Law firm featured: Chandler MHM

Thailand is on a quest to decarbonise its gas-heavy power grid, setting its eyes on the goal of reaching carbon neutrality by 2050 and net-zero carbon emissions by 2065.

The Thai government has also penned the National Energy Plan to steer the Southeast Asian country to a greener future. However, while there are sectors that are poised to benefit from the green initiatives, there are also potential pitfalls during the energy transition journey.  

Thailand has developed a robust appetite for renewables as it aspires to achieve net zero greenhouse gas emissions by 2065. But there seems to be an uphill batter ahead as the second-largest Southeast Asian economy boasts a gas-heavy electricity generation system.

In 2021, 66 percent of Thailand’s generation mix was covered by natural gas and 17 per cent by coal, while low-carbon sources provided only 12 per cent, a report by the International Energy Agency (IEA) showed.

But Thailand’s total power sector emissions have climbed to new highs in 2023, even as coal power generation has been scaled back. Natural gas accounted for about 67 per cent of Thailand’s total electricity generation last year, accord-ing to Reuters, citing data from think tank Ember.

As Thailand is viewed as an impactful regional player that can influence others in terms of energy transition ambitions and strategies, the government has been accelerating its speed to reach its goal of carbon neutrality by 2050.

For example, it has announced plans to update the Power Development Plan (PDP), which governs the buildout of Thailand’s power sector. Under the 2018 version of the document published in 2020, emissions would exceed the new targets by 44 per cent in 2030, and 80 per cent in 2037.

“We understand that upcoming revisions to the PDP will contain ambitious goals aimed at drastically increasing renewable energy capacity on the grid,” says David Beckstead, an energy and infrastructure partner at Chandler MHM.

This development has come to the attention of lawyers in Thailand as one of the major areas set to stimulate demand for legal services.

“Renewable energy projects need legal support in numerous ways, from land acquisition, drafting and negotiating key project agreements, and assisting sponsors and lenders on project financing,” notes Beckstead.

He anticipates a jump in legal work accompanying the government’s emphasis on the electric vehicle (EV) sector as well.

“Thai government is emphasising the transition to EVs by offering subsidies to consumers, as well as cutting duties and excise taxes for imported EVs. Further, a new suite of incentives has been announced to spur investment by automakers in the hopes of retaining the country’s position as an automobile manufacturing hub,” says Beckstead. As a result, “automakers looking

to establish or build factories in Thai-land will require similar legal support relating to incorporation, labour and employment, and applying for investment promotion at the Board of Investment,” he notes.

 

SUNSHINE PROBLEM

One of the key solutions to decrease emissions generated by Thailand’s gas-dominated power system is to bolster the amount of wind and solar photovoltaics (PVs). The country’s geographical posi-tion means it has high solar irradiance, especially in the northeast and the south, with high daily solar exposure. Therefore, it appears to be a viable attempt to decarbonise Thailand’s power grid by deploying solar PVs, especially with the country’s strong potential for roof-top solar.

However, wind and solar power each contributed to a mere two per cent of Thailand’s total power generation in 2021, according to IEA data. Solar projects, especially if co-located with energy storage, are predicted to be deployed significantly in the next decade, but solar power seemed to be unlikely counted on alone.

“Thailand has abundant solar potential; however, even if on-grid solar capacity increases significantly, alter-nate sources of dispatchable power will be necessary in order to ensure the grid can reliably supply electricity throughout the day,” explains Beckstead.

But there could be a host of new challenges once the supply and usage of renewable electricity, including solar, tick up, including potential curtailment orders restricting the deliveries of solar power.

“At the moment, given the comparatively small volume of solar power being supplied to the grid, curtailment is not an issue for Thai solar projects. However, as solar capacity continues to expand, it is feasible that supply of solar power may exceed the grid’s capacity, thus necessitating curtailment orders,” says Beckstead.

But as energy storage is still far from ubiquitous, Thailand could be facing an imbalance between peak demand - which occurs after sunset - and solar power generation - which at the time is no longer available. This imbalance could hinder a wholesale adoption of renewables especially in high-solar capacity energy markets.

“Excess solar capacity may result in the emergence of the so-called ‘duck-curve’, thus requiring dispatchable thermal power plants to be available on standby to meet daily peak power demand,” explains Beckstead. The “duck curve” is a graph of power production over the course of a day that depicts such imbalance between peak demand and the supply of electrical power from solar and other dispatchable sources.

Therefore, one of the major concerns for grid operators where there is rapid growth of PVs is the need to rapidly increase other forms of power generation around the time of sunset to compensate for the loss of solar generation, especially in the absence of any form of energy storage.

“Natural gas-fired power plants are currently playing a dominant role in supplying power to the grid. Over the coming two decades, as solar grid capacity builds out, it is likely that some of this burden will shift to energy storage technologies, particularly as costs of deploying these technologies continue to fall,” says Beckstead.

“Developers and storage OEMs should be aware of likely opportunities to support the Thai grid will be arriving in the near future,” he adds.

 

GREEN-AGE LAWYERS

Noting these trends, Beckstead believes law firms and lawyers should proactively take advantage of Thailand’s energy transition endeavour, which is “requiring lawyers to become well-acquainted with new and emerging technologies in order to understand how these will shape markets”.

An understanding of new markets, including carbon credit trading and EV manufacturing, will be a skill that is much coveted, he adds.

“As new technologies and business models emerge, lawyers will need to be able to assist their clients on regula-tory and licensing requirements, as well as drafting and negotiating novel and often bespoke contracts,” says Beckstead.

He also underlines the need for legal counsel to stay close to their clients to understand the commercial aspects of new developments in the energy transition sphere.

“Ongoing dialogue with clients is important to understand the technical and commercial challenges that clients face and therefore possible risks,” adds Beckstead.