Kudun and Partners
  August 11, 2020 - Thailand

Will COVID-19 Derail Thailand's Progress in the Renewable Energy Sector?

Thailand’s two-decade long growth of the renewable energy sector has been pivotal in the pursuit of Thailand 4.0, but has the coronavirus outbreak thwarted these plans?

COVID-19 has forced many of the world’s most exciting economies into a full or partial shutdown, suspending their plans for development. Thailand is no exception.

The pandemic occurred just as Thailand was beginning to reap the rewards of an ambitious national strategy designed to shake off the ‘middle-income trap’ and propel the economy into high-income status, attracting more than THB 203.4 billion (USD 6 billion) of foreign investment into its target sectors between January and September 2019.

Renewable energy is one of these ten ‘S-Curve’ sectors and, like many infrastructure-centric industries, it is facing an uncertain short, medium and long-term future.

Pre-COVID-19 Trends in the Renewable Energy Sector in Thailand

Thailand’s national strategy to become a high-income, value-based economy runs parallel to and intertwines with its carbon reduction targets. In 2019, the Thai government and the National Energy Policy Council approved the Power Development Plan (PDP 2018-2037) after several years of revision.

The PDP 2018 – 2037 explicitly expresses that Thailand aims to become a low carbon country, with renewables accounting for 30% of the energy mix by 2037. Achieving this will require 56,431 MW of new power generation capacity—a significant opportunity for investors.
To implement the PDP 2018 – 2037, the Electricity Generating Authority of Thailand (EGAT) is executing several projects including a pilot project to develop and install the world’s largest hydro- floating solar hybrid power project, which combines hydropower and solar power project with an output of 45 MW at the Sirindhorn dam in Ubon Ratchathani, Thailand. EGAT aims and is committed to the development of floating solar farms at nine dams nationwide with a combined capacity of 2,725MW.

Although natural fuel will still represent the majority Thailand’s power production, dwindling domestic natural gas reserves will likely lead Thailand’s market to reconsider investment in more renewable energy projects in the future.

To support its carbon reduction and economic development plans, Thailand’s Board of Investment (the “BOI”) has introduced a number of tax incentives for investment in both renewable power generation and the manufacture of parts or equipment for solar power. These incentives include, but are not limited to tax holidays and exemptions on selected import duties (Refer to Appendix 1). 

Caution and Delays

Investors in any industry rely on certainty and forward projections when making decisions. Unfortunately, there is still no definite end in sight for the COVID-19 pandemic, putting future projects in a difficult position.

Players in the renewables sector are understandably exercising caution. The pandemic has significantly reduced and disrupted cash flow and limited access to manpower. For projects already underway, contractors have a legal obligation to complete works, and these are set to resume as soon as it is deemed safe to do so.

In addition, government funding is being saved or diverted to maintain cash flow and support projects directly related to the pandemic, such as the healthcare industry and businesses that may be struggling with reduced consumer spending.

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Read full article at: https://www.kap.co.th/thought-leadership/will-covid-19-derail-thailands-progress-in-the-renewable-energy-sector/