Thailand: The impact of the war in Ukraine on the power sector

Friday 11 August 2023

David Beckstead
Chandler MHM, Bangkok


As in many other Southeast Asian jurisdictions, in Thailand, one of the primary impacts of the war in Ukraine has been higher electricity charges. As a result, the war has acted as a catalyst in accelerating the ongoing trends of market liberalisation and increased reliance on renewable energy as the country reorientates the power sector in connection with its energy transition.

Background and direct impacts

Currently, natural gas is the fuel for approximately 56 per cent of on-grid power generation.[1] Although Russia is a significant producer of natural gas, direct trade with Thai purchasers has essentially been non-existent, meaning that the war did not directly affect any immediate shipments. Rather, the majority of gas used in Thai power plants is produced domestically, with some quantities being shipped via pipelines with Myanmar and an increasing share arriving as liquefied natural gas (LNG).

Although the overall supply of natural gas decreased by around 13 per cent from 2018 to April 2023, reliance on LNG increased significantly.[2] In 2018, Thailand imported 579 million standard cubic feet per day (MMSCFD) of LNG, accounting for 11.8 per cent of total supply; by contrast, during the first four months of 2023, Thailand imported 1,328 MMSCFD of LNG, representing 29 per cent of the entire country’s natural gas supply.[3] In other words, while Thailand is slowly moving away from dependence on natural gas as a fuel source, it is simultaneously becoming more dependent on LNG to meet its needs, thus resulting in greater exposure to international markets.

The cost of natural gas procured by PTT Public Company Limited, Thailand’s national petroleum company, is passed on to power generators (primarily the Electricity Generating Authority of Thailand (EGAT) and independent power producers (IPPs)) who, in turn, ultimately pass on the costs to consumers. The fuel tariff charged to consumers is regulated by Thailand’s Energy Regulatory Commission (ERC), meaning that the public is partially insulated from the negative consequences of higher LNG spot prices on international markets; however, the state is not able to cushion the blow entirely, and consumers in Thailand have seen increases in power charges as a result of the war in Ukraine.

Policy implementation since February 2022

The impacts of the war in Ukraine must be situated within the larger discussion relating to the energy transition generally. Measures taken to alleviate higher power prices in the wake of increased LNG costs are difficult to disentangle from policy-makers’ steps to facilitate the energy transition more broadly. Nonetheless, it is fair to say that the war in Ukraine has, at a minimum, been an incentive for government action to reconfigure Thailand’s power market.

Thailand’s primary statute governing the power sector, the Energy Industry Act, BE 2550 (2007), explicitly mandates the ERC to adopt measures to promote competition, efficiency and transparency in the power market.[4] The current market structure has been described as an ‘enhanced single-buyer’ model, whereby EGAT is the primary purchaser of electricity from independent power producers. The only examples of private power trading occur in the context of direct supplies to industrial users from cogeneration power plants, as well behind-the-meter solar power to commercial and industrial (C&I) customers, mainly from rooftop solar systems. Although generating capacity greatly exceeds demand on the national grid, increased competition and a decrease in reliance on natural gas in the power sector would be a clear way to reduce power charges.

To this end, some of the concrete actions taken by the ERC since February 2022 are set out below.

Third-party access codes

In May 2022, the ERC adopted a regulation mandating that EGAT along with the two state-owned distribution utilities, the Provincial Electricity Authority (PEA) and the Metropolitan Electricity Authority (MEA), adopt third-party access codes (TPA Codes) to set the rules and regulations for private parties to access the power transmission and distribution grids. While private power sales are currently possible where generating assets are co-located with the offtaker’s facilities, the adoption of TPA Codes will permit private power generators to reach customers at a distance through the state-owned grid.

Although the ERC regulation mandated the adoption of the TPA Codes by the end of 2022, as of today, the final versions have yet to be adopted. It would appear that governmental authorities have realised that the adoption of TPA Codes will fundamentally change the roles of the state-owned power utilities (ie, EGAT, PEA and MEA), thus transforming their roles as purely purchasers and sellers of power to grid system operators in a more dynamic power market. Although the adoption of the TPA Codes has been delayed, it is reasonable to assume they will be approved and implemented at some point in 2023 or 2024.

Renewable energy tender

The development that has gained more attention in Thailand’s energy sector over the past year has been a new round of renewable energy procurement. The original ERC announcement called for approximately 5.2 GWp of new renewable power being granted long-term power purchase agreements with the relevant governmental authorities, though projects amounting to only 4.88 GWp of installed capacity were ultimately selected. However, the National Energy Policy Council, Thailand’s highest administrative body responsible for overseeing public energy development, has since approved the tender of an additional 3.66 GWp of renewable projects. The projects under both tenders have scheduled commercial operations dates ranging from 2024 to 2030.

The feed-in-tariffs (FiT) per kWh were set by the ERC and range from THB 2.0724 for biogas projects to THB 3.1014 for wind projects.[5] The bidding conditions, and in particular the FiT, proved to be quite attractive to private developers, resulting in more than 17 GWp of proposed projects being submitted. Given this strong private appetite to participate in renewable projects with a Thai Government offtake, the FiT should still be considered as a subsidy. It is unclear whether the Thai Government will adopt a reverse auction approach for future tenders, though doing so would presumably permit projects with lower energy tariffs to be developed.

Merger control regime

The Thai Government is laying the foundation for greater private sector participation in the power sector. With new actors entering the sector, and certain established operators growing their portfolios, the need for competition law to correct any market failures will increase. Accordingly, in December 2022, the ERC revised the existing merger control framework to allow it greater ability to scrutinise proposed mergers by adopting a suite of regulations.[6]

Unlike the old regime, the new merger control framework will apply to both direct and indirect acquisitions of energy licensees. The ERC now has the authority to review most proposed mergers in the power sector, unless the transaction involves businesses that fall under certain monetary thresholds relating to capital assets and revenues. Although M&A activity in Thailand’s power sector has historically been relatively quiet compared with other sectors, with the expected influx of capital to power projects in the coming decades, the ERC is building up its toolbox to allow it to properly oversee and regulate the market.

Conclusion and final thoughts

It is unlikely that the war in the Ukraine has been the primary motivator for the Thai Government’s push for greater involvement from private investors in the power sector. However, the consequences of the war, and primarily the disruption to natural gas prices, have certainly helped solidify the view among Thai policy-makers that the country must continue to diversify its energy sources. Going forward, it seems to be likely that we will continue to see policy initiatives that promote greater competition and private investment in power projects generally.


[1] Energy Policy and Planning Office, Ministry of Energy (Thailand). Electricity Statistics accessed 1 August 2023.

[2] Ibid.

[3] See n 1 above.

[4] Energy Industry Act, BE 2550 (2007) at ss 7 (3), (4) and (5).

[5] As of 26 June 2023, the exchange rate with the USD is USD 1 = THB 35.28. Accordingly, the feed-in-tariffs range from 5.9 US cents–8.8 US cents based on the current exchange rate.

[6] ERC Regulation re: Rules and Procedure for Mergers and Acquisitions and Cross-Shareholding in Energy Businesses, dated 20 December 2022; ERC Notification Re: Rules, Procedures and Conditions on Transfer of Energy Licenses, dated 20 December 2022; ERC Regulation Re: Definition of Market and Scope of Relevant Energy Market, dated 20 December 2022; ERC Regulation Re: Rules on Dominant Players, dated 20 December 2022; and ERC Regulation Re: Rules and Measures Relating to Monopolies, Reduction of Competition, and Restrictions on Competition, dated 20 December 2022.