As the prices of fossil fuels trend higher amid dwindling supplies, attention is now turning to alternative energy resources, particularly renewable energy sources. Currently, one of the most interesting renewable energy resources is solar energy as seen in the apparent growth of the solar power business over recent years.
KResearch is of the view that there is huge potential for this business here, thanks to many supporting factors, however, prospective investors should not overlook the difficulties too. Among the supporting factors are continued growth in the industrial sector, few competitors, government incentives, persistent increases in fossil fuels, e.g., for natural gas, fuel oil and coal that are driving up power generation costs, plus the government's policy of raising the share of renewable energy resources used in power generation, due to a delay in the planned construction of a nuclear power plant in Thailand following the recent nuclear plant disaster in Japan.
Investors interested in solar power business will need to brace for a number of obstacles. One of those impediments is the fact that there are relatively few power distribution organizations in the market, enabling them to dictate prices, terms and the loadings they will place on the grid. In addition, construction costs for solar power plants and the generation costs thereof are relatively expensive, thus it may take quite a long time (about 8-10 years) to break even. Thus, financial stability will be a prerequisite for prospective investors. Moreover, competition in the solar power market here will likely intensify, as domestic investors vie for joint ventures with foreign partners to obtain the technological know-how to gain an advantage over rivals.
Recently, private power producers signed an agreement to sell 2,000 MW of solar-generated electricity to the Provincial Electricity Authority (PEA), Metropolitan Electricity Authority (MEA) and Electricity Generating Authority of Thailand (EGAT). To date, about 55 MW have been supplied to the power grid. If more enters the system in the near future, it is expected that the total volume of solar electricity in the system will reach perhaps 755-1,000 MW within 2012, which would be substantially higher than the target set in the 15-year Energy Conservation Plan specifying 500 MW by 2022. In addition, if the above agencies can purchase all of solar electricity as mentioned in the agreement, that volume would be sufficient to compensate for power that would be have been generated by two nuclear power plants, each intended to have a generating capacity of 1,000 MW per the 2010 Power Development Plan (PDP).