Recovering from a polarizing election, Thailand is now working to get back on track to address policy matters, particularly in the energy sector. The Southeast Asian nation recently released a new 20-year Power Development Plan, which lawyers say paints a clear picture of the energy market’s growth and priorities.

Thailand’s national elections, held in March, continue to generate much news in the country and globally. Junta chief-turned-civilian prime minister Prayuth Chan-ocha may have taken charge following the publication of the official results, but that hasn’t stopped the debates and analysis surrounding the election from continuing. However, for businesses that have a stake in Thailand, the priority has been to focus on what policies and regulations the new government will bring.

In June, Reuters reported that Prayuth faced the task of “reviving a faltering economy and sinking investor confidence - the same problems as when he seized power in a military coup five years ago.” While there may be challenges ahead, there are also many bright spots, and many of these to be found in Thailand’s energy sector.

According to Reuters, Thailand is the beneficiary of two decades of government energy policies that have supported the sector. After a slump, oil and gas prices are recovering, and there is an increasing demand for electricity. Thai companies have also started investing in overseas markets, such as Vietnam, to help feed the hunger for energy. 

ENERGY ROADMAP

ET Hunt Talmage, III, senior counsel at Thai law firm Chandler MHM, tells Asian Legal Business that over the past few months there have been a number of key developments in the Thailand renewable energy sector that have been worth noting, and these will help set the tone for future growth in this area. 

One major recent development has been the long-awaited publication of the 20-year Power Development Plan, which was released in early 2019. As the first significant update to Thailand’s Power Development Plan since 2015, this is an important document that helps to paint a clear picture of the energy market’s growth and priorities. “It sets out a road map of the long-term composition of the power sector,” Talmage explains, noting the plan relies “heavily on gas and, to a lesser extent, solar power.”

Rooftop solar created something of a buzz last year, but Talmage says that while the residential rooftop programme continues to encourage household producers, “its small scale will not favour industrial investments.” The programme, which encourages solar panels to be installed on residential properties, and then enables surplus power harvested to be sold to the state-run Electricity Generating Authority of Thailand (EGAT), helps support the growth of renewable energy development in the Southeast Asian nation.

According to the Bangkok Post, EGAT aims to purchase at least 100MW of solar power a year in the next 10 years. While this has been met with support locally, it appears that the focus on mass solar generation may have cooled slightly. “Programmes for the development of larger scale ground-based solar have been suspended for the time being. Another trend has been the reduction in tariffs for solar power, as evidenced by the ground-based competitive bid programme at the end of last year,” Talmage notes.

As the energy sector in Thailand continues to mature, law firms are watching the changing landscape closely as the scope of their legal work continues to expand.

In addition to petroleum, E&P, M&A and regulatory matters, Chandler MHM is also seeing a lot of acquisitions and divestitures of power assets. “An example is the recent acquisition of gas and combined cycle assets acquired by a PTT subsidiary and B. Grimm,” Talmage says. EGAT, which buys gas from a state-owned unit of PTT Pcl, Thailand’s sole gas supplier and liquified natural gas importer, has recently narrowed down its list of potential liquefied natural gas sources to 12 companies, Reuters notes, adding that “the move comes as Thailand joins other Asian countries such as China where LNG imports have risen exponentially over the past few years, driven by strong economic growth and a push for cleaner air.”

The firm also counsels potential new entrants to the renewables sector, both for greenfield and existing projects. “For the latter, we deal with the normal due diligence review of target companies, as well as the standard site ownership, access, rights-of-way and zoning issues. For new entrants, it is the usual education on regulatory and licensing formalities and Thailand’s someone unique land tenure system,” Talmage says.

CHANGES IN THE MARKET

While regulatory changes and an increasingly maturing market are promising indicators, companies investing in Thailand still require support along the way.

“Some challenges are similar to other jurisdictions: site, security interests and regulatory issues, for example. This is certainly true with respect to certain wind projects and to rooftop industrial and land-based solar,” Talmage explains, adding that there are also other, more specific challenges that pertain specifically to the energy sector.

“Other issues include project qualifications of renewable programmes supervised by the Energy Regulatory Commission, such as programme eligibility criteria, and changeable government policies. Tariffs are also becoming more competitive. The monopoly of PTT, the state-owned enterprise, on the domestic transportation of gas with limited third-party access may also be a constraining factor, although this may be relaxed in the long term,” he notes.

“The need to formulate clear and consistent programmes with uniform eligibility requirements and dependable tariff policies would be an important improvement. The clarification of sometimes competing and conflicting land use limitations and restrictions to foster security of tenure would also increase investor confidence. In addition, simplification and acceleration of the licensing process would be a positive factor,” Talmage adds.

While the road forward is clearly positive, further legislative changes will be firmed up once the new government puts greater focus on policy reform. Talmage notes that this may take a few months before the new government will be able to review and confirm energy policies and programmes. Meanwhile, lawyers and their clients will need to wait and watch.

Turning to the future, Talmage suggests this may well result in more energy initiatives in the future –perhaps even with land-based solar projects.

“In the meantime, the domestic rooftop solar programme will continue to be implemented. Also, we will see the increasing replacement of IPP and SPP projects with expiring PPAs, mostly with an emphasis on gas.  So, the government’s reliance on LNG and imported gas and electricity from contiguous countries will continue,” he says.

To contact the editorial team, please email ALBEditor@thomsonreuters.com.