The political economy of Thailand’s renewable energy ambitions – The Diplomat

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In 2010, Thailand generated 3,426 GWh of electricity from renewable energy sources such as solar energy. The entire system used 164,829 GWh that year, so about 2% of the total came from renewable sources. By comparison, coal and natural gas have combined to generate 148,202 GWh, or 90% of the country’s electricity supply. Like many emerging markets in Southeast Asia, Thailand’s economy has grown rapidly and has resulted in ever-increasing demand for electricity. If the switch to more sustainable energy is not made on time, the country risks being locked into a high carbon economic development model.

The good news is that things have changed a lot over the past decade. In 2019, renewable sources generated 21,402 GWh of electricity, or around 10% of the system total. Meanwhile, coal and natural gas have grown from 90 percent of the energy mix to 75 percent. It may sound modest to some, but the pace of renewable energy growth has accelerated dramatically in recent years alone. If they stay this course, renewable energies will soon become a dominant component of the Thai energy mix. How did Thailand get started on this path?

From a political point of view, the answer is clear. From 2007, the government of Thailand launched a series of incentive programs in which the country’s main energy supplier, the Electricity Generating Authority of Thailand (EGAT), has entered into purchase agreements with small power producers and agreed to purchase renewable energy from them at reasonable prices attractive and for a fixed period.

These types of contractual guarantees can help get started investment in nascent renewable energies sectors by essentially guaranteeing developers that there will be a market for the energy they produce. The discounted cost of solar and wind power has fallen so rapidly in recent years that it is questionable whether these types of guarantees are still needed. But certainly in 2007, when the cost of developing solar energy was considerably higher than it is today, the government’s use of such programs marked its commitment to diversifying the energy mix.

But it takes more than just a well-designed policy instrument to induce large-scale renewable energy growth. It also requires buy-in from key stakeholders, perhaps more importantly from electric utilities. In Thailand, EGAT is the key player. The utility is not only the sole operator of Thailand’s national electricity grid, it also produced 50% of the grid electricity in 2010. For any kind of renewable energy investment program to actually work, EGAT should really support it.

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Ultimately, EGAT is the entity responsible for signing all these contracts with renewable energy producers, increasing its expenses and long-term liabilities while reducing its market share, since it is in direct competition with these same developers. . So how do you get EGAT to work against its own interests and cede market share to renewable energy producers?

This is the crucial question when considering renewable energy transitions, as the political economy and energy mix of each country will provide a different answer. In well-developed markets, as renewables become cheaper, fossil fuels will naturally tend to be phased out due to competitive market balances. In less competitive markets dominated by politically powerful fossil fuel interests like Indonesia, renewables have struggled to make inroads or obtain the adhesion of the state public service.

In the case of Thailand, EGAT ultimately had little choice as the country’s natural gas production – its main source of electricity generation – has been declining since 2014. EGAT and Thai energy regulators were forced to face the reality that the natural gas that electrified the country for decades was running out. They could either import energy from their neighbors (on whom they would increasingly depend for the supply of a critical strategic good), or they could accelerate the development of domestic energy sources such as solar. It seems that they prioritized the second option.

There is always large coal-fired power plants under development, and EGAT’s dual nature as a major purchaser and one of the largest power producers in Thailand creates political and economic complications. But the pace of renewable energy growth has accelerated considerably in recent years, while the ability to supply the grid with domestic natural gas has an increasingly narrow time horizon. These factors suggest that renewables are expected to continue to grow as part of Thailand’s energy mix.

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