Thailand: Renewables have their day in the sun

Thailand: Renewables have their day in the sun

The boom-and-bust cycle of renewable energy is not a new issue for Thailand,
having emerged in 2013 when the government announced a plan to support the
fledgling sector.

But the latest boom is bigger than previous ones, with many large firms
jumping in the sector and pouring investment budgets into renewable
projects.

At the beginning of the boom in 2013, the Thai government reviewed its power
development plan (PDP), raising the total power generated from renewable
energy to 13,927 megawatts by 2036. That is nearly double the 7,500MW of
renewable energy produced in 2014.

The sector became more attractive when the new government increased the
renewable power-generating capacity goal to 19,000MW by 2036 in a PDP
revision, accounting for around 30% of total power consumption.

Back in 2013, many investors believed to have close relationships with the
government were granted licences to develop renewable energy projects.

But some by-laws of the City Planning Act and Industrial Works Act did not
allow construction of power plants in specific areas, delaying the
development of renewable energy in Thailand for nearly two years.

The boom resumed in 2015 when the military government amended several
regulations to facilitate renewable energy investment to allow several
delayed projects to start construction.

Another obstacle is Thailand's insufficient high-voltage transmission lines
to carry renewable power from private power generators to consumers. This
delayed the development of renewable power projects further.

High-voltage transmission lines in many areas are scheduled to be upgraded
and developed by the Electricity Generating Authority of Thailand (Egat)
from 2015-19. Egat expects to spend almost 300 billion baht on the
transmission line upgrade, covering 780 kilometres of lines.

The new lines are projected to offer business opportunities to small
power-generating firms.

Viraphol Jirapraditkul, a member of the Energy Regulatory Commission (ERC),
said it expects to grant new renewable energy development licences for a
combined power-generating capacity of more than 1,000MW to private firms. Of
the total, 519MW would be for solar farms, about 400MW is for biomass power
plants and 140MW from waste-to-power projects. Total investment in renewable
energy for this round of licences is worth about 65 billion baht.

"During 2016-17, the renewable energy sector will remain robust,
particularly for small and midsized power businesses because of licences due
to be granted for capacity of less than 10MW," Mr Viraphol said.

But large power-generating companies, including Ratchaburi Electricity
Generating Holding Plc, SPCG Plc, BCPG Plc and Electricity Generating Plc,
can also join in the renewable power licence bidding, he said.

Kasikorn Research Center (K-Research) reported capital expenditure on the
renewable energy segment during the second half of this year to 2018 would
be in the range of 110-150 billion baht. Of the total, some 23 billion baht
is to be allocated for solar farm projects.

K-Research estimated solar power, biomass and waste-to-energy projects would
generate more new businesses.

The boom is expected to spread to other countries in Asia-Pacific, ranging
from Myanmar to Australia and Japan, where people are concerned about the
environment and climate change.

The frenzy in renewable energy investment has encouraged companies in other
sectors to diversify their business.

SET-listed Super Block Plc, a building material maker, switched its focus
from construction materials to renewable energy in 2013 by spinning off
major assets and setting up its wholly owned Super Block Energy Group
(Super). Super is now recognised as one of Thailand's fastest growing
businesses in this sector.

Most of Super's renewable energy projects came from acquisitions and mergers
with existing renewable energy developers who were granted licences since
2010 but had construction delayed. Super had power-generating capacity of
30MW in its first year of operation.

Jormsup Lochaya, the company's board chairman and managing director, said
Super planned to increase capacity to 1,000MW by the end of this year and
2,000MW by next year. It is looking for opportunities in Japan and is in
talks to start a business.

"We strongly believe in renewable energy," he said. "That's why we spun off
our building material assets with full service to renewable energy from our
engineering, procurement and construction business."

TPCH Power Holding, the MAI-listed power business arm of Thai Polycons Plc
(TPOLY), plans to expand its power-generating capacity to 350MW by 2021, up
from 20MW.

Managing director Cherdsak Wattanavijitkul said the capacity expansion will
focus on renewable power from biomass, waste-to-energy and hydropower both
domestically and overseas.

Since TPOLY diversified from the construction business to the power sector
in 2013, it has 11 power plant projects on hand with total capacity of
141MW.

TPCH recently conducted a feasibility study to develop a hydropower plant in
Laos with a capacity of 100MW.

Mr Cherdsak said the 1.1 billion baht raised from its initial public
offering and bank loans would finance its capital expenditures.

"Our debt-to-equity ratio is below one time, so we are in a strong position
to ask for additional loans," he said.

TPCH recently received three licences from the ERC to develop biomass power
plants via its projects dubbed TPCH 1, TPCH 2 and TPCH 5 with a combined
capacity of 26.1MW. The company was one of four winners out of 89
applicants.

But the Energy Policy and Planning Office has warned investors, especially
small investors, to be cautious about buying shares in listed renewable
energy companies because the boom in the sector could lead to speculation as
small renewable power firms resort to tactics to make their share prices
unrealistically high.

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Link to Original Article:
http://www.bangkokpost.com/news/special-reports/1136585/renewables-have-thei
r-day-in-the-sun

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John Diecker
APT Consulting Group Co., Ltd.

www.aptthailand.com