Despite successfully wooing big tech companies such as Microsoft to invest in a new data centre, Thailand’s aspiration to become Southeast Asia’s hub for cloud computing might just be a pipe dream. A major hurdle is its outdated energy policy.
In mid-March, Microsoft CEO Satya Nadella announced that Microsoft and the Thai government had signed a memorandum of understanding to establish Microsoft’s first data centre in Thailand. This move aims to capitalise on the growing demand for cloud computing and AI services in the region.
According to Kasikorn Research Centre (K-Research), Thailand anticipates $7.8 billion in investments from major tech companies for the development of data centres and other AI infrastructure in the country from 2024-2027.
Thailand’s goal to become the regional hub for cloud computing and data centre services is evident in its Digital Economy and Society Ministry’s “Go Cloud First” policy, which anticipates annual growth of about 30% in the data centre sector.
However, as leading tech companies have become more conscious of their carbon emissions and have policies to use clean energy for their businesses, Thailand’s energy policy — where natural gas still constitutes the majority of the country’s power generation — does not align with its strategy to attract significant investment from tech giants.
Cloud computing is an energy-intensive operation that requires vast amounts of electricity to keep its extensive network of data centres’ supercomputers running around the clock. This high energy demand is primarily due to the need for cooling systems that prevent computer servers from overheating.
The International Energy Agency (IEA) reported in 2020 that data centres and data transmission networks are responsible for 1% of global energy-related greenhouse gas emissions, comparable to the annual emissions of some medium-sized countries. This figure is expected to rise as global internet traffic continues to grow at an unprecedented rate.
According to Steven Gonzalez Monserrate, a digital sustainability advocate, the Cloud’s carbon footprint now surpasses that of the airline industry. One data centre alone can use as much electricity as 50,000 homes. Data centres worldwide consume about 200 terawatt hours (TWh) of energy each year, exceeding the energy consumption of some countries.
Acknowledging the significant energy demands of data centres, leading ICT companies have heavily invested in renewable energy projects to improve their public image.
According to the IEA, Amazon, Microsoft, Meta, and Google are the top purchasers of corporate renewable energy Power Purchase Agreements (PPAs), with contracts totalling nearly 50 GW as of 2021, equivalent to Sweden’s generation capacity. Tech giants like Google and Microsoft have announced plans to achieve “net-zero” emissions by the end of this decade.
As of now, details about Microsoft’s new data centre in Thailand have not yet been disclosed. However, it is certain that our power grid remains far from clean and efficient. More than half of Thailand’s electricity generation comes from natural gas, while renewable and sustainable energy, such as solar, wind, and biomass, accounts for only about 10%.
According to the draft of Thailand’s 2024 Power Development Plan (PDP), renewable energy will constitute only 51% of the total generation capacity by 2037. The country lags behind its neighbours like Vietnam, which has surpassed Thailand as the leader of renewable energy in ASEAN, with roughly 30% of its electricity coming from renewable sources, most of which is solar.
Moreover, the average cost of electricity in Thailand is projected to reach nearly 4 THB/kWh, according to the 2024 PDP draft. Consequently, the country’s electricity prices remain uncompetitive compared to those of Vietnam and Malaysia, at 3.50 baht/kWh and 2.85 baht/kWh, respectively.
To remain competitive and appealing to tech giants, Thailand should aggressively adopt solar and wind energy, as their costs are expected to continue declining due to ongoing research and development.
Meanwhile, the feed-in-tariff rate for electricity from ground-mounted solar coupled with battery energy storage systems over a 25-year Power Purchasing Agreement (PPA) is already at 2.83 baht/kWh — rather too cheap to encourage small power producers to sell renewable energy into the national grid system.
Indeed, one approach that the government should have taken and failed to do is to give the green light to a net metering system, which would promote the expansion of renewable energy by allowing households to offset their electricity costs with power generated from rooftop solar panels.
Additionally, Thailand should transition to a liberalised electricity market where power producers can sell electricity to retailers through open auctions, rather than the current enhanced-single-buyer system, where the Electricity Generating Authority of Thailand (EGAT) monopolises the country’s electricity distribution.
A liberalised system would allow retailers, including state-owned enterprises like the Metropolitan Electricity Authority and the Provincial Electricity Authority, as well as private retailers and individual household producers, to compete in providing electricity to consumers.
This would give consumers and investors the flexibility to choose their electricity provider directly or through a trading platform, eliminating intermediary costs and providing more incentives for renewable energy generation. Consequently, the country would remain competitive in the international market, where countries and businesses are racing to achieve Net Zero.
First Published on the Bangkok Post
