1. Power Sector in Thailand: from Problematic Planning and Governance to Feed-in Tariffs Chris Greacen Palang Thai Helvetas seminar Power Sector Governance in the Mekong Region: Challenges and Opportunities in Thailand and implications for Laos 1 March 2011 Vientienne, Laos

2. MW 2550 – 2554 average increase 1,386 MW 2555 – 2559 average increase 1,877 MW 2560 – 2564 average increase 2,315 MW 1,444 1,26 8 1,410 1,361 1,629 1,759 1,832 2,03 5 2,131 2,178 2,23 5 2,28 7 2,399 2,477 Demand increase per year 1,449 27,996 MW 37,382 MW 48,958 MW แผนพัฒนาฯ ฉบับที่ 10แผนพัฒนาฯ ฉบับที่ 11แผนพัฒนาฯ ฉบับที่ 12 In Thailand the dominant narrative concerning Lao hydropower goes more or less like this… ที่มา กฟผ. 1.“Thai demand for electricity will rise a lot” 2.“Thailand needs to diversify its fuel sources from natural gas” 3.“Thai people don't want any more dams” 4.“Lao people will benefit from sale of hydro-electricity to Thailand” 5.  “Therefore, Laos should build dams and Thailand should buy from dams in Laos.” “Thailand’s electricity demand is projected to increase over 34,000 MW (2.5 times) by 2030”.

3. Outline •Where Thailand’s electricity comes from •Structure of Thai power sector •Centralization and its problems •Governance issues in Thai power sector •Thai electricity consumption patterns •Planning –Load forecast –Power Development Plan (PDP), –Over-investment •Decentralized generation alternatives •Renewable energy –Target –Very Small Power Producer (VSPP) regulations •Some Thai clean community energy examples

4. Generation by sources Generation by fuel type EGAT, 13,615 MW (48%) IPP 12,151 MW (43%) Import & Exchange 640 MW (2%) SPP 2,073 MW (7%) Total: 28,482 MW Oil, 0.1% Natural Gas, 70% Hydro, 6% Coal & Lignite, 21% Import & Others, 3% Power generation (May 2009) ที่มา: EPPO Aug 2009

5. •Thailand has cooperated in hydropower development with neighboring countries, on a bilateral basis. •MOUs on power purchase have been signed with Laos, China and Myanmar, with a total power purchase of 11,500 MW. MOUs on Power Purchase Signed CountrySigning DatePurchase Cap. (MW) Within Year LPDR 22 Dec 20077,0002015 Myanmar 14 Jul 19971,5002010 PR China 12 Nov 19983,0002017 • Imported power being supplied to Thailand’s Grid:  LPDR 313 MW  Malaysia 300 MW [High Voltage Direct Current (HVDC)] Power Purchase from Neighboring Countries ที่มา: EPPO Aug 2009

6. Project Sale to Thailand (MW) COD 1) Currently supplying power to Thailand 1.1 Nam Theun-Hinboun 18731 Mar 1998 1.2 Houay Hoa 1263 Sep 1999 Sub-total 313 2) PPA signed but not yet supplied power to Thailand 2.1 Nam Theun 2 920Dec 2009 2.2 Nam Ngum 2 615Mar 2011 2.3 Theun-Hinboun Expansion 220Mar 2012 Sub-total 1,755 3) Tariff MOU signed 3.1 Hongsa Lignite 1,4732013 Sub-total 1,473 GRAND TOTAL 3,541 Power Purchase from LPDR Status as at Jun09. ที่มา: EPPO Aug 2009

7. Import (2%) EGAT (50%) IPPs (41%) Generation (% share) Transmission Distribution EGAT (100%) PEA (67%) MEA (31%) Direct Customers (2%) Users Remarks: - Figure of % Share in 2008 - ERC = Energy Regulatory Commission VSPPs (<<1%) SPPs (7%) Govt. ERC Structure of Thai power sector ที่มา: EPPO Aug 2009

8. Customers Large power plant Centralized Power Electricity flow Money Flow Centralized decision-making Government and utilities Citizens and consumers &

9. (all of the) supply options considered in the PDP by EGAT 700 MW Coal-fired power plant 700 MW gas-fired combined cycle plant 230 MW gas-fired open cycle plant 1,000 MW nuclear plant Hydro imports are politically negotiated outside of PDP process DSM/EE, RE, Distributed generation not considered as supply options

10. Problems with Centralized Power •(more costly) •Separation of consumption and production leads to inefficient consumption –“Out of sight, out of mind” •Loss of livelihood/health/forests for local people for the benefits of others, mainly urban commercial and industrial interests –Generate at large power plants hundreds of km from commerce and industry that uses power

11. Problems with centralized decision-making •Lack of accountability, transparency, participation in centralized planning processes –Political decisions masked in technical language –Social and environmental concerns are ignored •“Cost plus” incentive structure –passes risks to consumers –“Overcapacity worth 400 billion Baht” ( from total assets of 700 billion Baht and annual turnover of 240 billion Baht) – Prime Minister Thaksin Shinwatra

12. Governance issues

13. Conflict of interest : policy v business Permanent secretary of ministry of energy Board of directors Chairman of PTT Chairman of EGAT Board member of PTT chemical Chairman of Rayong refinery Dep. permanent secretary Board member of Thai oil Board member of RATCH Board member of Aromatics PLC Board member of PTTEP Director general,Energy fuel Board member of PTTEP Director general of energy business Board member of PTT Director general of Department of Alternative Energy Development and Efficiency energy Director of Energy Policy and Planning official Senior official of ministry of energy Board member of RATCH Board member of Ratchaburi generation company Board member of Bang chak Dep. permanent secretary

14. Performance of high-level energy officials in serving the government vs. PTT Plc. (Thai gas/oil utility, the largest list company in Thailand) Attendance of PTT board meetings* Attendance of Automatic tariff (Ft) mechanism mtgs** Permanent secretary 13/134/6 Director of EPPO 8/95/6 * จากรายงานประจำปีบมจ. ปตท. ปี 2546 ** ตั้งแต่มีการปรับองค์ประกอบคณะอนุกรรมการ Ft โดยแต่งตั้งให้นายเชิดพงษ์เป็นประธาน และนายเมตตาเป็นรอง ประธาน ( ปลายปี 46) Government officials serve energy companies better than the Thai public? 100% 90% 67% 83%

15. Consumption patterns

16. Industrial 49% Commercial 25% Residential 21% Others 5% การใช้พลังงานไฟฟ้าแยกตามประเภทผู้ใช้ 133,132 133,132 GWh Electrical consumption by sector in 2007 ที่มา กฟผ.

17. การกระจายตัวของการใช้ไฟฟ้าแยกตามพื้นที่ Distribution of electricity consumption by region Source: Figure 19, Statistical Report Fiscal Year 2003 Power Forecast and Statistics Analysis Department System Control and Operation Division. Report No. SOD-FSSR-0404-05 Central South North Northeast

18. Comparison of electricity consumption of three big malls vs. 16 provinces 278 GWh Siam Paragon MBK Central World ที่มา: การไฟฟ้านครหลวง 2549 ที่มา: พพ. รายงานการใช้ไฟฟ้า ปี 2549 123 81 75

19. Electricity production and consumption (GWh) 1700 families relocated Loss of livelihood for >6200 families Loss of 116 fish species (44%) Fishery yield down 80% 65 Mae Hong Song Source: MEA, EGAT, Searin, Graphic: Green World Foundation Dams Malls Province Pak Mun Impacts of Pak Mun Dam alone MBK 123 81 75 Siam Paragon Central World

20. การกระจายของจำนวนผู้ใช้ไฟและปริมาณการใช้ไฟฟ้า Distribution of number of power users & energy consumed ที่มา : รายงานการปรับโครงสร้างอัตราค่าไฟฟ้า ( มติ ค. ร. ม. วันที่ 3 ตุลาคม 2543) Small houses (<150 kWh/mo) Large houses (>150 kWh/mo) Small industrial/commercial Large industrial/commercial) Specific businesses Government Agricultural pumping Number of customersElectricity consumption

21. "Nature has enough for our need, but not enough for our greed." - Gandhi

22. Thai load duration curve (2002) > 1,000 MW in 66 hours

23. Source: EPPO, 2007.

24. Load profile on the day of annual highest consumption Notice the rise of air-conditioning load พลังไฟฟ้า ( เมกะวัตต์ ) เวลา ( ชั่วโมง ) 25 32 2533 2534 2549 25 50 2548 2551

25. Thai power sector planning: Demand Forecast, Power Development Plan (PDP), Over-investment

26. MW 2550 – 2554 average increase 1,386 MW 2555 – 2559 average increase 1,877 MW 2560 – 2564 average increase 2,315 MW 1,444 1,26 8 1,410 1,361 1,629 1,759 1,832 2,03 5 2,131 2,178 2,23 5 2,28 7 2,399 2,477 Demand increase per year 1,449 27,996 MW 37,382 MW 48,958 MW Economic Development Plan (years) Average GDP growth rate/year Average demand growth rate/year 10 th plan (2550-2554)5.05.86 11 th plan (2555-2559)5.65.95 12 th plan (2560-2564)5.65.54 แผนพัฒนาฯ ฉบับที่ 10แผนพัฒนาฯ ฉบับที่ 11แผนพัฒนาฯ ฉบับที่ 12 Power demand projection Sep 2007 (PDP 2007 revision 1) ที่มา กฟผ.

27. Planning of capacity additions (Total capacity requirement = peak demand + 15% reserve margin)

28. Power Demand: Projections vs. Actual 1992 – 2008 If no systemic bias, the chance of over-projecting demand 12 times in a row should be 1/4096!! MW

29. •Financial criteria for utilities link profits to investments –Thailand uses outdated return- based regulation •ROIC (Return on Invested Capital means: the more you invest, the more (absolute) profits you get Incentive structure for utilities: the more expansion, the more profits ROIC = Net profit after tax Invested capital EGAT 8.4% MEA PEA 4.8% Result : Demand forecast have systemic bias toward over-projections Too many expensive power projects get built

30. Cycle of over-expansion under the centralized monopoly system Power demand (over-)projections Deterministic planning based on demand forecast leads to over-investment in capital-intensive power projects Tariff structure that allows pass-through of unnecessary investments Utilities’ Profits 1 2 3

31. Comparison of trend lines with historical peak consumption Exponential Linear Past demand trajectory was linear but how come the official demand projections have always assumed exponential trend and over-estimated?

32. The government forecast was based on the assumption of exponential growth 21 power plants

34. หมายเหตุ 1. ใช้สมมติฐานว่าต้นทุนร้อยละ 12.4 ของค่าไฟฟ้ามาจากธุรกิจสายส่ง 2. ใช้สมมติฐานว่าต้นทุนร้อยละ 14.5 ของค่าไฟฟ้ามาจากธุรกิจจำหน่าย 3. ค่า CO2 ที่ 10 ยูโร/ตัน 4. ค่า Externality ตามการศึกษา Extern E ของสหภาพยุโรป และนำมาปรับลดตามค่า GDP ต่อหัวของไทย 5. 5. The World Bank, Impact of Energy Conservation, DSM and Renewable Energy Generation on EGAT’s PDP, 2005. 6. ตามระเบียบ SPP 7. ที่มา : กฟผ. 8. California Public Utilities Commission (CPUC), 2050 Multi-Sector CO2 Emissions Abatement Analysis Calculator, 2009 9. Cost of liability protection, Journal “Regulation” 2002 – 2003. Supply options Cost estimate (Baht/kWh) GenerationTrans missio n 1 Distrib ution 2 CO 2 3 Other envi impacts 4 Social impacts Total DSM0.50 – 1.50 5 -----0.50 - 1.50 SPP cogeneration (PES > 10%) 2.60 6 -0.440.080.71-3.83 VSPP (Renewable) Bulk supply tariff (~ 2.62) + Adder (0.3 – 8) -0.44-0 – 0.630 – low2.92 – 10.62 gas CC2.25 7 0.370.440.090.79low – medium 3.93 Coal2.11 7 0.370.440.152.76High5.82 Nuclear2.08 7 –7.30 8 0.370.44-0.15 + 1.00 9 High – very high 4.04- 9.26

35. Office of the National Economic and Social Development Board O F F I C E O F T H E P R I M E M I N I S T E R Low Quality Education Low Quality labour Insufficient in R&D Investment Slow Technology Development Low Quality for Raw-material, machinery and equipment (Low margin/return) Low Basic infrastructure and Logistic development Enabling factors: MACROECONOMIC MANAGEMENT No immunity/ High volatility Financial System Lack of Saving Lack of regulation on industrial product’s quality control Low Value Creation High Import Contents & Sheer size of export to GDP High Energy Intensity & Low Efficiency & Unsustainable structure Macroeconomic Analysis

36. Decentralized generation •Decentralized generation: generation of electricity near where it is used

37. Energy efficient end-use Solar Wind power Biomass Customers Power plant Old way New way Power plant Biomass

39. Energy waste in a typical pumping system

40. Sankey Energy Flow Diagram

41. Cogeneration Combined Heat and Power (CHP)

43. Centralized energy is more costly Thailand PDP 2007 requires 2 trillion baht to implement, comprising: million B •generation 1,482,000 •transmission 595,000 Transmission adds 40% to generation costs Decentralized generation brings down costs Ireland – retail costs for new capacity to 2021 Source: World Alliance for Decentralized Energy, April 2005

45. Very Small Power Producer (VSPP)

46. $

47. Technical regulations: •Allowable voltage, frequency, THD variations •Protective relays –1-line diagrams for all cases: •Induction •Synchronous •Inverters •Single/multiple •Connecting at different voltage levels (LV or MV) •Communication channels Commercial regulations: •Definitions of renewable energy, and efficient cogeneration •Cost allocation •Principle of standardized tariff determination •Invoicing and payment arrangements •Arbitration $

48. Evolution of Thai VSPP regulations •2002 –VSPP regulations drafted, approved by Cabinet –Up to 1 MW export, renewables only –Tariffs set at avoided cost (bulk supply tariff + FT) •2006 –Up to 10 MW export, renewables + cogeneration –Feed-in tariff “adder” –If > 1 MW then utility only pays for 98% of energy •2009 –Tariff adder increase, more for projects that offset diesel http://www.eppo.go.th/power/vspp-eng/http://www.eppo.go.th/power/vspp-eng/ for English version of regulations, and model PPA

49. Thai VSPP feed-in tariffs Assumes exchange rate 1 Thai baht = 0.029762 U.S. dollars FuelAdderAdditional for diesel offsetting areas Additional for 3 southern provinces Years effective Biomass Capacity <= 1 MW $ 0.015 $ 0.030 7 Capacity > 1 MW $ 0.009 $ 0.030 7 Biogas <= 1 MW $ 0.015 $ 0.030 7 > 1 MW $ 0.009 $ 0.030 7 Waste (community waste, non-hazardous industrial and not organic matter) Fermentation $ 0.074 $ 0.030 7 Thermal process $ 0.104 $ 0.030 7 Wind <= 50 kW $ 0.134 $ 0.045 10 > 50 kW $ 0.104 $ 0.045 10 Micro-hydro 50 kW - <200 kW $ 0.024 $ 0.030 7 <50 kW $ 0.045 $ 0.030 7 Solar $ 0.238 $ 0.045 10 Tariff = adder(s) + bulk supply tariff + FT charge Biomass tariff = $0.009 + $0.049 + $0.027 = $0.085/kWh

50. July 2010 Thailand VSPP Status 847 MW online PPAs signed for additional 4283 MW

51. •Uses waste water from cassava to make methane •Produces gas for all factory heat (30 MW thermal) + 3 MW of electricity •3 x 1 MW gas generators Korat Waste to Energy – biogas … an early Thai VSPP project

52. Biogas from Pig Farms Reduces air and water pollution Produces fertilizer Produces electricity 8 x 70 kW generator Ratchaburi

53. Biomass Gasification Rice mill in Nakorn Sawan 400 kW

54. •40 kW •Mae Kam Pong, Chiang Mai, Thailand Micro hydropower

55. Rice husk-fired power plant •9.8 MW •Roi Et, Thailand

56. Bangkok Solar 1 MW PV •Project size: 1 MW •Uses self-manufactured a-Si

57. Saving electricity is cheaper than generating it Source: The World Bank (1993) Demand Side Management (saving electricity) Actual 10-year DSM average cost!!! 1.5

58. The Arun-3 story •Planned 201 MW hydro in Nepal •Sell electricity to India, rural electrification •Nepalese NGOs and small business: “Micro-hydropower cheaper, better for local economy” •World Bank pulled out of project, project cancelled •10 years later…the Nepali power system has seen the addition of: –over a 1/3 more capacity than the Arun-3 –at ½ the cost –In ½ the time it would have taken to complete Arun-3

59. Summary: •Key tenets of Thailand’s narrative about dams in Laos are flawed: –Thailand’s demand is increasing more slowly than advertised –Thailand has plenty of clean alternatives •Thailand’s excessively centralized electricity structure leads: –to investments that are more costly –conflicts between those that benefit (industry, commerce) and villagers who suffer impacts to health and livelihoods • Thai utilities are perversely incentivized to build, build, build However… •Decentralized generation has been helped significantly by VSPP regulations, which Thai utilities have done a good job implementing.

60. Thank you For more information, please contact chris@palangthai.org chris@palangthai.org This presentation available at: www.palangthai.org/docs