Bullish Renewables Outlook Driven By Regulatory Changes

BMI View : We have revised up our short- and long-term forecasts for non-hydropower renewables generation and capacity in Thailand this quarter on the back of new data and impending changes to the regulatory environment. Growth in 2014 will be largely driven by the solar sector, but we see growth across all sectors over the long-term. 

We have made slight amendments to our 2014 forecasts for non-hydropower renewables generation and capacity in Thailand this quarter on the back of new data. While our forecasts for solar and wind energy remain unchanged, we have revised up our forecasts for the biomass sector to account for a stronger-than-expected project pipeline.

Solar: We are forecasting 450MW of new solar capacity installations in 2014, with commercial and residential solar accounting for approximately equal shares of new capacity additions. This would be the highest amount of solar capacity additions in a single year, slightly outpacing the record 440MW of solar capacity installed in 2013. As highlighted previously, we continue to see a number of large commercial scale projects commence development in recent months, with Thai solar developer Solar Power Company commissioning 12 solar plants with capacities of 7.5MW between February and June 2014 ( see 'Commercial Solar Dominated By Few', April 2 2014).

Solar: Big Jump
Thailand - Non-Hydropower Renewables Capacity, MW

BMI View : We have revised up our short- and long-term forecasts for non-hydropower renewables generation and capacity in Thailand this quarter on the back of new data and impending changes to the regulatory environment. Growth in 2014 will be largely driven by the solar sector, but we see growth across all sectors over the long-term. 

We have made slight amendments to our 2014 forecasts for non-hydropower renewables generation and capacity in Thailand this quarter on the back of new data. While our forecasts for solar and wind energy remain unchanged, we have revised up our forecasts for the biomass sector to account for a stronger-than-expected project pipeline.

Solar: We are forecasting 450MW of new solar capacity installations in 2014, with commercial and residential solar accounting for approximately equal shares of new capacity additions. This would be the highest amount of solar capacity additions in a single year, slightly outpacing the record 440MW of solar capacity installed in 2013. As highlighted previously, we continue to see a number of large commercial scale projects commence development in recent months, with Thai solar developer Solar Power Company commissioning 12 solar plants with capacities of 7.5MW between February and June 2014 ( see 'Commercial Solar Dominated By Few', April 2 2014).

Solar: Big Jump
Thailand - Non-Hydropower Renewables Capacity, MW

Wind: We are forecasting around 150MW of new wind capacity in 2014, most of which is being developed by Thai wind developer Wind Energy Holding (WEH). WEH had commissioned the West HuayBong 2 and 3 wind farms in Nakhon Ratchasima with a combined capacity of 207MW in February 2013, and is working on seven projects with a total capacity of close to 650MW. We expect one or two of these projects to come online in 2014, and they are most likely to be the 100MW Korat 02/1 and/or the 100MW Korat 02/2. We note that WEH has a target of 800MW of capacity by 2016 and 3,000MW by 2020.

Biomass: We have revised up our forecasts for biomass energy this quarter due to new data from the Department of Alternative Energy Development and Efficiency (DEDE). According to the DEDE, there was 2,632MW of installed biomass and biogas capacity in Thailand at the end of 2013. This is around 50% higher than our previous estimate, and we have scaled up our forecasts to account for a higher base. We now expect around 250MW of biomass capacity to be brought online in 2014, up from 50MW previously. The majority of these plants will be 10MW or smaller, and the 9.9MW plant being developed by AREVA for U-Thong Bio Power is one of the plants set to come online.

Positive Fundamentals Drive Growth Over Long-Term

We have also revised up our long-term forecasts this quarter, and are now forecasting non-hydropower renewables generation to grow by an average of 10.7% per annum between 2014 and 2023 (up from 9.2% previously). This upward revision was partially prompted by data from the DEDE (referenced above), as well as impending changes to the regulatory environment.

We believe that the regulatory environment for the Thai renewable energy sector is set to change, with the most likely outcome to be an improvement in the returns for renewable energy projects. On July 17 2014, the director-general for the DEDE, Viraphol Jirapraditkul, said the department would revamp privileges in terms of tax holidays and feed-in tariffs (FiTs) for all kinds of renewable energy. We expect the DEDE to try and improve returns for renewable energy projects as the country is far from its renewable energy targets, and needs to shift its energy mix in the coming decade. The country aims to source 25% of its energy mix from renewable energy by 2021, but this target is still far from realisation. Installed renewable capacity stood at 3.8GW at the end of 2013, while the 25% target is projected to be around 13.9GW of capacity ( see 'Positive Regulations And Fuel Shortages Drive Growth', November 6 2013). Therefore, we expect the DEDE to sweeten the rewards for investors in order to attract and hasten investments into the sector ( see 'Market-Oriented Reforms To Bring Sector Relief' July 21 2014).

FACT BOX: RENEWABLE ENERGY TARGETS
Technology Capacity (MW)
Biomass 4,800
Biogas 3,600
Solar 3,000
Wind 1,800
Source: Ministry Of Energy

We expect solar and waste-to-energy projects to enjoy the greatest benefits from the upcoming regulatory changes. Jirapraditkul had said that these two technologies would play key roles in attracting investment into Thailand's second generation of renewable energy schemes. This is a slightly different approach from the country's initial foray into the renewables sector, which saw a diverse mix of biomass, biogas, solar, wind and mini-hydro projects being developed.

Strong And Sustained Growth
Thailand - Non-Hydropower Renewables Capacity, MW

We note that our bullishness towards the sector is very much tied to the fact that Thailand's current energy mix is unsustainable over the long-term, in terms of both costs and availability of fuel. There is limited scope for growth in gas-fired generation - which accounts for 70% of the electricity mix - as the country's gas reserves will be insufficient to meet its needs over the long-term and imports are becoming increasingly costly. Gas reserves in Thailand have been declining since 2002 and we estimate that the country is likely to exhaust its gas reserves in around eight years at the current rate of production, barring any major gas discoveries.

Insufficient Gas Reserves
Thailand - Natural Gas Production and Consumption, bcm (LHS) and Natural Gas Reserves To Production Ratio, years (RHS)

Meanwhile, Myanmar - which supplied more than 75% of Thailand's gas imports via pipeline in 2012 - is likely to cut down on export volumes as gas consumption in Myanmar is increasing following the opening of its economy ( see 'Domestic Needs Hit Thai Supplies', October 5 2012). The only other option left to Thailand is to import LNG, but this will be substantially more expensive than piped gas from Myanmar ( see 'PTT Looks To Long-Term LNG For Domestic Needs', October 17 2013).

Read the full article

This article is tagged to:
Related sectors of this article: Renewables, Biomass, Solar - Renewable, Solar - PV - Renewable, Wind - Onshore - Renewable, Regulatory/Policy
Geography: Thailand
×

Enter your details to read the full article

By submitting this form you are acknowledging that you have read and understood our Privacy Policy.