Rethinking “energy security” and power sector planning: a case study of Thailand 18-19 January 2012 Chuenchom Sangarasri Greacen Palang Thai "Know Your.

Rethinking “energy security” and

power sector planning: a case study of Thailand

18-19 January 2012 Chuenchom Sangarasri Greacen

Palang Thai"Know Your Power“ International Conference

Towards a Participatory Approachfor Sustainable Power Development in the Mekong Region

Brief history of Thai power sector

• 1960s: decentralized coops in close competition with centralized utilities as the model to electrify Thailand. • Centralized model chosen not by technical superiority but

rather by Cold War politics• 1960s-90s: rapid expansion of power system by

state-owned utilities• World Bank and aid agencies had major roles

• 1990s: neoliberal reforms• Partial divestiture of EGAT’s generation assets (EGCO, RATCH)• Small and Independent Power Producers (SPPs/IPPs)• Role of private foreign capital

Brief history of Thai power sector (2)

• 2000s-present: • Plan to create Power Pool abandoned• Attempt to partially privatize (equitize) monopoly EGAT in

the stock market thwarted by civil society’s lawsuit• But increasing financialization of electricity in the stock

market continued via EGAT’s subsidiaries, other Thai energy companies and their joint ventures with foreign capital

• Increasing roles of Thai listed non-energy companies (e.g. construction) in power project investment

• Mushrooming power projects, domestic & trans-boundary

ISSUES AND TRENDS IN POWER SECTOR PLANNING AND DEVELOPMENT

Changing role of electricity

• Electricity as public service profitable commodity

• Commons like rivers trans-boundary commodities

Performance of high-level energy officials in serving the government vs.

PTT Plc. (Thai gas/oil utility, the largest list company in Thailand)Attendance of

PTT board meetings*

Attendance of Automatic Tariff (Ft) mechanism

mtgs**

Permanent Secretary

13/13 4/6

Director of EPPO

8/9 5/6*จากรายงานประจาป�บมจ. ปตท. ป� 2546** ต��งแต�ม�การปร�บองค์�ประกอบค์ณะอน�กรรมการ Ft โดยแต�งต��งให้�นายเชิ!ดพงษ์�เป$นประธาน และนายเมตตาเป$นรองประธาน( ปลายป� 46)

100%

90%

67%

83%

Changing role of policy makers:Serving public or corporations?

Hybrid identity, conflict of interest

Source: www.ratch.co.th

Power projects and policies driven by companies

• Power Development Plan (PDP) used to be the master plan for capacity expansion• Determines how many of which kind of plants get

built when• But now some projects were on “fast track”

even before being listed in the PDP, e.g. • 1,260 MW Xayaburi dam• 4,000 MW coal-fired plants in Dawei

Energy policy and plans become tools to drive the stock market and churn profits

• The coup-installed government announced its policy on energy investment opportunities on 3 Oct 2006

• Energy policy, PDP approval and IPP bidding resulted in significant windfall benefits for selected companies

• 1 year later, the share prices of companies benefiting from the PDP jumped 66% (other companies had a 8.7% rise)

Index Market Cap.

(M Baht) Index

Market Cap. (M Baht)

SET index 732.3 5,398,975 894.34 6,902,455 22.1%Energy - total 1,549,720 2,416,915 55.4% Energy - PDP-related 1,189,947 1,975,093 66.0% Energy- PTT-related* 1,178,612 1,946,230 65.1% Energy - PDP/PTT-related 1,379,886 2,259,729 63.8% Energy-non-PDP/PTT 25,212 22,126 -13.2%Non-energy SET index 3,849,255 4,485,540 8.7%

*"PTT-related" = PTT having more than 25% shares (voting rights) in the company

Share value increase in 1

year (%)

3-Nov-06 2-Nov-07

Investment disconnected actual need for electricity

• Criteria for determining generation requirement:• Reserve margin (capacity in excess of peak demand) ≥ 15%

• Yet Thailand’s PDP2010 adds generation:• 920 MW Nam Theun 2 when reserve margin > 28%• 597 MW Nam Ngum 2 when reserve margin > 27%• 660 MW Gheco1 when reserve margin > 27%• 1600 MW SiamEnergy when reserve margin > 25%• and many more….

Planned new investments are so excessive despite exaggerated “needs”

Used to justify NT2

5,800 MW

The year NT2 came online

Over-investment = unnecessary impacts,burden on consumers and economy

Thai power sector suffered from “over-capacity worth 400 billion Baht” (from total assets of 700 billion Baht and annual turnover of 240 billion Baht)

– PM Thaksin Shinwatra, 2004

Wasteful inefficiencychanging energy intensity over 20-yr period

Data source: Energy Information Administration 2008

Electricity productionand consumption(GWh)

1700 families relocated

Loss of livelihood for >6200 families

Loss of 116 fish species (44%)

Fishery yield down 80%

65MaeHongSong

Sou

rce: M

EA

, EG

AT, S

earin

, Gra

ph

ic: Gre

en

World

Fou

nd

atio

n

Dams Malls Province

Pak

Mun

Impacts of Pak Mun Dam alone

MBK

123

81

75

Siam Paragon

Central World

Extreme inequalityStructural violence in the name of “energy security”

TIME TO RETHINK “ENERGY SECURITY” & POWER SECTOR PLANNING

What is “energy security”?

A. The more, the betterB. Resource adequacy (availability)C. Resource adequacy & affordability.D. Resource adequacy & affordability &

efficiencyE. Resource adequacy & affordability &

efficiency & environmental quality

Source: Brown, Marilyn A., 2011

What is “energy security”?

A. The more, the betterB. Resource adequacyC. Resource adequacy & affordability.D. Resource adequacy & affordability &

efficiencyE. Resource adequacy & affordability &

efficiency & environmental quality

Government Policy Frameworkaccording to Energy Industry Act 2007

4 dimensions of energy security

Energy Industry Act 2007 Indicators

Availability - Resource Adequacy- Min. dependency on imports- Diversification (supply disruption)

- Reserve margin ≥15%- % energy imports- Concentration (plant)

Affordability - Affordable cost of service- Min. exposure to price volatility

- Electricity cost (B/mo.)- % exposure to oil price

Efficiency - Energy & economic efficiency - Energy intensity (GWh/GDP)

Environment - Min. environmental impacts - GHG emissions- SO2 emissions

Need to make “energy security” and PDP accountable to

government policy frameworkFramework for

evaluating PDPs

MAKING NEW & IMPROVED POWER DEVELOPMENT PLANS

PDP 2010

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

nuclear

EE/DSM

Others

Oil/gas

RE DEDE

Cogen

Hydro imports

Hydro

Gas

Coal

New generation includes:11,669 MW of imports 8,400 MW of coal plants16,670 MW of gas plants 5,000 MW of nuclear

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

-500

0

500

1000

1500

2000

Avg forecast increase1,491 MW/yr in PDP 2010

Avg forecast increase 830 MW/yr in PDP2012

Past actual averages:830 MW/yr (25 yrs)813 MW/yr (15 yrs)772 MW/yr (10 yrs)407 MW/yr ( 5 yrs)

Actual Forecast

New & improved PDPs

• New PDP based on more realistic demand forecast = “PDP2012”

• Improved PDP based on PDP2010 forecast = “PDP2010v2”

Methodology

– Maintain 15% minimum reserve margin– Prioritize investment in energy efficiency (EE)/ demand-side

management (DSM) as a resource option– Consider life extension (delayed retirement) of power plants

as a resource option• Additional investment might be required but only done in cases

that are economic compared to building a new power plant.

– When additional capacity is needed, prioritize (high-efficiency) cogeneration over (inefficient) centralized generation

– New generation not already under construction may be removed if not needed to maintain 15% reserve margin

EE/DSM cumulative savings in PDP2012 and PDP2010v2

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

0

1500

3000

4500

6000

7500

9000

10500

EE/DSM cumulative savings in PDP2012 or PDP2010v2 (MW)

EE savings (PDP2010)

Additional EE savings consistent with the gov-ernment's 20-yr EE Plan (PDP2012)

0

2

4

6

8

10

12

245 514 1598 2202 2560 3444 4934 6735 8945

Cumulative Resource Potential (Average Megawatts)

Real Leveliz

ed C

ost

(C

ents/k

Wh - 2

000$

)

EE

Renewables

Coal

Gas turbines

Combined cycle

Resource potential for generic coal, gas & wind resources shown for typical unit size. Additional potential is available at comparable costs.

Source: Northwest Power and Conservation Council

DSM/EE are the cheapest options to meet growing demand (but not yet considered an

option in Thailand)Cost comparison for different supply options in Pacific Northwest, USA.

PDP 2010 (Thailand) Pacific NorthwestUSA

DSM saving potential is under utilized in Thailand

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

GWH/

year

1978 1982 1986 1990 1994 1998 2002 2006

BPA and Utility Programs NEEA Programs State Codes Federal Standards

DSM/EE measures led to savings of over 30,000 GWH/yr

0

5000

10000

15000

20000

25000

30000

35000

2553 2555 2557 2559 2561 2563 2565 2567 2569 2571 2573

ท�'มา: Tom Eckman, Northwest Power and Conservation Council, 2009.

ท�'มา: สไลด�แผ่�นท�'19, สมมต!ฐานและภาพรวมร�างแผ่น PDP 2010, 17 ก�มภาพ�นธ� 2553.http://www.eppo.go.th/power/pdp/seminar-17feb2553/assumptions-PDP2010.pdf

0.3% saving in 20 yrs

Cogeneration (Combined Heat and Power – CHP)

Cogeneration in PDP 2012Application MW ProgramExisting signed PPAs 3790 SPPApproved but not yet signed PPA 2835 SPPNew cooling CHP projects under 10 MW each -- identified in (Menke et al., 2006)

3500 VSPP

New VSPP in ceramics, paper, pellet and other industries

(not counted)

VSPP

0.9% per year growth in opportunities over next 18 years

1700 SPP+VSPP

Total 11825

PDP2012 adds 4,800 MW of cogenerationbeyond what was already in the plan

Plant life extension (1)Power plants to be

decommissioned in PDP2010 MWPlant life at

decommissioning

Extended life to delay

decommissioning and construction of

new plants*EGAT Nam Pong CC #1 � 325 25 Nam Pong CC #2 � 325 25 30 Bang Pakong TH #1-2 1,052 30 Bang Pakong TH #3 576 30 Bang Pakong TH #4 576 30 Bang Pakong CC # 3 314 25 Bang Pakong CC # 4 314 25 30 South Bangkok CC #1 316 25 30 South Bangkok CC #2 562 25 30 Mae Moh TH # 4 140 40 Mae Moh TH # 5-6 280 40 Mae Moh TH #7 140 40 Mae Moh TH # 8 270 40 Mae Moh TH #9 270 40 Wang Noi TH #1-3 1,910 25 30

* Plant life extension may require additional investments and time to maintain and upgrade equipment. The time and resources required to extend plant life are usually significantly less than building a new one. However, more detailed assessment should be done on a case by case basis to ensure technical and economic feasibility of plant life extension.

Plant life extension (2)Power plants to be

decommissioned in PDP2010 MWPlant life at

decommissioning

Extended life to delay decommissioning and construction of new

plants*

IPPs Khanom TH #1 70 15 Khanom TH #2 70 20 Khanom CC #1 678 20 Eastern Power 350 20 30 Glow IPP 713 25 30

Independent Power (Thailand) (IPT) 700 25 30

Tri Energy Co., Ltd 700 20 30 Hauay Ho 126 30 Theun Hinboun 214 25 Rayong CC #1-4 1,175 20 Ratchaburi TH #1-2 1,440 25 30 Ratchaburi CC #1-2 1,360 25 30 Ratchabuti CC # 3 681 25 30

* Plant life extension may require additional investments and time to maintain and upgrade equipment. The time and resources required to extend plant life are usually significantly less than building a new one. However, more detailed assessment should be done on a case by case basis to ensure technical and economic feasibility of plant life extension.

Renewable Energy

• Same amount as planned in PDP2010• PDP2010 did acceptable job of including more

RE• RE projects also have impacts and face

community opposition• Need to address EIA loophole for projects < 10

MW to address environmental concerns

Summary of different PDPs

Generation by fuel type

2010PDP 2010 PDP 2010 v. 2 PDP 2012

2030 2030 2030

MW % MW % MW % MW %

Coal 3,527 11% 12,669 19% 6,269 13% 3,087 9%

Gas 16,091 51% 21,668 33% 15,972 34% 9,572 27%

Hydro – EGAT 3,424 11% 3,936 6% 3,936 8% 3,936 11%

Hydro – imports 1,260 4% 9,827 15% 3,827 8% 1,737 5%

Cogeneration 1,878 6% 7,024 11% 11,824 25% 11,824 33%

Renewables 767 2% 4,804 7% 4,804 10% 4,804 14%

Oil/gas 3,784 12% 0 0% 0 0% 0 0%

Nuclear 0 0% 5,000 8% 0 0% 0 0%Others (fuel oil, diesel, Malay) 619 2% 619 1% 619 1% 619 2%

Total generation 31,350 100% 65,547 100% 47,251 100% 35,579 100%Additional EE/DSM

savings -   -   13,160   9,923  

Total Resources 31,350   65,547   60,411   45,502  

Comparing PDPs

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

PDP 2010

nuclear

EE/DSM

Others

Oil/gas

RE DEDE

Cogen

Hydro imports

Hydro

Gas

Coal

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

PDP2012

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

PDP2010v2

Dependency on electricity/fuel imports

2010 PDP2010 PDP2010v2

PDP20120

50,000

100,000

150,000

200,000

250,000

Uranium (Kazakhstan/Aus-tralia)

Power imports (Laos/Burma/Malay)

Diesel

Fuel Oil

Gas imports (Burma/Middle East)

Coal imports (Indonesia/Australia)

GWH

Cost of service (Baht/month) change in 2030 compared to 2010

2010 PDP2010 PDP2010v2 PDP20120

50

100

150

200

250

300

350

400

450

500Cost of service (Baht/month)

PDP2010 PDP2010v2 PDP2012

-15%

-10%

-5%

0%

5%3.5%

-13.2%

1.3%

Exposure to price volatility risks change in 2030 compared to 2010

PDP2010 PDP2010v2 PDP2012

-35.00%

-30.00%

-25.00%

-20.00%

-15.00%

-10.00%

-5.00%

0.00%

-29.65%

-20.81%-18.87%

Energy intensity change in 2030 compared to 2010

PDP2010 PDP2012v2 PDP2012

-20.0%

-15.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%

4.1%

-16.7% -16.7%

Energy intensity (GWh/GDP billion Baht)

Emissions of air pollutantschange in 2030 compared to 2010

GHG Nox SO2 TSP Hg-50%

0%

50%

100%

150%

200%

250%

300%

350%

400%

450%

PDP2010PDP2010v2PDP2012

Comparing PDPs against different elements of energy security

change in 2030 compared to 2010

SO2 em

issions

GHG emiss

ions

Import

dependen

cy

energ

y inten

sity

Cost of s

ervice

Exposu

re to

oil pric

e risk

s

Concentra

tion (plan

t disr

uption)

PDP2010

SO2 em

issions

GHG emiss

ions

Import

dependen

cy

energ

y inten

sity

Cost of s

ervice

Exposu

re to

oil pric

e risk

s

Concentra

tion (plan

t disr

uption)

42%52% 56%

-17% -13% -21%

-97%

PDP2010v2

-15%

4%18%

-17%

1%

-19%

-97%

PDP2012

Concluding remarks

• Worrying trend of commoditizing electricity• “Energy security” and PDP process distorted to generate profits

for a few at the expense of– Affected communities - Environment– Consumers - Economy

• Need framework to hold “energy security” and PDP accountable to Energy Industry Act & the public

• Need to reform PDP process to prioritize cheaper, cleaner options to meeting demand

• Proposed PDP2012 better achieves energy security without the need for new green-field centralized coal/ gas/dam/nuclear.

Thank you

www.palangthai.org

Source: The 5th NW Electric Power and ConservationPlan

Supply options in NW USA

Source: The 5th NW Electric Power and ConservationPlan

Supply options in NW USA