A recent ruling by Thailand’s Supreme Administrative Court to revoke a wind farm licence could render the land agreements of multiple projects null and void, derailing the plans of investors and potentially undermining the government’s energy targets. Graham Lees seeks expert opinion.
WHAT: Thailand’s Supreme Administrative Court ruled that use of a 6-hectare site for a 90-MW wind farm was illegal.
WHY: The land was deemed for farming under Thai Sor Por Kor law, meaning it cannot be rented for other development.
WHAT NEXT: Many sites approved in the country’s windy north now look to be in jeopardy. Government branches tasked with renewables and agriculture are now reviewing a workaround, but the verdict may ward off would-be investors.
The future of numerous renewable energy projects in Thailand – described as the Southeast Asian hotspot for such investment – has been thrown into doubt by a high court ruling which revoked a wind farm licence on grounds that it was a misuse of land.
The Supreme Administrative Court ruled earlier this month that it was illegal to use land designated for farming for other purposes. The order applied to a planned project in Chaiyaphum Province northeast Thailand – a region favoured for wind projects because of its higher wind speeds.
The court intervention sent a wave of concern through the local industry. In addition to causing the suspension of applications for power purchase agreements (PPAs) for 11 wind projects under development, it has raised questions about the legitimacy of another four which are already in operation. The 11 projects awaiting PPAs from the Electricity Generating Authority have a potential capacity of 700 MW and the four in operation a combined 350 MW.
Overall, up to 17 wind projects now have an uncertain future because of land rights issues, an official of Thailand’s Agricultural Land Reform Office (ALRO) said.
Prospects of a reversal are also slim; Thailand’s Supreme Administrative Court is the country’s highest court and its rulings are considered final.
The court action was brought against Thep Sathit Wind Farm Company by local residents and backed by the Association of Lawyers for Environmental Protection. They objected to ALRO’s approval of farm land being rented out for other uses. The test case involved Thep Sathit’s 27-year lease of 6 hectares of land, for a 90-MW wind scheme.
Meetings between ALRO – which said it was acting in support of government renewable energy targets – the Department of Alternative Energy Development and Efficiency (DEDE) and the Ministry of Agriculture and Cooperatives were in progress this week (beginning February 13) to try to find a solution.
The decision underlines the complicated lands rights rules in Thailand, as in many other Asian countries.
Isaan Lawyers in Thailand told NewsBase that the court ruling concerned land designated Sor Por Kor in Thai law, which means it cannot be transferred from family ownership or rented out other than to another farmer. Such land can also only be passed on via family inheritance.
In addition, under Thai law foreigners are not permitted to own any land – so potential investors in energy projects always need a Thai citizen partner, Isaan Lawyers managing director Sebastian Brousseau explained.
Land assigned as Sor Por Kor is intended to protect farming communities from encroachment by development of any kind, so all agreements reached between owners of such land and renewable energy investors is unofficial and now liable to be declared null and void.
Hotspot or troublespot?
Thailand’s military-led government, in place since a coup in 2014, is enthusiastically promoting expansion of renewable energy because of concerns that the country’s energy security is being compromised by over reliance on natural gas to fuel 70% of generating capacity. Domestic gas reserves are declining and imports now meet at least 30% of demand.
The government has called for a combination of solar, wind and biomass to provide 25% of electricity demand by 2021, although BMI Research, among other analysts, has said that it doubts this can be achieved in spite of a state supportive of new investment.
Nevertheless, in a note published earlier this month on renewable energy growth in Asia, BMI described Thailand as the investment hotspot in ASEAN, the ten-country Southeast Asia Association of Nations.
“We view Thailand as the ASEAN renewables investment bright spot, and the country has emerged as the outperforming solar market in the South East Asia region,” BMI said. “The growing cost-competitiveness of wind and solar with conventional power sources, due to falling installation costs, is an important driving force behind the deployment of renewable energy globally. In Asia, this dynamic is [aided] by close proximity and access to low-cost Chinese renewable energy components.”
On present growth projections, BMI forecasts that Thailand will be contributing 39% of the total non-hydropower renewable generating capacity in ASEAN by 2026. Much of its this development will be driven by solar and could even reach 2,700 MW on the back of Thailand’s feed-in tariff (FiT) programme and a procurement programme for solar developments, as well as a growing local manufacturing capacity, it said.
Wai to go
ARLO, a government agency, did not respond to emailed questions from NewsBase, but Bangkok’s The Nation newspaper quoted an official saying ARLO was earning US$285,000 per year in rents charged to seven firms operating wind farms on Sor Por Kor land in Nakhon Ratchasima, the province adjoining Chaiyaphum.
The money is distributed to farmers as loans for farming, to buy land for landless farmers and for funding other agricultural activities, The Nation said.
DEDE’s director-general Praphon Wongtharua said his agency would now focus on finding a solution to help investors who have begun projects on Sor Por Kor land and now face potential eviction.
One prominent Thai developer, Bangkok stock exchange listed Gunkul Engineering, has already announced suspension of plans to build a 90-MW wind farm on Sor Por Kor land in Saraburi just north of Bangkok, the Post said. Investment of more than US$142 million was at stake, it said.
However, Gunkul’s CEO Sopacha Dhumrongpiyawut said she did not think the suspension would have lasting impact on her company’s five-year plan to develop renewables capacity of 1,000 MW.
Like many East Asian countries, Thailand has a complex legal system and entrenched bureaucracy, but often tries to work round such obstacles with an informal nod and a wai – the closing of hands in a prayer-like manner that can mean hello, goodbye or thank you. In many cases this is enough – provided lobbying or environmental groups do not propose a legal challenge.
ALRO has doubtless been over-enthusiastic about embracing the government’s renewables expansion programme while at the same time raising funds for farming communities, potentially one of the main reasons for the development of Sor Por Kor land.
More than 60% of Thailand’s 67 million population is rural and gain their living from farmland often fit only for growing rice. Indeed, the northeast where the court ruling has been applied is the one of poorest regions of the country.
The ruling is a salutary lesson for would-be investors, especially foreign firms working with Thai partners. While a nod, a wai and a smile may appear to seal a deal – an expert in land rights will clearly be an essential part of the equation for future developments.