The AEDP also serves to heighten the confidence that local and foreign investors have placed in Thailand. In December 2015, 47 projects in the alternative energy sector, approximating a value of THB 68,476 million, were approved by the BOI. The government’s plan clearly works towards an increase in alternative energy consumption in the long run, as well as the reduction of the country’s reliance on oil imports by about THB 574,000 million. It is also expected to promote private sector investment by THB 442,000 million, and create at least 40,000 new jobs that generate extra income and employment in rural areas.Market Potential for Thailand’s Alternative Energy Sector
Under the Ministry of Energy, alternative energy is divided into three categories:
- Natural Energy (such as solar and wind)
- Bio Energy (such as biomass, biogas and waste)
- Bio Fuel (such as ethanol and biodiesel)
Although all renewable sources are important to the Thai Alternative Energy sector, the top three renewable sources that still have a lot of investment potential are solar, biomass and wind.
Solar Farms are becoming an increasingly big market in Thailand. Solar energy is projected to contribute around 30% of the total alternative energy consumption target as set by the AEDP 2015, which amounts to about 6,000 MW. The investment opportunities that exist here are manifold. Thailand’s excellent location near the equator ensures that it has an advantage in the harnessing of solar power. It is important to note that solar electricity is under a single buyer scheme provided by the Electricity Generating Authority of Thailand (EGAT), so private investors will need to set up an infrastructure allowing the transmission of electricity to EGAT. Currently, the government supports the country’s solar energy sector with feed-in-tariff subsidies of up to 6.85 baht per kilowatt-hour (KWH) paid out over 25 years to energy producers.
Renewable energy harnessed from biomass stands as the second biggest potential market in the alternative energy sector. In 2014, Thailand generated about 2,452 MW from biomass. The government aims to get 5,570 MW or 28% of its alternative energy consumption from this source by 2036. This comes as no surprise as Thailand is rich in agricultural products. There are numerous opportunities for investors to generate renewable energy from biomass waste such as rice husks, palm oil and rubber wood. Reducing carbon emissions also benefits the environment.
Wind Energy serves as the third potential alternative energy market for investment in Thailand. In 2014, Thailand generated only 224 MW of energy from wind. Under the AEDP, energy created from wind should contribute to 3,002 MW or about 15% of total alternative energy consumption. Thailand has the potential for creating alternative energy by utilizing wind turbines, both in the South, along the sea shores bordering the Gulf of Thailand or the Andaman Sea, as well as certain areas in the northeastern part of Thailand such as Nakhon Ratchasima. BOI Incentives & Policies
The BOI recognizes the importance of alternative energy and offers attractive tax and non-tax incentives to encourage industry growth. Effective since 1st January, 2015, the new policies for investment promotion specify production of electricity from renewable energy under ‘A1’ or ‘A2’ categories to be eligible for Activity-based Incentives, while Energy Service Companies (ESCO) are eligible under the ‘A1’ category. The incentives include an 8-year corporate income tax exemption with or without cap and the exemption of import duty on machinery. Non-tax privileges offered by the BOI include the right to own land and the facilitation of visas and work permits for expatriates.The Future of Alternative Energy in Thailand
It is evident that Thailand is a growing market for alternative energy investment. The latest report on Alternative and Renewable Energy in Thailand between 2009 and 2014 from the DEDE shows how alternative and renewable energy consumption gradually increased from 7 % to 11.91% in terms of total energy consumption. With the gradual increase in renewable energy consumption over the recent past as well as the government’s updated AEDP, Thailand has become an attractive prospect for both local and foreign private sector investors looking to invest in alternative energy.