2011 International Conference on Alternative Energy in Developing Countries and Emerging Economies
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Abstract--
This paper seeks to discover the roles of
financial institutions in the development of the
renewable energy in Thailand. We begin with a review
on Thailand’s energy situation and policies related to
the development of renewable energy industry. Then we
provide the overview of constituents and mechanisms of
public and private financing in Thailand. Employing
research on secondary resources and interviewing
financial professionals and government officers, we find
that the financial institutions are not the key players in
the development of Thailand’s renewable energy
industry. Rather, the public sector, through proactive
policies, has had a crucial role in such development. We
also find that certain barriers weaken attractiveness of
return on investment by the financial institutions;
namely, uncertainties and unpredictability of
Thailand’s energy policies, unattractive public finance
mechanisms, and the lack of transparency of public-
private partnership. Nonetheless, we see improving
positive trends and investment opportunities in the near
future as more aggressive policies and incentive
programs have been introduced by both public and
private sectors for the last few years.
I . I
N T R O D U C T I O N
Population growth, economic growth, and
urbanization undeniably have affected and will
continue to elevate energy consumption and
environmental problems globally. Further, such
factors can create climate change-related issues such
as reduced food security, poverty, forced migration,
and negative impacts on natural habitats and
ecosystems which will ultimately cause interruption
of social and economic development. Given this
current circumstance and future outlook, energy
security, energy import reduction, and green house
gas (GHG) emissions reduction are utmost agendas
for many developed and developing economies.
Thailand, an emerging country with the population of
68 million [1], is not an exception from this
challenge. Its population is forecast to reach 73.4
million, 7.9 percent increase, by the year 2050.
Within the same period, the percentage of urban
population will almost double from 34 to 60 percent
[2]. In addition, GDP is forecast to grow at 5.6
percent this year and continue on average 4.5 percent
for the next five years, despite facing political turmoil
[3].
Given the above drivers, Thailand has put energy
security, reduction of reliance on energy importation,
and mitigation of climate change impact in the
forefront of all national interests for the past decade.
These agendas have created mechanisms such as
supportive public policies, public-private partnership
programs, and private investment promotions. The
goals of these policies and programs are to ensure
that the country sustains energy supply in the long-
term and to minimize cash outflow from importation
and climate change-related damages. To accomplish
the goals, the utilization of renewable energy
technologies has become one of the most effective
solutions. Adopting renewable technologies requires
four main processes: development, deployment,
commercialization, and scale up. Such processes will
have to be carefully and professionally undertaken
and also require significant financing programs from
both private and public sectors.
Generally, public finance mechanism should be
used at a margin to mobilize private finance, which is
more sustainable and makes a commercial sense for
the development of the renewable energy industry in
the long-run. Private financing from financial
institutions (FIs) is therefore a key driver to help
achieve the desirable energy production from
renewable energy in the prime energy consumption
portfolios. FIs, for the purpose of this paper, include
banks, private equity and venture capital firms, and
funds (e.g. hedge fund, pension fund, and mutual
fund). This paper primarily seeks to explore and
evaluate roles of FIs in Thailand on the development
of renewable energy industry. Ultimately, this paper
hopes to provide current situation of Thailand’s
renewable energy roadmap which will be useful for
energy policy architecture developed by policy
makers and business opportunities undertaken by FIs
operating in Thailand. We begin by reviewing the
importance of FIs in the process of renewable energy
P. Wairith
Roles of Financial Institutions in the
Development of the Renewable Energy Industry
in Thailand
Master of International Business, the Fletcher School, Tufts University, Massachusetts, (
USA
)
Thai-MC (Mitsubishi Corporation), (
Thailand
)
