors;
progress in developing technology and improvements in processes are making
other renewable energy sources increasingly attractive to investors,
according to Cherdsak Wattanavijitkul, president of renewables firm TPC
Power Holding, which operates four biomass plants with another two set to
come online through the Provincial Electricity Authority's
very-small-power-producer scheme.

"While biomass has traditionally been an investment-heavy alternative energy
source, requiring up to BT70m-80m ($2m-2.3m) in investment for every 1 MW
generated, as technological advancements are made and processes are
streamlined, greater generation is possible at the same level of
investment," he told OBG.

Cherdsak also highlighted the speed with which power producers have been
responding to the government's drive to develop alternative energy sources.

"Solar power has been the fastest to develop in Thailand due to relatively
high government tariff incentives when compared to those for wind, waste and
biomass," he said. "However, revisions to feed-in tariff rates point to
biomass as the upcoming energy source being targeted for development."

Biomass has been identified as a key source of energy under PDP2015, set to
account for 5570 MW of generation capacity - well over a quarter of the
total renewables target for 2036 and second only to the 6000 MW planned for
solar.

Any revision of PDP2015 could raise the share of biomass and solar PV
further as input from Thailand's renewables expands, providing greater
opportunities for investors as well as technology and service providers.

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Link to Original Article:
http://www.oxfordbusinessgroup.com/news/thailand-sharpens-focus-alternative-
energy

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John Diecker
APT Consulting Group Co., Ltd.

www.aptthailand.com