Thailand takes its foot off the gas

Thailand’s energy security means relying less on gas, but will renewable sources and a plan for nuclear units get the country where it needs to be in time?

Bang Pakong, Thailand’s largest and most efficient thermal power plant
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At the heart of Southeast Asia, Thailand is an increasingly energy intensive country. Out of an estimated population of 67.7 million over 15 per cent live in greater Bangkok and the trend is increasingly away from rural dwelling and towards a city-based population. The result is more energy-intensive industry, more demand for electricity and inevitably, more carbon emissions.

Thailand’s economic growth has stalled as a result of the global economic crisis but recent upward trends point to a recovery, fuelled by a substantial government stimulus programme. The Bt1.4 trillion ($41.2 billion) “Strong Thailand” package includes energy infrastructure project investment. A recent power report on Thailand forecasts that the country will account for 1.9 per cent of Asia’s regional power generation by 2013. The same report projected GDP per capita rising by 40 per cent and electricity consumption per capita growing by eight per cent over the same period.

Gas domination

To understand Thailand’s power sector, it is necessary to understand the extent to which fuel supply is a driving force. Gas is the feedstock for 74 per cent of Thailand’s power generation. Its gas production capabilities are substantial but Thailand is also such a large consumer of gas, not just for power generation, that imports are still necessary, 25 per cent of which come from Burma.

The partly-privatized PTT company dominates the oil industry although Thailand’s oil sector is open to foreign investment, which usually choose to partner with PTT Exploration and Production (PTTEP), PTT’s upstream subsidiary. Thailand’s proven gas reserves were put at 419 billion m3 as of January 2007 and although production has been increasing in recent years these resources are not expected to last more than another 20 years. PTTEP has a stake in many Thai gas fields but the bulk of supply comes from foreign companies, with Chevron being the largest foreign operator, accounting for 70 per cent of the country’s natural gas production. Thailand and Malaysia are jointly developing a new gas field located in the lower part of the Gulf of Thailand, estimated to hold between 226 billion m3 and 679 billion m3 of natural gas reserves. This is one among a number of ongoing projects that will see Thailand increase its natural gas supplies in the next few years. With gas being so important for the current power generation fleet and with domestic gas reserves limited, the country is likely to face increased dependency on gas imports.

Thailand’s power generation by fuel source, October 2008 Source: EGAT
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Although domestic lignite reserves are quite abundant, they have low calorific content and are environmentally damaging. Any expansion of coal fired power plants nearby is unlikely due to public opposition to environmental emissions. Therefore, any new coal fired power plants would have to rely on imported coal, which in turn raises the issue of supply security.

The Electricity Generating Authority of Thailand (EGAT) is primarily responsible for power generation and transmission, while the Metropolitan Electricity Authority (MEA) and the Provincial Electricity Authority (PEA) share responsibility for distributing electricity to Bangkok and the provinces, respectively. By the end of 2008, EGAT’s generating facilities had a total installed capacity of 15 GW, accounting for 50.25 per cent of the country’s total generating capacity of 29.9 GW.

EGAT’s long-term plan is to increase the minimum power reserve from 15 per cent to 25 per cent. The Thai Power Development Plan envisages installed capacity increasing to 52 GW by 2021. Around 14.8 GW of power generation is accounted for by a mixture of independent power producers – IPPs (12.1 GW), small power producers à‚— SPPs (2.1 GW) and power imports from neighbouring power utilities in Laos and Malaysia (640 MW). EGAT plans to increase its purchase of power for the national grid from SPPs to a total of 4000 MW during the period 2009-2014.

Privatization saga

There have been repeated attempts to privatize EGAT, with the intention of using the funds raised to invest in building new power plants. In early 2004, massive employee protests forced the EGAT governor to resign, thus delaying the planned privatization. The succeeding governor, Kraisri Karnasuta, worked with employees to address their concerns and, by December 2004, 80 per cent of the employees supported privatization, and the process was restarted. The agency was transformed to public limited company in June 2005. However, EGAT’s privatization was once again halted when a petition was filed with the Supreme Administrative Court a few days before the scheduled listing.

In March 2006, the court ruled against EGAT’s privatization, citing conflicts of interest, public hearing irregularities and the continued right of expropriating public land. The court also ruled that insufficient opportunities were given for EGAT employees to make themselves heard, as there was only one public hearing for employees. The court nullified two decrees: one ordering the dissolution of the status of EGAT as a state enterprise, and the other serving as a new charter for EGAT plc. A combination of legal obstacles, public mood and government instability probably points to the issue of privatization remaining on the back burner for the time being.

Green agenda

The Thai government has declared its objective of increasing the level of renewable energy use from the current level of 0.5 per cent to eight per cent by 2011. Its stated goal is that renewables will make up 20 per cent of total energy consumption by 2020. Thailand is one of the first countries in the region to announce a fully developed renewable energy policy.

Its 15-year Renewable Energy Development Plan (REDP) aims to diversify the sources of power generation through investment by EGAT, IPPs, SPPs, as well as investing in neighbouring countries. “The objective is to ensure the security and the sustainability of the energy system in Thailand,” said the Thai Minister of Energy, Wannarat Channukul, in his introductory letter to the POWER-GEN Asia conference & exhibition, taking place in Bangkok on 7-9 October 2009.

Thailand believes it can create 40 000 new jobs in the arena of clean technology and potentially earn up to Bt14 billion a year from carbon credit trading. The country’s policies have attracted the interest of companies seeking to develop power and cogeneration projects under the Kyoto CDM mechanism. Germany utility EnBW has just announced its intention to partner with local investors to build up to 12 small (10 MW) biomass-based plants.

The REDP will focus on four types of power plants; mini-hydropower plants, waste power plants, wind power plants and solar power plants. To achieve the eight per cent goal, the government is encouraging the power generation sector to produce around 1900 MW from renewable sources. IPPs are required to adhere to the renewable portfolio standard, under which power producers that wish to sell power to EGAT must produce five per cent of their installed capacity from renewable sources.

Biomass-based energy is expected to be a big contributor reflecting Thailand’s high dependence on the agricultural sector and its access to large amounts of waste agricultural material. Agricultural residues, such as bagasse and palm fibre have been used as energy sources in cogeneration plants. However, expected improvements in the efficiency of operation of these plants will also ensure greater heat rate and improved electricity levels.

EGAT also plans to encourage very small power producers (VSPPs) to use solar cells. A solar cell power plant with a capacity of 500 kW, which is the largest plant in Southeast Asia, was opened in a remote area in the north of Thailand in July 2006. Solar energy plants are expected to increase in remote areas that do not have access to the power grid.

Infrastructure Investment

Thailand has continued to invest in its power delivery infrastructure over the past two years. Under the “Strong Thailand” project, plans for two transmission grid projects worth $411 million are being accelerated by a year. One project with connect a number of IPPs’ plants to the grid while the second project is to connect the Hongsa power plant on Laos.

Installed generating capacity, October 2008 Source: EGAT
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EGAT is planning to build two 1000 MW nuclear power plants, beginning in 2020 and 2021. Even if this timetable is adhered to, it leaves Thailand dependent on gas for at least another decade. Meanwhile, a consortium including Siemens and Marubeni completed the building of a 700 MW gas fired combined-cycle power plant, Bang Pakong 5, in March 2009 à‚— Thailand’s biggest and most modern thermal power plant. Amata and Sumitomo are building a 280 MW cogeneration plant in Rayong, due to enter commercial operation in 2012.

SGC Wind Energy is developing Thailand’s first private wind power plant. It will be located in Nakhon Si Thammarat on the Hua Sai coastline, with a capacity of 30 MW. Demco is also developing a 100 MW wind plant in Petchaboon. Lastly, in June 2007, Thailand’s National Energy Policy Committee called for bids for up to 1000 MW of SPP plants, ranging in size from 10-100 MW. Around half of this capacity will be from cogeneration plants while the other half will be from renewable energy.

Future Trends

Thailand is finalizing a new national power development plan covering 2009 à‚— 2024. Between 2007 and 2021, electricity demand is expected to increase at an average of around 5.7 per cent per year. The economic crisis, coupled with political unrest earlier in the year, has inevitably resulted in a drop in electricity demand. However, in August EGAT reported national power consumption up two per cent, the first increase in eight months and, according to the EGAT governor, a sign of the recovery.

The current high dependence on gas in power generation makes Thailand vulnerable to fluctuations in the international market. Speaking recently, the deputy governor of the Electricity Generating Company of Thailand (EGAT) said, “The dependence on natural gas left the country at the mercy of global prices, because natural gas fluctuated in line with the global oil price. Another risk is that the country has to rely on natural gas from a foreign country.”

Meanwhile, this dependence makes the electricity generation system more vulnerable to disruption, as the country may not have sufficient capacity to meet demand in the case of a supply shortage.

All this means that Thailand must diversify its generation base away from gas and do so as quickly as possible.

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