Understanding the Thai renewable energy market

The energy demand in Thailand is rising rapidly - while the country's power plants need to be replaced. (Photo of Bangkok: Pixabay/derstiefel)
The energy demand in Thailand is rising rapidly - while the country's power plants need to be replaced. (Photo of Bangkok: Pixabay/derstiefel)

8 GW new PV and 5 GW wind until 2040: will they be enough to support the growth in the seven most rapidly increasing regions in the world?

Thailand’s energy consumption is to jump by 75% over next two decades according to the Thailand Power Development Plan of 2015 – even calculated under conservative assumptions such as
(1) the number of inhabitants to remain stable at 66 million until 2040,
(2) growth of the gross domestic product (GDP) of this upper middle-income economy to be 3.4% per year until 2040, i.e. the lowest within the ASEAN, where GDP is expected to double by 2030 from the current US$ 2.6 trillion,
(3) a successful implementation of the Energy Efficiency Programme to reduce energy use by 30% by 2036 (to the 2010 standards) and
(5) a smart grid development.

High electricity demand and old power plants

Power estimates were elaborated considering relatively high capital costs (CAPEX) of US$ 1.6m/MWp for PV and US$ 1.7m/MWp for wind. With the current lower CAPEXs, the deployment of wind and solar shall be higher. Also, power energy demand is rapidly increasing in the strong local paper/pulp sub-sector. At the transport level, several high speed train projects shall be realised which have also not been considered in the calculations. Finally, domestic demand will dramatically increase in a country where 23% of the population still uses biomass for cooking.

In addition to this higher power demand, the Thai’s old power fleet needs to be replaced by renewables. Midd-2014, the peak power demand was as high as 27 GW and almost the same amount (25 GW out of the operational capacity 37 GW) needs to be decommissioned.

Renewables set to grow …

Another important motivation is Thailand’s increasing dependence on energy import, which is expected to grow from 42% (2013) to 78% (2040). The share of natural gas imports almost doubles due to declining domestic production and the high demand for power generation. To limit energy imports, the national power plan (AEDP 2015-2036) foresees that, by 2040, biomass shall have the largest share with 13% (11 GW), followed by PV with 9% (8 GW), wind with 6% (5 GW) and hydropower with 5% (4 GW).

… while nuclear and coal power plants on hold

Plans to add 2 GW of nuclear power have been on hold since 2007 and no financing is available to support the government’s wished increase of 7.5 GW in coal/lignite power plants. Carbon capture and storage technologies are still immature and the Fukushima accident has driven specific investment costs for nuclear to unfeasible levels.

Solution: increase renewable energy shares

For all these figures, it is expected that the figure of 22 GW of new capacity based on renewable energy, which is supposed to be reached by 2036 (PDP2015), will be increased (again) in the national power plan. Consequently, Thailand’s ambitious 10-year-action plan for renewables (Alternative Energy Development Plan (AEDP)), that aims to achieve a 25% energy consumption from renewable energy sources by 2021 (currently 8%) will need to be adapted.

The AEDP 2015-2036 plan considers plants located in Thailand, but also in neighbouring countries. Thai companies or private investors shall sign power purchase agreements (PPAs) with renewable projects located abroad. As solar resources are plentiful (up to 1,400 kWh/kWp) in Thailand, it is expected that mainly hydropower and wind energy will be acquired from the neighbours.

Table 1: Alternative Energy Development Plan for Thailand during the period 2015-2036. (Source: Renewable Energy Industries Club, Federation of Thai Industries FTI, 25 March 2016)

Are the tariffs for renewables attractive?

In 2006 Thailand was the first country to implement a feed-in-tariff (FiT) for renewables in the ASEAN. The programme, called “adder”, added a premium to the wholesale electricity price. Though the wholesale price is volatile and the premium was guaranteed for periods of only 7 to 10 years, depending on the technology, the level was attractive: 4 TBH/kWh (approx. 10 €-ct/kWh in 2014). This volatile support mechanism expired on 31 December 2015 and was substituted by a FiT plus a premium model which was especially supportive for projects of a size up to 10 MW – and exceptionally for PV projects of up to 50 MWp.

Under the FiT plus premium programme, approx. 2 GW (31 projects) have already signed a PPA with the Electricity Generation Authority of Thailand (EGAT) as per March 2016. The EGAT and, to a lesser extent, the Provincial Electricity Authority (PEA) and the Metropolitan Electricity Authority (MEA) have been the main offtakers. Offtakers are monitored by the Ministry of Energy or the Thailand Village Fund, which decided last year not to award further PPAs. The intention was to avoid the risk of a power financial deficit or increase on household electricity bills. The first PV projects were cross-funded by fossil fuel levies. With the reduction of oil prices, the ASEAN reduces fossil subsidies as well. Thus, it is not surprising that the updated power plan sets as a condition to expand wind and solar capacity, levellised electricity costs to be in the range of LNG.

In a country with a comparatively low GDP per capita (US$ 5,977 according to worldbank data) it is understandable that the government tries to avoid an increase of households’ electricity bills (and industry’s power costs). Lifeline rates have been introduced by the Energy Regulatory Commission since 2011 to provide free access to electricity to households. Also, the power prices for high household-consumers of 400 kWh/p.m. are comparatively low at 3.9361 TBH/kWh (9.9 €-ct/kWh).

Competitive bidding shall replace the FiT plus premium incentives (for all technologies except PV) in an attempt to keep power prices low and quickly increase the power fleet with renewables. To this end test tenders are running for biomass and biogas projects in three southern provinces.

With a stable BBB+ (S&P as of 31/03/2016) and thus a similar rating as in Mexico, Poland or Spain, the government expects international investors will be attracted to enter this new market. Japan and the UAE are expected to be major investors, whereas European utilities like Engie already have well-stablished entities in Thailand.

On 15 December 2015, the National Energy Policy Council announced the following FiT levels:

Table 2: Tariffs for small producers (up to 10 MW) commissioning previous to 31 /12 / 2017

Capacity (MW)





Total FiT 1

   ≤ 1 MW

3.13 THB/kWh

2.21 THB/kWh

5.34 THB/kWh


7.83 €-ct/kWh

5.53 €-ct/kWh

13.36 €-ct/kWh

   >1-3 MW

2.61 THB/kWh

2.21 THB/kWh

4.82 THB/kWh


6.53 €-ct/kWh

5.53 €-ct/kWh

12.06 €-ct/kWh

   ≥ 3 MW

2.39 THB/kWh

1.85 THB/kWh

4.24 THB/kWh


5.98 €-ct/kWh

4.63 €-ct/kWh

10.61 €-ct/kWh


2.79 THB/kWh

2.55 THB/kWh

5.34 THB/kWh


6.98 €-ct/kWh

6.38 €-ct/kWh

13.36 €-ct/kWh


6.06 THB/kWh


6.06 THB/kWh


15.16 €-ct/kWh


15.16 €-ct/kWh

Table 3: FiTs for PV projects for a term of 25 years




≤ 10 kWp



10 - 250 ≤ kWp



250 - 1,000 kWp

Agro-Solar Program2

≤ 5 MWp

Large Scale

≤ 90 MWp

THB / kWh






€-ct/ kWh







300 MWp

800 MWp



Footnotes for tables 2 and 3:

1 Projects in the Yala, Pattani, and Narathiwat regions and 4 subdistricts in Songkla (Jana, Tepha, Sabayoi y Natawee) obtain an additional 0.50 THB/kWh (1.4 €-ct/kWh).

3The Agro-Solar Program tariff applies for a plant factor of 16%. Higher production is remunerated at the 12 month-average wholesale price of the EGAT, which is recalculated every four months.


In addition to the FiT and tender incentives, the “Investment Policy for Sustainable Development Campaign for Renewable Energy Projects” offers several tax incentives. For instance, an 8 year exemption on corporate income taxes on net profits and a 50% reduction the following 5 years, 8 year tax exemption on dividends as well a 25% subsidy on capital costs in some specific cases.


Until now the Thai government has focussed on promoting small projects to gain knowledge. However, this will hardly enable the country to achieve the target of 25% renewable energy generation by 2021. The situation is expected to radically change, especially in terms of the PV installed capacity. PV module producers are already preparing for a deployment of PV in Thailand and the ASEAN, having ordered 68% of the contracts of German PV equipment suppliers last year.

Rosa Tarragó

The author is Head of Structured Finance at Sowitec operation GmbH. Sowitec, as a project developer focussed on emerging markets, entered into Thailand’s market more than one year ago considering the large potential the country offers.

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