Renewable energy is shining brightly on the world’s stage and in the bustling Asia-Pacific (APAC) region, with Thailand positioned as a major player in this green revolution. From a modest start, renewable energy in APAC is flexing its muscles, growing at an impressive compound annual growth rate (CAGR) of 9%. Fast forward to 2030, and renewables might just be lighting up 30% to 50% of the power grids throughout many APAC markets.
This burgeoning potential is a vibrant canvas of opportunities and hurdles for renewable energy trailblazers, investors, and operators, as detailed in Boston Consulting Group (BCG)’s insightful report, “Asia Pacific is Ready for Renewables. Are Energy Players?” Understanding the twists and turns unique to each market is crucial in this arena, requiring a strategic touch finely tuned to local nuances. The stakes are high, with the International Energy Agency forecasting a hefty US$286 billion to flow into APAC renewable energy projects between 2022 and 2030.
Now, let’s zoom into Thailand—a regional maestro in the renewable energy symphony, boasting around 12,500 MW of installed capacity. Despite its current status as a net electricity importer, Thailand is on the cusp of an energy makeover, driven by a need to diversify away from gas, which dominates about two-thirds of its electricity concoction. These strategic shifts aim to dodge the uppercut of rising gas prices in an already pricey electricity market.
Thailand’s hunger for electricity nearly doubled from 2000 to 2021, though it doesn’t sit with the same voracious demand of some of its neighbors. The nation’s sights are set on ramping up renewables like solar, wind, and biomass to fill the gap, planning a 5.5 GW leap in capacity by 2030. With the Power Development Plan 2024 paving the way, Thailand aims for renewables to blaze through 51% of its power mix by 2037.
Further down the lane, a carbon tax looms in 2050, set to roll out at 200 baht per metric tonne starting with oil producers. These moves are stitches in Thailand’s grand tapestry of achieving carbon neutrality by 2050, and net-zero greenhouse gas emissions by 2065, with renewables as the shimmering thread.
Charting a path towards this energy utopia hinges on an ensemble of strategies, all working in concert. At the forefront are technological advancements and economies of scale that have slashed the costs of renewable energy, particularly solar, making it a worthy rival to fossil fuels. This price parity is the wind beneath the wings of APAC’s renewable energy ascent, fueling investments and the establishment of fresh, clean energy infrastructures.
For developers and investors tackling the renewable energy frontier in Thailand and beyond, flexibility is key. We’ve clocked five critical considerations: honing in on specific markets and technologies; cultivating local partnerships to navigate the regulatory maze; expanding financing to offset tighter margins and heated competition; entwining with local supply chains; and refining offtake expertise to outmaneuver rivals in bidding wars.
Thailand is ripe with solar and wind prospects, bolstered by governmental green energy policies and corporate ambitions. Yet, renewable project Internal Rates of Return (IRR) have recently lingered in the single digits.
Solar capacity is projected to soar by about 3GW by 2030, galloping forward at an 8.3% CAGR. This growth will largely bloom in Central and Northeastern Thailand, where the sun cooperates with a more arid climate and ample land at the ready. Solar projects will often bundle in battery installations, coordinated by the Energy Regulatory Commission (ERC) of Thailand and Energy Policy and Planning Office (EPPO). As of now, the field is dominated by local powerhouses supported by hefty energy conglomerates, with mergers and acquisitions providing a fast track to expansion. Private investors are currently eyeing small-scale ventures, under 30MW, with potential IRRs reaching 8%.
Wind energy is spinning into focus as another tantalizing opportunity, with expectations to climb at an 8.2% CAGR, reaching approximately 1.45GW by 2030. Wind farms will dot the Southern and Northeastern landscapes predominantly, with most bids targeting onshore facilities. In Thailand’s wind brigade, as in solar, local players buoyed by major conglomerates take center stage. Thanks to relatively juicy feed-in tariffs, wind projects could reap IRRs between 10% and 11%.
Biomass, woven from Thailand’s lush agricultural industry, stands as a unique opportunity with the most matured supply chain in the region. Its consistent output, in contrast to more fickle renewable sources, wins it favor in governmental eyes. Small-scale ventures, under 30MW, are a common sight in rural outposts, inviting local and international biomass aficionados to step into the spotlight.
Nevertheless, navigating Thailand’s renewable roadmap requires a clear-eyed view of its challenges. Renewable energy procurement has its quirks, such as the limited supply of renewable energy certificates (I-RECs) and the budding development of digital power purchasing agreements (dPPAs).
The return on investment, with solar at 7% to 8% IRR and wind at 8% to 11% IRR, should pepper any investment calculus. Profit shadows are looming too, as recent shifts have nudged profitability downward due to reduced Feed-in Tariffs (FiT) and the winding down of a supportive adder system from 2014. While there’s no official mandate or favoritism for local content in renewable projects, a strong scent of local bias lingers in market activities.
Thailand’s renewable pledges are bold, supported by fresh pacesetting updates in 2024. These declarations signal a robust welcome to renewable energy investments, though further nurturing of the dPPA mechanism could be the linchpin for future growth. The horizon glows with promise, contingent on affordable capital for competitive costs and solid local ties. With these strategies set, Thailand’s renewal wave is poised to surge ever higher.
Thailand’s goal of 51% renewable energy by 2037 is ambitious but necessary. However, I wonder if they can realistically achieve it considering current infrastructure and investment levels.
I agree, Joe. It’s not just about setting goals; the execution is key. They will need substantial foreign investment and government commitment.
Absolutely, Lisa! And with rising global energy demands, competition for resources might increase. I hope Thailand has a solid plan.
Yet these goals are aligned with global sustainability trends. If countries don’t set ambitious targets, we’ll never tackle climate change effectively.
The focus on solar energy is a smart move given Thailand’s climate. But I’m not sure the wind energy targets are as feasible.
Wind energy can be unpredictable, but it could complement solar nicely during off-peak sunlight hours.
True, Chen. Maybe a hybrid approach is the best way forward. Ultimately, diversification is essential.
I wonder how the biomass energy projects will affect local agriculture in Thailand. Could this lead to conflicts over land use?
Reading about the projected IRR for renewables in Thailand makes me question whether the financial incentives are strong enough to attract significant investment.
The return rates aren’t great. But the long-term potential for growth in this sector might entice more adventurous investors.
That’s a good point, Bob. It’s a gamble, but perhaps a calculated one. Still, the government should offer more incentives.
Can someone explain why Thailand doesn’t just stick to biomass? If the supply chain is so mature, why not focus efforts there?
While biomass is reliable, it’s not enough to meet future demand alone. Diversifying energy sources reduces risks.
The report mentions the lack of local content mandates in renewable projects. I think enforcing such mandates could boost local economies.
Technological advancements are indeed lowering costs, which makes renewables more viable. But how quickly can Thailand adopt these technologies?
I think Thailand’s approach to renewables is wise, but are the current policies enough to counteract the established power of fossil fuel industries?
Does anyone else worry about the pace of progress here? The carbon tax in 2050 feels like it’s too late.
I agree, Carter. More immediate action is needed. Why wait until 2050 when the planet is suffering now?
Exactly, Jane. We could benefit from bolder initiatives right now to mitigate climate impacts sooner.
It seems like Thailand is banking heavily on government initiatives. But what happens if there’s a political shift?
The IRRs for wind and solar are underwhelming. Private investors need better payouts to justify their participation.
I’m curious how digital power purchasing agreements (dPPAs) will play a role in streamlining renewables transaction processes.
What are the geographical challenges in Thailand for wind and solar installations? Location must impact these projects considerably.
Am I the only one skeptical about these renewable energy timelines? History shows us that such projects often face delays.
I find this transition fascinating! Do you think Thailand’s success could influence other Southeast Asian countries to follow suit?