Land problems for investors in Thailand


February 10, 2017

This content is from our archive. Some formatting or links may be broken.

Thailand is known for its tropical beaches, ancient ruins and astonishing temples. It also has some attractive sites for wind farms – but that is no guarantee they can be built on. This is at the heart of a dispute that is currently unsettling wind investors.

In late January, the Asian country’s Supreme Administrative Court ordered that work should stop on a 90MW project by Thepsathit Wind Farm Company in the northeast of the country. The court is enforcing a rule that so-called ‘Sor Por Kor land’ cannot be rented to the developer because it is designated for farming.

Last Monday, Thailand’s agriculture minister Chatchai Sarikulya ordered the land reform office in the city of Nakhon Ratchasima to enforce the court’s order within 90 days, by 24 April. The revocation of the lease is considered final, and Sarikulya says that 21 other wind projects in the surrounding region will also be affected.

The dispute centres on the fact that the site was intended for distribution to farmers under the agricultural land reform scheme, known as Sor Por Kor. However, in 2009, the National Energy Policy Committee sought to overrule this as it decided that the energy and agriculture ministries should work together on wind projects in Sor Por Kor areas, after finding out that those areas were suitable for wind farms. Bad move.

After this decision, the Thepsathit Wind Farm Company was granted a licence in 2010 to build wind projects on Sor Por Kor land. But the Supreme Administrative Court has now ruled that the NEPC’s decision from 2009 contravened land regulations, and has now nullified the project licence.

The positive side of this is that the company had yet to build it and so the financial impact has been limited. But the impact on investor confidence and the future of Thai wind cannot be ignored.

Companies in the area have been granted licences to develop 21 other wind farms on affected land. For example, The Clean Energy Company has rented Sor Por Kor land to build a 260MW wind farm to produce energy in Chaiyaphum province. After the court ruling, those have automatically stopped and firms have raised concerns about developing renewable projects in future.

They are right to do so. Investors are rightly nervous about working in a nation where the government is happy to scrap permission for projects that they already approved.

It is tough to operate in a market when you can’t trust your consent. Uncertainty over legal and political systems is one of the major barriers for investors looking to enter new markets, and developers in Thailand will be poring over their land contracts.

This situation could seriously affect the wind sector in Thailand.

Praphon Wonggtharia, director-general of the Department of Alternative Energy Development & Efficiency, has pointed out that Thailand has limited potential to develop wind farms, with total capacity at around 13GW, as there are few locations that can provide the wind speeds needed to generate power. Many sites on Sor Por Kor land do, but this regulatory hurdle stops that and could put a halt to the sector.

This runs contrary to the country’s ambitions.

In 2011, Thailand’s government put in place a plan to install over 19GW of renewable energy by 2036, with the aim to meet the country’s increasing demand for energy and to be less dependent from importing oil and gas from other countries. However, at the end of 2016, around 3GW of renewable capacity was installed, with only 305MW operational.

If Thailand is serious about making wind a part of this plans then it must bring in clear regulations that give more confidence to investors. If that does not happen then this promising new market will suffer due to a lack of clarity over the legal system, and a lack of appropriate wind sites.

You can’t exactly build on the tropical beaches.

Investment expertise. High-quality events. Exclusive content. Lead generation.

Talk to the Tamarindo team today to find out how membership would benefit your business.

Related content