Thailand a renewable power outperformer
Highly supportive policies encouraging communities as well as corporations to adopt new power systems.
We expect Thailand to maintain robust growth in its renewable energy sector, and remain one of the renewables outperformers in Southeast Asia over the coming decade.
Our view is underpinned by a highly supportive regulatory environment for renewables, which the government considers key to diversifying the power mix away from a heavy reliance on natural gas-fired power, particularly as the country will become a net importer of liquefied natural gas (LNG) over the coming years.
The supportive policies include attractive feed-in tariffs, tax incentives, net metering schemes, bidding programmes and improved financing access. The latest Power Development Plan (PDP 2018-37) aims to source 35% of the country's energy mix from non-fossil fuel sources by 2037.
Under the new PDP, the Energy Regulatory Commission (ERC) is expected to grant licences for a total of at least 10 Gigawatts of solar power capacity over the next two decades.
Ongoing efforts to decentralise and digitise the grid will also improve the integration and uptake of intermittent renewable sources, supporting growth of the sector. We forecast non-hydro renewables capacity to more than double over the coming decade to reach 17.7GW by 2030, accounting for 24.7% of the total power mix.
This expansion will be driven largely by the solar and biomass subsectors, with a stronger upside for the latter. We have made a slight upward revision to our biomass capacity and generation forecasts in this quarter, as the sector grew more strongly than our initial expectations in 2019 and 2020.
We are also more optimistic about the growth outlook for the subsector. The National Energy Policy Council (NEPC) has streamlined its "Energy For All" programme to focus biomass and waste, and has excluded solar and wind farms.
The scheme aims to develop community-owned power generation projects, largely using waste-to-energy resources, particularly in more remote areas. It will encourage local communities to sell crop waste to be used for biomass and biogas generation in order to earn additional income.
The NEPC has set 2021 as the pilot year for the scheme, and will kickstart the bidding process for 150 Megawatts over the coming months. Concurrently, the Energy Ministry has approved a budget of 6.5 billion baht from the Energy Conservation Fund for 2021, the majority of which will be allocated to support renewable projects for agriculture purposes.
Absolute Clean Energy Plc has also claimed that it has successfully designed a waste-to-energy technology that could use different varieties of agricultural waste as biomass feedstock, overcoming the challenge of unsteady supply sources and the need for different handling methods for each specific type of waste. If such a system can be scaled up, we believe that this will encourage stronger biomass and waste growth in the market.
Growth will also be driven by significant investor and commercial interest in the sector. Beyond investor interests to develop renewable-energy projects in Thailand, there is also a rising number of corporate energy procurement deals, primarily in renewable energy. These include power purchase agreements, green power purchases and green tariffs amongst others.
In line with broader environmental consciousness, many commercial entities have developed their own environmental and sustainability goals. Many large firms in Thailand have already announced their own greenhouse gas emission reduction targets, and have largely turned to sourcing renewable energy as part of improving their corporate social responsibility image.
Alongside this, a growing number of companies are looking to install their own distributed self-generation sources, such as rooftop solar or burning waste products for energy and cost savings.
There has already been a significant increase in the number of firms across different sectors installing rooftop solar panels on their industrial or commercial buildings, under the independent power supply model, which allows them to supply surplus power back to the grid.
A recent example is AutoAlliance Thailand, the local Ford and Mazda assembler based in Rayong. The company has signed an agreement with WHA Utilities and Power Plc to install a 5MW rooftop solar project, which is expected to be completed in August this year.
In particular, companies with waste as their by-products have also looked to develop waste-to-energy plants as it can be used easily for feedstock to provide both cost savings and a more sustainable business model.
For example, we have seen investments by TPI Polene, Charoen Pokphand Foods and Kaset Thai International Sugar Corporation Plc among many others in recent years to develop biomass and waste-to-energy plants to support their facilities.