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

Over the past three years, Thailand’s state power utility paid 61 billion baht – roughly $2 billion – to seven gas-fired power plants during months when those plants were expected to generate no electricity at all. The money went to availability payments: fixed charges owed to plant operators regardless of whether a single kilowatt is produced. For the first tariff cycle of 2026, such payments are estimated to add 0.63 baht to every kilowatt-hour consumed – nearly a fifth of the base tariff, levied on households and businesses to service infrastructure that sits idle.

That figure deserves to sit at the center of any debate about Thailand’s energy future, and about the wisdom of expanding it further. As Iran-U.S. tensions send oil and gas prices climbing, attention has naturally turned to the geopolitical trigger. But Thailand’s LNG expansion was deeply problematic long before the Israel-U.S. strikes on Iran began.

In late 2025, Thai energy authorities halted operations at four power plants and delayed the opening of a fifth as weakening demand collided with a structural glut. Seven out of 11 privately owned gas-fired plants in the country operated at below 10 percent capacity in 2025; several of them were less than 15 years old. Thailand was already on track for its steepest decline in electricity generation in recent history, and its largest drop in LNG imports.

Against this backdrop, the continued push to build more gas capacity defies economic logic. The 540 MW Burapa gas-fired plant, co-owned by Gulf Development Plc, has already been delayed from 2027 to 2029, yet construction seems to be moving forward.

More striking still, Gulf has signed two long-term LNG supply agreements in the past six months: a 10-year deal with Italian major Eni for 0.8 million tonnes per annum from 2027, followed by a 15-year contract with French utility Engie for the same volume from 2028. In other words, Thai companies are increasing supply even while not fully using the capacity that already exists. Thailand’s own draft Gas Plan 2024 acknowledged that existing LNG terminal capacity is sufficient until 2037.

The economics of Thailand’s power sector have shifted in ways that make this expansion look not merely ill-timed but fundamentally ill-advised. BloombergNEF identified solar as the country’s cheapest source of new electricity. By 2025, the levelized cost of utility-scale solar had fallen not only below new gas and coal but below the short-run marginal cost of running existing combined-cycle gas plants. This means that it is now cheaper to build new solar than to operate fossil capacity already on the ground. Battery storage is following the same trajectory, and is expected to undercut existing gas on operating costs by 2026.

A 2024 report from the Climate Finance Network Thailand warned that nearly half of the country’s operating and proposed LNG terminal capacity could become economically unfeasible. This is a burden that would fall on the government and, ultimately, on consumers already absorbing billions in payments made to idle plants. The Institute for Energy Economics and Financial Analysis (IEEFA) made the point bluntly: Thailand’s gas expansion is misaligned with both demand and climate goals.

With capital costs for combined-cycle plants having tripled, each new commitment deepens the problem. Gas plants built today will still be on the books in the 2040s. If they operate at partial capacity (as many existing plants already do), they become stranded assets whose costs are socialized through tariffs, while their owners remain insulated by availability payment contracts. That is not energy security.

In the weeks since the Hormuz crisis began, Thai energy authorities have moved to fast-track rooftop solar, framing it explicitly as a structural response rather than a short-term fix. Energy Minister Akanat Promphan called the moment a chance to “restructure the energy system so Thailand can rely more on itself.”

Thailand’s solar resources are abundant, the technology is mature, and the economics are already there. What is missing is the regulatory architecture to let households and businesses actually benefit: net metering rules that treat the grid as a virtual battery rather than a one-way valve, buyback quotas broad enough to match demand, and an approval process that doesn’t take longer than a lease negotiation.

Those are solvable problems. New long-term LNG commitments are not. The case for expanding gas capacity rests on demand assumptions that have not held and a cost structure that has been overtaken. And every new contract signed today is a transfer of risk from investors to consumers who will be paying for it in their tariffs a decade from now.

Continuing to finance new LNG projects does not reduce Thailand’s energy vulnerability – quite the opposite, as the Hormuz crisis has shown. When the next price shock arrives, consumers will once again be left paying for capacity the system did not need.