Areeporn Asawinpongphan

Proposed Improvements to the Draft Power Development Plan of Thailand 2024-2040

As the Thailand Development Research Institute (TDRI) organized a seminar titled “PDP 2024: Accelerating or Hindering Thailand’s Path to Clean Energy?”, the TDRI research team identified that the draft plan lacks sufficient support for increasing the proportion of electricity generated from clean energy sources, particularly in developing decentralized power generation systems. 

These systems are crucial for effectively accelerating the transition to clean energy. The absence of such support could impact the country’s competitiveness, especially in light of the European Union’s Cross-Border Carbon Adjustment Mechanism (CBAM) and the growing demand for 100% clean energy (RE100) from leading private companies investing in Thailand.

The following comments and recommendations on the draft PDP 2024 are synthesized from the seminar. These insights can be utilized to improve the Power Development Plan of Thailand 2024-2040 (PDP 2024).

Comments and Recommendations on the Draft Power Development Plan of Thailand 2024-2040 (PDP 2024)

1. The Energy Efficiency Plan (EEP) Should Precede the Power Development Plan (PDP)
   The Ministry of Energy should begin drafting the PDP by first assessing the Energy Efficiency Plan in alignment with advancements in energy conservation technology. Developing the EEP before the PDP is crucial because the PDP is a supply-side plan, and failing to consider demand-side management through energy conservation may result in overestimating energy production needs.

Effective energy conservation, in line with technological advancements, will help reduce energy consumption, lower the costs of large-scale energy infrastructure, mitigate environmental impact, and enhance energy security.

Recommendations:

1. Actively promote and implement effective incentives to encourage businesses and the public to conserve energy and maximize energy efficiency. This will help businesses reduce costs, increase competitiveness, and lower energy expenses for the public.
2. Support research, development, and the adoption of technologies related to energy conservation and the use of clean energy in Thailand.
3. Develop an effective EEP that aligns with technological advancements in energy savings before drafting the PDP to prevent overestimating energy production needs.

2. Electricity Demand Forecasts Should Not Be Overly Estimated
   The electricity demand forecasts in the draft PDP 2024 appear to be overly estimated as they are based on the 2022 economic growth projections, which do not reflect the current reduced economic growth potential. These projections are significantly higher than the latest estimates from the Bank of Thailand and other economic agencies.

Overestimating electricity demand could lead to the construction of additional power plants that may not be needed, as has occurred in the past, resulting in an excessive electricity reserve margin and increased electricity costs for consumers.
Furthermore, the overestimation in the draft PDP 2024 could lead to the construction of eight additional natural gas power plants with a total installed capacity of 6,300 megawatts, which would result in Thailand’s continued reliance on natural gas as the primary fuel for electricity generation over the long term.

 This reliance would also increase dependence on LNG imports. According to the draft 2024 Gas Management Plan (GAS plan 2024), Thailand is expected to import LNG for 43% of its total gas consumption for electricity generation by 2037, up from 33% in 2024. The increased LNG imports could expose the country to global LNG price volatility, especially during geopolitical crises, impacting energy security and costs.

Apart from additional gas-fired power plants, overestimated electricity demand forecasts have also led to plans for the construction of new hydropower plants with a combined capacity of 3,500 megawatts, which will have three major impacts:

1. Environmental Impact: The construction of dams will negatively affect ecosystems.

• Higher Electricity Purchase Prices: The purchase price for electricity from the new hydropower projects will be higher than that from existing plants. For example, the Pak Beng project has a purchase price of up to 2.92 baht per unit, which is significantly higher than the purchase prices of existing projects such as Nam Ngum, Xeset, Xayaburi, and Nam Theun 1, all of which have purchase prices below 2 baht per unit.

• Increased Dependence on Foreign Hydropower: The increased purchase of electricity from hydropower plants located outside of Thailand will affect the country’s energy security due to potential geopolitical factors beyond the control of the Thai government.

Recommendations:

2. Adjust the electricity demand forecasts in the draft PDP 2024 to reflect more current economic growth estimates and the reduced economic growth potential of the country based on projections from the Bank of Thailand and other economic agencies.

2. Revise the draft Gas Management Plan 2024 (GAS plan 2024) to reduce LNG imports and instead support the development of domestic clean energy sources to enhance energy security.

2. Delay investment in the third LNG terminal as the current LNG terminal capacity is not fully utilized.

2. Consider renewing contracts with existing hydropower plants rather than constructing new ones to reduce ecological impact, lower electricity purchase costs, and mitigate energy security risks.

2. Reevaluate long-term power purchase agreements for necessary power plants, ensuring that power producers share the plant’s construction cost to alleviate the availability payment debt burden of the Electricity Generating Authority of Thailand (EGAT).

3. The Efficiency of Clean Energy Technologies Should Be Realistically Evaluated
   The draft PDP 2024 underestimates the progress of clean energy, particularly solar power combined with battery storage. The cost of producing electricity from solar power combined with batteries has decreased by nearly 90% over the past decade (Tree Energy Solutions 2024^[1]). In Thailand, the cost of this technology is now lower than the cost of producing electricity from natural gas (World Economic Forum 2024^[2]).
   Furthermore, the draft PDP 2024 sets a target of only 1,000 megawatts for the development of Smart Microgrid and Demand Response technologies, which is insufficient considering that these technologies can significantly enhance grid efficiency, reduce unnecessary energy consumption, balance energy use across different periods, and improve the stability and efficiency of clean energy utilization.

Underestimating the efficiency of clean energy technologies has also led the draft PDP 2024 to set relatively low targets for solar power generation, both ground-mounted and floating and to instead favor higher-cost and less safe options such as small modular nuclear reactors towards the end of the plan, which may not be widely accepted due to safety concerns.

Recommendations:

3. Increase the targets for solar power generation, both ground-mounted and floating combined with batteries, to take advantage of the rapidly declining technology costs and the likelihood of further cost reductions in the future.

3. Accelerate the reform of regulations that limit solar power generation, particularly those requiring a factory operating license (Ror. Ngor. 4) for installations exceeding 1 megawatt and those restricting installations to specific zoning areas.

3. Support residential solar programs using the Net Metering system to incentivize greater adoption of solar rooftops.

3. Increase support for the use of Smart Microgrid and Demand Response technologies. These technologies effectively manage and control energy production and consumption in small areas, allowing for rapid and flexible responses to energy needs. They help reduce the need for energy reserves, ease the burden on the electrical grid, minimize energy losses during transmission, and enhance the stability and resilience of the system. 

Additionally, they can reduce the frequency of power outages from the current standard of 1 day per year to 0.7 days per year without increasing reserve capacity.

3. Consider discontinuing the use of small modular nuclear reactors for electricity generation as cleaner, safer, and more cost-effective energy technologies are now available.

4. Urgent Reform of the Electricity Market is Needed
   The draft PDP 2024 continues to rely on the Enhanced Single Buyer system, which significantly hinders Thailand’s ability to attract and retain foreign direct investment (FDI) from leading companies that require 100% clean energy (RE100). This system also obstructs the development of clean energy in the business and public sectors by preventing direct electricity sales between producers and consumers.

Recommendations:

4. Rapidly liberalize the electricity market by allowing private power producers to connect to the state’s transmission system (Third Party Access or TPA) with fair and transparent wheeling charges reflecting the efficient operation of the transmission system.

5. Reducing Electricity Production Costs by Avoiding Inappropriate Use of Technology
   The draft PDP 2024 proposes the inappropriate mixing of clean technologies, such as mixing hydrogen with natural gas for electricity generation. This technology should instead be applied in industries that are difficult to decarbonize (hard-to-abate sectors). Using hydrogen with natural gas for electricity generation would unnecessarily increase production costs. According to a study by SCB EIC (2024)^[3], mixing 5% hydrogen with natural gas for electricity generation by 2037 would raise electricity production costs by 9% and increase electricity prices by 1.6-1.7%.

Recommendations:

5. Hydrogen technology should be used in industries that are difficult to decarbonize rather than mixing it with natural gas for electricity generation.

6. Enhancing Governance in the PDP 2024 Drafting Process
   The PDP 2024 drafting process has faced significant criticism regarding governance, particularly due to the lack of public participation and transparency in key assumptions and data used in the plan. 

This includes the production capacity of Independent Power Supply (IPS) systems. Additionally, representatives of the planning agencies did not attend public consultation forums organized by other entities, which could undermine the acceptance of the plan.

Recommendations:

6. Public consultations in the future should adhere to international standards by disclosing all relevant data and key assumptions used in the plan’s development. Additionally, all data and feedback received from the public should be transparently shared.

When significant information or opinions are provided by the public, the planning agency should explain how this input was considered in the decision-making process. In cases where there are differing data or assumptions, the agency should clarify which data and assumptions were selected and the rationale behind these choices.

6. Key assumptions used in forecasting electricity demand, such as the production capacity of Independent Power Supply (IPS) systems, should be disclosed. 

Currently, a significant number of IPS producers, particularly those using solar energy, are exempt from licensing under the regulations of the Energy Regulatory Commission (ERC). As a result, the data used for forecasting electricity demand could be significantly inaccurate if the increasing installed capacity of IPS is not taken into account, potentially leading to an overestimation of the required electricity production capacity.

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^[1] TES-H2. (2024, April 18). The simple sense of generating solar power where the sun shines strongest. Retrieved from https://tes-h2.com/blog/the-simple-sense-of-generating-solar-power-where-the-sun-shines-strongest

^[2] World Economic Forum. (n.d.). Thailand system value analysis. Retrieved from https://www3.weforum.org/docs/WEF_Thailand_System_Value_Analysis.pdf

^[3] Economic Intelligence Center (SCB EIC). (2024). Hydrogen in the PDP 2024. Retrieved from https://www.scbeic.com/th/detail/file/product/9514/gxj1pwggl2/In-focus-Hydrogen-in-the-PDP-2024-20240628.pdf