Thai Fossil Fuel Power Generation Industry: Slower growth seen in 2025

• In 2025, the average fuel cost for fossil fuel power plants is expected to increase, driven by rising global natural gas prices, while electricity sales revenue per unit is projected to remain stable. Nevertheless, the industry is expected to continue growing, supported by increasing domestic electricity demand, albeit at a slower pace than the previous year.
• Revenue from fossil fuel-based electricity generation for government sales is expected to continue growing in 2025, albeit at a slower rate, when compared to 2024. This aligns with the deceleration in electricity demand within the public grid. Growth is projected at 1.4% in 2025, down from 3.5% in the previous year.
• Meanwhile, revenue from fossil fuel-based electricity generation for industrial estate users is also expected to continue expanding in 2025. However, the growth rate is likely to slow, when compared to the previous year due to a more moderate increase in electricity demand from industrial estates, reflecting a slowdown in manufacturing activity amid pressures from the oversupply of Chinese goods in the market.

        In 2025, the fossil fuel-based power generation business is expected to remain stable, supported by long-term power purchase agreements (PPAs) with the government, which account for approximately 80% of total revenue. This revenue structure consists of two primary components: Availability Payment (AP), which are received as stipulated in the contract regardless of actual electricity generation, and base electricity tariffs combined with the fuel adjustment charge (Ft), which are determined by the government and paid per unit of electricity generated and sold. Meanwhile, the remaining 20% of revenue comes from direct electricity sales to industrial estate operators under bilateral contracts, which are typically benchmarked against the government electricity tariffs.

Revenue per Unit and Fuel Costs of the Fossil Fuel Power Generation Business in 2025
        The revenue per unit of the fossil fuel power generation business in 2025 is expected to remain comparable to that of 2024, while the average fuel cost is projected to increase.
        In 2025, revenue from electricity sales per unit is expected to remain stable, supported by government policies that are aimed at maintaining domestic electricity prices to relief  burdens on consumers and businesses. Meanwhile, fuel costs are projected to rise, as the average price of natural gas - the primary fuel for power generation- is on an upward trend, in line with a projected 2.5% growth in global demand by the International Energy Agency (IEA). However, natural gas supply from the Gulf of Thailand, which has a lower production cost, is expected to return to full capacity throughout 2025. This may help moderate the overall increase in average natural gas costs.

Growth Trends of the Fossil Fuel Power Generation Business
        In 2025, the fossil fuel power generation business is expected to continue its growth trajectory, driven by increasing revenue in both the electricity generation market for government sales and the market for supplying industrial estate operators. However, the pace of revenue expansion is anticipated to slow, compared to the previous year, in line with the decelerating growth in electricity demand.

The electricity generation market for government sales
        In 2025, revenue from fossil fuel-based electricity generation for government sales is expected to continue growing, albeit at a slower pace than that in 2024. This growth will be constrained by the slower increase in electricity demand within the public sector grid, which is projected to rise by only 1.4% in 2025, down from 3.5% in the previous year (Figure 2). This slowdown is attributed to decelerating electricity consumption in both the business and household sectors.

Electricity demand in the business sector
        In 2025, electricity demand in the business sector is expected to grow by 1%, slowing down from 2.8% in 2024 (Figure 3) due to a slower increase in electricity usage in the manufacturing and service sectors.
In 2025, electricity demand in the manufacturing sector is expected to grow by 1.4%, while the service sector is projected to grow by 0.4%, slowing from 2.9% and 2.6% in the previous year, respectively.
        In the manufacturing sector, electricity usage primarily comes from three key industries: metal products, food and beverages, and chemicals and petroleum. Together, these industries account for more than 66% of the total electricity consumption in the manufacturing sector. In 2025, the average Manufacturing Production Index (MPI) for these three industries is expected to grow by only 1.2%, down from 2.4% in 2024. This reflects slower production activities due to a decelerating economy, leading to slower overall growth in electricity demand in the manufacturing sector in 2025.
        At the same time, electricity consumption in the service sector is also expected to slow down, as businesses related to the service sector have gradually recovered and returned to near-normal operations since 2024, after being affected by the COVID-19 pandemic. Additionally, the demand for electricity in wholesale/retail businesses, hotels and accommodations, and warehousing, which together account for nearly 70% of the total electricity consumption in the service sector, is expected to grow at a slower pace, in line with the slower growth in the registration of new business entities.

Household electricity consumption demand
        Household electricity consumption is expected to grow by 2% in 2025, a slowdown from 5.2% in 2024 (Figure 4).
The demand for electricity in the household sector in 2025 is expected to continue growing in line with economic growth and electricity prices that are similar to the previous year, as electricity remains essential for daily life in the current era. However, the overall electricity demand in 2025 is expected to grow at a slower rate due to a slower increase in the number of registered households, with a projected growth of 1.1%, as compared to 1.3% in 2024.

Electricity Generation Market for Sale to Industrial Estate Operators
        Revenue from the sale of electricity to users in industrial estates in 2025 is expected to continue growing, although at a slower pace compared to the previous year due to the slower increase in electricity demand.
Revenue from the sale of electricity by private fossil fuel power plants to users in industrial estates is expected to grow continuously, although the growth rate will slow down, compared to 2024. The main reason for this is the slower growth in electricity demand in industrial estates. In 2025, it is anticipated to grow by 0.9%, down from 2.7% in the previous year (Figure 5), due to slower production activity growth that is being driven by increasing competition, particularly from the influx of Chinese goods in the market.
        Nevertheless, private fossil fuel power plants remain important due to their ability to meet users’ demands for electricity quality and reliability, which renewable energy sources currently cannot fulfill. Additionally, the electricity prices from fossil fuel power plants contracted with industrial estate users are often discounted relative to the base electricity rate and the Ft charge, providing incentives for industrial estate operators to choose electricity from private sources. Therefore, while revenue growth from electricity sales is expected to slow down in 2025, the longer-term outlook remains positive, driven by continued demand, especially from new operators such as data center businesses, which have high electricity consumption needs.

Risks of the Fossil Fuel Power Industry in the Medium to Long Term

• The draft Power Development Plan for 2024-2037 (PDP 2024) aims to reduce dependence on fossil fuels and increase the share of renewable energy in the national electricity grid. The installed capacity from fossil fuels is projected to decrease from 38,108 MW in 2023 to 30,453 MW in 2037, a reduction of approximately 20%. Meanwhile, the share of fossil fuel supply is expected to drop from 72% in 2023 to 49% in 2037. In the long term, fossil fuel-based electricity production is anticipated to continue declining, in line with the goal of achieving net-zero greenhouse gas emissions by 2065.
• The necessity of adaptation and transition to new types of fuel, particularly renewable energy, once contracts with partners expire. Although most fossil fuel power plants hold long-term power purchase agreements with their partners, increasing pressure from global environmental movements and technological developments is pushing businesses to transition towards alternative energy sources. This transition requires significant investment in development to accommodate future changes.
• Industrial park operators are increasingly turning to clean electricity in response to the Climate Change Act and stricter global environmental trade regulations, particularly for businesses exporting to the European Union, where the Carbon Border Adjustment Mechanism (CBAM) is now in effect. This shift has led industrial producers to adopt more renewable energy to maintain their competitiveness in export markets.
• The supply of natural gas from domestic sources is expected to decline, necessitating increased import of LNG (liquefied natural gas), which will drive up electricity production costs. The draft National Gas Management Plan 2024-2037 (Draft Gas Plan 2024) states that the share of natural gas supply from domestic sources is expected to decrease to only 36% by 2037, down from 55% in 2024, while LNG imports will increase. As LNG prices exceed those of domestically produced natural gas, this will lead to an increase in fossil fuel electricity production costs. However, the natural gas supply situation in Thailand may change if negotiations regarding the overlapping maritime area between Thailand and Cambodia (OCA), a natural gas source, are successful, though the outcome is still uncertain and will take time.

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