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Thailand’s Renewable Energy Transitions: A Pathway to Realize Thailand 4.0

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Thailand’s Renewable Energy Transitions: A Pathway to Realize Thailand 4.0

Having a renewable energy transition is a critical step to realize Thailand 4.0.

Thailand’s Renewable Energy Transitions: A Pathway to Realize Thailand 4.0
Credit: Unsplash

After three years of revision, Thailand recently unveiled its updated power development plan (PDP 2018–2037), which explicitly shows the country’s ambition to embrace renewable energy.

PDP 2018–2037 was approved by the National Energy Policy Council on January 24 and is expected to take effect in the second quarter of 2019. Under the new PDP, Thailand’s power production capacity will have 67 percent growth from 46,090 megawatts (MW) in 2017 to 77,211 MW in 2037. The PDP sets a goal of new power capacity of 56,431 MW, of which renewable energy projects are planned to account for 20,766 MW, or about 37 percent. By 2037, the country’s power production is expected to come from natural gas (53 percent), non-fossil fuels (35 percent), and coal (12 percent).

Approval of the new PDP is a critical milestone reflecting not only Thailand’s future energy strategy but also its continuous progress in transitioning to renewable energy in the past year. In 2018, Thailand made some achievements in the renewable energy sector, including adopting innovative blockchain technology as well as issuing the first green bond in the country. Though the country’s renewable energy transition is only getting off the ground, it shows the country is heading in the right direction to become a low carbon society. Also, as Thailand aims at transitioning to Thailand 4.0, a new economic model driving Thailand to become a high-income country and low carbon society, the country should keep its momentum to develop renewable energy, which is a key factor to realize the ambitious Thailand 4.0 national strategy.

The Renewable Energy Landscape in Thailand

Thailand currently generates around 10 percent of its electricity from renewable sources, with a total energy generation capacity of 45,000 MW. As of April 2018, renewable energy supplied about 15 percent of total power consumption in Thailand. The Thai government has also decided to raise the non-hydro renewable target from 20 percent to 30 percent by 2036. Regarding the capacity for renewable energy generation, Thailand’s solar energy accounts for about 3,300 MW, which has more than doubled since 2014 and is halfway toward its 2036 solar target of 6,000 MW. Notably, Thailand’s solar capacity accounts for more than 60 percent of the total installed capacity in the Association of Southeast Asian Nations (ASEAN). Though Thailand’s wind capacity is not as large as that for solar, it is over 600 MW, which is a fifth of its 2036 wind target of 3,000 MW.

Blockchains and Green Bonds

In August 2018, an Australian blockchain company, Power Ledger, and a Thai renewable energy business, BCPG, launched a peer to peer (P2P) renewable energy trading trial in Bangkok. They have partnered with the Thai Metropolitan Electricity Authority to develop the pilot project with a total capacity of 635 kilowatts in solar power over the next two years. The trial allows for excess renewable energy to be sold directly within the community  rather than through state utilities.

Without centralized intermediaries, the blockchain-based renewable energy trading platform can minimize transfer costs in the small neighborhood market and provide real-time power supply. Also, the features of tamperproof ledgers and visible transactions in blockchain technology can ensure transparency in energy trading. Most importantly, blockchain technology enables conventional end users to become “prosumers” (production-by-consumer) and actively participate in energy transactions.

Later on December 11, 2018, the Asian Development Bank (ADB) invested in green bonds worth $155 million, issued by B. Grimm, one of Thailand’s leading private power producers. It was the first certified climate bond to be issued in Thailand, which provides finance supporting more renewable energy projects in the country. It was also the ADB’s second green bond investment, after the Philippines, and is consistent with the bank’s new “Strategy 2030,” which mandates that at least 75 percent of the ADB’s committed operations will support climate change mitigation and adaptation by 2030. The green bond proceeds will be used for nine operational solar power plants with a total capacity of 67.7 MW in Thailand.

Realizing Thailand 4.0 and a Sustainable Energy Future

Having a renewable energy transition is a critical step for the country to realize Thailand 4.0 as one of its critical objectives is environmental protection, which will create an economic system adjusted to climate change and a low carbon society. The government has indicated its determination to realize this objective through the three important improvements.

First, approving the new PDP is the most critical step showing the government’s continuous commitment to transitioning the country to a low carbon society. The government previously sent mixed signals toward the country’s renewable energy transition and considered halting the purchase of electricity from renewable energy. Compared to the past PDP (2015–2036), which emphasized the need for coal in future power capacity, including planning to develop controversial coal-fired plants in southern Thailand, the new PDP (2018–2037) indicates that the percentage of total power capacity from coal-fired power plants will be reduced to 12 percent. Though natural gas will keep dominating the country’s future power production as a stable and lower-emission alternative, the depletion problem of the domestic natural gas reserve will provide a great opportunity for the country to rethink and pivot to more renewable investments, despite the nation being a net importer of natural gas.

Also, the Thai government has acknowledged the impacts of disruptive technology such as the smart grid in the energy sector. Followed by last year’s new energy reform 2018-2022, the new PDP also requires Electricity Generating Authority of Thailand (EGAT) to partner with the Provincial Electricity Authority to develop a smart grid for the Eastern Economic Corridor (EEC), a part of the Thailand 4.0 plan to revitalize the eastern provinces and build a smart city. Developing a smart grid system in the EEC can decrease power fees, integrate renewable energy systems, and facilitate the needs of investors.

Second, the government has shown its willingness to adopt innovative technology and allowed more private participation in the energy trading sector through trying a P2P energy trading system. The energy market in Thailand can be regarded as an oligopoly as it has relied on a state-owned enhanced single buyer model for more than three decades under terms and regulations set by the Energy Regulatory Commission to allow EGAT to become the sole buyer of electricity. Adopting the blockchain-enabled trading system in Bangkok can be regarded as a positive signal from the Thai government to transform traditional power distribution from large power plants into a blockchain system and decentralize the overall management of state utilities to a prosumer system.

If the Thai government continues expanding and developing a P2P energy trading system and developing suitable regulation, the country can raise more interest from private investors and facilitate domestic innovation in the renewable energy sector with new methods and business models.

Finally, Thailand has cooperated with the ADB on several renewable energy projects, including the country’s first solar and wind generation plants. Further issuing the country’s first green bond with support from the ADB can not only facilitate more private investment in climate and environmental infrastructure projects, including renewable energy, but also reflect the confidence of a regional development bank in Thailand’s renewable energy potential.

As one of the pioneers bringing renewable energy to Southeast Asia, it is anticipated that Thailand can maintain its momentum of renewable energy transition, which is a key pathway to realize Thailand 4.0 and move forward to a low-carbon society in the near future.

Chen-Sheng Hong is a Research Associate at Taiwan-ASEAN Studies Center in Chung-Hua Institution for Economic Research, an economic think tank in Taipei. He can be followed on Twitter @markhong19