DATA COLLECTION SURVEY ON POWER SECTOR IN THE KINGDOM OF THAILAND FINAL REPORT July 2010 JAPAN INTERNATIONAL COOPERATION AGENCY Shikoku Electric Power Co., Inc. TIO JR 10-003 Summary 1 Background and Objectives of the Study 1.1 Target Area of Study The target area of the study is the whole of Thailand. An area study on the potential for renewable energy and energy conservation was undertaken. 1.2 Objectives of Study 9 Grasp the current situation of the energy sector and position of energy conservation/renewable energy in the electric power field. 9 Clarify government policy and institutions related to energy conservation/renewable energy in the power field, and identify trends of action plans of government, private companies, and households. 9 Propose prior issues and areas and applicable resources for a long-term Japanese ODA framework, especially for renewable energy and energy conservation in the power sector. 1.3 Local Organization Counterparts in this study are Energy Planning and Policy Office (EPPO) and Department of Alternative Energy Development and Efficiency (DEDE) under Ministry of Energy of Thailand, and electric power utilities such as Electricity Generating Authority of Thailand (EGAT), Provincial Electricity Authority (PEA), and Metropolitan Electricity Authority (MEA). To accomplish the study, it is indispensable to share neutral opinions with staff of electric power utilities, private companies and universities specializing in the study of renewable energy and energy conservation. 2 Current Conditions in Energy Sector 2.1 Governmental Policy in the Energy Sector The MOE in Thailand is therefore promoting renewable energy and energy conservation. 9 To improve energy efficiency, the elasticity of energy to GDP is to be lowered to the same level as that of developed countries 9 Target for share of alternative energy including renewable energy is to be 20% of the country’s final energy demand in the year 2022 2.2 Current Conditions of Power Supply Sector According to the Power Development Plan (PDP) 2010, although the demand will increase conspicuously, the demand prospect is planned lower than that of PDP 2007, after the energy conservation policy taken into account. And the development of nuclear power generation is planned. The percentages of the fuel consumed for power generation in 2009 are 71% for natural gas, 21% for coal/lignite, and 5% for hydro power and alternative energy. The reserve margin has been around 26% for the recent five years and is expected to be around 15% in the future. i 2.3 Current Conditions of Power Demand Sector: the Elasticity of Energy to GDP Energy elasticity, which is the ratio of the growth rate of electricity consumption to the growth rate of GDP, is between 0.8 and 0.9 in developed countries. Thailand is promoting energy conservation to reduce energy elasticity, which turned out to be below “1.0” in 2007 and 2008 owing to the slowdown in the growth rate of electricity consumption and stagnant economy. The level of energy elasticity comparable to that of developed countries is aimed at in the future, with the long-term target of 0.99 set in PDP2010. 3 Current Conditions and Future Prospects for Renewable Energy 3.1 Governmental Policy and Current Conditions in Renewable Energy ○ Governmental Policy for Renewable Energy and Application Condition The Thai government aims to adopt alternative energy including renewable energy for up to 20.3% of primary energy by 2022 as it promotes renewable energy based on the Alternative Energy Development Plan; AEDP (2008-2022), among which 2.4% is allocated to power generation. In general, introduction of renewable energy power generation of about 1,750 MW is set for January 2007, and it is necessary to increase that by 3,850 MW to about 5,600 MW of primary energy, or 2.4%. The existing biomass capacity of 1,600 MW accounts for more than 90% of the existing capacity. And the new biomass power development which accounts for more than 80% of the estimated potential and more than 60% of the target capacity in 2022, is required. Plus, the wind power capacity is planned to increase to 800 MW from 1 MW installed as of 2007 and the solar power is to 500 MW from 32 MW. ○ System for Promoting Utilization of Renewable Energy Adder System When electric power utilities (EGAT, MEA, and PEA) purchase power from SPPs: power producers under 90MW or VSPPs: power producers under 10MW, the "Adder" subsidy is added to the normal wholesale price. Adder differs in amount (0.3～8B/khW) and in period (seven to ten years) by the classification of the renewable energy and the scale of the contract to adjust promotion level in accordance with the business environment such as initial investment and administrative cost or the total amount of the applied capacity. Investment Promotion Plan of BOI BOI promotes all industries in Thailand, as well as renewable energy and energy conservation; however, the businesses related to renewable energy or energy conservation are prioritized and obtain the most generous benefits (tax incentives) as follows: 9 Corporate income tax exemption for eight years (plus an extra five years with a 50% tax reduction) 9 Import tax on equipment exemption Others As other effective promoting measures, Technical Assistance, Investment Grants, ENCON Fund (Revolving Fund, ESCO Fund) etc. are implemented. ii ○ Current Potential of Renewable Energy Solar Power Each domestic area has sufficient potential for development in the whole of Thailand. In particular, the central, eastern, and northeast areas are found to have good conditions, where many recent constructions of solar power generating facilities are being proceeded. Small Hydro Power The half of the development target is estimated to reach by using the irrigation dams for the generation. Although many water sources have the potential enough to produce electricity, it is regarded as difficult for the private sector to develop commercial-base power plants of around 1 to 15 MW because the permission to develop a forest area and successful negotiation with the inhabitants cannot be achieved easily. Biomass Farm product resources are constantly available in large supplies (rice husks and cassava rhizome (root and stem), sugar cane bagasse etc.), so abundant biomass resources are also produced. The total amount of biomass potential in Thailand is estimated to be 4,400 MW. But at present, the agricultural biomass supply market is typified by high prices due to a lack of resources for the large-scale businesses and it is not such a promising resource for power generation. Then the recent development of new resources such as wood chips is expected more. Wind Power The areas which provide good wind conditions for the large-scale wind turbines are located in the mountains of the southern Malay Peninsula, the western area and the eastern area, and account for 7% of the country. However, it is very likely that these areas are far from trunk lines of the electric power system. On the other hand, if small-scale wind turbines for low wind speeds can be introduced, wind power generation can become power source in the areas where 64% of the population lives. Their development is underway in Thailand at present, aiming at their supply by domestic companies. 3.2 Future Prospects for Renewable Energy For each of the various power generation businesses using renewable energy sources, the summary of those business conditions, the present support measures, the situation of the applications, the effectiveness of the promotion measures, etc. are described below. Solar Power Generation Businesses They are expected to achieve profitability under the current support measures including Adder, and the number of applications submitted, primarily for large-scale businesses, is already several times more than the promotion target. A further support to these businesses is considered unnecessary. On the other hand, small-scale solar power generation businesses have not spread due to their low current profitability, and their promotion is possible through financial and other supports. Since, however, the generating capacity per unit is small with small-scale solar power generation and since there is a limit to what one can expect of the financial capacity of general households, a support to these businesses is considered to be ineffective for promoting their introduction. iii Wind Power Generation Businesses There are some supports considered effective including assistance towards the costs for importing facilities and extending a power transmission line for large-scale businesses. The adder for wind power generating businesses, however, is one of the most preferential, second only to the adder for solar power generation, and the capacity of applications for wind power generation businesses is already several time more than the promotion target in spite of their lagged development relative to solar power generation. Therefore, a further support is considered unnecessary. On the other hand, with regard to small-scale businesses, a support is conceivable for technological development going on in Thailand for an increased promotion in the future, but its contribution to the achievement of the introduction target is considered to be low. Biomass Generation Businesses Biomass generation businesses have come to account for more than 90% of the current power generation from renewable energy sources by exploiting its rich potential in Thailand, but the future development of biomass generation is likely to slow down relative to others. The capacity of applications that have been approved at present barely reaches the introduction target. The reason for this is that there are fuel shortage and price hike, which constitute the operational problem for large-scale biomass generation. Unless this fundamental problem is solved, promotional measures through financial and other supports remain ineffective. On the other hand, small-scale businesses are expected to grow further given technological and financial supports which include providing new information, e.g., about generation method through self-supply of fuel and generation facilities designed to have greater durability than conventional ones.