Kudun and Partners
  February 11, 2020 - Thailand

Renewable Energy Thailand: Why A High-Income Future Is Likely a Low-Carbon One Too
  by Kudun & Partners

In Thailand, economic development, technological progress and energy transition go hand-in-hand. The government is continuing to pursue Thailand 4.0, the ambitious economic model designed to propel the country into high-income status. This transition hinges on Thailand moving from its agrarian and labour-intensive roots to a value-based economy where smart industry is king.

Concurrently, the Ministry of Energy has set impressive renewables targets to help minimise the country’s reliance on depleting oil and gas reserves and become a regional—if not global—leader in solar, wind and hydro-powered energy. Technology such as smart grids will be instrumental in helping Thailand meet these targets, creating an inextricable link between its economic growth and the switch to low-carbon fuels.

Kudun & Partners is a leading Thai law firm with substantial experience in the energy sector. We’ve proven ourselves critical in the negotiation of high value renewables and non-renewables-sector transactions for both domestic and international clients. In this article, we share some of our invaluable expertise on Thailand’s future as a developed yet low-carbon economy.

What are Thailand’s renewables targets?

Over the last five years, Thailand has repeatedly demonstrated its commitment towards a low-carbon future. In 2015, the Ministry of Energy adopted a power development plan (PDP) that set the target for the share of renewables in the country’s energy mix at 20% by 2037. This was updated in 2018, with a new target of 30%—almost double the level seen in 2015.

Thanks to this ambitious streak, Thailand is already the leader in installed renewables capacity in South-East Asia with 10GW, but it has its eyes firmly set on expansion. The current power development plan, approved by the National Energy Policy Council in January 2019 sets a target of 56.4GW of new power capacity by 2037, of which 37% will be renewables. This is equal to 20.76GW of new renewable power generation capacity in the next 17 years.

While natural gas is still expected to play a significant role in power generation, Thailand is clearly phasing out other fossil fuels, with renewables overtaking coal in the country’s energy mix.

The importance of smart technology

Central to this transition is the development of advanced technology as a part of Thailand 4.0. The implementation of smart energy—in particular the smart grid initiative—is a national policy under the Ministry of Energy’s Master Plan, which began in 2015.

Under this plan, state-owned enterprises (SOEs) are expected to spend around 200 billion baht on smart grids before 2036 to enhance energy supply, efficiency, grid resilience and reduce carbon emissions. This is consistent with Thailand 4.0’s emphasis on the value-based economy, driven by targeted S-Curve sectors like smart electronics, automation, biofuels and digital.

The investment environment

The increase in installed renewable capacity is in no small part due to Thailand’s highly attractive landscape for power-sector investments. In 2007, it was the first country in the region to implement an ‘adder’ or feed-in premium scheme to spur investment in renewable projects. This was replaced in 2014 by the even more competitive Feed-in Tariff (FiT) scheme.

The power market is partially liberalised: private companies cannot participate in transmission or distribution, but can undertake generation projects. Power from private renewables projects is sold exclusively to the state-owned Electricity Generating Authority of Thailand (EGAT), which is the sole transmissions system operator.

These projects are eligible for incentives from the Board of Investment (BOI), including but not limited to tax holidays, exemptions on dividends and exemptions on selected import duties.

While foreign ownership laws are typically a stumbling block for investment in Thailand, 100% foreign ownership is permitted for companies solely engaged in power generation. The Land Code does, in theory, restrict ownership of the project land, but it is common for companies to be exempt from this limitation under the investment promotion law.

Conclusion

Thailand is evidently doing something right, as its regulatory framework has supported more than US$9.7 billion of investment in renewable projects since 2010, putting it well on its way to achieving its targets. Smart technology and renewable energy are partners in Thailand’s future economic development—it is impossible to imagine one without the other under the current plan.

If you would like to know more about investment in Thailand’s renewables sector or require legal advice on a specific transaction, please contact Kudun & Partners experienced and forward-thinking team today.




Read full article at: https://www.kap.co.th/thought-leadership/renewable-energy-thailand-why-a-high-income-future-is-likely-a-low-carbon-one-too/