This content is from: Local Insights

Thailand: Energy policy developments

Solar and wind

Thailand has the highest solar and wind power output in ASEAN. The Thai regulators adopted an adder tariff policy, and subsequently a feed-in tariff policy, which provided incentives for renewable projects.

As of April 1 2018, the number of solar projects which had achieved a commercial operation date (COD) in Thailand was 531 with a total selling capacity of 2,567 MW. This included seven small power project (SPP) power purchase agreements (PPAs) signed with the Electricity Generating Authority of Thailand (EGAT) (436 MW), and 523 very small power project (VSPP) PPAs signed with the Provincial Electricity Authority (PEA)/Metropolitan Electricity Authority (MEA) (2,130 MW). The receipt of applications for open grid projects has been suspended due to the large number of applications received. Solar PV rooftop projects are still being accepted.

Fifteen wind projects had achieved COD in Thailand as of April 1 2018, with a total selling capacity of 459 MW. This includes nine SPP PPAs signed with EGAT.

On March 28 2018, the Minister of Energy stated that there would be no purchasing of state renewable power for five years from 2018 to 2023. Unless the cost was lower than THB2.44 (around $0.08) per kilowatt hour, the government would not consider buying additional renewable energy. His primary concern was the amount of subsidies in the tariffs, compared to purchases of power from gas-fired power projects. This will not affect the existing PPAs signed by EGAT, PPA and MEA. It will result in no further investment in solar or wind projects until satisfactory clarification on tariffs for renewables. In May 2018, the Federation of Thai Industries (FTI) and representatives of the industrial sector of renewable energy asked for clarifications and a clear policy framework from the minister.

This policy is contrary to recent policies to increase the use of renewable power, and Thailand's pledge to a 20 to 25% reduction in its emission of greenhouse gases by 2030. It is contrary to the Alternative Energy Development Plan 2015 to 2036.

The new national Power Development Plan (PDP) 2018 is going through the preparation process by the Ministry of Energy with the main target being to secure the public's interest without increasing power utilisation costs. The Ministry of Energy aims to complete the new PDP by September 2018.

Petroleum law

In 2017 the Petroleum Act (PA) and the Petroleum Income Tax Act (PITA) were amended to establish two new contractual regimes for exploration and projection, in addition to the concession:

  • Production sharing contracts (PSC): the model PSC was issued on March 8 2018. It provides for a cost recovery ceiling of 50%, and a ceiling on the contractor's share of 'profit oil' of 50%.
  • Service contracts: no model service contract has been issued.

In December 2017, the Minister of Energy announced that two public tenders would be conducted in 2018:

  • Auctions of the Bongkot and Erawan gas blocks in the Gulf of Thailand. The existing concessions on these fields (after one 10-year extension) expire in 2022 and 2023. Under the PA, a second extension is not allowed. The terms of reference were issued on April 23 2018.
  • The new, 21st-bid round for rights to explore, develop and produce petroleum on 22 blocks.

The Thai petroleum concession has proven to provide a very stable foundation for investment in oil and gas and downstream projects in Thailand since 1971. However Thailand has limited geological prospectivity. It imports more than 40% of its natural gas demand and 75% of its fossil fuels demand. Its petroleum reserves are declining with increasing demand.

It remains uncertain how the new contract regimes will be implemented and administered, and whether the oil and gas industry will accept the proposed new terms. The PSC cost recovery limit of 50% and the 50% minimum government share of 'profit oil' may not be economically viable with the prevailing low oil prices.

The PA could have simply been amended to allow second and subsequent extensions of existing concessions. This is the practice in most other producing jurisdictions, in which subsequent extensions are negotiated and granted, often on improved terms for the host government.

The termination of the Bongkot and Erawan concessions, the auctioning of those fields under PSCs, the settlement of decommissioning obligations, and the transfer, removal or abandonment of assets, will present interesting issues.

Foifa TharaphanSawanee Gulthawatvichai

© 2021 Euromoney Institutional Investor PLC. For help please see our FAQs.

Instant access to all of our content. Membership Options | 30 Day Trial