Bualuang Securities (BLS) noted in its report regarding Thailand’s utilities sector, mentioning a statement recently made by former Prime Minister Thaksin Shinawatra which suggested that Thailand’s electricity prices could potentially be reduced to THB 2.50 per kilowatt-hour (kWh). However, this target poses substantial challenges given the current economic and political landscape.
Cost Breakdown and Implications
Presently, Thailand’s electricity rate stands at THB 4.15 per kWh. The cost of electricity production from gas fluctuates between THB 2.50 and THB 4 per kWh, driven by the varying prices of LNG and oil. Should the expenditure on transmission systems and infrastructure decrease, it could lead to reduced government tax revenues and force EGAT and the Provincial Electricity Authority (PEA) to either decrease or delay crucial investments.
Achieving the THB 2.50/kWh Target with Fossil Fuels
BLS expresses that reaching the THB 2.50 per kWh goal while relying heavily on fossil fuels is notably challenging. Coal-fired power plants, though capable of producing cheaper electricity (THB 2-3 per kWh), face political and environmental constraints preventing their expansion.
Regarding natural gas, allocating cheaper gas from the Gulf of Thailand—identified as the least costly among PTT’s gas supply (with Myanmar’s gas volumes declining and LNG prices volatile)—into electricity generation might reduce rates by THB 0.30-0.50 per kWh. However, diverting the entire Gulf allocation to power production can adversely affect other industries and spark political and economic debate.
Solar Energy as the Primary Source: Opportunities and Challenges
Solar energy, currently the cheapest source of energy in Thailand (THB 2.10-2.20 per kWh), presents an intermittent power source, with peak electricity demand often occurring at night when solar production ceases. A shift to 100% solar usage necessitates substantial battery storage capacity (still relatively expensive).
The analyst anticipates approximately 223 GW of installed solar panels and a battery system of 1-2 TWh may be required. The cost of batteries is expected to decrease over the coming years, but extensive land would be necessary for solar farms and infrastructure enhancement, delaying feasibility until post-2035.
Attracting Data Centers: Beyond Just Low Electricity Costs
Inexpensive electricity alone may not exploit Thailand’s potential in attracting high-value data centers. Meanwhile, BLS foresees the rise of AI and digital economy adoption will lure advanced data center players, who prioritize connectivity and technology integration over mere low electricity costs.
Promoting Thailand as an advanced digital hub through a focused push on high-value tech infrastructure and AI adoption could help attract top-tier data center investment, thus fostering sustainable economic growth opportunities.
At the beginning of this year, Thai power plant stocks experienced significant fluctuations following the remark from former Prime Minister Thaksin Shinawatra regarding proposed electricity price targets, set at THB 3.70 per kWh.
The analyst suggested that if the sector does not exhibit a similar reaction this time, it could imply that the negative sentiment has already been factored into the market.
Following these developments, Bualuang Securities gives an ‘Overweight’ rating for Thailand’s utilities sector.
