Need for a sustainable solar energy policy in Thailand-
Thailand’s solar sector has been one of the fastest growing in the world over the past couple of years. Preliminary estimates show that the country added 210 MW of solar capacity in 2012, thus bringing the total installed capacity in the country to 360 MW. In terms of percentage of capacity increase in 2012, only a handful of countries such as India, Denmark, Bulgaria, and Greece fared better.
Thailand’s Alternative Energy Development Plan (AEDP) for 2012–21 plans to increase the country’s total installed solar capacity to 2,000 MW.
D. Wiedmer, Senior Investment Specialist at the Asian Development Bank’s (ADB) Private Sector Operations Department, highlights Thailand’s committed endeavour to realising its goals: “Thailand’s 2,000 MW target seems ambitious for the Southeast Asia region, as no other country has significant solar power development plans, but given the overall development trends of the solar industry worldwide, the target is definitely achievable.” The country’s solar potential, based on its average solar irradiance of 5 kWh per square metre per day, has been estimated at around 50,000 MW.
With power purchase agreements (PPAs) signed for projects amounting to 2,000 MW of solar energy, Thailand should not have any problems meeting the AEDP’s 2012–21 target on paper. So far the solar market development has been relatively smooth: the land acquisition and permit process has been uneventful. Moreover, mostly private sector developers have received generous financing support from multilateral financial institutions such as ADB and commercial banks. Foreign contractors and manufacturers have also shown a steady interest in the sector, which was reflected in the statement by M. Lohoff, Chief Sales Officer of German module manufacturer Conergy, at a press conference: “Currently, Thailand has to cover around half of its primary energy demand with imports, which is very costly in the long run. The country is, therefore, subsidising solar energy. We therefore want to further increase our market share of around 10 per cent and benefit from this growth potential.”
Current state of play
At present, 715 solar projects, with a total gross capacity of 3,430.38 MW, are at various stages of development around the country. Over 500 of these projects, with a combined capacity of 2,190 MW managed to finalise their PPAs before tariff-related uncertainties affected the remaining projects (see Box 1). As of end-2012, around 200 of the 500 projects with PPAs had been commissioned, bringing the total grid-connected solar capacity to 360 MW.
Only two of these projects can be classified as “large scale”, namely, Natural Energy Development Company Limited’s (NED) Lop Buri power plant, which has an AC output of 55 MW (gross capacity 73 MW); and Bangchak Petroleum’s Sunny Bangchak project (first phase), which has an AC output of 30 MW (gross capacity 44 MW).
Both companies are selling power to the Electricity Generating Authority of Thailand (EGAT) under the small power producer (SPP) scheme. In total, there are seven such projects that are either operational or under development whose total gross capacity is close to 450 MW. However, only four projects (including the two commissioned) have firm PPAs: apart from the two plants that have been commissioned, there are two 90 MW projects by Energy Absolute Public Company Limited with PPAs.
The main activity has been taking place in the very small power producer (VSPP) segment involving licensed projects of up to 10 MW. Although the PPAs for these projects were signed between late 2008 and early 2009, they will not be commissioned until late 2013.
Of the 708 VSPP solar projects under development or commissioned, 475 are solar photovoltaic (PV) projects. Most the solar thermal projects are based on the Stirling engine technology, rather than the more conventional parabolic trough. All 120 Stirling engine-based projects (with a total capacity of 717.5 MW) are being developed by D&J Clean Energy, a small Bangkok-based company. Other companies with multiple projects include Thailand’s Electricity Generating Public Company Limited (EGCO) (projects with a total capacity of 300 MW) – mainly as a strategic shareholder) – and Solar Power Company Limited (243 MW). While there are trading companies and industrial conglomerates that have entered the sector, most developers are pure-play renewable energy companies.
In terms of geographical spread, most projects are located in the north-eastern region of the country (about half of the projects with confirmed PPAs). The region enjoys the highest solar irradiation in the country. Moreover, the relative abundance of land and low prices make this area highly attractive to developers. The higher terrain is also important as it offers some protection against floods – a major reason for delays in projects located in other parts of the country.
The absence of import duties means that key components of solar power systems are mostly imported from Chinese, German, Japanese, Taiwanese, or American companies. Foreign manufacturers with a major presence in Thailand’s solar sector include Suntech, Conergy, and Sharp. In the lower-capacity segment, indigenous module manufacturers such as Bangkok Solar, Ekrat Solar, and Solatron have fared well against foreign competition.
An era of uncertainty
Based on the projects registered, as well as private and foreign interest generated, Thailand’s solar sector can be considered to be thriving. However, for the past two and a half years, there has been little development in the institution of a new tariff or regulatory regime, which has left a large number of projects (with no PPAs) stranded.
For new entrants looking to break into Thailand’s solar market, the situation is discouraging. Given the expanding solar market in other Asian countries such as China, India, and Japan, many of these developers may opt to move to these markets instead. It is also likely that Thailand’s neighbours such as the Philippines, Indonesia, and Malaysia will attract a substantial number of investors who may have been looking at Thailand.
What is sorely needed is the development of a unifying energy policy that incorporates long-term solar targets into the country’s overarching energy requirements and its desired fuel mix. Setting targets for solar power projects, comprising a healthy mix of utility-scale PV projects, rooftop PV projects, and large thermal power projects with specific timelines, will create stability in the market. Finally, the authorities need to put in place a clear renewable energy regulatory framework that carefully monitors the selection and project development process. Most importantly, they should establish a tariff determination mechanism that effectively integrates solar power with the Thai grid without overburdening consumers.
