“In light of Thailand’s goal to achieve carbon neutrality by 2050, the power sector is considered the most crucial in supporting this goal. The continuous and high rate of electricity consumption in Thailand has led the electricity sector being the largest contributor to carbon dioxide emissions. Apart from that, in the private sector, there has been a significant awareness and initiative in reducing carbon dioxide emissions. In the manufacturing sector, leading private organizations have set targets to achieve carbon neutrality faster than the national goals, as seen in companies within the RE100 group. This signifies the need for the power sector to adjust and reduce emissions, given its significant role in the overall manufacturing system. Therefore, it is imperative for the government to expedite the reform of the power sector to transition towards cleaner electricity sources.
While each country’s energy policy planners can prioritize clean electricity, energy policies must consider a balanced approach which called “Triangle of balancing”, addressing aspects such as energy security, energy affordability, and sustainability. Thailand, as per evaluations of its energy balance index by the Office of Energy Policy and Planning, has shown a consistent trend of lower the score of energy balancing, particularly in terms of high electricity prices and the proportion of clean electricity. When compared to neighboring countries such as Vietnam and Indonesia, the results also align, indicating that Thailand should continuously improve its electricity pricing and increase the proportion of clean electricity, even though the clean electricity share is relatively favorable compared to neighboring countries.
The government itself has recognized the necessity for Thailand to improve its electricity pricing and accelerate the transition to a higher proportion of clean electricity. In addition to setting a target to achieve carbon neutrality by 2050, there have been an effort to increase the share of clean electricity in the power sector and make electricity more affordable and equitable. According to the LT-LEDS plan, to achieve Thailand’s carbon neutrality goal, the power sector plays a crucial role, aiming to have clean electricity constitute up to 74% of the total fuel mix in electricity production by 2050. According to this, the government has planned some policies, as outlined in the draft of Power Development Plan (PDP) 2023, including initiatives like supporting community solar projects, phasing out coal in electricity production, and mandating that at least 50% of new installed capacity must be from clean fuel sources. Additionally, there are measures to support energy storage technologies and hydrogen. In terms of electricity prices, the government aims to cap the cost at not exceeding 5 Baht per unit throughout the plan. Furthermore, there is support for innovation in the electricity sector, exemplified by the ERC Sandbox project.
However, these efforts, while commendable, are only part of the solutions to achieve carbon neutrality and may not be sufficient on their own. The key factor in making the goal more achievable is the promoting of electricity liberalization, which should be clearly outlined in the Power Development Plan (PDP).
Despite several government policies aimed at supporting carbon reduction, some policies have been perceived as inconsistent with the stated goals and hinder the promoting of electricity liberalization. These policies can be categorized along the electricity supply chain as follows:
1. Production: The policies that have been perceived as inconsistent with the goals of moving toward increasing clean electricity in generation mix include approvals for additional gas power plants construction, adjustments in clean electricity purchasing prices, and the disapproval of net metering.
2. Transmission: The policy that has been perceived as inconsistent with the goals of promoting electricity liberalization is that the government does not grant the right to connect the transmission lines to private entities, limiting community participation in electricity trading.
3. Distribution: The policy that has been perceived as inconsistent with the goals of affordability and fair electricity prices involve setting electricity prices without comprehensive coverage of the actual costs which is from an unfair pricing structure.
In terms of production, Thai government continues to allow the construction of additional gas power plants, which can imply that the country may rely on gas as the main fuel for electricity production for another approximately 20 years, based on the average lifespan of gas plants. This could affect the goal of achieving a clean electricity proportion and may impact the resilience of the energy system. The continuous increase in gas imports for electricity production, which has risen from 18% to 20% from 2017 to 2022, could pose a risk to the overall electricity security of the country, especially if there are geopolitical issues affecting gas imports, such as disruptions from Myanmar. Additionally, the future acceleration of reducing the role of gas power plants could pose a risk to managing the assets of these plants that may become stranded assets.
Furthermore, the adjustment of the clean electricity’s purchase price by the government has led several Thai energy companies to invest in clean electricity projects in Vietnam. In 2020, Thai energy companies invested in building 2,000 MW of clean electricity, accounting for 12% of Vietnam’s total clean electricity capacity. This not only hinders Thailand’s competitiveness in increasing the share of clean electricity but also diminishes the ability to attract investors interested in clean energy businesses in the country.
One recent policy that deviates from the goal of increasing the share of clean electricity is the government’s decision to disapproved the Net Metering plan during in the late stages of General Prayuth’s government, citing tax system constraints. This is considered a significant demotivation factor in accelerating the growth of clean electricity through the installation of solar rooftops as net metering policy could have helped households save on electricity costs by offsetting the electricity produced from their rooftops with actual consumption.
In the transmission part, the government’s policy which is perceived as not supporting a liberalized market, is evident in the restriction of access for private entities to the transmission system. Although the Energy Regulatory Commission has outlined criteria for connecting to the transmission system with service charges starting from early 2022, there is still no clear policy yet.
For the distribution part, the government’s electricity pricing structure has led to high electricity costs. The unfair pricing structure can be divided into two issues. Firstly, the government’s overestimation of electricity demand has resulted in the approval of additional power plants. When the actual demand falls short of the projections, many power plants remain idle, leading to an excess reserve capacity above the standard (36.4% compared as of Mar 2023 to the 15% standard). As per the Power Purchase Agreement (PPA), the power plants are entitled to Availability payments even when not in operation, reflecting in the electricity tariffs. The second issue is the government’s unfair setting of the structure cost of natural gas used in electricity production. The power sector uses expensive gas as a production cost, while the petrochemical industry enjoys the benefit of cheap gas, particularly from the Gulf of Thailand. This results in power sector compensating for the higher cost of gas by importing liquefied natural gas (LNG) and gas from Myanmar, which are more expensive. Despite the logical allocation of gas from the Gulf of Thailand to the petrochemical industry, the unfairness arises as the petrochemical industry does not contribute proportionately to the cost structure of gas used in electricity production.
It can be observed that despite the government’s policies aiming to promote a higher proportion of clean electricity and affordable electricity prices, there are several conflicting policies. However, pressure from domestic organizations and international organizations has compelled the government to expedite efforts to achieve a clean electricity target of up to 74% and affordable electricity prices. To make this goal a reality, the government needs to accelerate the reform of the electricity system, moving towards a liberalized electricity market.
The current electricity system and a liberalized electricity market system differ. The existing system is referred to as the “Enhanced Single Buyer” system, where the electricity authority (EGAT) acts as the sole purchaser from private electricity producers. Private producers cannot sell electricity directly to consumers, except for small-scale private power plants that can directly sell to industrial estates. Electricity distribution to the public must go through state entities, such as the Metropolitan Electricity Authority and the Provincial Electricity Authority. In a liberalized electricity market system, multiple competitive electricity producers participate in auctions to sell electricity to retailers through the wholesale market. Retailers, including the Metropolitan Electricity Authority, the Provincial Electricity Authority, private retailers and household-level electricity producers, then compete to sell electricity to consumers. Consumers have the freedom to choose their electricity supplier through a trading platform or without going through the platform. The liberalized electricity system promotes efficient allocation of resources at fair prices, as producers in a competitive electricity market have the incentive to meet the needs of consumers in terms of price, type and quality of electricity.
The liberalized electricity system can help the power sector achieve its goal of increasing the share of clean electricity and ensuring fair prices. In this market, the government should provide support by promoting competition in production, granting access to the transmission system, and selling electricity to the public at fair prices.
In terms of promoting competition in production, alongside the plan to reduce and phase out coal in electricity production, the government should consider increasing the construction of clean electricity power plants and implementing hydrogen-gas fired power plants which can reduce emissions from electricity production. This would support the target of achieving a 74% share of clean electricity by 2050 and reduce the role of gas power plants. However, questions arise about the current state of existing power plants, as the country’s electricity reserve is relatively high. Therefore, merely increasing clean electricity power plants may not efficiently support energy balance.
To address this, negotiations and collaboration with private power plants should be pursued to modify Power Purchase Agreements (PPAs), reducing the lifespan and availability payment costs. This is crucial as the demand for gas in electricity production would decrease with an increased number of clean electricity power plants. However, in a short term, the current challenges with the stability of electricity production persist. Gas power plants still play a crucial role in maintaining electricity production stability, but the adjustments of the operation themselves are necessary to ensure flexibility, allowing them to start and stop more quickly than before and can operate at a lower level than before to enhance production when clean electricity generation does not meet the plan. In the long term, when the cost of energy storage technology combined with the cost of clean electricity production decreases to a level lower than the cost of electricity per unit from gas-fired production, then the role of gas power plants will decrease.
Furthermore, in terms of promoting production competition, the government should consider implementing a Net Metering system. As of 2020, the installed capacity of solar rooftop was at 350 megawatts per year, falling short of the target of 3,000 megawatts by 2025. The government needs to accelerate support in addition to policies on purchasing electricity from residential rooftops and business models that help people install solar rooftops without upfront investment, such as Solar Leasing/Solar PPA or Solar Loans which are not yet attractive enough to significantly increase solar rooftop installations. Clear benefits, such as increased electricity bill savings from installing solar rooftops, can be achieved through the Net Metering system.
On the transmission side, the government should open access to the transmission system (Third-Party Access) for all producers, with fair charging mechanisms (Wheeling Charge). Also, the transmission system should be modernized to accommodate the increasing share of clean electricity. For example, the establishment of Demand Response centers, allowing producers to adjust electricity production to meet the varying demands of the public. Developing energy storage systems at power station levels to reduce the instability of electricity produced from clean electricity is also essential.
In terms of distribution, the government should support the sale of electricity to the public at fair prices. The sale of electricity in a liberalized market can help reduce electricity prices due to increased competition from private entities in the market, which have the ability to manage costs and maintain cost stability. However, in a liberalized market system, the purchase of electricity from government’s existing power plants may decrease, leading consumers who are not in the liberalized market absorb more cost. Additionally, in the short term, the country still relies on gas-fired power plants to maintain the stability of the electricity production system. These gas-fired power plants have construction and maintenance costs which electricity consumers should collectively bear. Therefore, the government should consider establishing criteria and policies for all electricity consumers in the country to jointly bear the costs for electricity stability, possibly based on business types or the electricity generation capacity needed by each consumer. This may result that electricity prices in the liberalized market system in the short-term may not being significantly lower than the current system due to the added cost of stability. However, in the long term, as energy storage technologies play a more significant role and the role of gas power plants in supporting the stability decreases and the cost of stability will diminish, will help make electricity prices in the free-market system significantly lower than the current system.
In conclusion, increasing the share of clean electricity in a way that keeps electricity prices fair will not be achieved if the government does not reform the electricity market to be liberalized market from production to distribution, with policies such as “opening up production competition,” “allowing all producers to access the transmission system,” and “selling electricity to the public at fair prices.” These measures will support Thailand in achieving its carbon neutrality goals and play a crucial role in efficiently transitioning the country into a low-carbon economy.
Reference
Energy Policy and Planning Office. 2022. Electricity Consumption and Carbon Dioxide Emissions by Economic Sector
Energy Policy and Planning Office. 2022. Assessment Report of Thailand’s Energy Balance Index 2020-2022
Electricity Generating Authority of Thailand. 2023. Managing the New Era of Electricity Business in Response to Changing Energy Consumption
Thailand Long-Term Low Greenhouse Gas Emission Development Strategy. 2022, pages 17-24, Office of Natural Resources and Environmental Policy and Planning, Ministry of Natural Resources and Environment”