FUTURE PERSPECTIVE
21 January 2022
Achieving Net Zero in the Thai Power Industry: Rationale and Guidelines
Power generation is one of the main sources of greenhouse gas (GHG) emissions, accounting for approximately 30% of total global emissions ...
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Power generation is one of the main sources of greenhouse gas (GHG) emissions, accounting for approximately 30% of total global emissions. The power industry’s transition towards cleaner energy use is crucial to achieving net-zero – as it can mitigate the impacts of climate change through the adoption of cleaner generation capacity and clean technologies, which are declining in cost.
Investments in fossil fuel power plants are no longer deemed to be low-risk due to greater transitional risks from policy changes and stricter environmental and GHG emission regulations. Fossil fuel power plants risk becoming stranded assets as transitional risks intensify.
The Thai power industry cannot avoid the energy transition, given the pressures to meet the national target of net-zero by 2065 as announced at COP26. Likewise, the industry faces pressures from the private sector, which must achieve their own net-zero targets at the organizational level, and from stricter environmental policies imposed by Thailand’s trading partners.
Within the next decade, Thailand will need to dramatically increase the use of electricity from clean energy to maintain the country’s competitiveness. As trading partners adopt carbon border tax/adjustment mechanisms, which will add the impact of GHG emissions into the cost of goods, Thai businesses will benefit from having higher proportions of cleaner electricity as they would face lower carbon adjustments in trading markets.
Thailand has a highly reliable power generation capacity, which allows it to focus more on policy adjustments and investments in the energy transition, such as new renewable generation capacity and smart grids. With higher system reliability, it would be possible to revise energy policies to remove inflexible long-term agreements, as well as speed up policy revisions on 1) electricity purchases to reduce the grid emission factor (GHG emissions associated with the production of electricity), 2) creating a transparent market mechanism to pass on costs, and 3) promoting efficient electricity consumption and clean electricity.
Optimal policy designs, market mechanisms, and widespread cleantech adoption are the key driving forces that will enable the power industry and Thailand to meet its net-zero ambition, as announced to the global community. This transition will not only reduce harmful environmental impacts but strengthen Thailand’s competitiveness as well.
