There’s no denying Thailand is going to see a massive spurt in energy demand in the coming decades. Even factoring in conservative assumptions such as the country’s population remaining the same, the successful implementation of its Energy Efficiency Programme, and the development of a smart grid, energy consumption is set to jump 75 percent over the next two decades, according to the Thailand Power Development Plan of 2015. At the same time, energy imports are expected to rise from 42 percent in 2013 to a staggering 78 percent in 2040.

Driven by the need to secure its energy supply for the foreseeable future, as well as increase its economic competitiveness regionally and globally, Thailand became one of the first countries in Asia to encourage alternative energy investment, according to Jessada Sawatdipong, senior partner at Chandler & Thong-Ek Law Offices. “As early as 2008, government introduced the Alternative Energy Development Plan or AEDP,” says Jessada. “Today, we are seeing positive results. Thailand is currently the leading biofuel producer and user in Southeast Asia, and at the end of 2015, it had more solar power capacity than all of Southeast Asia combined. At the same time, the country also encourages production of other renewable energy resources.”

In September last year, Thailand’s National Energy Policy Council (NEPC) approved the AEDP 2015-2036, an action plan that aims to increase energy consumption from renewable energy sources to 30 percent by 2036. Additionally, in order to boost private sector investment in renewable energy, the country’s Board of Investment (BOI) is providing a number of incentives, including tax-related ones such as an exemption or reduction of import duties on machinery and raw materials.

RED CARPET

Apart from taxation incentives, Jessada says that incentives for prospective investors in energy projects include benefits available under BOI promotion schemes, incentives under the Foreign Business Operations Act (FBOA), and financial institution lending programmes. For starters, BOI – the principal agency tasked with providing investment information, services to investors and investor incentives – offers benefits for developers of renewable power plants under numerous categories.

When it comes to tax incentives, projects can receive benefits like an eight-year corporate income tax exemption, exemption of import duty on machinery, and others, says Jessada. He adds that developing and operating renewable power plants in Thailand is not subject to FBOA-related restrictions. “A foreign shareholder may thus hold up to 100 percent of the shares in the project without having to obtain any approval under the FBOA,” says Jessada. “However, a non-Thai company cannot own land under the Land Code unless BOI promotion is granted.”

Finally, both local and foreign financial institutions are willing to provide financing for renewable energy power projects, says Jessada. “Thai banks, in particular, are strong financially and have the  appetite to provide financing for renewable projects on a project finance basis,” he adds.

RISKS AND CONSIDERATIONS

According to Jessada, prospective investors in energy, and particularly renewable energy projects, should consider three major factors. These are grid capacity, land issues and, most importantly, availability. “Applications for sale of power from each type of renewable project will be announced by the Energy Regulatory Commission in accordance with the NEPC’s resolution from time to time,” he says.

“So investors need to carefully follow the government’s current policies in this area, conduct independent research, and prepare in advance with energy sector specialists to ensure requirements are met prior to submission of applications.”

Additionally, investors need to be certain that grid capacity is available in the area where the project will be developed, says Jessada. And then of course, there are land issues. “Securing the land throughout the period of the renewable project is critical,” he says. “Investors can acquire or lease the land depending on the type of qualifications or limitations incumbent on the land. Both private and public land can be leased in Thailand for up to 30 years – with the possibility of renewal – and leases have to be registered through the Land Department.”

Again, the feasibility of the land for the project could be a potential concern, notes Jessada. “The type of land required would depend on the project contemplated,” he says. “Wind power plants require the  project site to be located in areas with suffcient wind speed and energy, and these sites are often not available for implementation as there are limited freehold lands with these characteristics remaining.” Finally, forest land and other lands that do not have title documents will also be an issue raised by financial institutions when conducting their due diligence, explains Jessada.