Alternative Energy

Alternative Energy Being heavily dependent on imported oil but endowed with a large agriculture sector, it is not surprising that Thailand is one of the first countries in Asia to have a policy to encourage the utilization of alternative energy sources, like biofuels and solar/wind power. Although Thailand has a large amount of agriculture raw materials for the production of ethanol and biodiesel for the past few decades, it is the rise of oil prices, beginning in 2004, along with government policy that led to a dramatic increase in the consumption and production of biofuels in recent years.

Thailand is ASEAN’s leading country in terms of renewable energy, particularly electricity sourced by sunlight. Renewable energy was promoted actively starting in 2010 when the Government announced its aim to make the Kingdom a lowcarbon society modeled on the principles of His Majesty the King’s sufficiency economy. One of the goals was to increase the production and consumption of renewable energy in the face of projected average energy demand rising 4.2 per cent per year.

According to the Ministry of Energy’s estimation, under Alternative Energy Development Plan (AEDP 2012-2021), it has been found that in 2021, the demand for energy in Thailand will increase from 71,728 ktoe (kilo tonnes of oil equivalent) today to 99,838 ktoe, or a 39.19% increase. The Thai government is hoping to push the use of alternative energy and renewable

energy to reach 25% of total energy consumption. This is because Thailand has agricultural products that can be used as energy sources such as biomass, biogas, biodiesel and ethanol. Food industries also yield a great amount of byproducts that can be made into energy from waste. Thailand’s natural resources also have great potential for energy generation - the country has the average sunlight energy of 18.2 megajoules per square meter a day, not to mention the Kingdom’s potential in wind energy. (Interesting to note, thin-film solar technology, which is cheaper and more efficient than older thick-film technology, was pioneered in Thailand.) This makes the country the right place for alternative energy and renewable energy investment, which will lead to a significant decrease in greenhouse gas emission, making Thailand a low-carbon society in the future.

Thailand is a leader in pursuing the development of alternative sources of energy. The country’s 15-year plan to lift alternative and renewable energy’s share of total energy production from 6% today to 20% by 2022 has been implemented with great success and spearheaded fast and expansive growth of the alternative energy sector. In 2010, for example, requests for investing in Thailand’s renewable energy projects increased 300%, as compared to the already impressive numbers of the previous years.

The Ministry of Energy has issued two major renewable energy schemes. The first was a 15-year renewable Energy Development Plan (2008-2022) in 2010, followed by the more ambitious 10-year (2011-2021) Alternative Energy Development Plan (AEDP) announced in 2012 which raised the target for renewable energy to comprise 25 per cent of total energy consumption by 2021, thereby saving the country oil imports worth 574,000 million baht. According to the Ministry of Energy’s Department of Alternative Energy Development and Efficiency (DEDE), the entire renewable energy sector in 2010 contributed 2,026 MW (megawatts) of electricity, of which solar sources produced 32 MW. By 2012, solar output more than doubled to 75.48 MW. Small and medium-sized enterprises (SMEs) shape up as a major beneficiary of the Government’s energy policies. Under the Ministry of Industry’s Green Industry Project launched in May 2011, SMEs are receiving assistance on environment-friendly output through five stages: commitment, implementation, review, company-wide participation, and convincing others in the supply chain to go green. Likewise, Thailand’s Energy Conservation Plan promotes biogas production from swine farms, tapioca factories, and wastewater from industrial plants. The commitment to alternative energy application is driven by the recognition that continued reliance on foreign oil imports is unsustainable and a drag on the country’s otherwise strong economic performance.

Trying to mediate the effect of swings in the global oil market, Thailand has turned to natural gas, which accounts for nearly a third of the country’s total energy consumption mix. It must be pointed out that Thailand is the second largest net oil importer in Southeast Asia, after Singapore. Nonetheless, like Indonesia, the Philippines and Vietnam, Thailand’s economy is expanding, and so is its natural gas consumption and depletion of its reserves. Indeed, the Asia Pacific Energy Research Centre (APERC) states that natural gas will be the most rapidly growing primary energy source in Thailand, at an average rate of 4.4 percent per year from 2010 to 2025. The APERC adds that Thailand’s limited gas production will require imports to expand nearly four-fold, from 7.5 mtoe (million tonnes of oil equivalent) in 2009 to 27 mtoe in 2035.

Furthermore, the Ministry of Energy expects gas production to peak in 2017.

The country produced 1,360 bcf (billion cubic feet) of natural gas and consumed 1.645 bcf in 2011, resulting in 340 bcf of net imports.

The Thai landscape is also seeing “eco- industrial towns” sprout up. A longterm plan forged by the Industrial Estate Authority of Thailand pushes operations at 42 industrial estates to go green over 10 years. Nearby residents are to participate in pollution monitoring systems. In addition to measures for better control of pollution, planted trees will serve as buffer zones at the industrial areas. The Government’s goal is for alternative energy’s share of national energy consumption to increase to a solid 20% by 2022. This alone would create 40,000 new jobs, enriching Thailand’s economic growth.

According to the BOI’s most recent announcement on alternative energy (dated the 28th of February 2013), there are certain sectoral activities that have been identified as eligible for promotional incentives. For instance, the manufacture of alcohol or fuel from agricultural products, including scrap, garbage and/ or waste; the manufacture of energy-conserving machinery or equipment or machinery which uses alternative energy; the manufacture of fuel cells; and the production of electricity or steam power using alternative energy such as energy from agricultural materials, biogas and wind energy.

Moreover, the BOI put together an attractive package of inducements to raise the profile of Thailand’s burgeoning alternative energy sector. For example, there is an import duty exemption on machinery in all zones, except Bangkok; an 8-year-corporate income tax exemption without being subject to a corporate income tax exemption cap in all zones, except Bangkok; and a 50% reduction of CIT (Collective Investment Trust) on the net profit generated from investment for 5 years after the exemption period. Additionally, the BOI offers double deductions for transportation, electricity and water costs for 10 years from the date of first income derivation from the promoted activity as well as a deduction of infrastructure installation or construction costs from net profit in addition to

normal depreciation of not more than 25% of the project. However, applications must be submitted by the 31st of December 2013.

Apart from this, under the National Biotechnology Policy, a collaborative effort between multiple government agencies, promotional packages and tax incentives are offered to promote research and development in biotechnology and its applications, particularly those which use agricultural outputs and byproducts for alternative energy production.

In order to meet the challenges posed by continuing increases in domestic demand and by volatile global oil prices, the Government of Thailand has recently overhauled its national energy strategy. Policy targets will no longer reflect an aspiration, but are now being set to create a holistic approach that will address realistically the country’s energy supply and demand. To that end, the Government has committed itself to reducing energy consumption and pollution, raising green awareness across the Kingdom, improving waste collection and disposal methods, and developing the Thai alternative energy sector.