Thailand Walked Into Its LNG Trap With Its Eyes Open – Long Before Hormuz

Why It Matters

The policy locks consumers into costly, under‑used gas infrastructure, undermining energy affordability and climate goals while exposing Thailand to stranded‑asset risk.

Key Takeaways

• Thailand paid $2 bn in availability fees to idle gas plants
• New LNG contracts lock consumers into long‑term tariff burdens
• Solar now cheaper than operating existing combined‑cycle gas plants
• Capacity utilization of Thai gas plants fell below 10% in 2025
• Regulatory reforms needed for net‑metering and faster solar approvals

Pulse Analysis

Thailand’s state utility has spent roughly $2 billion on availability payments to gas‑fired plants that produced little or no electricity over the past three years. Those fixed fees, now embedded in the 2026 tariff at about 0.63 baht per kilowatt‑hour, represent almost one‑fifth of the base price paid by households and businesses. The practice was intended to guarantee capacity, but with demand weakening and a surplus of under‑utilized plants, the cost is being socialized across all consumers while investors remain insulated. The payments also distort market signals, discouraging investment in more efficient technologies.

Meanwhile, the economics of power generation have turned against new gas projects. BloombergNEF reports that utility‑scale solar in Thailand fell below the levelized cost of new gas and coal by 2025, and battery storage is on track to undercut operating costs of combined‑cycle plants by next year. Capital expenditures for gas plants have tripled, creating the prospect of stranded assets that will sit on balance sheets into the 2040s. Each megawatt of idle capacity deepens the tariff burden and erodes the country’s climate commitments. As renewable penetration rises, grid operators will rely less on firm gas capacity.

Policymakers now face a choice: continue locking consumers into long‑term LNG contracts or accelerate a solar‑first strategy. The Energy Ministry’s push for rooftop solar and faster net‑metering rules could unlock cheap, distributed generation and turn the grid into a virtual battery. However, without clear reforms—such as broader buy‑back quotas and streamlined permitting—solar’s potential will remain constrained. Abandoning further gas expansion would prevent new stranded assets and align Thailand’s power system with both energy security and its net‑zero targets. International investors are watching Thailand’s approach, as stranded‑asset risk could affect financing terms.