Dr. Marko Lackovic, Managing Director & Partner, alongside Suncica Zdunic, Project Leader at Boston Consulting Group, took to the stage to discuss the vital role renewable energy plays in shifting global energy dynamics, with a sharp focus on the Asia-Pacific (APAC) region. Interestingly, Thailand emerges as a key player in this transformation. While starting from a modest baseline, renewable energy is witnessing a robust uptick in APAC, marked by an impressive compound annual growth rate (CAGR) of 9%. Projections for 2030 indicate that renewables could make up between 30% to 50% of the power generation mix across numerous APAC markets.
The APAC region, with its vast potential and varying market dynamics, offers both tantalizing opportunities and challenges aplenty for renewable energy developers, investors, and operators. These complexities are outlined in Boston Consulting Group (BCG)’s insightful report, “Asia Pacific is Ready for Renewables. Are Energy Players?”
To navigate these choppy waters, a keen understanding of each market’s unique subtleties and a strategic focus attuned to local conditions are crucial. Significant investments are needed for comprehensive renewable energy integration. The International Energy Agency’s Announced Pledges Scenario, updated in August 2023, anticipates investments in APAC renewables to soar to US $286 billion from 2022 to 2030.
Energized Ambitions in Thailand
Thailand steps into the spotlight as a trailblazer in renewable energy, showcasing around 12,500 MW of installed capacity. Even though the country is currently a net electricity importer, there’s enormous potential to tap into renewables. The push to diversify energy sources away from gas, which constitutes about two-thirds of electricity generation, is paramount. This diversification aims to cushion the impact of rising gas prices in an already pricey electricity tariff scenario. From the turn of the millennium until 2021, Thailand’s electricity consumption nearly doubled, though it doesn’t face the skyrocketing demand forecasts of some neighbors.
Thailand has every intention of increasing its reliance on renewable sources, with a keen eye on solar, wind, and biomass as viable alternatives to gas. Plans are in motion for a 5.5 GW increase in renewable energy capacity by 2030. Recently, Thailand raised its renewable energy targets in its Power Development Plan 2024, aiming to elevate renewables to 51% of the power mix by 2037.
Moreover, there’s a carbon tax envisioned for 2050, starting at 200 baht per metric tonne, with oil producers being the early adopters. These ambitious energy goals are Thailand’s ticket to achieving carbon neutrality by 2050 and net-zero greenhouse gas emissions by 2065. A robust renewable energy ecosystem will be fundamental in steering this path.
Charting a Course for Success: Essential Strategies at Play
Thailand, along with APAC, drives renewable energy development through several key elements, accelerating the march toward a sustainable energy future. A primary catalyst is cost reduction. Technological advancements and economies of scale have brought renewable energy into competitive alignment with traditional fossil fuel-based power generation. Particularly in solar, this cost parity has been a game-changer, spurring renewed investment and the establishment of cleaner energy infrastructures.
For developers and investors exploring Thailand and APAC’s renewable energy scene, adaptability to diverse business climates is crucial. Here are five strategic factors to consider: (1) narrowing focus to zero in on specific markets and technologies; (2) forging local partnerships to secure land and navigate regulatory landscapes; (3) expanding financing options to manage challenges associated with lower returns and heightened competition; (4) integrating with local players to manage supply chain intricacies; and (5) harnessing offtake expertise for a competitive advantage in bidding processes.
Thailand presents particularly enticing prospects in solar and wind energy, bolstered by governmental renewable policies and corporate objectives. Nevertheless, recent renewable projects have experienced single-digit internal rates of return (IRR).
Solar capacity is set for a surge, with an expected 3GW increase by 2030, growing at an 8.3% CAGR. Installations will primarily sprout in Central and Northeastern Thailand due to favorable climates and land availability. These developments typically involve battery requirements as stipulated by tenders from Thailand’s Energy Regulatory Commission (ERC) and the Energy Policy and Planning Office (EPPO). Local players, supported by energy giants, dominate the landscape, but a vibrant mergers and acquisitions market offers a fast track to scale up. Private investors often lean towards small-scale projects under 30MW, yielding potential IRRs up to 8%.
Meanwhile, wind energy provides a compelling narrative, with capacity projected to rise at an 8.2% CAGR, reaching roughly 1.45GW by 2030 under the national renewable energy roadmap. Southern and Northeastern Thailand will host most of these wind ventures, predominantly onshore. Like the solar sector, the wind market is led by local entities backed by major energy conglomerates. Wind’s attractive feed-in tariffs over other renewables offer IRRs as high as 10% to 11%.
Thailand also boasts a unique opportunity in biomass energy, supported by its substantial agricultural industry—the most developed biomass supply chain in the region. Biomass power generation’s reliability compared to other renewable sources makes it a preferred choice for the government. Many small-scale ventures, each under 30MW, thrive in rural areas, welcoming both local and international biomass players.
There are challenges, however, in the Thai market. Renewable energy procurement happens through distributed generation, with a limited supply of renewable energy certificates (I-RECs) and digital power purchasing agreements (dPPAs) available. Investors should consider the IRRs of 7% to 8% for solar and 8% to 11% for wind. Recent developments hint at thinning profit margins due to lower FiTs and the phase-out of a system introduced in 2014. While no official local content or preference for renewable projects exists, market actions reveal a strong favor towards local players.
All said, Thailand’s renewable energy commitments, underlined by the recent 2024 ambitions, pulse a reinforcing market signal about attitudes toward renewable energy investment. Further advancement of the still young dPPA system for renewables marks a crucial future step. Moving forward, the landscape appears encouraging with clear pathways to success. Access to affordable capital and nurturing strong local partnerships will be pivotal. With these strategic elements in place, Thailand can eagerly anticipate a bright future brimming with renewable energy growth.
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It’s great to see Thailand embracing renewable energy, but can they really hit 51% renewable by 2037 with the current growth rates?
I think they can if they ramp up investments and technology. But without a major push, it seems too ambitious.
True, but Thailand lacks the political will sometimes. It’s more than just economics—it’s about societal change.
The reliance on solar and wind seems promising, but shouldn’t they also explore other resources like geothermal? They might be missing out.
Geothermal potential in Thailand is minimal compared to solar or wind. They should focus on what’s viable instead of chasing unicorns.
Diversification is key to energy security. Even if geothermal is minimal, dismissing it outright is shortsighted.
Agreed, Analyst42. It’s about having a balanced mix to cushion any unforeseen failures in one sector.
It’s interesting that Thailand is increasing solar capacity so rapidly. But are they also investing in battery storage to manage the intermittency of solar power?
They are. The tenders for solar farms typically require battery components, which should help with energy storage and grid stability.
That’s good to hear! Proper storage solutions are critical to maximizing solar’s potential.
While these plans sound good on paper, has anyone thought about the impact of all this industrial expansion on Thailand’s natural habitats?
Environmental sacrifices seem inevitable with this level of industrial growth. I doubt the government would prioritize ecosystems over energy goals.
That’s why we need stronger environmental regulations alongside these developments. Ignoring it would lead to irreversible damage.
Wind energy’s high IRR looks attractive, but won’t site acquisition issues slow down wind farm development substantially in Thailand?
True, land acquisition can be a hurdle. Building local partnerships to navigate these challenges is essential.
Partnerships are crucial, but transparency is needed to prevent disputes. Local communities must benefit and not be sidelined.
I don’t think these projects have the economic incentives to attract significant foreign investment. Thailand needs more favorable policies.
IRR figures, even if they look modest, are appealing given the relatively stable Thai market. Policy tweaks can help, but it’s not a deal breaker.
Fair point, but the competition is fierce in APAC. Thailand’s neighbors offer better tailwinds for investors with more lucrative returns.
What about educating the workforce for these emerging renewable sectors? Without skilled labor, all these plans could stall.
Thailand should indeed invest in education as much as in infrastructure. Skilled workers are critical for tech-driven fields like renewable energy.
I’m optimistic that Thailand will lead the way in Southeast Asia by showcasing a successful renewable energy model!
Optimism is great, but success will depend on overcoming numerous practical hurdles, including policy consistency and corruption.
Biomass energy sounds good, but will it disrupt the agricultural industry? Farmers might face price hikes for biomass feedstocks.
I see it as a symbiotic relationship. Farmers can find new revenue streams by supplying crop residues for biomass.
Echoing what others have said, let’s not overlook the potential impact on Thailand’s food security economy with biomass focus.
Exactly! Diversifying crops might be beneficial, but there’s also a risk if this isn’t managed properly. Prices for essentials could spike.
I’m excited about the carbon tax concept by 2050. It’ll push industries to become cleaner. But will it be enforced effectively?
Past attempts at regulation enforcement have been shaky at best. Without firm commitments, it might just be another paper tiger.
For strategic wins, local companies must be integral to the supply chain to retain profits in Thailand.
True, but they must also be internationally competitive to prevent quality compromise and ensure efficient production.
Is there any plan to increase the use of digital power purchasing agreements? It seems like a futuristic solution to energy trading.
dPPAs are still young, but successful implementation could revolutionize how renewables trade power. It needs stronger tech frameworks.
Tech advancements are reducing costs, yes, but what happens when the economy or tech demands change? Will renewables remain viable?
I see a clear strategy laid out in this plan. Thailand could become a renewable powerhouse if they stick to it through thick and thin.