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B A N G L A D E S H | C A M B O D I A | I N D O N E S I A | L A O P . D . R . | M Y A N M A R | S I N G A P O R E | T H A I L A N D | V I E T N A M
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The Thai Solar Draw: Update and Opportunities for Power Developers
Breakfast Briefing – Dusit Thani Hotel, Bangkok
29 June 2016
Introduction
3
Bangladesh (2011)
Country Partner: 1
Advisers: 11
Cambodia* (1995)
Partners: 5
Advisers: 42
Lao PDR (1994)
Partners: 2
Senior counsel: 1
Advisers: 10
Indonesia‡ (2011)
Mataram Partners
Partner: 1
Advisers: 10
Myanmar (1995)
Partners: 2
Senior Counsel: 1
Advisers: 20
Philippines‡ (2015) Ocampo & Suralvo Law Office
Partners: 3
Singapore (2010)
Partners: 2
Advisers: 3
Thailand (2005)
Partners: 4
Advisers: 28
Vietnam (2006)
Partners: 4
Advisers: 17
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.
Regional Reach: ASEAN and South Asia
Pioneers in frontier markets of S.E. Asia
What Makes DFDL Unique?
2010
Singapore
2011
Bangladesh
Indonesia*
1994
Lao PDR
1996
Vietnam
2005
Thailand
1995
Cambodia*
Myanmar
2015
Philippines*
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.
"Very international - but there on the ground!“ - Chambers Asia 2016
Presenters
Audray Souche Partner;
Deputy Head of Energy, Mining and Infrastructure
Phattharaporn Phetphong Legal Adviser
[email protected]@dfdl.com
Thailand Energy : General Overview
Energy Net Generation by Fuel Type
Energy Policy and Planning Office Ministry of Energy
Energy Consumption
Industrial 44%
Residential 23%
Small General Service 11%
Business 18%
Other 4%
2014 Electricity Consumption
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)
Key Issues
Thailand Energy : Institutional Framework
Thailand: Institutional Structure
Ministry of Energy
Office of the Minister Office of Permanent Secretary
Energy Fund Administration
Institute
Energy Regulatory
Commission
Department of Mineral Fuels
Department of Energy
Resources
Dept. of Alt. Energy
Development and Efficiency
Energy Planning and Policy Office
Elec. Generating Authority of
Thailand (EGAT) PTT Public Co. Ltd
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: Roles and Functions
Energy State Owned Enterprises
Generation
Distribution
Transmission EGAT Responsible for generation and transmission
MEA Distribution and
retail service the rest of
country
PEA Distribution and
retail service the rest of
country
SPP (7%)
EGAT (47%)
IPP (38%)
Import (5%)
VSPP (3%)
Direct Customers
25.41% Associated Company
45% Subsidiary
99.99% Subsidiary
45% Subsidiary
35% Joint Venture
Ratchaburi Electricity Generating Holding Plc.
Electricity Generation Plc.
EGAT International Co., Ltd
District Cooling System and Power Plant Co., Ltd
EGAT Diamond Service Co., Ltd
User
EGAT: Electricity Generation Authority of Thailand MEA: Metropolitan Electricity Authority PEA: Provincial Electricity Authority
% Ownership
Thailand: Role of State-Owned Enterprises
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
16
2006 2009 2011 2013 2014
Introduction of Incentives/ Revision of SPP program
Renewable Energy Development Plan (REDP)
Alternative Energy Development Plan (AEDP)
200 MW Rooftop Solar Program
BOI Policy Revision
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
2015
Power Development Plan (PDP) 2015-2036
Alternative Energy Development Plan (AEDP) 2015-2036
PDP/AEDP Targets
17
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 Biomass 2,451 5,570 MSW 65 501
*MOE AEDP 2015 Presentation
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
Unit: MW installed capacity Source: Ministry of Energy: Sept. 2015
Type Already COD
In contract
Total
Solar farm
1,504 1,100 2604
PV roof-top
78 89 167
Total 1,582 1,189 2,771
Installation capacity
FiT/ Kwh (USD)
Building Type
Rooftop Solar PV
House ≤10 Kw 0.20
Small business 10 Kw ≥ 250 kw 0.19
Med-large business
250 Kw ≥ 1000 Kw 0.17
Government Agency and Agricultural Cooperative
≤ 5 MW 0.16
Adder Tariff Program - Timeline
Adder tariff introduced for solar <90MW (THB 8/$0.23)
Energy Industry Act establishes ERC
Bid bond introduced to deter PPA speculators
Solar PPA applications suspended by EGAT and PEA
Managing Committee appt. to oversee PPA approvals + stricter criteria: land, loan, technology, permits
AEDP targets 25% RE by 2021 (incl. 3000MW solar)
Deadline for application to convert adder tariff to 20 year FIT
2007
178 adder tariff applications (1,013 MW) approved (submitted prior to suspension)
ERC orders EGAT, MEA, PEA to cease offering PPAs to IPPs <10MW
Apr 2010
Jun 2010
2011
Dec 2014
Mar 2015
2015
Aug 2009
2007
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
PDP & AEDP released, targets 3,861MW (+2,250MW) solar by 2021; 6,000MW (+4,400MW) by 2036
281MW awarded to 67 projects (Phase 1):
Applications accepted for ground-based solar projects <5MW ‘lucky draw’ up to 800MW total @ THB 5.66 ($0.16) FIT / 25 yr PPA
319MW to be awarded (Phase 1b)
Jun 2015
Nov 2015
Apr 2016
Aug 2016?
200MW to be awarded (Phase 2) Jan 2017?
Sched. Commercial Operation Date (SCOD) deadline for Phase 1 30 Dec 2016
Sched. Commercial Operation Date (SCOD) deadline for Phase 2 30 Jun 2018
Government Agencies (GA): State Agency University under Government Control Government Organizations (excluding
Public Organizations and State Enterprises)
Local Administrative Organizations Agricultural Cooperatives (AC): Agricultural Cooperative Land Settlement Cooperative Fisheries Cooperative Sponsors:
Limited Company Public Limited Company
Key players
Energy Regulatory Commission Metropolitan Electricity Authority Provincial Electricity Authority Satahip Electric Welfare
Relationships Between Key Players
Project Owner
Sponsor
Off Taker
Project Development Agreement (PDA)
Power Purchase Agreement (PPA)
Required Permits Related Authority
GA
AC
MEA
PEA
Satthip
ERC
Other
Limited Company
Public Company
Or
Phase 1: Capacity Targets
North
5 MW
West
159 MW
Central
138 MW
East
87 MW
Sattahip
11 MW
Bangkok
200 MW
Total
600 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 5 (1 projects)
-
3. Sattahip Electric Welfare
11 - 11
Total (MW) 600 281.32 318.68
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.
Project Sponsor Qualification
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
Final selection by draw and announcement of results
Announcement of list of projects that have passed qualification screening
Signing of PPA with off taker within 120 days after receipt of official letter from ERC
Applicable Licences
33
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) 2-3 Months
Controlled Energy Generation Energy Regulation Commission (ERC) 2 Months
Machinery Registration Ministry of Industry, Dept. of Industrial Works 2 Months
Tax Privileges Board of Investment (BOI) 2 Months
PPA and Licensing Process
Letter of award stating that a PPA will be granted to a specific investor and project
Pre-PPA Execution
Application for Construction Permit
Power Generation License: ERC
PPA Execution
Commencement of Construction Post-PPA Execution
Machinery Registration: Department of Industrial Works.
Tax Privileges: BOI
Signing of PPA
SCOD Start of Commercial Operation Date
Factory Operation License (if required)
Simultaneous Actions for Greater Efficiency
Simultaneous Actions for Greater Efficiency
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
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
Assignment of Rights and Change of Control
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
BOI Incentives Available to Relevant Projects
Where to next for the Thai solar sector?
38
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.
B A N G L A D E S H | C A M B O D I A | I N D O N E S I A | L A O P . D . R . | M Y A N M A R | S I N G A P O R E | T H A I L A N D | V I E T N A M
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