Thailand’s new solar push seeks to reduce reliance on expensive spot LNG

Thailand is trying to offset the impact on its energy sector from the increase in spot LNG prices and supply disruptions from the Strait of Hormuz closure, accelerating its push into solar and energy storage.

On September 2, Thai energy minister Energy Minister Akanat Promphan announced that the government would spend around $6 billion in energy transition emergency funds to accelerate around 5 gigawatts (GW) of rooftop solar power across one million households. He added that the target will be incorporated into the country’s 25-year power development plan (PDP) due for release in October.

The moves are in part a reaction to gyrations in prices for LNG delivered into Northeast Asia, which more than doubled this year amid panic buying following the start of the Middle East conflict between the U.S. and Iran. They increased from $10.40/million British thermal units (MMBtu) on February 28 to $25.30/MMBtu by late March.

Prices then pulled back to a summer floor between $16.05/MMBtu and just under $20 MMBtu between April and July. Prices remained high following Qatari supply disruptions caused by Iranian missile strikes on QatarEnergy’s LNG production facilities, along with continued Strait of Hormuz shipping disruptions. In July, Qatar Energy extended force majeure to several of its Asian buyers. On September 11, prices hit $24.89/MMBtu.

LNG price spikes have been particularly hard for Thailand since natural gas makes up around 60% of the country’s power generation mix. LNG imports account for between 27% and 33% of that amount. Added to Thailand’s energy supply dilemma, about half its imported gas comes from volatile spot LNG imports. Thailand’s gas supply also includes domestic Gulf of Thailand gas and Myanmar pipeline gas.

A recent Center for Strategic and International Studies (CSIS) report on Thailand’s growing gas supply problem notes that dwindling legacy output from the Gulf of Thailand and a 9.6% drop in Myanmar pipeline gas imports have turned imported LNG into “the nation’s critical marginal fuel source.”

However, higher LNG prices aren’t the only reason that Thailand is reformulating its gas usage plans. Sam Reynolds, an energy finance analyst with the Institute for Energy Economics and Financial Analysis (IEEFA), told Gas Outlook that Thailand has found itself heavily exposed to volatile LNG prices in the wake of the Iran conflict and the Russian invasion of Ukraine.

“At the same time, previous plans to build more gas-fired power plants have collided with global gas turbine shortages and escalating equipment costs,” he said. “The combination of unpredictable fuel costs and rising capital costs have largely eliminated the economic case for new LNG-fired power plants.”

By 2050, the plan projects total gas capacity contracted by state-owned power utilities falling from 32 GW in 2025 to as low as 16 GW by 2050,” he added.

Untapped solar potential

Solar and wind power made up a small but growing portion of Thailand’s overall electricity mix in 2025, with solar providing roughly 4.8% and wind contributing about 1.5%. However, a recent Stockholm Environment Institute (SEI) report found that Thailand has vast rooftop solar space available. It’s just not using it. The report estimated that if the country utilised just 10% of its total available rooftop space for distributed PV, more than 38 GW of solar PV could be installed.

If Thailand has 38 GW of solar potential, could a fresh 5 GW of distributed solar power be enough to make a difference to offset expensive imported LNG? Ember analyst Dr. Dinita Setyawati thinks so. She described Thailand’s recent rooftop solar announcement as “significant.”

“Five GW of solar could generate roughly 8-9 Twh of electricity a year and displace up to 60 million MMBtu of LNG, which could save hundreds of millions of dollars in LNG costs annually,” she told Gas Outlook.

She added that the distributed solar slot of 5 GW is realistic, given the strict tentative scheduled commercial operation date (SCOD) within 18 months from the date the power purchase agreement (PPA) is officially executed.

“The average time for distributed solar projects to reach COD (commercial operation date) is under 1 year,” she said. “If we look at Vietnam, the country historically deployed almost 10 GW of solar in a single year, in 2020. In one month alone, around 6 GW was installed.”

She explained that solar alone isn’t enough, however. “The real opportunity comes from pairing it with storage, so that clean electricity can also cover peak evening and nighttime demand,” she said.

Battery energy storage systems

A battery energy storage system (BESS) stores electricity when supply is abundant and releases it when needed. It’s particularly important for intermittent renewable sources such as solar and wind, helping balance the grid when the sun is not shining or the wind isn’t blowing. BESS can also reduce the need to fire up expensive gas-fired “peaker” plants, potentially reducing gas consumption and exposure to volatile LNG prices.

Thailand is rapidly expanding its BESS market to stabilise its power grid and support a goal of reaching around 70% renewable energy by 2050, according to an Energy Storage News report. Also in February, the Asian Development Bank (ADB) arranged $350 million in financing for Bangkok-based Gulf Renewable Energy projects that include solar paired with BESS, part of an earlier renewable energy programme.

Reputational damage

Other Asian countries, including South Korea, India, the Philippines and Cambodia, are also exposed to volatile spot LNG price hikes, causing them to rethink their LNG and gas import plans.

A recent IEEFA report said that “for many Asian economies, the Iran conflict has already done lasting damage to the reputation of LNG as an affordable, secure resource for long-term energy sector development.”

It added that countries are ensuring short-term energy security by relying on existing energy infrastructure, including coal and nuclear facilities, adding that renewables may offer the most significant opportunity for expanding new infrastructure.

“LNG projects have already been cancelled in China and Vietnam … Despite short-term profits for LNG exporters, the global gas industry is also increasingly concerned that price volatility and supply unreliability are hindering demand growth,” it said.