Thailand’s ambitious commitment to achieve carbon neutrality by 2050 and net-zero greenhouse gas emissions by 2065 underscores the nation’s urgent need to expand its renewable energy (RE) capacity. Rooftop solar PV systems represent a promising solution to diversify Thailand’s energy mix and empower consumers to participate in the energy transition. Despite its vast solar potential and declining technology costs, the adoption of rooftop solar remains significantly underutilized due to various barriers. At CASE, we’ve carefully analysed the challenges holding back rooftop solar in Thailand and crafted a strategic roadmap to help unlock its full potential.
The Untapped Potential of Rooftop Solar
Thailand boasts a technical solar potential exceeding 300 GW, yet less than 2% of its land area is needed to achieve this. By 2037, the market potential for rooftop solar PV energy is projected at 9,000 MW. However, as of 2022, only 1,800 MW of rooftop solar PV capacity has been installed, representing a small fraction of this potential. With electricity costs reaching grid parity and technology advancements making solar PV more efficient and affordable, the opportunity to harness rooftop solar as a key renewable energy source has never been greater.
Key Barriers to Investment
Our research has uncovered eight key risks that are slowing down investments in rooftop solar PV systems.
- Administrative and Permitting Risks: A complex and time-consuming permitting process involving multiple agencies results in high costs and inefficiencies. For installations exceeding 1 MW, additional factory operation permits are required, further complicating the process.
- Power Market Risks: Inconsistent policy frameworks, low buyback rates under net-billing schemes, and a lack of long-term incentives hinder investor confidence and consumer adoption. Policies allowing only self-consumption and prohibiting grid exports also limit financial viability for larger systems.
- Financial Risks: Restricted access to financing, unattractive loan terms, and lender aversion to project-specific risks discourage investments. Fluctuations in exchange rates exacerbate these financial challenges, as most solar equipment is imported.
- Developer Risks: A lack of experienced and certified developers increases uncertainties. Small developers often face challenges related to financial management and capacity, while third-party ownership contracts introduce additional risks, such as discrepancies between projected and actual energy consumption.
- Hardware Risks: High costs of lithium-ion batteries and limited capacity for testing solar panels pose challenges for ensuring the quality and affordability of installations.
- Grid and Transmission Risks: Limited grid hosting capacity and a lack of transparency regarding grid codes and connection requirements lead to additional costs for consumers.
- Labour Risks: Insufficient certified solar PV installers and a lack of specialized engineering expertise hinder the deployment of high-quality systems.
- Social Perception Risks: Misconceptions about rooftop solar systems, such as fears of lightning strikes or unrealistic expectations about energy independence, deter adoption, particularly in the residential sector.
Quantifying the Impacts of Risks
To help you better understand the financial impact of these risks, we’ve used the UNDP’s Derisking Renewable Energy Investment (DREI) framework to break it down. The analysis reveals that administrative and permitting risks, power market risks, and developer risks account for 57% of the risk premiums that elevate the cost of equity and debt. Mitigating these risks could lower the cost of equity by 2.4 percentage points and the cost of debt by 1.7 percentage points, making rooftop solar investments more attractive.
Recommendations to Overcome Barriers
To address these challenges, we outline several actionable recommendations:
- Streamlining Administrative Processes:
- Develop a centralized one-stop-shop platform to simplify permitting, streamline equipment registration, and provide online application processes.
- Use this platform to consolidate information on equipment standards, financial products, policy incentives, and regulations, reducing time and costs for stakeholders.
- Enhancing Policy and Financial Support:
- Establish long-term targets and steady support programs for rooftop solar PV, covering residential, commercial, and industrial consumers.
- Introduce risk-sharing mechanisms like loan guarantees, performance-based incentives, and partial risk guarantees to improve access to finance.
- Encourage the development of insurance solutions to cover risks associated with energy production interruptions.
- Aligning with Grid Planning:
- Integrate rooftop solar targets with grid development plans to enhance demand forecasting and grid hosting capacity.
- Promote the use of energy storage systems (ESS) to enable demand response and reduce peak demand.
- Building Capacity and Raising Awareness:
- Expand training and certification programs for solar PV installers to improve the quality and safety of installations.
- Conduct public awareness campaigns to address misconceptions and highlight the economic and environmental benefits of rooftop solar.
- Fostering Innovative Business Models:
- Support peer-to-peer (P2P) energy trading and direct power purchase agreements (PPAs) to encourage community-driven energy sharing and long-term price stability.
- Explore vehicle-to-grid (V2G) technology to use electric vehicles as energy storage devices, creating new revenue streams and enhancing grid resilience.
- Improving Developer Transparency:
- Establish review systems for developers and installers to enhance transparency and build investor confidence.
- Implement policies to manage solar waste and promote second-life markets for used panels and batteries.
We believe the success of these initiatives depends on all of us—government agencies, utilities, financial institutions, private sector stakeholders, and individuals—working together. By fostering partnerships and aligning goals, Thailand can create a conducive environment for rooftop solar PV investments, ensuring a just and sustainable energy transition.
Unlocking rooftop solar PV in Thailand: Facilitating policy and financial de-risking instruments
Rooftop solar PV systems offer a transformative opportunity for Thailand to achieve its renewable energy targets, reduce dependence on fossil fuels, and empower consumers to participate in the energy transition. By addressing key barriers and implementing the recommendations outlined in the CASE report, Thailand can unlock the full potential of rooftop solar, paving the way for a cleaner, greener future