THAILANDS APPROACH TO PROMOTING CLEAN ENERGY IN THE ELECTRICITY SECTOR

Dr. Pallapa Ruangrong. Energy Regulatory Commission of Thailand In Thailand, efforts have been made to diversify away from the use of oil and natural gas for power generation by, among others, increasing the use of indigenous renewable energy resources and using fuel energy-efficient technologies for power generation so as to enhance the security of national power supply as well as to reduce environmental impact. Various incentive and promotional measures have been applied -- most importantly the provision of pricing subsidy/feed-in tariffs via the Small & Very Small Power Producer (SPP & VSPP) programs using renewable energy or cogeneration and micro-hydro projects, promotion of the use of clean coal technology for power generation, including the recent serious deliberation on the use of nuclear power generation. PROVISION OF PRICING SUBSIDY FOR RENEWABLE SPPS VIA COMPETITIVE BIDDING In 2001, consideration was made by the government on the past achievement and SPP participation in the SPP program since its launch in 1992. A number of SPPs, using fossil fuel e.g. coal and natural gas or using renewable energy e.g. bagasse, rice husks, wood chips and palm shells, had proposed sale of capacity to the grid system. However, it was recognized that capital cost was the most important barrier affecting the competitiveness and hence the viability of the renewable energy power generation. Therefore, in May 2001, the government initiated the pricing subsidy in the form of energy payment adder for electricity generated by renewable energy for a period of five years at a maximum rate of 0.36 baht/kWh, under a competitive bidding. A budget of 3,060 million baht (about US$ 90 million, at a rate: US$ 1 = 34 Thai Baht) was allocated from the Energy Conservation Promotion Fund for this purpose. About 300 MW generated from renewable energy was expected under this pilot scheme. As at 31 October 2001, that is, prior to the final consideration of the proposals submitted under this project, 47 SPPs (1,958 MW) had supplied power to the grid, but only 24 SPPs (282.4 MW) used renewable energy as fuel. Under this pilot scheme, 20 new SPPs, with a total proposed sale of 243.3 MW to the grid, have been awarded the pricing subsidy, accounting for a total subsidy of 1,401 million Baht, or an average adder rate of 0.17 Baht/kWh. However, only biomass projects could participate in the competitive bidding because the cost of energy, using biomass as fuel, was cheaper than other renewable energy projects, so the aim of fuel diversification, which is the key to affordable and reliable electricity, had not been fully achieved. PROMOTION OF GREATER USE OF RENEWABLE ENERGY FOR POWER GENERATION THROUGH THE VSPP PROGRAM In mid-2002, the government, via the two power distribution utilities i.e. the Provincial Electricity Authority (PEA) and the Metropolitan Electricity Authority (MEA), announced power purchase from VSPPs with capacity supply to the grid <1 MW. This program has been initiated because the existing SPP regulations of EGAT are not designed for power producers that are smaller than 1 MW. If small-scale power producers using renewable energy, wastes or residues as fuel have to comply with the SPP regulations, a substantial cost for grid connection will be required, making the projects uneconomic. This is aimed, among others, to promote greater use of nonconventional energy for power generation, to promote efficient use of domestic energy sources and to distribute power generation to rural areas and encourage public participation in the power generation. The main targets of this program are pig farms and food processing industries. The
Forum on Clean Energy, Good Governance and Regulation 16 18 March 2008 Singapore 1

manure and organic wastes from the farms and factories can generate biogas which can then be used as fuel for power generation. Later, on 4 September 2006, the government, via the National Energy Policy Council (NEPC), approved the increase of capacity purchase from VSPPs from 1 MW to 10 MW each. Also, the technical interconnection restrictions and requirements were revised to facilitate power purchase from VSPPs. PROVISION ENERGY
OF

ADDERS

TO

STIMULATE MORE POWER GENERATION USING RENEWABLE

On 26 December 2006, the NEPC approved the increase of power purchase from SPPs (as a whole) from 3,200 MW to 4,000 MW. In order to induce more investors to produce electricity from renewable energy, in 2007 the Ministry of Energy set a target to purchase power from SPPs using renewable energy, totaling 530 MW. Also initiated was another supportive scheme, Adder Provision -- an additional energy purchasing price on top of the normal prices that power producers will receive when selling electricity to the Power Utilities. The amounts of adders vary, depending on the technology used. The provision of adders will be for a period of 7 years as from the Commercial Operation Date (COD). Adder Rates for SPPs Using Renewable Energy For the required 530 MW from SPPs using renewable energy, the provision of Adder is divided into: - Fixed Adder (230 MW) -- the adder rate for SPPs using municipal solid waste & wind is 2.50 Baht/kWh (about US 7.35), and for SPPs using solar energy is 8.00 Baht/kWh (about US 23.53). - Adder Bidding (300 MW) -- for SPPs using other types of renewable energy, such as rice husks or wood chips, the adder is provided via a competitive bid. However, the maximum adder rate is set at 0.30 Baht/kWh (about US 0.88).
Fuel MSW Wind Solar Other RE Types Adder (Baht/kWh) 2.50 2.50 8.00 0.30 Total Fixed } Bidding Purchase Capacity (MW) 100 115 15 300 530

To implement the Adder Bidding for purchase of 300 MW, a Request for Proposals (RFP) from SPPs using renewable energy (other than MSW, wind and solar energy) to bid for the Adder was issued on 1 May 2007. The Adder Bidding has been finalized since 12 October 2007, with 7 SPP proposals approved, accounting for a total proposed sale of 335 MW (average price = 0.297 Baht/kWh). The selected SPPs are obliged to sell electricity to the grid by 2012.

Forum on Clean Energy, Good Governance and Regulation 16 18 March 2008 Singapore

Adder Rates for VSPPs On 6 December 2006, the government approved the Adder Rates for 10 MW VSPPs that supply power to the grid, at the following fixed rates:
Fuel/Technology Biomass Biogas Mini-hydro (50-200 kW) Micro-hydro (< 50 kW) MSW Wind Solar Adder (Baht/kWh) 0.30 (US 0.88) 0.30 0.40 (US 1.18) 0.80 (US 2.35) 2.50 (US 7.35) 2.50 8.0 (US 23.53)

Remarks: 1) PEA/MEA announcements issued on 1Feb07 and 2Feb07 respectively. 2) VSPPs must submit the proposal to sell electricity by Dec 2008. 3) Rate used: 34 Baht/US$.

After the announcement was made in early February 2007 by the two Distribution Utilities, i.e. the Metropolitan Electricity Authority (MEA) and the Provincial Electricity Authority (PEA), on the provision of Adder, overwhelming response has been received. The number of participating VSPPs has considerably increased from 23 VSPPs (13 MW) in March 2007 to 264 VSPPs in December 2007, making a total proposed sale of 804.83 MW. Of these, 67 VSPPs are already on stream, accounting for a total of 74.60 MW supply to the grid. Special Adder Rates for Renewable Energy SPPs/VSPPs in the Three Southernmost Provinces In order to alleviate the investment risks for power generation from renewable energy in the three southernmost provinces, i.e. Yala, Pattani and Narathivath, the NEPC passed a resolution on 4 June 2007 approving the Special Adder Rates for renewable energy SPPs/VSPPs located in the three provinces. Accordingly, PEA and EGAT have issued an announcement on these Special Adder Rates on 13 and 23 July 2007 respectively.
Fuel/Technology Biomass, Biogas Mini Hydro (50-200 kW) Micro Hydro (< 50 kW) MSW Wind Solar Existing Adder
(Baht/kWh)

Extra Adder
(Baht/kWh)

Special Adder for SPPs/VSPPs in the 3 Southernmost Provinces

(Baht/kWh)

0.30 0.40 0.80 2.50 2.50 8.00

1.0 1.0 1.0 1.0 1.50 1.50

1.30 1.40 1.80 3.50 4.00 9.50

REVIEW OF ADDERS FOR WIND AND SOLAR ENERGY PROJECTS So far, there has been no SPP/VSPP using wind or solar energy participating in the power purchase program although the designated adders have been announced. Following a policy research study, it is found that, although the designated adders is added to the purchasing prices for SPPs/VSPPs, power generation using wind or solar energy is still not cost-effective. To address this problem and to enhance fuel diversification, on 16 November 2007, the NEPC approved the adjustment of adder rates to encourage investment in power generation using wind or solar energy as fuel. That is, for wind-energy power generation, the adder is increased from 2.50 to 3.50 Baht/kWh;
Forum on Clean Energy, Good Governance and Regulation 16 18 March 2008 Singapore 3

for solar-energy power generation, the adder is 8.00 Baht/kWh still; however, the duration of adder provision for both wind and solar energy projects is extended from 7 years to 10 years as from the COD. For the three southernmost provinces, the adder adjustment for wind/solar energy projects is also applied, and the extra adders, as per the 4 June 2007 resolution, remain unchanged. Hence, the adder rates for wind/solar energy projects in the three provinces are currently as follows:
Fuel/ Technology Wind Solar Existing Adder
(Baht/kWh)

Extra Adder
(Baht/kWh)

Special Adder for SPPs/VSPPs in the 3 Southernmost Provinces

(Baht/kWh)

3.50 8.00

1.50 1.50

5.00 9.50

Duration of Adder Provision 10 years 10 years

PROGRESS OF POWER PURCHASE FROM SPPS USING COGENERATION SYSTEM As for SPPs using cogeneration system, the adder scheme is not applied. After a power purchase announcement was issued in early 2007 for a total required capacity of 500 MW from cogeneration SPPs, considerable response was received, i.e. 28 SPPs had submitted proposals with a total proposed sale capacity of 2,191 MW, which was 1,691 MW more than the announced amount. Hence, acceptance of proposals has been discontinued since 31 August 2007. On 16 November 2007, the NEPC approved the selection of the first lot of 9 projects, with 760 MW of proposed sale capacity and also gave consent to increasing the purchase from cogeneration SPPs, but not exceeding the previously approved overall purchase amount from SPPs, i.e. 4,000 MW. Consequently, additional cogeneration SPPs have been selected, making altogether 16 cogeneration SPPs approved for sale of electricity, with a total proposed supply of 1,314 MW to the grid. FORESIGHT OF RENEWABLE ENERGY-FUELED POWER GENERATION Generation of 81.7 MW of electricity from renewable energy projects (solar/wind: 3 MW; small hydropower: 78.7 MW) by EGAT has been incorporated into Thailands Power Development Plan (2007-2021). In addition, more money will be allocated from the governments Energy Conservation Promotion Fund to be used as soft-loans for investors interested in renewable energy projects, such as biogas generation from wastewater in tapioca starch factories to generate electricity. The potential of power generation from biomass is remarkable. So far, rice husks and bagasse have been the main feedstock; however, potential Target of Renewable Energy-Fueled Power Generation of other biomass still exists, such as rice straw, during 2008-2011 sugarcane leaves, cassava rhizomes and emptied Existing in 2006 Target in 2011 Fuel Type palm bunches. A study is now being undertaken MW ktoe MW ktoe on the effective collection system and 30 3 Solar 45 4 management of these types of biomass scattered 1 Wind 115 13 here and there. In addition, the trend of biogas 44 5 Mini/Micro Hydropower 156 17 1,977 664 Biomass 2,800 941 generation from industrial wastewater is rising 4 2 Municipal Solid Waste 100 45 since the industrial operators have better 5 2 Biogas 60 27 recognized the benefits of the biogas system Total 2061 676 3,276 1,047 installation instead of the former wastewater Promotional Measures: - Provision of Adder for power generation using RE & treatment system, in terms of effective - Provision of Soft Loans for RE use environmental impact solution and by-product Speed up implementation via: assistance in designing/subsidizing investment capital/ publicizing past achievements/provision of related information & technical advice energy that can be used on site and/or sold to the Source: Thailands Energy Conservation Program, Renewable Energy Development Program 2008-2011, revised September 2007. grid.
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The target is to increase the use of renewable energy for power generation from 2,061 MW in 2006 to 3,276 MW in 2011, or an increase of 1,215 MW, being able to replace commercial energy consumption at the expected amount of 1,047 ktoe. Thailand has much potential to generate power from renewable energy. Nevertheless, systematic support and promotional policy guidelines of the government is currently necessary to help alleviate the investment cost for renewable energy-fueled power generation development so as to eventually enhance its commercially competitiveness, which will be a key mechanism to further promote the development of appropriate technologies for power generation from each type of potential domestic renewable energy sources. PROMOTION OF THE USE OF CLEAN COAL TECHNOLOGY The Thai government will encourage EGAT and new IPPs to use imported coal for power generation to reduce pollution problems. In addition, efforts will continue to promote the use of Clean Coal Technology. Government support will also be given to R&D on Clean Coal Technology to help open up new opportunities for developing coal-based fuels, which can help utilities to meet more stringent clean air requirements. NUCLEAR POWER GENERATION DEVELOPMENT In addition, in order to be prepared for the rising energy demand in the country and to alleviate the global warming due to fossil fuel combustion, Thailand is contemplating on the road map for nuclear power generation development, which is divided into two phases: 1st Phase (2007-2014) -- a preparatory stage, involving: a feasibility study for the development of a nuclear power generation project; human resources development; selection of an appropriate technology to be used as well as the identification of possible plant sites; establishment of the standards of nuclear power plants (NPP) and related laws to create confidence of the public; and public campaigns to create accurate understanding of the use of nuclear energy together with its advantages and the necessity of its application to Thailand. nd 2 Phase (2015-2020) -- construction of a nuclear power plant (6 years). As there are concerns over the use of nuclear energy, particularly its safety and waste disposal, before making a final decision on the construction of an NPP, public consultations will be organized and a final approval from the cabinet must be obtained.

Forum on Clean Energy, Good Governance and Regulation 16 18 March 2008 Singapore