Home
Internal
The Thai government keeps and updates regularly various plans to develop production capacities of powers. Under these plans, the total generating capacities are fixed for a certain period of time. Thus, Thailand does not offer a general feed-in tariff to all producers of power from renewable energy but allocates a certain quota of MV per each source and allows market participants to bid on these quotas.
Power producers have to participate in a bidding process in order to sign power purchase agreements with Thailand’s state-owned power distributers, the Provincial Electricity Authority (PEA) and the Metropolitan Electricity Authority (MEA) as well as the Electricity Generating Authority of Thailand (EGAT), usually depending on the production capacity of the power producer. PEA and MEA purchase power from Very Small Power Producers (VSPP – up to a capacity of 10 MW), EGAT purchases from Small Power Producers (SPP – capacity between 10 to 90 MW)
In general, feed-in tariffs are available for the following energy types: biomass, biogas (from waste and crops), municipal solid waste, industrial waste, wind, hydro, solar, and hybrids. The calculation of the feed-in-tariffs is comprised of three parts; first is a fixed FiT (2.39 – 6.85 THB per kWh – applicable for all engery types); second part is a variable FiT (2.69 - 3.21 THB per kWh - applicable only to certain fuels) which can change depending on external factors; the third and final part is a premium (0.5- 0.7 THB per kWh - applicable for waste, biomass, biogas or projects located in three southern provinces of Thailand.
Feed-in tariffs are provided based on quota allocation, and if the quota has been filled, no further producers are eligible. The political process surrounding the quotas can be difficult to follow, especially from abroad, and is subject to change. The government tends to revise the general plans, such as the Power Development Plan and the Alternate Energy Development Plan. However, in the past, these changes have seen a shift toward renewable fuel sources. However, it remains to be seen whether the trend continues. Market participants thus have to stay vigilant for any changes or announcements regarding quota allocations.
In general, Thailand’s economy is forecasted to grow, and thus the national power consumption will grow. In the short-term, the growth might be tempered due to external factors such as the pandemic and internal factors such as political unrest. However, under the current Power Development Plan, Thailand shall increase the overall installed capacities by 56,431 MV until 2037, whereby 20,766 MW shall be contributed from renewable sources. Thus, we deem it likely that Thailand will provide further feed-in tariffs for Small and Very Small Power Producers.
Self-consumption of power produced from renewable energy is generally allowed, provided the power producer complies with the general legal requirements. Thailand distinguishes between off-grid systems (all power required is produced by the plant and consumed by the power producer), self-consumption (part of the required power is produced by the plant and part is received via the general grid), and systems allowing to feed electricity back into the system.
Systems designed to feed-back excess electricity back into the system require the conclusion of a power purchase agreement with either MEA, PEA, or EGAT (subject to the allocated quotas, etc.). Thus, in the following, we are limiting the scope to off-grid systems and self-consumption.
Producers have to comply with a variety of laws and regulations, usually depending on the size of the power plant:
The preparation and application process can be lengthy and difficult, especially for foreign investors, since most documents are in Thai only. However, a wide variety of service providers in Thailand can assist with the documentation process. Lastly, the requirements with regards to the plants are subject to change on short notice. From an economic point of view, the existing self-consumption and off-grid schemes rely on the forecasted retail price of electricity over the next 15 years. In turn, the retail price hinges at least partly on the assumption that the price for natural gas will drop over the same period of time.
It is likely that the share of energy produced from renewable fuels for self-consumption – especially for PV solar rooftop – will increase over the next years. The Thai Board of Investment offers various incentives to producers of renewable energy. In general, one can distinguish between incentives for increasing production efficiency and incentives for the production of power from renewable energy. The offered incentives depend on the details of the projects; however, in general, tax incentives (up to 8 years of corporate income tax exemption) and other incentives are available (for example, easier employment of foreigners in Thailand). We deem it likely that the Thai Board of Investment will continue support for renewable energy and, therefore, see room for further development of self-consumption projects outside of allocated power production quotas.
Thailand distinguishes between private Power Purchase Agreements, and Power Purchase Agreements concluded between MEA, PEA, EGAT, and the power producers.
Non-private PPAs are subject to the Energy Regulatory Commission's regulations and are concluded with regards to the allocated quota for the respective fuel. Power producers have to follow an application process and, once selected, have to sign the PPA within a certain period of time (for example, 120 days since selection). Usually, the PPAs contain clauses requiring the power producer to pay fines if the applicant fails to provide the power as of a certain date. During the application process, applicants usually have to provide a guarantee concerning the offered power production. The guarantees are returned subject to signing a PPA and commencing operations within the stipulated timeframe.
Private PPAs are subject to the general civil law and thus can be drafted based on the parties’ preference (freedom of contract). The PPAs have to comply with the general legal requirements such as the Civil and Commercial Code and the Unfair Contract Terms Act.
A leasing model is currently interesting for solar PV rooftop models. Under this model, a third party constructs, operates, and maintains the solar plant and sells the power to the customer (usually factories, malls, other businesses) at a rate lower than the current retail price of electricity. Financing of the construction, maintenance, and operation is agreed between the parties under freedom of contract.
Most leasing models we have seen include the sale of the entire power plant over a certain period of time, sometimes factored into the electricity price. While generally possible, the parties should keep an eye on the restrictions of foreign investment in Thailand. If a foreign-owned entity operates the plant, the sale of the plant might require a separate investment license. Note that investment promotions usually promote energy production, not the sale of a solar power plant.
We deem it likely that the leasing model of solar plants will remain interesting in Thailand for the foreseeable future, as long as the price for solar cells price low.
Since electricity is generally distributed by the government authorities (MEA, PEA, EGAT), direct marketing is mostly relevant with regards to the leasing model. From our experience, the leasing model is limited to medium to large-sized businesses.
Back to main page
Martin Chrometzka
Associate Partner
Send inquiry
