As Thailand becomes one of the world’s first countries to trial blockchain-enabled peer-to-peer trading of solar power, regulators have their hands full drafting rules to catch up.
In the past few months, Thailand has seen a rapid growth in independent solar power producers that are using blockchain-enabled technology to trade electricity between themselves. Blockchain, the distributed ledger technology that underpins bitcoin currency, offers a transparent way to handle complex transactions between users, producers, and even traders and utilities. It has been revolutionising finance by bringing about decentralisation, and in countries like Thailand, blockchain is enabling households connected to microgrids to conduct peer-to-peer transactions, buying and selling surplus electricity to each other instead of through traditional providers.
According to media reports, a growing number of Thai companies are using blockchain to help home-owners trade electricity from their own rooftop solar systems. Among them is a blockchain-linked solar power system in the capital of Bangkok that is among the world’s largest peer-to-peer renewable energy trading platforms using the fast-evolving technology, reports Reuters. The system, offered by a subsidiary of state-owned oil refiner Bangchak, real estate developer Sansiri, and an Australian blockchain company called Power Ledger, has a total generating capacity of 635 KW that can be traded via Bangkok city’s electricity grid between a mall, a school, a dental hospital and an apartment complex.
The World Energy Council has predicted that this kind of decentralised energy will grow to about a fourth of the market in 2025 from 5 percent today, according to Reuters. Thailand, Southeast Asia’s leading developer of renewable energy, aims to have it account for 30 percent of final energy consumption by 2036. As a part of this, the energy ministry is encouraging community renewable energy projects to reduce fossil fuel usage, and the regulator is drafting new rules to permit the trade of energy.
“Thai regulators have been quite innovative and supportive of new technological advancements in an effort to implement the Thailand 4.0 initiative which is designed to support the development of ICT infrastructure, financial technology and to bolster online security,” says Nopamon T. Intralib, an associate at Thai law firm Chandler MHM. “This is largely because Thai regulators are aware that a favourable and sound legal and regulatory framework is the pillar supporting the development of the country’s growth in this space.”
“Thailand 4.0 is now materialising through incentive programs, and a focus on making Thailand more attractive for investors in ICT industries,” Nopamon adds. “In correlation with Thailand 4.0, blockchain technology is a significant part of the growth of a global digital economy.”
REGULATORY ISSUES
Nopamon notes that currently, Thai regulators have not issued any regulations to address or regulate blockchain-powered peer-to-peer (P2P) electricity generation and distribution. However, that the Metropolitan Electricity Authority has allowed access to its network in the abovementioned Bangkok pilot project. “The Energy Regulatory Commission is closely monitoring this trial to determine feasibility, further implementation, and applicability of such systems,” Nopamon says.
“The largest challenges to increased implementation are the lack of regulations in place for blockchain P2P power generation, and somewhat limited information being available to players interested in possible investment regarding what those regulations will entail,” she adds. “Available information suggests that the Electricity Generating Authority of Thailand (EGAT) may require fees from power producers trading on a P2P platform.”
Nonetheless, Thai regulators understand that the legal framework must encourage innovation and as such, many public hearings are being conducted for the new draft laws, says Nopamon. “At the same time, the private sector is encouraged to consult and share information and understanding regarding new technology and the potential impact of related developments on these draft laws and regulations,” she notes. “There are also those who view that the lack of regulations may enable more experimentation of new products without legal barriers at such an early stage in the development process.”
Threenuch Bunruangthaworn, executive partner, and Panwadi Maniwat, senior associate, at ZICO Law say that as the government is set to allow the private sector to sell the electricity by bypassing EGAT, it will be losing out on revenue from what was previously a monopoly business. “The government will put some regulations in place, with electricity providers needing to meet some requirements if they want to compete,” they say. “Solar power producers will probably need a retail license from the authorities, which means that they will need to meet some criteria. They will probably need to report the amount of power they sell and the fees they charge, on the basis of which they will have to pay fees to the authorities.”
LAW FIRMS INVOLVED
Nopamon of Chandler MHM says that the regulatory landscape in Thailand is no longer reactively addressing the development of new, digital investment opportunities, and industries. “Certain industries have been faster than others in development of laws and regulations to address new technology – such as financial institutions and start-ups. For example, certain products and projects can be experimented with under the regulatory ‘sandbox’ environment,” she says.
The energy industry in Thailand appears to be the next industry interested in changing how power generation and distribution is managed, she adds. “Chandler MHM has had a robust renewable energy practice for decades and has close ties with key regulators. As with any emerging market, the most important aspects for maintaining the best position possible for assisting clients, is to continuously be aware of new laws, regulations, and more importantly, to have the background and capacity to advise on how regulators may apply and interpret these laws and regulations. This is also applicable to an evolving energy market,” says Nopamon.
Threenuch and Panwadi Maniwat of ZICO Law say that normally advise developers in real estate projects, assisting them in obtain the relevant licenses to operate the project. “For these solar trading projects, you might need to acquire technology from a foreign country, and clients will need some help in dealing with foreign entities.” They add that they also expect to work with Board of Investment and assist clients in applying for BOI certificates for foreign investors and foreign operators that make investments into this industry, so that these clients can obtain the appropriate foreign registration and licenses to do business.
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