Thailand’s green building and energy efficiency construction sector, which may need BT400bn ($13bn) in spending over the next two decades, is looking toward better certification standards and government incentives to drive growth. Figures released by the Department of Alternative Energy Development and Efficiency (DEDE) show that BT216bn ($7bn) was spent on energy efficiency between 2003 and 2011, highlighting the growing awareness of sustainability and conservation within Thailand in recent years.
But for green construction practices to take hold in Thailand, they will depend upon the credibility of competing certification standards drawn up by business coalitions, governments and financiers. Green development rests on three separate but related standards: certification systems, national building codes and eligibility criteria for incentives.
Current standards and financing schemes – notably the Thai Ministry of Energy’s (MOE) revolving loan programme – should continue to support energy efficiency in the construction sector. But deeper market penetration, especially for advanced green building solutions promising more than moderate energy efficiency gains, will rest on the stringency of new certifiers and continued financial support from the Thai government.
CERTIFICATION: By auditing and rating buildings’ energy efficiency and environmental friendliness, certification systems provide a common point of reference for investors, developers and end-users to value green buildings.
“The starting point [for us] is certification,” Poul Kristensen, the director of Malaysia’s largest green building services firm, told OBG. “To be able to use green building certification standards is critical to our work.” Five years ago, before green labelling attained widespread use in Southeast Asia, he says “there was no market” for certified green buildings, and green buildings were built on the basis of individual preferences and ad-hoc energy efficiency metrics. Now all Kristensen’s clients want their buildings certified: of his firm’s nine to 10 on-going projects, each will conform to at least one recognised third-party standard, with most adhering to more.
Different standards offer unique benefits. Industry-led, internationally recognised standards – like the US Green Building Council’s (USGBC) Leadership in Energy & Environmental Design (LEED) labelling scheme or the UK’s Building Research Establishment Environmental Assessment Method (BREEAM) – are attractive to multinationals, while regionally respected government standards like Singapore’s Green Mark programme carry weight among members of the Asian business community.
Increasingly, however, local industry stakeholders are establishing their own green standards, often in collaboration with government agencies. In Thailand, green developers will soon be able to choose among three different local green building codes that conduct comprehensive assessment and certification. The Thai MOE, in partnership with Chulalongkorn University, runs the Thailand Energy & Environmental Assessment Method (TEEAM).
Two private sector organisations also have set up standards. The latest figures from the Thailand Rating Energy & Environment System (TREES), spearheaded by the Thai Green Building Institute (TGBI), indicate that 20 applications are under review.
In addition, the Thailand Association for Sustainable Construction (TASC) is working with the German Sustainable Business Council (DGNB) to adapt DGNB standards to Thailand. “We are working for a Thai product based on German knowledge,” said Stefan Hoffman, DGNB’s Thai representative. With financial support from the German Company for International Cooperation (GIZ), Hoffman is collaborating with experts at Chulalongkorn University and King Mongkut’s University of Technology to ensure the TASC standard is fully operational by February 2013.
It will likely take time for these standards to get off the ground. Kartik Mani, the regional manager and head of sustainability services for the Asia Pacific at Jones Lang LaSalle, identified bureaucratic inertia as a persistent challenge. While “there will be some pressure on Thailand to keep up” with its neighbours, he told OBG, “right now there is no push from the top, which is why the take-up at the bottom is not there.”
His colleague Michael Tang, the director of project management at Jones Lang LaSalle (Thailand), concurs. “When you get into the [Thai] MOE,” he said, “there’s really no push to go further than what they need to do.” A comprehensive local standard for green construction still remains down the line, according to Tang. “If anything, we’re talking about LEED.”
But if Thailand can successfully promote a standardised energy use labelling system through the MOE, it will have a major advantage over its neighbours. By backing labelling schemes, government agencies “certainly play a major role in shifting the market,” says Christopher Seeley, who manages the Clinton Climate Initiative (CCI) Asia’s building retrofit programme and directs the organisation’s Bangkok portfolio. “I would really like to see governments play a more active role in green building labelling, as opposed to independent councils,” he told OBG, “because there is a vast difference in the respect and confidence that governments command.”
BUILDING CODES: The Thai building code has favoured greener buildings since the 1990s, but widespread adoption of green building practices will require steeper requirements and improved enforcement. Thailand’s Energy Conservation Promotion (ENCON) Act, revised in 1995, mandates that buildings larger than 2000 sq metres or with peak demand above 1000 megawatts (MW) meet standards for six green criteria: building envelope, lighting, heating, air conditioning, renewable energy and overall performance.
“The Thai green construction market should benefit from [these] laws,” Celina Chew, the managing director of Bayer Thai, a materials company, told OBG, “especially energy-efficiency consultants, green architects and designers, and energy-saving material providers.”
Though about 1900 buildings fell under ENCON’s purview by the end of 2010, the building code – according to the Asia Pacific Energy Research Centre (APERC) – requires only about a 5-10% reduction in energy use. With many green buildings and retrofits reaching energy reductions of 30-50% – a target the UN Environmental Programme (UNEP) identifies as attainable with “proven and commercially available technology” – Thailand’s building bylaws have not yet driven a major shift to greener buildings.
Enforcement also remains an obstacle, with a significant gap between legal requirements and actual performance. “The main challenge is enforcement,” Chew told OBG. “The Thai government must rigorously enforce the Building Energy Code Act and other standards that are currently in place.”
A peer-reviewed study published in 2010 by APERC with the Institute of Energy Economics, Japan (IEEJ) calculated that buildings under ENCON averaged 65 W/m2 in terms of thermal transfer and 25 W/m2 in energy consumption from lighting – more than 30% higher than the stipulated requirements (45 W/m2 and 16 W/m2). In part, these difficulties reflect jurisdictional conflicts between the Department of the Interior and the Department of Energy, which are each tasked with enforcing different parts of the building code.
Thailand’s enforcement problems mirror the challenges faced by supporters of green buildings across the region. Aside from Singapore’s Green Mark programme, which aims for 80% of buildings in Singapore to meet its green ratings by 2030, other Southeast Asian governments “have not really embraced the concept of green building and pushed it toward regulation”, Seeley says.
ENCON’s compulsory auditing provision may represent a small step forward on the path to comprehensive regulation. A 2007 study by the Asian Business Council, while critical of ENCON’s enforcement, found that the mandate “has spawned the development of a Thai energy auditing industry, and… a valuable database of energy characteristics of larger Thai buildings.” It concluded that the act is “a major energy code implementation undertaking and is unparalleled in the Southeast Asia region, perhaps with the exception of Singapore.”
CARROTS: Even without certification or government incentives, green projects can pay for themselves when financed on a sufficiently long-term basis. Returns on building retrofits in Southeast Asia remain profitable with the right lines of credit, Seeley says, so “the governmental [regulatory] role is not necessarily that large in any of the decisions that are made in the private sector”.
Nevertheless, government financial support has stimulated a fair amount of commercial investment in energy efficiency. Between 2003 and 2012, for instance, the Ministry of Energy’s Energy Conservation Revolving Fund (EERF) loaned $235m for 294 projects to help finance equipment, installation, consulting design, piping and civil works aimed toward energy efficiency, according to a study by the Frankfurt School - UNEP Collaborating Centre for Climate & Sustainable Energy Finance.
The fund collaborated with 11 of the largest banks in Thailand, including Bangkok Bank, TMB Bank, Siam City Bank and Siam Commercial Bank. Once deemed eligible by DEDE – based on a feasibility study and bank-led financial analysis – projects could access up to 100% of project financing at a fixed 4% interest rate. Individual project allowances are capped at $1.5m – allowing medium-sized efficiency improvements and retrofits but not larger solar or wind projects.
The fund saw diminishing utilisation from 2010 onward, in part because commercial banks like CIMB starting issuing similar loans on their own, and in 2012 the government decided not to renew the EERF’s onlending budget. Instead of a sign of failure, however, the programme’s directors see this development as a maturation of the sector, allowing DEDE to take on the backseat role of technical assistance and letting the private sector handle the financing.
In addition, the Thai tax code offers incentives for the nascent green building sector. The government has approved 350 energy efficiency projects for its five-year, 25% corporate tax credit, which backs investments up to $1.25m. The Thai Board of Investment (BoI) also exempts energy efficiency and renewable energy businesses from import duties for eight years, an incentive for which it has already approved 37 applications. “The ESCO [energy service company] funds,” says Chew, “and other current financial incentives provided by the government should help grow the market for green building materials.”
Room for improvement remains. For example, for government-owned buildings, the Thai government only allots about 1.75-2% of a project’s total investment to architectural design, “not enough to encourage the design of green buildings,” which usually require an additional design fee. “The Thai government should lead by example,” Chew says, “and ensure that the buildings that it builds, rents or otherwise uses are green, sustainable and meet the relevant green or sustainability standards.”