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INSIDE STORIES on Climate Compatible Development

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INSIDE STORIES on Climate Compatible Development INSIDE STORIES on climate compatible development May 2013 Key messages Pioneering renewable energy options: countries in Asia to introduce incentive policies for the generation of electricity from renewable energy (RE) sources, Thailand’s support policies for renewable energy (RE) in the power leading to rapid growth, particularly in solar power. sector have allowed individual small projects to add up to something Programmes for small and very substantial, attracting more investment and leading to faster growth in the small power producers created sector than in most other Asian nations. Thai energy policy is complex, predictable conditions for RE and the development of RE has not been without controversy. While this investors to sell electricity to brief provides some elements of the context necessary to understand premium, guarantees higher rates renewable electricity promotion policies, it cannot cover all aspects of for RE, making the investments Thai energy policy. Instead it focuses on identifying factors that explain updates technical regulations, the relative success of Thai policies and highlights some lessons for future development. invests in research and training. Civil society involvement in 2011.1 strengthened and improved RE controversial electricity imports from expertise and links to international rate and high per-capita energy demand Lao PDR, natural gas imports from networks brought in by civil society compared with neighbouring countries Myanmar, and volatile global fossil experts were crucial for the design fuel markets risks undermining the and approval of the incentive security of energy supply. Energy measures. imports also represent an economic challenges: burden for the country, consuming adapting its policies to take 1. Thailand is dependent on energy almost 12% of gross domestic account of recent technological 2 progress and market growth. imports. It is considering a sophisticated dominated by natural gas, providing 2. Thailand needs to provide for feed-in tariff to better control around 70% of electricity (see the growing electricity needs of costs, while continuing to offer an its citizens and its economy. On enabling environment for exploits its domestic fossil fuel average, over the past 5 years, RE investments. reserves, it is still highly import- electricity consumption has grown dependent, importing almost 25% by 3.3% per year.3 Civil society of its natural gas supply and over and researchers have accused the Author: 50% of its primary energy supply Lutz Weischer, World Resources Institute demand in order to justify new CDKN helps developing countries to design and deliver climate compatible development. When decision-makers in government, business and civil society speak to us about their aims and needs, they often ask about ‘best practice’ in other countries or, indeed, mistakes to avoid. What are the leading innovations in integrating climate change planning with economic growth strategies and poverty reduction? Table 1. Key energy statistics for Thailand and its neighbours, 2010 (2009 for electricity access) Energy use Electric power Access to GDP consumption electricity Population (current US$) per capita) (kWh per capita) (% of population) Thailand 69 million 318.9 billion 1698.9 2243.4 99.3 Cambodia 14 million 12.8 billion 355.4 146.1 24.0 Lao PDR 62 million 7.1 billion — — 55.0 Malaysia 28 million 246.8 billion 2557.8 4117.4 99.4 Myanmar 48 million — 291.8 131.1 13.1 Viet Nam 87 million 106.4 billion 681.4 1034.7 97.6 Source: World Bank, World Development Indicators, World DataBank, http://databank.worldbank.org/ Figure 1. Thailand’s power generation mix 180,000 Fuel oil and diesel (2012: 0.7%) 160,000 140,000 Other RE (2012: 1.5%) 120,000 Imported (2012: 6.0%) 100,000 generation 80,000 Hydro (2012: 4.8%) 60,000 Power Coal (2012: 19.5%) 40,000 20,000 Natural gas (2012: 67.5%) 0 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 Source: large hydro, coal or nuclear power 3. Thailand recognises the need to plants. Experience from the past reduce pollution and greenhouse this objective.5 shows that demand growth has gas emissions. th National consistently been overestimated Economic and Social Development RE sources can be an important part Plan, a 5-year framework guiding of the answer to these challenges. government policy, includes Resource assessments show a the objective to move “toward a large potential for a number of RE and alternative scenarios agree low-carbon society”.4 that some additional capacity will sector was responsible for 42% be needed in coming years as of greenhouse gas emissions 15-year Renewable Energy Develop- electricity demand grows. in 2011 and will have to make a ment Plan (2008–2022), setting a target 2 Table 2. Renewable energy potential, 2008 capacity and 2021 Alternative Energy Development Plan targets RE technology Technical potential (MW) 2008 capacity (MW) 2021 target (MW) Solar 50,000 32 2,000 Wind 1,600 1 1,200 Small/micro hydro 700 56 324 Biomass 4,400 1,610 3,630 Biogas 190 46 600 Municipal solid waste 400 5 160 — — 1 — — 2 Source: and predictable power purchase the Metropolitan Electricity Authority consumption. At the end of 2011, a new agreements (PPAs). Power plants with (MEA) and the Provincial Electricity plan, the 10-year Alternative Energy a capacity to export up to 60 megawatts Development Plan (2012–2021), (MW) to the grid – later increased to 90 increased these targets to 25% in MW – were eligible. For power plants distribution companies paid the same total energy consumption and 10% in mostly based on fossil fuels as well have paid to purchase electricity from as biomass, 20- to 25-year PPAs were achieving these targets would: avoid over US$19 billion in energy most RE projects, received 1- to 5-year imports annually with a few projects with a total capacity encourage around US$15 billion in of 16 MW being connected to the private investment avoid 76 million tonnes of to generate the same amount of power. the utilities to become familiar with greenhouse gas emissions per year the programme and showed that RE create at least 40,000 new jobs co-generation plants using fossil fuels. generate extra income and further streamlined the procedures and employment in rural areas.6 development of some plants using introduced the ‘Adder’. waste biomass, such as bagasse, A policy mix to promote paddy husks or woodchips, to compete. renewable energy Other RE sources were not competitive at the offered rates.7 of the avoided cost rate. It ranges from around 8 to 21 US cents per kilowatt Small Power Producer (SPP) hour (kWh) and is paid for 7 to 10 years, depending on the technology. It is RE plants with an export capacity of up funded through a small surcharge per to 1 MW (later increased to 10 MW). kWh paid by all electricity consumers. from power plants that combined heat and power generation or ran on regulations and were able to sell power renewable sources, under transparent directly to the distribution companies cost. For example, the Adder for solar 3 The structure of the Thai electricity sector the Board of Investments, eligible RE Since the 1990s, successive governments have taken steps to open the projects can get a corporate income tax break for up to 8 years and are exempt 8 As a 11 A revolving fund, capitalised through contribution from private power generators and a strong role for the state- a tax on all petroleum products sold purchases electricity from Independent Power Producers (IPPs) and SPPs and operates the country’s entire transmission infrastructure. Electricity is local banks so that they can pass on distributed to consumers by two public distribution companies: the MEA, low-interest loans with a maximum serving the Bangkok area, and the PEA, serving the rest of the country. interest rate of 4% to RE projects. Another government fund provides Figure 2: The structure of Thailand’s electricity sector up to 50 million Baht (US$1.7 million) Generation SPP EGAT IPP Import VSPP for smaller RE projects, as well as (% installed capacity) (7%) (47%) (38%) (5%) (3%) technical assistance and support for developing and selling carbon credits. EGAT Transmission (100%) such as the World Bank or the Asian PEA MEA Distribution Direct customers (70%) (30%) Why did it happen in Users Users Thailand? Source: policies in the region. Introducing these policies was not easy in a country heavily reliant on fossil fuels, with growing demand for electricity and energy is higher than for biomass. An additional premium is paid to projects Adder provides additional certainty by explain what made it possible include that replace diesel generators in remote the following:12 RE policies were aligned with three southern provinces. simple rate structure, make it easy for broader political priorities, beyond investors to develop viable business environmental considerations. plans. Energy security was an important provided power producers with driver for the introduction of the certainty that they would be able to sell Other government measures complement these programmes. context of the struggle over electricity was simple, using standardised PPAs Regulations dealing with the technical sector deregulation between the and interconnection procedures. challenges of RE sources are being government-owned utilities and Utilities
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