Harnessing the power of clean energy

Attractive investment incentives are necessary to catch the interest of prospective foreign investors but they may not be enough to ensure they will definitely establish businesses in Thailand.

A sufficient supply of renewable power has become an increasingly important factor behind companies’ decisions on whether or not to invest here as they need to reduce carbon dioxide emissions to help decelerate the rise in temperatures globally.

Entrepreneurs, especially those operating in the data centre sector, have even called on the government to facilitate clean electricity trade under direct power purchase agreements (PPAs), a request that led Prime Minister Srettha Thavisin to instruct officials to pilot a direct PPA project.

The Explainer examines this type of electricity trade which is new to Thailand as well as how the government will apply it as part of its efforts to make Thailand a regional data centre hub.

Why is the direct PPA important?

Such agreements not only promote renewable electricity sales between power producers and end users, but this aspect is one factor foreign firms use to decide whether or not to expand their business into Thailand.

The government previously invited foreign companies specialising in data centre development to invest in Thailand, but these firms sought clarity regarding the country’s direct PPA policy.

Peer-to-peer power trade in the renewables category was not permitted in Thailand, but once the direct PPA process has been carried out, companies will be able to purchase electricity directly from power producers.

This will be a major change in the power sector because the country has long been familiar with the enhanced single buyer (ESB) system.

The ESB has allowed the Electricity Generating Authority of Thailand (Egat) to be the single buyer that sells electricity to the public.

If power companies want to sell electricity produced by renewable resources at present, they are required to sell it to Egat and state power distribution agencies, which then distribute electricity via the grid to companies and households.

One advantage of direct PPAs is that electricity users can better manage their energy costs in addition to implementing plans to reduce carbon dioxide emissions.

Greater use of clean power in Thailand is required to attract foreign investment, which is committed to cutting carbon dioxide emissions to avoid non-tariff barriers being imposed on carbon-intensive manufacturing, according to Suvit Toraninpanich, chairman of the board of the Clean Energy for People Foundation.

Thailand needs to speed up efforts to promote renewable energy or see foreign companies invest in neighbouring countries, he said.

What are the government and business sector doing to prepare for the direct PPA?

Energy authorities and business groups, including power companies, are jointly studying a plan to support direct sales of renewable energy from producers to factories in the Eastern Economic Corridor (EEC).

Covering Chon Buri, Rayong and Chachoengsao, the EEC is set to become Thailand’s high-tech industrial hub, hosting 12 targeted S-curve industries, including smart electronics and electric vehicles.

The state-private cooperation came after the National Energy Policy Council (NEPC) agreed to approve a pilot direct PPA to attract foreign investors, especially those in data centre and cloud service businesses, who demand a sufficient supply of clean energy for their operations.

During an NEPC meeting chaired by Mr Srettha in June, officials resolved to give the green light to renewable electricity trade not exceeding 2,000 megawatts under direct PPAs, according to Prasert Sinsukprasert, permanent secretary of the Energy Ministry.

Renewable power can be generated from various sources, including solar and wind energy, hydropower plants and biogas.

The pilot project led the authorities to team up with business groups to look into issues including regulations on the construction of a new grid network, its costs and the construction area, said Chula Sukmanop, secretary-general of the EEC Office.

The Energy Regulatory Commission said if power companies use the state grid under the Third Party Access Code (TPA Code), a wheeling charge would be imposed on electricity trade.

This refers to a fee collected from the use of state transmission lines to deliver renewable power.

The TPA Code will be an essential part of a plan to promote free trade in the power market, according to Harald Link, chairman of the Association of Private Power Producers and chief executive of B.Grimm Power.

The direct PPA will be an alternative for companies which need clean energy, and it will support the government’s goal of achieving carbon neutrality, a balance between carbon dioxide emissions and absorption by 2050, he said.

His association is among business groups that signed a memorandum of understanding on the joint study with the EEC Office and the Provincial Electricity Authority, the state power distribution arm.

Other business groups included the Clean Energy for People Foundation and the Thai Renewable Energy (RE100) Association.

Can Thailand become a hub for data centres?

Promoting affordable renewable power and continuing investment in related infrastructure are key factors if Thailand is to achieve its goal of becoming a regional data centre hub, according to executives.

Supparat Sivapetchranat Singhara na Ayutthaya, chief executive of data centre provider STT GDC Thailand, earlier told the Bangkok Post that Indonesia, Thailand and Vietnam have growth potential in the data centre sector.

Mr Supparat said by year-end, total data centre capacity in Thailand should reach 357.4MW before exceeding 400MW at the end of next year.

He said Thailand should offer affordable power rates for data centres at a rateof less than US$0.10 (3.67 baht) per kilowatt-hour.

The country should have a transparent renewable energy roadmap that outlines the availability and development of renewable energy sources because it would provide certainty for investors and stakeholders regarding Thailand’s energy future, said Mr Supparat.

Marcus Burtenshaw, executive director head of occupier strategy and solutions at Knight Frank Thailand, said Thailand must address the high energy demands of data centres with green initiatives to continue attracting leading data centre operators.