An Industry Perspective on Strengthening Onshore Wind Development in Thailand

Wind and other renewables can play a far The GWEC South East Asia Task Force larger role in resolving the main challenges and ThaiWEA published this position facing Thailand’s energy system: 1) energy paper as a guiding document for the security, by diversifying fuel sources, industry, with the aim of providing a reducing dependence on energy imports course of action to grow the onshore and improving the balance of trade; 2) wind sector in Thailand. energy economy, or the need to generate power at reasonable costs and maintain As a hub of steady economic and economic competitiveness; and 3) population growth, South East Asia is poised ecology, or the need to decarbonize the to become a decisive actor in the energy power, industrial and transport sectors. transition. Urbanization and rising income levels are fueling the region’s demand for As of October 2019, installed onshore wind electricity, which has increased by an capacity in Thailand is 1.5 GW – half of the average of 6.1 percent each year since 3 GW target set by the government for 2000. However, South East Asia’s energy 2037. Wind power has the potential for a generation mix continues to be dominated much larger, cost-competitive contribution by fossil fuels, and particularly coal-fired to the future energy mix; however, an generation, with damaging unclear roadmap for future procurement socioeconomic, health and environmental are restraining the ability of wind power impacts. market to contribute to Thailand’s sustainable (both economic Thailand, the region’s second-largest environmental) future. economy, reflects this scenario: Its generation mix (in GWh) in 2018 was highly In the EU, the share of renewables in power dominated by natural gas (54.4%), production has exceeded expectations, followed by coal (16.8%) and non-hydro reaching almost 50 percent in Germany for renewable energy (12.7%), the majority of the first six months of 2019.2 By 2017, 11 EU which is biomass (8.2%), according to the countries sailed past their 2020 targets for Ministry of Energy (MOE). 1 Wind and solar the share of renewables in final energy account for only 2.9 percent of total power consumption, three years early.3 This trend generation. has been driven by technological innovation and the increasing cost- competitiveness, volumes and industrial scale of wind power and other renewables, which have set many such markets on a development path with lower emissions.

1http://www.eppo.go.th/index.php/en/en- windenergieanlagen-erzeugen-im-ersten- energystatistics/electricity- halbjahr-2019-mehr-strom-als- statistic?orders[publishUp]=publishUp&issearch kohlekraftwerke.html =1 & 3https://ec.europa.eu/eurostat/statistics- http://www.dede.go.th/download/stat62/Thailan explained/index.php?title=File:Share_of_energy_ d_Alternative_Energy_Situation_2018.pdf from_renewable_sources_2017_infograph.png 2https://www.ise.fraunhofer.de/de/presse-und- medien/news/2019/solar-und-

public opposition to coal projects is Wind has proven itself as a clean and cost- especially vocal in the country’s south – the competitive source of power, nearing grid time for scaling up renewables is now. parity with the price of coal-fired power and other fossil fuels in markets like China Apart from the current 1500 MW wind and the UK. As energy systems around the installation, another 1.5 GW of new onshore world approach this significant turning wind can be easily achieved by 2023 at point to transit from fossil fuel energy to competitive price at grid parity, provided clean energy sources, stronger collective the necessary policy clarity and grid efforts from the government, with a strong capacity. And further capacity of another message to spur the investors, are needed 5-10 GW can be realized if proper to enable wind power in Thailand to follow government target is set up to further spur this trend of cost reductions and to reach wind development. Thailand is the current grid parity. Energy cost dynamics have leader in onshore wind installations in South evolved to the point where renewables East Asia, positioning it at the vanguard of can assume a far greater role in supporting the region’s wind power buildup and clean the kingdom’s sustainable development. energy transition. The wind development Global Wind Energy Council (GWEC) and over the last decade has led to a mature ThaiWEA, together with the industry Thai wind industry, with several strong local stakeholders represented among GWEC’s and international industry players. Thai wind South East Asia Task Force and ThaiWEA industry players are now building on this members, are presenting this position experience to invest in wind opportunities paper to urge the Government of Thailand elsewhere in Southeast Asia, notably in to take action to resolve the barriers Vietnam and the Philippines. inhibiting growth of the wind sector. This position has been achieved due to the Leading South East Asia’s wind power sophisticated financing models pioneered expansion by Thai investors in the region, setting a Thailand reflects strong fundamentals for strong example for renewable energy macroeconomic growth, with GDP growth investment. Banks and lenders in Thailand above 4 per cent in the past two years. have a mature outlook on renewable Although economic growth is forecast to energy, and have displayed greater slow to below 3 per cent in the years willingness to underwrite clean energy ahead, the country’s industrial and service assets when well supported. These sectors are still on track to continue achievements should be celebrated in the expanding – as will the appetite for broader context of South East Asia’s energy electricity.4 The recent issuance of the transition; however, Thailand’s leading country’s first green bond, announcement position in wind, and any long-term sector to set up battery production factories, the growth, is being restrained by challenges in buildup of mass rapid transit systems and policy direction, procurement and grid campaigns for the automobile sector to expansion. invest in electric vehicles are reflections of the effort to balance energy security with low-carbon development.

More action is required to reactivate the renewable energy sector. Power consumption at the current rate would deplete Thailand’s proven domestic reserves of natural gas and oil within five years – and further exposure to import ratios and commodity market volatility is not the answer. Coupled with the diminishing credibility of coal-fired power plants –

4https://www.bangkokpost.com/business/17694 04/world-bank-joins-ranks-of-gdp-naysayers

An opportunity to accelerate wind power means that both sources could contribute deployment in Thailand significantly to midday peak demand and Wind power in Thailand has come a long evening peak demand, particularly during way from the first pilot program of 150 kW the annual peak period. With higher levels on Phuket Island in the early 1980s. In the of solar foreseen in the PDP (an additional last decade, favorable pricing 10,000 MW by 2036), an increase in wind mechanisms have generated strong capacity is warranted in this regard. interest from both domestic and foreign developers, manufacturers and service The fast-moving dynamics of the global providers. These mechanisms include the energy transition require any national 2007 Adder Program of feed-in premiums energy strategy to be updated with for small power producers (SPPs) and very regularity, in line with international small power producers (VSPP) from 2006 to commitments5, market trends, 2014 – the first such scheme in South East technological developments and political Asia – and the current system of Feed-in- objectives. All of these factors should Tariffs (FITs). convene to transform the state’s approach to power market design and future energy In January 2019, the National Energy Policy systems planning, with periodic reviews of Council approved the latest version of the the PDP and horizon-scanning exercises. Power Development Plan (PDP) (2018- Thailand has strong fundamentals for wind 2037), a vital compass which guides the power to take off, including a mature development of Thailand’s energy system. investment environment for clean energy While capacity targets for all non-fossil fuels and sizable volumes of wind installed and in including hydro were revised upwards to 35 the pipeline. Focusing efforts on long-term per cent by 2037, the targets for wind system integration will allow it to build upon power remained untouched from the last the progress achieved to date. edition. In addition, the new PDP doesn't foresee any new wind capacity before In order to deliver the vision of a high- 2034. The vision for the country’s generation income, low-carbon Thailand 4.0, the mix nearly 20 years down the road relies government must adapt its energy heavily on natural gas, at a time when blueprint to account for the market-tested domestic gas reserves are rapidly knowledge surrounding wind power: depleting, and still allots coal a 12 per cent increasing cost-competitiveness; proven share as shown in figure below. routes to market; technological innovations which act as enablers for system integration; and technical research which scales up the potential deployment in the country.

Key challenges and calls to action 1. Clear and ambitious targets of at least an additional 7 GW of wind

The International Energy Agency (IEA) power in the next PDP. conducted a study in 2018 with support The current target of 3,002 MW of from the Thai Ministry of Energy and EGAT wind power capacity to be on the integration of renewable energy installed by 2037 is conservative, into the grid. This study concluded that given the ample technical Thailand’s grid is sufficiently robust and feasibility for wind power in the flexible to handle higher levels of solar and country, the installation scale wind, but that institutional and contractual required to generate local/regional arrangements are a bigger constraint. In supply chain activity and the addition, it concluded that solar and wind investment potential at stake (an resources have highly complementary estimated USD 6-10 billion over the generation profiles in Thailand, which next 20 years). The government should revise its wind power targets

5 Thailand has pledged to reduce greenhouse gas emissions by 20-25 per cent by 2030

upward to 5-10 GW, which would The greatest wind potential is provide long-term policy stability concentrated in the northeast, and investment confidence in the west, south and east regions of sector. Thailand, which are less developed.8 More ambitious Overview: It is estimated that targets will drive development in between 13-17 GW of onshore wind these regions, which are far from capacity could be developed in large urban centers, and create Thailand, given the appropriate opportunities for community regulatory and policy environment. investment, local job creation and A 3 GW long-term target is improvements to quality of life. An exceptionally low when compared estimated USD 6-10 billion of with the technically feasible wind investment could be generated by potential across the country, which the wind sector over the next 10 ranges from 13 GW (a figure years, if targets reached 5-10 GW.9 endorsed by the MOE and DEDE) to 17 GW (according to external The latest revisions to the PDP (2018- studies).6 Correcting the mismatch 2037) take a step in the right between ambition and potential direction by de-emphasizing will provide policy stability and send reliance on coal in future power a strong signal of the government’s capacity. But the problems of commitment to growing the sector. depleting natural gas reserves on the horizon, reliance on imports More ambitious long-term targets which expose national capital also provide industry with sufficient accounts to volatile gas/LNG prices time to plan and develop project and Thailand’s pledge for emissions pipelines. A typical onshore wind reductions are all impending risks. project requires at least 2-3 years for Wind power can and should play a feasibility studies, planning and greater role in complementing the permitting, and another 1-2 years future energy system’s large base of for construction.7 Revising the gas power plants – but needs the targets sooner will provide industry right targets and policy framework with the necessary time to to set the pace and scale. anticipate scale and make the necessary additional investments in 2. Create a supportive and local/regional supply chains. In transparent policy structure for Europe, clear political support for procurement and a clear PPA sizable long-term sector growth has application process. spurred economic activity among A strong wind sector can generate developers, manufacturers and jobs, capital, economic activity service-providers which make and power which is cheap, clean financial commitments to building and reliable. But this requires a local facilities, modernizing transparent and predictable infrastructure and upskilling local procurement framework that workforces. Economies of scale allocates risks appropriately and coupled with technological gives industry a strong innovation drives down costs, understanding of the timelines and making wind energy cheaper and requirements to enable financial more competitive. commitments. A clearly defined PPA application process, wherein

6https://www.irena.org/- f_enc/files/knowledge- /media/Files/IRENA/Agency/Publication/2017/N documents/cif_case_study_thailand_dtp3.pdf ov/IRENA_Outlook_Thailand_2017.pdf 8https://www.irena.org/- 7https://www.iwea.com/images/files/iwea- /media/Files/IRENA/Agency/Publication/2017/N onshore-wind-farm-report.pdf; ov/IRENA_Outlook_Thailand_2017.pdf https://www.climateinvestmentfunds.org/sites/ci 9 Based on ThaiWEA Wind Energy White Paper

power producers must meet potentially implementing this model relevant technical and financial nationwide. conditions, will also help prevent grid capacity from being allocated A transition from FITs to competition to projects that will not be requires transparency and implemented. dedication. Communication to industry must be clear and timelines Overview: The European must be adhered to, particularly in experience has demonstrated that emerging markets seen as riskier FITs are an efficient avenue for targets for private capital. In development of a strong wind general, outlining downward industry, providing fixed and increments of FITs in regulated predictable revenues to power stages will allow industry time to producers. The recent shift in many prepare and make adjustments. markets from FITs to competitive Appropriate auction designs with mechanisms, such as auctions or well-defined pre-qualification reverse auctions that are viewed as requirements and a concrete markets for “true price discovery,” schedule for bid submission, has seen wind power achieve selection, construction and COD incredibly low bid prices in places are then necessary to provide like the UK and India. policy stability. Larger bid volumes are encouraged by scheduling However, functioning auctions multiple, regular competition mechanisms generally take time a rounds, which provide developers period of 2-3 years to be with more lead time for planning. implemented. Given the current stage of development in Thailand A successful procurement and the level of cost reduction of mechanism also requires bankable the wind energy, it is advisable for PPAs with technical and financial Thailand to continue with a grid conditions that guarantee parity competitive FiT price to awarded capacity is financeable maintain the current experienced and can be delivered. Projects contractors and investment in rural which apply for connection to the areas, contributing to the grid through the Electricity development and welfare of local Generating Authority of Thailand communities. If there is a (EGAT) must meet these conditions government appetite for designing at application process, in order to auction system, it should continue prevent any grid capacity from the FIT while developing auction being occupied by non-viable system, which will take another 2-3 projects. years to come into shape. More certainty in the application Since April 2017, when the Minister process will also provide greater of Energy announced that within investor confidence. Having a well- the next five years, Thailand would defined and efficient process of not contract any new RE approvals will reduce the time and generation, unless it would be able money spent in pre- construction to generate at the wholesale tariff development. The specific level of 2.4 THB/kWh, the recommendations for the wind appropriate tariff level for power PPA application process are renewable energy in Thailand has in Annex of this paper. become an issue of debate. Since 2014 Thailand has been piloting 3. Optimize the FIT. versions of competitive bidding GWEC and ThaiWEA understand schemes, with the FIT level as the that it is the intention of the Thai ceiling, for biomass and biogas Ministry of Energy to aim for a Feed- projects in the south, with an eye to in-Tariff for wind power of less than 2.99 THB/kWh. The Thai Industry is

able to deliver the FiT below dividends in overall efficiency and 2.99THB/kWH with current reliability. technology. The industry is also able to deliver project at even more The areas with the strongest wind ambitious level of 2.5 THB/kWh, if potential are in the northeast, west further government support is given and south – far from load centers in to facilitate wind development. the country. Transmission network Such support could include, but is planning should account for not necessarily limited to, investments in transmission assets for streamlining of the permitting these locations which are more process, clarification of land use suitable to wind power, with a long- issues, loosening of setback term view to reducing the grid costs regulations and more preferential incurred by transmission constraints access to the electricity network. and losses. Here are some proposals from the industry. The differentiated FiT Level, The Thai government has already depending on regions and wind recognized the potential upsides of resources: For example, to disruptive technologies like incentivize investment in remote, or intelligent control systems, less developed area, where there is demand-side management less infrastructure; Or a stabilized FIT schemes and smart grids. Looking with certain contributions further ahead, the potential channelling back to the local application of storage facilities like community to build up the local batteries and hydrogen fuel cells economy. can take advantage of electricity generated at night by wind power, 4. Grid and transmission infrastructure when demand is generally lower, planning must introduce flexibility and reduce operational costs. and integration. Wind and other renewable energy 5. Update national knowledge on sources will require long-term grid wind resources and feasibility. development roadmaps in order to The wind power targets set in facilitate their integration into the national strategy have been driven power grid. EGAT must be by the understanding of Thailand’s proactive in upgrading and wind resources. However, the building out its transmission studies used to develop wind maps infrastructure at a pace which can date back to studies in the 1970s, accommodate greater and more 2001 and 2010-2011, each of which diversified generation. Authorities used different methodologies and should also introduce flexibility into turbines of a certain model to the grid which can make optimal determine technical feasibility. A use of the potential recent effort to harmonize these complementarity of wind and solar studies found that the potential power and match load profiles when using turbines specifically where possible. designed for low wind speeds was as high as 17 GW. The approach to Overview: While Thailand’s wind feasibility should account for a transmission grid is generally greater range of turbine assessed as stable and robust, technology, which can optimize authorities should prepare for and low wind speeds and capture optimize the increasing penetration larger volumes of wind power. of renewable energy by enhancing grid flexibility. This work will need to Overview: The most recent wind be undertaken on a region-by- potential assessment that has been region basis, depending on endorsed by the MOE’s available infrastructure and Department of Alternative Energy resources, but has the potential to Development and Efficiency lower electricity tariffs and pay (DEDE) reflects average wind

speed of 5-7 m/s at heights of 90 ● A “house” must be clearly meters. This assessment found that defined, as interpretations Thailand had 13 GW of technical of different types of potential across 21 areas, with the buildings as houses or not most favourable winds in the directly affects the layout northeast, west and south regions of of the turbine and the road the country. design for the project. However, a recent study According to the Civil (Manomaiphinoon et al, 2017) Registration Act, a “house” shows that technical potential can is defined as the residence reach up to 17 GW if the turbines of the people registered deployed are a modern model with a registrar with a adapted for low wind speeds, and house number. only 5 GW of potential could be ● A “highway” should be realized with conventional defined in accordance turbines.10 The large gap in the3 GW with international by 2036 target for wind power and standards, which this high potential can be partially determines the existence attributed to assessments which of a highway according to have not accounted for turbine its traffic density. As innovation. It is necessary that wind setback rules require the turbine technology, hub height and distance between the location be accounted for in official turbine and highway to be wind maps, in order to accurately equal to not less than 1.2 reflect the technical feasibility for times the sum of the height wind power in Thailand. and blade radius for all types of highway, this 6. Review land location rules to implies that low-traffic enable greater deployment of wind roads and throughways power. built for project access The wind turbine setback should also be included. regulations introduced by the Given land plots in Energy Regulatory Commission Thailand are already very (ERC) in 2015 have created small, this interpretation is challenges in implementation, adversely affecting primarily due to interpretations projects by limiting the which fall short of international number of turbines which standards. These setback rules can be deployed per plot. should be relaxed in order to enable smoother project Modifying the language in the development and optimize the ERC’s setback rules (Clauses 4 and available land area for wind power. 5 in the original notification) to be more specific and in line with Overview: The setback regulations international standards will enable introduced by the ERC determine greater deployment of turbines on the distance between a wind leased land area, and therefore power plant and other structures. more productive wind power However, the language used in projects. these rules has been interpreted in practice in ways that fall short of international standards. Two areas stand out for recommended review:

10https://www.irena.org/- https://www.climateinvestmentfunds.org/sites/ci /media/Files/IRENA/Agency/Publication/2017/N f_enc/files/knowledge- ov/IRENA_Outlook_Thailand_2017.pdf; documents/cif_case_study_thailand_dtp3.pdf

Annex 1: PPA Application: Technical Requirements (Source: ThaiWEA 2018 Position paper)

PPA Application: Technical Requirements Section Recommendation Project Boundary Any Project Application should include a map showing a well-defined project boundary (polygon) officially approved and registered by Local Subdistrict Administrative Organizations (SAOs) to avoid project overlap.

Wind Monitoring Mast Installed Proper financing will be obtained only with proprietary project wind data recorded at the site. Given Thailand wind characteristics, only projects with 90 m or higher wind monitoring masts with a suitable height in accordance with the selected hub height for the project as per international best practice (eventually through supplementary data from Lidar or Sodar) and with more than one year of measurements should be considered for installation of turbines within 2 to 5 km radius around the wind recording equipment depending on the turbine layout and site complexity. Proof of a signed and paid-for met mast land lease must be required.

Land Lease To be able to be financed and constructed, the project will have to sign a long-term lease (25 years or in agreement with PPA period) with all parcels inside the project boundaries. Any project application must have, at the moment of application, a signed lease contract or a signed commitment to enter into a leasing agreement which covers the PPA duration with 80 per cent of the parcels owners and users within the project boundaries (boundaries as defined by the regulation).

Community Support Any Project Application must have, at the moment of application, a written letter of support by the SAO within the project boundaries (boundaries as defined by the regulation) and a commitment to implement some community funds over the life of the wind farm.

Environmental Assessment Any Project Application must have, at the moment of application, an Initial Environmental Evaluation for the wind turbines installation. The site boundaries will have to be clear from watershed protection areas as well as protected forests.

Grid Availability Confirmation To be able to get connected to the grid, the project will have to get confirmation of the grid capacity availability at the expected connection point. To be able to be financed, the construction budget of the grid connection to be borne by the applicant must also be known before the application. Any Project Application must have, at the moment of application, a Grid Availability Confirmation with a clear expected point of connection and capacity available by EGAT (for SPP) or PEA (for VSPP) as well as an estimated construction budget from EGAT (for SPP) or PEA (for VSPP).

Construction Schedule and Any Project Application must include, at the moment of Turbine Manufacturer Support application, a detailed construction schedule as well as a Letter of Support from a turbine manufacturer.

PPA Application: Financial Requirements Section Recommendation Financing Term Sheet and The contenders will have to prove their ability to finance Credentials their wind project by showing credentials in wind power development and construction, and by showing in- principle support by reputable financial institutions. Any Project Application must include, at the moment of application, a presentation of the developer’s credentials in wind power and a financing term sheet by a reputable financial institution.

Application Bond In order to cover the application review costs and to prevent from non-credible applications, a bid bond will have to be presented by any applicants. The Energy Regulatory Commission (ERC) will have the ability to draw upon it to cover its processing costs. Any project application must include, at the moment of application, a bid bond from a reputable bank for THB 500,000 per MW. If the application is successful and a PPA signed or if the application is not successful, the full bond is released to the bidder.

PPA Time Limits To ensure real project completion, PPA contract should include a COD limit date within 2 years from date of PPA signing and any delays beyond that limit is under the project applicant responsibility through the reduction of the PPA duration. In case no tangible progress has been made with the project development within the set time limits, ERC has the right to revoke the PPA.