Thailand is poised for a solar energy boom as private companies have committed to investing at least US$2 billion over the next five years in solar power production, while the country’s representatives pledged to reduce greenhouse gas emissions by as much as 20 percent by the year 2020 at a United Nations climate conference.
Subsidies from the government have incentivized investments in clean energy, and many firms, including large corporations such as Bangchak Petroleum, are using those incentives to invest more resources in solar power and raise it as a share of their energy output.

“Solar is hot,” Wandee Khunchornyakong, CEO of SPCG, owner and operator of Thailand’s largest solar power generation farm, told Reuters. “It’s undeniable that everyone wants to enter this business.”

The administration of Prime Minister Yingluck Shinawatra has set an ambitious target of producing 25 percent of the country’s energy from ‘green’ sources by 2021. In addition, the government stated this week at the U.N. COP19 conference on climate change in Warsaw, Poland, that it would reduce greenhouse gas emissions by between 7 percent and 20 percent by 2020, with an emphasis on achieving the higher figure.

Rising and volatile prices for energy from fossil fuels have proven difficult for economic planners to manage, and so the government is now paying premium prices for solar and other alternative forms of energy. That has made the field more attractive for producers and investors.

Solar power’s profitability in Thailand was apparent in a recent earning statement by Bangchak Petroleum, a large energy firm operating under the umbrella of state energy giant PTT. Solar power is now the fastest growing division of the company in terms of profitability, accounting for 15 percent of quarterly earnings of roughly $83 million. That represented a year-on-year increase of 150 percent.

Bangchak is raising its solar capacity to 169 megawatts next year from 94 megawatts in 2013, and has plans to increase that to 500 megawatts by 2020.

Bangchak and SPCG are two of about a dozen firms that will pour about $2 billion into solar power over the next half decade. The Electricity Generating Company of Thailand (EGCO) is another. An EGCO affiliate recently won licenses to start installing rooftop solar panels. The government just recently made tax breaks and incentives available for companies and homeowners who invest in rooftop solar power panels, spurring a rush for applications.

Analysts said the government has made it attractive to produce solar power now because of the incentives and high prices it is paying. They cautioned, however, that there was no guarantee the government would continue to pay such high prices in the future. They also said growth in the sector has been a bit constrained because no one knows when the government will issue more licenses to produce solar power.

Thailand is keen to purchase energy from new and alternative sources because its oil imports hit a record $38 billion last year, or 9.3 percent of gross domestic product. High dependence upon oil and gas imports means the country is less energy secure than it would like to be.