How do you assess the sustainability of the recent influx of corporate investment into renewable energy in Thailand?
BUNDIT SAPIANCHAI: It has been the case in Thailand over the past few years that the renewable energy sector has become open to almost anyone, and is no longer a sector reserved for existing players in petroleum or even entities focused solely on renewables.
We have experienced an influx of initial public offerings (IPOs) of renewable energy companies, as well as the diversification of companies in sectors ranging from media to real estate and health care into renewables, as the perception is that there is money to be made in the sector, and anyone with the capacity to invest in it should do so.
This has both positive and negative consequences. If you follow some of the IPOs of late, the success rate has not been very high, even for those listings that have risen above their IPO price on the first day of trading.
The fact is that the sector has many moving parts, from the purchase of land to building and operating plants and, eventually, expanding in a sustainable manner. Existing energy players are increasingly investing in renewables – given fluctuations in the oil price and other external factors – and hold some core advantages, such as existing infrastructure, technology and a relationship with the relevant authorities and regulators.
Investment style is also key to ensuring sustainability. While many newer players aggregate megawatts in small increments, experienced players engage in larger investments often involving the acquisition of existing companies and their full asset portfolios, which lends itself better to business growth over the long term.
In what ways are government policy and incentives shaping the expansion of Thai renewables players into neighbouring markets?
BUNDIT: It is always important to compare one’s domestic market with opportunities overseas, and if good domestic opportunities exist then that is always the first investment choice. Looking at solar power in Thailand, the original adder tariff subsidisation scheme was very attractive and garnered a high level of investment in the sector.
Eventually, as happens in all economies across the world, technology improved and the cost of installation and equipment fell, triggering revisions to tariff rates and lower levels of government subsidy. The spread between tariff and investment is continually shrinking, and for solar power in Thailand currently stands at around BT4.12 ($0.12) per KWh.
This has prompted many players to look overseas. Japan has been a particularly attractive destination, as the return on investment for solar projects there is roughly equivalent to that achieved from a project in Thailand having a tariff rate of BT5.66 ($0.16) per KWh. Japan has experienced issues with safety in terms of nuclear power and is now heavily promoting green energy, so we expect it to continue to be an attractive market in the medium term.
Looking closer to home, the ASEAN region is very diverse and holds great potential for renewable energy. The sector demands resources rather than raw materials, and the range of resources in ASEAN is vast. For example, Thailand is well positioned for solar energy, the Philippines has good wind resources, Indonesia is plentiful in geothermal potential and Laos excels at hydropower. Thus, the region is ripe for the various economies to play complementary roles in terms of energy production.
What level of innovation can we expect from Thailand’s power production industry in the medium term?
BUNDIT: Many minor innovations are already being enacted in the sector, such as solar cooperative programmes and small power producer/very small power producer hybrid offerings. The next crucial step for the sector will be entirely changing the existing business model.
I believe strongly in the concepts of distributed energy and peer-to-peer energy, whereby technologies such as blockchain can be mobilised to deregulate the sector and reduce the need for large-scale government spending and capacity, while offering customers and end-users more choice in purchasing and all other aspects of the distribution process.
It will take a change in mentality and established roles but will create economic efficiency and innovation if fully embraced.
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