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8 Jul 2020

Econ Digest

Household solar rooftop project …plans to raise power feed-in tariff

Raise power feed-in tariff to reduce the payback period by about one year

          The solar power project for household rooftops is a project to purchase solar power generated by household rooftop solar panels. Excess electricity will be purchased by Metropolitan Electricity Authority (MEA) and Provincial Electricity Authority (PEA) at a price of THB1.68 per kilowatt-hour (unit) for ten years, with a purchase target of 100 MW. Although  many households applied for this program, only a small percentage passed the criteria to reach the stage of signing an electricity trading contract; the main issues causing criteria to not be met were that the transmission line was not supported or that the location of the applying building was too far away from the transmission line.


Raise power feed-in tariff, attract more people to participate

           At present, the Ministry of Energy of Thailand is considering rolling out incentive measures to promote the household solar rooftop scheme and to encourage people to participate in the production of clean energy by installing solar rooftop systems. The initial plan is to raise power feed-in tariff from THB1.68 per kilowatt-hour (unit) for 10-year contracts (when the plan was launched in 2019) to THB2.20 per kilowatt-hour (unit) to attract the installation of household rooftop solar panels, but so far most households have not installed solar panels because of the high cost.

          However, after the application deadline at the end of 2020, the number of applicants and those of qualified candidates were not many, equaling around 3 megawatts (MW) of power generation compared to the target of 100 megawatts (MW), so there is a policy to raise the power feed-in tariff for this year's project. This guideline should increase the initiative's attractiveness to a certain extent, because the rate is higher than the power generation cost from rooftop solar panels, i.e. about THB1.85 per unit, which can shorten the payback period by about one year and should create more business opportunities for the rooftop solar panel industry in the future.


Household rooftop solar panel market

         In addition, promoting rooftop solar panels is also conducive to supporting the growth of related businesses such as Energy Storage Systems (ESS), and is in line with the global trend of clean energy technology development, making various equipment increasingly cheaper; meanwhile, the number of self-consumption electricity producers is also increasing, especially within the household rooftop solar panel market, which has the following two groups of potential markets:

          New residential projects with rooftop solar panel installation: A large-scale installation of rooftop solar panels on hundreds of residential units will help reduce costs, as the installation costs are often included in the construction cost. Consumers are able to more easily qualify for a home mortgage and at a lower interest rate than a separate rooftop solar panel loan, prompting consumers to be interested in buying such type of house to save on electricity bills, even though they may not be at home during the day. At present, the total electric capacity of this market is about 2 MW, and the average growth rate in the past 5 years has been about 20%. In addition, in 2020 housing developers in this market have begun to expand their customer base, from single-detached houses priced at more than THB4 million to townhouses priced at more than THB2 million, making the market more broad-based and giving the opportunity for more growth in the future.

        However, the installation of solar panels on new residential project roofs is usually operated by the real estate developers' subsidiaries or jointly with business partners, resulting in limited opportunities for other operators in this market.


General housing/existing residential project without rooftop solar panel installation: In particular, resident households in areas with an unstable electricity supply and residents who frequently use electricity during the day, such as those who use their houses as offices, need to install rooftop solar panels to reduce electricity bills during the day.

         Currently, the total solar electric capacity of general housing/existing residential projects is about 4.9 MW, and it may continue to increase. However, the installation quality of the above-mentioned rooftop solar panels is usually inconsistent, or does not meet the household rooftop solar panel scheme equipment standards stipulated for safe access to the Electricity Authority's system, resulting in some residential households failing to pass the above standards. The above issues need to be better publicized to encourage households and rooftop solar panel operators to install equipment that meets the required standards.

            KResearch believes that general houses/existing residential projects that have not yet installed rooftop solar panels have a large market base, and should be the segment of the rooftop solar panel installation with the most potential for accelerated growth in the future if households can receive sufficient incentives. However, when considering the issue of incentives, given the limitation that the power feed-in tariff cannot be raised so high that households would install rooftop solar panels for the sole purpose of selling electricity, another option is to extend the power purchase period from 10 to 25 years, which equates to the lifetime of solar panels, and is equivalent to the power purchased period of the previous private sector solar project. Using the above two methods together would shorten the investment payback period to 7.7 years, compared to about 10.1 years only using the adjusted power purchased rate, which will help attract more households to invest in solar panels.

             In the long run, in order to promote the use of rooftop solar panels more widely, the government may need to amend laws and regulations related to electricity trading to open up opportunities for the private sector to sell electricity to households. This would create private enterprises that invest in rooftop solar panels and sell electricity to households at affordable prices, which would reduce the burden of households investing in solar panels, similar to the current electricity trading business between private sectors. If the above investment is made by the private sector on a large scale, it is expected to save costs. At the same time, a battery-equipped system can be designed to store electricity for night use. 

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