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The Thai Solar Draw: Update and Opportunities

for Power Developers
Breakfast Briefing Dusit Thani Hotel, Bangkok
29 June 2016
BANGLADESH

CAMBODIA

INDONESIA

LAO P.D.R.

MYANMAR

SINGAPORE

THAILAND

VIETNAM

Introduction

Regional Reach: ASEAN and South Asia

Bangladesh (2011)
Country Partner: 1

Philippines (2015)

Advisers: 11

Ocampo & Suralvo Law

Office

Cambodia* (1995)

Partners: 3

Partners: 5

Singapore (2010)

Advisers: 42

Partners: 2

Lao PDR (1994)

Advisers: 3

Partners: 2

Thailand (2005)

Senior counsel: 1

Partners: 4

Advisers: 10

Advisers: 28

Indonesia (2011)

Vietnam (2006)

Mataram Partners
Partner: 1

Partners: 4
Advisers: 17

Advisers: 10
Myanmar (1995)
Partners: 2
Senior Counsel: 1
Advisers: 20

In Cambodia, DFDL works in commercial cooperation with Sarin & Associates. In Indonesia, DFDL works in association with Mataram Partners.
DFDL does not operate or practice law in the Philippines. DFDL collaborates with Philippine law firm, Ocampo & Suralvo Law Offices, which provides local legal advice.
3

What Makes DFDL Unique?

Pioneers in frontier markets of S.E. Asia

1994

1995

1996

2005

2010

2011

2015

Lao PDR

Cambodia*

Vietnam

Thailand

Singapore

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Philippines*

Myanmar

Indonesia*

"Very

international - but there on the ground! Chambers Asia 2016

In Cambodia, DFDL works in commercial cooperation with Sarin & Associates. In Indonesia, DFDL works in association with Mataram Partners.
DFDL does not operate or practice law in the Philippines. DFDL collaborates with Philippine law firm, Ocampo & Suralvo Law Offices, which provides local legal advice.

Presenters

Audray Souche
Partner;
Deputy Head of Energy, Mining and
Infrastructure
audray.souche@dfdl.com

Phattharaporn Phetphong
Legal Adviser
phattharaporn@dfdl.com@dfdl.com

Thailand Energy : General Overview

Energy Net Generation by Fuel Type

Energy Policy and Planning Office

Ministry of Energy

Energy Consumption
2014 Electricity Consumption

Other 4%
Business 18%
Industrial
44%
Small General Service 11%

Residential
23%

Key Issues

2/3 Natural Gas but reserves decreasing ; imported supply mostly from
Myanmar (single supplier) and Myanmar now needs this gas.
Goals

Strengthen natural gas infrastructure gas pipelines, LNG import

terminals
Diversify to Coal (imported)
Diversify to renewables (domestic and imported)
Increase electricity imports (mainly Laos hydropower) x 13%
Energy Efficiency

Three Pillars: Security, Affordability, Sustainability (efficiency)

Thailand Energy : Institutional Framework

Thailand: Institutional Structure

Energy
Regulatory
Commission

Ministry of
Energy

Office of the Minister

Department of
Mineral Fuels

Department of
Energy
Resources
Elec. Generating
Authority of
Thailand (EGAT)

Energy Fund
Administration
Institute
Office of Permanent
Secretary

Dept. of Alt.
Energy
Development
and Efficiency
PTT Public Co. Ltd

Energy Planning
and Policy Office

Thailand: Roles and Functions

National Energy Policy Council (NEPC): policy making, headed by PM
Ministry of Energy (MOE): Policy and Governance of sector
EPPO: research, recommends and develops policy, PDP
Office of Permanent Secretary (OPS): coordination
Department of Alternative Energy Development and Efficiency (DEDE)

Ministry of Finance (MOF): approves all public electricity related projects

Energy Regulatory Commission (ERC): sector regulator since 2008

Works within policy framework of NEPC

Issues operating licenses
Regulations for power purchases; approve electricity tariff
Not fully independent as MOE sets budget and operating plan and nominates
commissioners

Ministry of Interior: regulate SOEs

Thailand: Role of State-Owned Enterprises

Energy
State Owned Enterprises
45%
Subsidiary

Generation

SPP
(7%)

EGAT
(47%)

IPP
(38%)

Import
(5%)

VSPP
(3%)

25.41%

Transmission

%
Ownership

EGAT

Associated
Company

Electricity Generation
Plc.

Responsible for generation and transmission

99.99%
Subsidiary

Distribution

Ratchaburi
Electricity
Generating Holding
Plc.

PEA

MEA

Distribution and
retail service
the rest of
country

Distribution and
retail service
the rest of
country

EGAT International Co.,

Ltd

Direct
Customers

35%
Joint Venture

District Cooling System

and Power Plant Co., Ltd

User

45%
Subsidiary

EGAT: Electricity Generation Authority of Thailand

MEA: Metropolitan Electricity Authority
PEA: Provincial Electricity Authority

EGAT Diamond Service

Co., Ltd

Energy Master Plans

Power Development Plan

(PDP) 2015-2036

Alternative
Energy
Development
Plan (AEDP)

Energy
Efficiency
Development
Plan (EEDP)

Oil Plan

Gas Plan

Thailand Renewable Energy: History, Targets and

Tools

Renewable Energy Policies A Chronological

Perspective

2006

2009

2011

2013

Introduction of
Incentives/
Revision of SPP
program

Renewable
Energy
Development
Plan (REDP)

Alternative
Energy
Development
Plan (AEDP)

200 MW
BOI Policy
Rooftop Solar Revision
Program
Shift from
Adder to FIT

Pre 2006

Strategic Plan for Renewable

Energy Development: 8%
Target (2004)

SPP and VSPP Programs

introduced in 1994

Energy Conservation Program

(ENCON) 1992

2014

2015
Power
Development
Plan (PDP)
2015-2036
Alternative
Energy
Development
Plan (AEDP)
2015-2036

16

PDP/AEDP Targets

RE Type

2014 Capacity* (MW)

2036 Target (MW)

Solar

1,287

6,000

Wind

224

3,000

Small Hydro

142

376

Biogas Energy Plant

297

600

2,451

5,570

65

501

Biomass
MSW

*MOE AEDP 2015 Presentation

17

RE Support Toolset

18

Focus on Thai Solar

Thailand Geographical Advantage for Solar

Thailand: 42,356 MW potential

Average sunlight 6 hours/day year-round

Irradiance of 1,700-2,100 kWh/m2/year

Vs.
Australia: 2,100-2,300 kWh/m2/year
EU/UK: 900-1,200 kWh/m2/year

Regional Comparison Solar

Capacity

Target

FIT

Thailand

1,244 MW (2015)

6,000 MW (2036)

THB 5.66 ($0.16)

Vietnam

4.5 MW (2014)

12,000 MW (2030)

under consideration

Philippines

132 MW (2015)

500 MW (FIT cap)

PHP 9.68 ($0.21)

Indonesia

43 MW (2014)

5,000 MW (2025)

$0.25 (bid ceiling)

India

5,167 MW (2015)

100,000 MW (2020)

reverse bidding

China

43,062 MW (2015)

150,000 MW (2020)

RMB 1.15 ($0.18)

Solar Farm vs. Rooftop Progress

Type Already In
Total
COD
contract
Solar
farm
PV
rooftop
Total

1,504

1,100

Installation
capacity
Building Type

2604

House
78

1,582

89

1,189

167

Rooftop
Solar PV

2,771

Government
Agency and
Agricultural
Cooperative

Unit: MW installed capacity

Source: Ministry of Energy: Sept. 2015

FiT/ Kwh
(USD)

10 Kw

0.20

Small business

10 Kw 250 kw

0.19

Med-large
business

250 Kw 1000 Kw

0.17

5 MW

0.16

Adder Tariff Program - Timeline

2007

Adder tariff introduced for solar <90MW (THB 8/$0.23)

2007

Energy Industry Act establishes ERC

Aug 2009

Bid bond introduced to deter PPA speculators

Apr 2010

Solar PPA applications suspended by EGAT and PEA

Jun 2010

Managing Committee appt. to oversee PPA approvals +

stricter criteria: land, loan, technology, permits

2011

AEDP targets 25% RE by 2021 (incl. 3000MW solar)

Dec 2014

178 adder tariff applications (1,013 MW) approved

(submitted prior to suspension)

Mar 2015

Deadline for application to convert adder tariff to 20 year FIT

2015

ERC orders EGAT, MEA, PEA to cease offering PPAs to IPPs <10MW

Adder Tariff Program - Effects

Overly generous and simple qualification

= oversubscription and PPA speculators
Govt. burdened with overpriced power and many PPAs never
developed
Stricter criteria = deterred speculators, but also decreased
transparency for PPA awards
Abrupt policy changes = increased uncertainty for investors
But.. successfully added substantial RE capacity over short period

Focus on Governmental Agencies and Agricultural

Co-op Solar Program

GAAC Program Timeline

Jun 2015

PDP & AEDP released, targets 3,861MW (+2,250MW) solar by 2021;

6,000MW (+4,400MW) by 2036

Nov 2015

Applications accepted for ground-based solar projects <5MW lucky

draw up to 800MW total @ THB 5.66 ($0.16) FIT / 25 yr PPA

Apr 2016

281MW awarded to 67 projects (Phase 1):

Aug 2016?
30 Dec 2016
Jan 2017?
30 Jun 2018

319MW to be awarded (Phase 1b)

Sched. Commercial Operation Date (SCOD) deadline for Phase 1
200MW to be awarded (Phase 2)
Sched. Commercial Operation Date (SCOD) deadline for Phase 2

Key players
Government Agencies (GA):

Energy Regulatory Commission

State Agency
University under Government Control
Government Organizations (excluding
Public Organizations and State
Enterprises)
Local Administrative Organizations

Metropolitan Electricity Authority

Agricultural Cooperatives (AC):

Agricultural Cooperative
Land Settlement Cooperative
Fisheries Cooperative
Sponsors:
Limited Company
Public Limited Company

Provincial Electricity Authority

Satahip Electric Welfare

Relationships Between Key Players

GA
Or

Project
Owner

AC

Project Development
Agreement (PDA)
MEA

Limited
Company

Public
Company

Power Purchase
Agreement (PPA)

Off
Taker

Satthip

Sponsor
Required Permits

PEA

Related
Authority

ERC

Other

Phase 1: Capacity Targets

North

5 MW
West

159 MW
Bangkok

200 MW
Total

600 MW

Central

138 MW
East

87 MW
Sattahip

11 MW

Phase 1: Power Purchase Target by Region

Offtaker

Phase 1: Target

Phase 1: Awarded

Phase 1: Remaining

1. MEA

200

21.65

178.35

2. PEA

389

259.67

129.33

- Central

138

108.20
( 25 projects)

29.8

- West

159

76
(18 projects)

83

- East

87

70.47
(17 projects)

16.53

- North

5
(1 projects)

11

11

600

281.32

318.68

3. Sattahip Electric
Welfare
Total (MW)

Project Sponsor Qualification

Limited Company or Public Limited Company Registered in
Thailand
Objective of generating and selling electricity
Minimum Investment
- Registered capital of THB 2 million per 1 MW sponsored
- At least 25 % of registered capital must have been injected
Readiness criteria:
1) Technology capacity
2) Financial potential
3) Experience
4) Not be on Govt. supplier blacklist
May apply for multiple projects provided aggregate <50 MW.

Process for Power Purchase by drawing lots or lucky draw

Points
connecting
power
network system
open for
inspection
File application for
sale of power
Submit application supporting
documents
Announcement of list of
projects that have passed
qualification screening
Final selection by draw and
announcement of results
Signing of PPA with off
taker within 120 days after
receipt of official letter
from ERC

Applicable Licences
License and Permit

Contact Agency

Estimated Approval Period

Building Construction Permit

Tumbol Administration Organization

(TAO); Provincial Public Works Office

2 Months

Factory Operation License

Ministry of Industry, Dept. of

Industrial Works

2 Months

Power Generation Licence

Energy Regulation Commission (ERC)

Controlled Energy Generation Energy Regulation Commission (ERC)

2-3 Months
2 Months

Machinery Registration

Ministry of Industry, Dept. of

Industrial Works

2 Months

Tax Privileges

Board of Investment (BOI)

2 Months

33

PPA and Licensing Process

Pre-PPA Execution

Letter of award stating that a PPA will be

granted to a specific investor and project
Application for Construction Permit
Factory Operation License (if required)

PPA Execution

Simultaneous Actions
for Greater Efficiency

Signing of PPA
Power Generation License: ERC

Post-PPA Execution

Commencement of Construction
Tax Privileges: BOI
Machinery Registration: Department of
Industrial Works.

SCOD

Simultaneous Actions
for Greater Efficiency

Start of Commercial Operation Date

34

Key Conditions of the Power Development

Agreements (PDAs)
Agricultural Co-op (AC) Obligations:
Propose the project to ERC
Provide Land
Sponsor Obligations:

Develop/Obtain all Required Permits.

Financial Compensation to AC:

- Land Rental Fees
- Annual Benefit to AC for 25 years
- Provide Guarantee/Security to AC (repayable at expiration of PPA)
- Contribution to Electricity Fund
- Property tax

Assignment of Rights and Change of Control

1. Assignment of Rights under PPA/Application
Rights and obligations under an application to sell electricity or PPA cannot be
assigned unless the authority responsible for sale of electricity gives consent
and ERC approves it.
2. Shareholding Lock-Up Period
The Sponsor must not change its shareholding structure where it would
cause:
(i) the number of original shareholders to be less than a half of the original
shareholders as of the PPA execution date; and
(ii) the number of shares held by the original shareholders to be less than 51
% of the total shares during the first 3 years of COD

BOI Incentives Available to Relevant Projects

Developers of solar power plants can apply for BOI promotion under
category 7.1.1.2: Production of electricity or electricity and steam from
renewable energy.
Group A2 incentives available as follows:
Exemption of import duty on machinery (Sections 28 and 29)
8 year exemption of corporate income tax on the net profit and
dividends derived from the promoted activity which capped at the
amount of actual investment (Section 31)
Other non-tax incentives

Where to next for the Thai solar sector?

1. Adder Program
Not clear if outstanding applications (rolled over to 20-year FIT) will
ever be awarded
2. Rooftop Program
167MW awarded (of 200MW target)
Private solar rooftop development: game changer?
3.

GAAC Solar Farm Program

Phase 1 SCOD unrealistic given time required to obtain permits
Not confirmed when Phase 1b 319MW (Aug 2016?) and
Phase 2 200MW (Jan 2017?) will actually be awarded.
Approx. 1,200MW additional still required for 2021 solar target, assuming
Phase 1 & 2 and rooftop targets are all met.
38

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