Thailand studies direct purchase of clean energy by datacenters

A pilot project announced by Thailand’s National Energy Policy Council will allow datacenters to buy renewable energy directly from generators. According to the Bangkok Post, the measure is a response to requests from foreign investors, especially energy-intensive datacenter operators, and includes the possibility of direct purchase agreements (PPAs) in order to better manage energy costs.

The permanent secretary of the Thai Ministry of Energy detailed that the direct power purchase agreements will exceed 2,000 megawatts. A regulatory commission will study the negative impacts that the contracts could have on energy users, both domestic and business, since Thailand has only used a single procurement system until now, which requires energy produced from renewable sources to be sold to the Thai electricity generating authority and state distribution agencies.

Thailand is carrying out other pilot projects to develop a more advanced energy grid with the introduction of renewable sources. The expectation is that solar energy will account for more than 80 per cent of renewable sources. In addition, Thailand intends to explore bioenergy from raw materials derived from biomass, biogas and biofuels.

There are controversies surrounding PPAs

The so-called PPAs (Power Purchase Agreements) have attracted the attention of datacenter operators for their potential contribution to defining the energy mix and sustainability efforts of these facilities. To give you an idea, the renewable energy capacity contracted by companies through PPAs worldwide in 2012 was just 0.3 gigawatts. By 2023, it was 46 gigawatts.

BigTechs have been major buyers of energy from renewable sources for some years now. In 2023, they continued to contribute to the growth of the PPA market, with Amazon being the leading corporate buyer of clean energy for the fourth consecutive year among a group of more than 200 companies monitored by BNEF, followed by Meta, LyondellBasell and Google. Last year, Amazon announced 8.8 GW of PPAs in 16 countries. The company’s clean energy portfolio totalled 33.6 GW, the largest capacity in the Belgian and Chilean markets.

More recently, in May 2024, Microsoft signed the largest PPA for renewable energy totalling more than 10.5 gigawatts of capacity in the United States and Europe. Construction of the projects is scheduled to begin in 2026 and is expected to cost more than $11.5 billion to build. According to Microsoft, this PPA is almost eight times larger than any other involving renewable energy for corporate use.

There are those who say, however, that there is too much marketing around PPAs and their ability to make datacenters greener and more sustainable. An opinion piece by Max Schulze, founder of the Sustainable Digital Infrastructure Alliance, an organisation that seeks to present a path through which digital growth and environmental sustainability go hand in hand, points out that PPAs certainly help finance new renewable energy sources, but only because there is an economic reward, i.e. lower energy costs.

The article explains that each renewable energy generator produces two results: electricity and guarantees of origin (green certificates), but this is no different from a traditional “green” energy contract. The difference is that, in the case of PPAs, it is possible to unbundle the guarantees of origin from, for example, the wind farm that generates the renewable energy and use them to offset emissions from coal-based energy purchased elsewhere.

In other words, PPAs can create the illusion that datacenters use renewable energy sources 24 hours a day, seven days a week and are therefore more environmentally sustainable, simply because there is a wind or solar farm running somewhere and generating certificates to be purchased. There is no real physical improvement necessarily.