Up to this point, Thailand’s strategy of providing affordable energy to the country primarily by exploiting domestic natural gas supplies – supplemented by foreign imports – has been successful in meeting growing domestic demand while maintaining tariff rates competitive enough to remain attractive for industrial customers. Yet as domestic oil and gas reserves decline and the costs of importing increasing amounts of gas continue to mount, the government rolled out a new power development plan in 2015 which puts a heavier emphasis on domestic energy sources. This new roadmap differs from its predecessor, the Power Development Plan (PDP) 2010, in terms of the overall primary energy mix, energy efficiency measures and reserve margins, while taking into account a downward revision of GDP growth rates from 4.49% per year to 3.94%.
Thailand’s National Energy Policy Council approved the PDP 2015 in May 2015, ushering in what looks to be a new era of development, including for the first time an Alternative Energy Development Plan (AEDP) and an Energy Efficiency Development Plan (EEDP). The PDP 2015 lays out Thailand’s energy and investment plans for the next 21 years, from 2015-36, with a more pronounced focus on three key national strategic objectives: security, ecology and economy.
“The current areas of focus for Thailand in power generation are to ensure energy security through the reduction of gas fuels’ contribution to total power generation, to reduce carbon dioxide emissions from 0.5kg/KWh to 0.3 kg/kWh over the span of the current PDP, and to ensure that electricity tariffs are structured such that they are regionally competitive,” Saharath Boonpotipukdee, deputy governor for corporate social affairs at the Electricity Generation Authority of Thailand, told OBG. The first of these objectives, security, seeks to address the growing dependence on foreign sources for Thailand’s primary energy needs in the oil, gas and electricity sectors, by diversifying the country’s energy basket. This is to be done while also taking into account the environmental impact of the sector, and placing new emphasis on deploying renewable and energy efficiency measures through the integration of the EEDP and the AEDP.
There is also a social and civil component which factors into this emphasis on cleaner power production. Historically, new power plants in Thailand – particularly coal-fired, nuclear and large hydropower projects – have faced strong opposition from local communities due to their social and environmental impacts. Opposition has grown in recent years, aided by stronger laws and regulations, as well as a growing public awareness. Developers utilising these technologies have found it increasingly difficult to bring new projects to fruition profitably. Security and ecological concerns also must take into account the economic implications, by keeping fuel and power generation costs manageable over the coming decades through appropriately determining power tariffs that accurately reflect the costs of primary energy.
These objectives are to be achieved by adding new generation capacity, which will far more diverse than in earlier plans in an effort to reduce the sector’s dependence on fossil fuels. This in turn provides investors with substantial opportunities to develop the alternative technologies favoured by the new plan, including increased usage of clean coal technology, greater usage of renewable energy sources, nuclear power projects, greater energy efficiency measures and a higher proportion of imported power from neighbouring countries.
New generation is expected to include a reserve margin of at least 15% above peak power demand, and much higher than this in the near term, while power and distribution networks will also be bolstered. This will include the implementation of new smart grid technology to aid in absorbing greater amounts of renewable energy that produce variable rather than constant electricity output.
The Next Generation
With electricity consumption expected to continue to climb over the next two decades regardless of efficiency measures, a total of 57,459 MW of additional power capacity is projected to be installed from 2015-36 in the form of new power plants. These facilities, combined with the 37,612 MW of installed capacity at the end of 2014 minus the 24,736 MW of obsolete power plant capacity expected to be retired over this time period, will result in a near doubling of the installed capacity by 2036 to 70,335 MW. In spite of a declining position in the country’s overall energy fuel mix over time, natural gas-fired power plants will remain well represented as 15 new gas-fired facilities – with a combined total of 17,478 MW – are expected to be built over the life of the development plan.
Renewable energy stands to gain the most ground, adding 12,105 MW of new installed capacity to its relatively low current base, while another 11,016 MW of imported power will also be factored in. This will be supplemented by another 7390 MW of clean coal technology that will be spread over nine power plants, 4119 MW of co-generation, 2101 MW of pumped storage hydropower, 2000 MW from two nuclear power units and 1250 MW (supplied through five plants) of gas turbine technology.
By the end of the PDP 2015, the aim of policy makers was to cut natural gas to a share of 30-40%, down from the 2014 level of 64%. In order to compensate, the proportion of renewable energy will rise to 15-20% of total electricity production from the 8% share it held in 2014. This marks a significant departure from the far less ambitious renewable targets that were laid out in the previous development plan, PDP 2010, which projected no significant growth in the sector, with renewable energy still only making up 8% of total generation capacity by 2030.
The plan also foresees the share of coal and lignite rising from the 2014 level of 20% to 25% in 2036. An unspecified amount of this capacity is supposed to be delivered as “clean coal” through carbon capture and storage technology. Hydropower is expected to deliver 15-20% of power production by 2036, while a share of 0-5% will come from nuclear power.
The plan will also accelerate a strategy in Thailand which is unique within the region – that of developing large power plants, generally large hydro projects, outside of the country coupled with long-term power supply contracts to import electricity. By outsourcing these builds, the power sector has been able to circumvent some of the domestic regulatory hurdles and social opposition to such projects, while still securing the power necessary to fuel planned economic expansion.
Following in the same vein as existing arrangements, the majority of new imports laid out in PDP 2015 will be sourced from Laos, along with Myanmar and Yunnan Province in south-western China. As of 2014, imported hydropower accounted for 7% of Thailand’s power requirements. This source will increase to 10-15% in the first decade of the plan of PDP 2015 and then to 15-20% in the second decade. This includes committed projects including the controversial Xayaburi Dam on the Mekong River, and the Hongsa coal-fired plant in Laos.
One of the most significant changes in the composition of the primary energy structure in the plan is a dramatic increase in efficiency measures, which are projected to replace the need for 8900 MW of installed capacity by 2036. The prominence of energy efficiency in the master energy plan is largely the result of the inclusion of the EEDP (2011-30), which aims to reduce energy intensity by 25% in 2030 from 2005 levels. This will be equivalent to a reduction of energy consumption of roughly 30,000 tonnes of crude oil equivalent. The Ministry of Energy projects that implementing the EEDP will result in energy savings worth some BT272bn ($8.2bn) annually, while also cutting carbon dioxide emissions by an average of 49m tonnes per annum.
Energy efficiency efforts will be implemented through measures such as revised building energy codes, performance standards, financial incentives and consumption limits. For some of these measures, support for smaller businesses will come out of government budgets in the form of soft loans, while many larger businesses and industrial producers will be mandated by law to comply with the guidelines, compared to previous efforts which encouraged companies to comply voluntarily. These efficiency measures are projected to increase the reserve margin of the power sector significantly over the next decade. Commercial businesses are expected to contribute the lion’s share to these efficiency gains, with the segment accounting for 41% of the total planned savings; this is followed by industrial users with a 36% reduction, residential customers with a 15% decrease and planned government cutbacks of 8%.
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