Navigating Thailand’s Renewable Energy Landscape: Insights From APAC

Despite starting from a low base, renewable energy is experiencing robust growth in APAC, with installed generation capacity increasing at an average compound annual growth rate (CAGR) of 9%. By 2030, renewable energy is expected to account for 30% to 50% of the power generation mix across most APAC markets. 

APAC’s vast potential and diverse market dynamics present significant opportunities and unique challenges for renewable energy developers, investors and operators. These complexities are examined in Boston Consulting Group (BCG)’s recent report, Asia Pacific is Ready for Renewables. Are Energy Players? 

Navigating this complex landscape demands a nuanced understanding of each market's intricacies and a strategic approach tailored to local conditions. Achieving substantial renewable energy integration will require significant investment. According to the International Energy Agency's Announced Pledges Scenario, revised in August 2023, investments in APAC renewables from 2022 to 2030 are projected to reach US$286 billion. 

Energised ambitions in Thailand 

Thailand is a regional leader in renewable energy with around 12,500 MW currently installed. The country is currently a net electricity importer, but with significant opportunity in renewables underpinned by a drive to diversify away from gas, which currently accounts for around two-thirds of total electricity generation. These diversification plans are also designed to mitigate rising gas prices in an already costly electricity tariff landscape.  

The nation’s electricity consumption almost doubled between 2000 and 2021, although it does not face the same accelerating future demand projections faced by some neighbouring countries.   

Thailand plans to increase reliance on renewables, particularly solar, wind and biomass, as alternatives to gas. This will see an expected 5.5 GW of renewable energy capacity growth by 2030. Thailand recently announced more ambitious renewable energy targets with its Power Development Plan 2024, with the aim of renewables increasing to 51% of the power mix by 2037. 

Thailand has also set a carbon tax due to be implemented by 2050, set at 200 baht per metric tonne with rollout beginning with oil producers. These energy goals are designed to enable Thailand to achieve carbon neutrality by 2050 and net-zero greenhouse gas emissions by 2065. A strong renewable energy ecosystem will be vital in achieving this.  

Charting a Course for Success: Essential Strategies at Play 

Renewable energy development in Thailand—and across the APAC region—is driven by several key elements, each adding momentum toward a sustainable energy future. ​​One significant driver is the reduction in costs. Advances in technology and economies of scale have made renewable energy increasingly competitive with traditional fossil fuel-based power generation. This cost parity, particularly in solar, has accelerated the adoption of renewables in APAC, driving investment and the deployment of clean energy infrastructure. 

In navigating the renewable energy landscape across Thailand and APAC, developers and investors must adapt to the diverse business environments present in each market. We have identified five key factors for both developers and investors to consider: (1) finding focus by concentrating efforts on specific markets and technologies; (2) establishing local partnerships to access land and navigate regulatory landscapes; (3) broadening financing options to address challenges of lower returns and increased competition; (4) navigating the supply chain by integrating with local players and meeting local content requirements; and (5) leveraging offtake expertise to gain a competitive edge in tender processes. 

Thailand boasts particularly strong opportunities in solar and wind, supported by key government renewable energy policies and corporate targets. However, renewable projects have seen single-digit internal rates of return (IRR) in recent years. 

Solar capacity is expected to increase by approximately 3GW by 2030, growing at 8.3% CAGR. These installations will primarily be in Central and Northeastern Thailand due to the drier climate and availability of suitable land. 

Solar development will predominantly include battery requirements as part of tenders organised by the Energy Regulatory Commission (ERC) of Thailand and Energy Policy and Planning Office (EPPO). The market is dominated by local players backed by large energy conglomerates, although an active mergers and acquisitions market can be used as a pathway to rapidly gain scale. Private investors currently show a preference for small-scale development under 30MW, which offer up to a possible 8% IRR.  

Wind offers another compelling opportunity, with capacity expected to increase at 8.2% CAGR to reach around 1.45GW by 2030 under the national renewable energy plan. Wind is expected to be predominantly located in the South and Northeast Thailand, with most tenders centred around onshore wind. Thailand’s current wind market, much like solar, is dominated by local players backed by large energy conglomerates. Higher feed-in-tariffs compared to those offered for other renewable technologies position wind as an attractive play in Thailand, with IRR as high as 10% to 11%. 

Thailand also boasts a unique opportunity in biomass energy generation, with the significant agricultural industry providing the region’s most developed biomass supply. The reliability of biomass power generation compared to other, variable renewable energy source also makes it a preferred energy source by government. Many small-scale developments operating with capacity under 30MW have also been located in rural areas, offering opportunities for local and international biomass players to enter the market. 

There are some challenges which must be recognised when considering the opportunities in the Thai market. Renewable energy procurement options are possible in the form of distributed generation, with limited supply of renewable energy certificates (I-RECs) in place, as well as availability of digital power purchasing agreements (dPPAs).  

The IRR of 7% to 8% for solar, and 8% to 11% for wind, should also be factored into investment decisions. There are also indications of declining profitability resulting from recent developments due to lower FiT and the end of an adder system which started in 2014. Also, while there is no official local content requirement or local preference for renewable energy projects, a strong unofficial preference for local players can be seen in market actions.