Introduction:
As the world increasingly prioritises sustainability and environmental consciousness, the renewable energy sector has emerged as an area of focus for the BOI. Thailand, and the BOI, has positioned itself as a regional leader in the renewable energy landscape. Through a comprehensive framework of supportive policies and incentives, the Thai government has created an industry encouraging investment and innovation to continue its development.
Key Points
- Thailand has set ambitious targets to increase the share of renewable energy in its total energy consumption through policies like the Power Development Plan (PDP) and Alternative Energy Development Plan (AEDP).
- The Thai government offers various incentives for renewable energy projects, including tax exemptions, import duty exemptions, Feed-in Tariffs (FiT) that guarantee fixed prices for renewable energy, and low-interest loans.
- The Board of Investment (BOI) provides substantial incentives, such as 8-year corporate income tax exemptions and non-tax incentives, for projects in solar, wind, biomass, biogas, and waste-to-energy sectors.
- Public-Private Partnerships (PPPs) are encouraged for renewable energy infrastructure development, leveraging government support and private sector efficiency.
Renewable Energy in Thailand
Thailand’s commitment is evident through numerous policy initiatives, such as the Power Development Plan (PDP) and the Alternative Energy Development Plan (AEDP). The establishment of these frameworks have set clear targets for Thailand’s energy mix, with renewable sources set to account for a significant portion of Thailand’s total energy consumption by 2036. These developments have led to the rapid expansion of renewable energy projects, ranging from large-scale solar farms to innovative biomass and biogas plants.
What Types of Renewable Energy Projects are there in Thailand?
Thailand’s shift in focus towards renewable energy has seen various types of projects appear at the forefront of the industry. Below is a list of the most popular types of renewable projects for companies in Thailand.
Solar Power Projects
Thailand has made significant steps relating to solar power projects, with numerous large-scale solar farms dotting the country’s landscape. The Feed-in Tariff (FiT) scheme, a key policy initiative, has played a major role in driving investment in these solar projects by offering guaranteed prices for the electricity generated, ensuring their long-term financial viability.
Wind Energy Developments
Leveraging its strategic geographical location, Thailand has also invested heavily in wind energy facilities, particularly in regions with favourable wind conditions. Again, the FiT scheme has been instrumental in promoting the growth of this sector, providing investors and operators with the financial stability needed to expand their wind energy operations.
Biomass and Biogas Plants
Thailand’s renewable energy landscape has also seen the emergence of biomass and biogas plants, which harness agricultural residues and waste to generate clean energy. These innovative facilities not only contribute to the nation’s energy mix but also address waste management challenges.
Hydropower Initiatives: Harnessing the Power of Water
While hydropower is the least popular choice of renewable energy project for a company in Thailand, small-scale hydropower projects in Thailand also contribute to the country’s renewable energy portfolio. The FiT scheme has helped offset the initial costs associated with these projects, making them more attractive to investors and further driving the expansion of hydropower in the nation.
What is The Legal Framework for Renewable Energy?
Understanding the legal landscape governing renewable energy in Thailand is important for investors and companies operating or looking to invest in this sector. Two key laws, the Energy Industry Act and the Energy Conservation Promotion Act, form the basis of Thailand’s renewable energy framework, providing the necessary regulatory guidelines and incentives.
The Energy Industry Act
The Energy Industry Act establishes the Energy Regulatory Commission as an independent regulatory body, overseeing the energy industry and setting the parameters for licensing and participation. This Act aims to encourage private sector involvement and enhance competition, ultimately promoting the efficient and renewable energy resources.
The Energy Conservation Promotion Act
The Energy Conservation Promotion Act serves as the foundation for Thailand’s renewable energy legal framework, providing financial and policy support for initiatives that align with the nation’s energy conservation goals. This Act incentivizes businesses and consumers to adopt sustainable energy practices, further driving the growth of the renewable energy sector.
What are the Investment Opportunities and Incentives Available to Investors in Thailand?
The Thai government’s commitment to renewable energy is reflected in the various incentives and support mechanisms it has put in place to attract domestic and foreign investment. These initiatives have significantly reduced the financial barriers to entry, making Thailand an increasingly attractive destination for renewable energy projects.
Tax Incentives and Exemptions by the Board of Investment (BOI)
The Board of Investment (BOI) offers substantial tax breaks and exemptions to promote investment in the renewable energy sector. Eligible projects may receive corporate income tax exemptions ranging from 5 to 8 years, along with import duty exemptions on machinery.
Additionally, non-tax incentives include 100% foreign ownership, the ability to hire foreign expatriates with reduced requirements when compared to other types of company, the ability to own land and remit funds abroad from Thailand.
It is important to note that the production of electricity or steam from waste or refuse-derived fuel has been classified as an activity of special importance and benefit to Thailand. Therefore, any projects who undertake activities within this field will be granted 8-year corporate income tax exemptions. This exemption will not be subject to a corporate income tax exemption cap. Such projects will also be eligible for the exemptions of import duty on machinery and other non-tax incentives.
Furthermore, projects that:
- manufacture of solar cells and/or,
- Manufacture raw materials for solar cells,
- produce electricity and steam from renewable energy sources, e.g. solar energy, wind energy, biomass or biogas
Will be granted the following incentives:
- an 8-year corporate income tax holiday,
- exemptions of import duty on machinery as well as non-tax incentives.
Projects that manufacture fuel from agricultural products or agricultural scrap or garbage or waste, e.g. biomass to liquid (BTL) or biogas from wastewater, as well as the traditional non-tax incentives will also granted:
- an 8-year corporate income tax holiday,
- exemptions of import duty on machinery and import duty on raw or essential materials used in manufacturing export products,
Finally, projects that manufacture biomass briquettes and pellets will be granted a 5-year corporate income tax holiday, exemptions of import duty on machinery as well as the traditional non-tax incentives.
Feed-in Tariffs (FiT) for Renewable Energy
The FiT scheme is a key aspect of Thailand’s renewable energy policy, guaranteeing fixed prices for energy generated from renewable sources. This policy reduces the financial risk associated with renewable energy projects, making them more appealing to potential investors.
Feed-in TariffF rate (FiTF) is a fixed buying rate for electricity produced by renewable sources. The rate is calculated from initial investment for the power plant construction and the full lifetime use] of its operation and maintenance cost. Furthermore, the scheme will also compensate investors for any price inflation for raw material used in biological energy production (for waste, biomass and biogas).
FiT is available to various types of renewable energy sources such as local solar farms, water & wind availability and biological feedstock for energy production
Public-Private Partnerships (PPPs)
Thailand actively encourages Public-Private Partnerships (PPPs) in renewable energy projects, offering a collaborative approach to infrastructure development. These partnerships leverage government support and private sector efficiency, creating synergies that benefit both parties and contribute to the sector’s growth.
Low-Interest Loans: Facilitating Project Financing
Financial institutions in Thailand, in collaboration with governmental policies, have been known to offer soft loans or loans with lower-than-market interest rates for certain renewable energy projects, further enhancing the financial viability of these investments.
What Opportunities are Available to Investors in the Renewable Energy Sector?
Thailand’s journey towards sustainable energy presents investors and companies with a unique opportunity to capitalise on the growing potential of this sector.
Driving Innovation and Technological Advancements
The renewable energy landscape in Thailand offers many opportunities for innovation and the integration of cutting-edge technologies. Investments in emerging solutions, such as energy storage systems, smart grid infrastructure, and advanced renewable energy technologies, can position companies at the forefront of the industry’s evolution.
Collaboration and Knowledge Sharing
Strengthening collaborative efforts between the public and private sectors, as well as facilitating knowledge sharing among industry players, can further boost Thailand’s renewable energy sector. Such synergies can lead to the development of more efficient, cost-effective, and sustainable energy solutions, benefiting the nation as a whole.
Our Thoughts
Thailand’s renewable energy landscape presents a compelling opportunity for investors and companies seeking to contribute to a more sustainable future. The comprehensive framework of supportive policies, incentives, and legal structures has created many opportunities for growth and expansion of renewable energy projects.
