Thailand’s power sector is regulated with an “Enhanced Single Buyer Model”
and the current generation is dominated by natural gas. The electricity market is dominated by three main state-owned utilities. The Electricity Generating Authority of Thailand (EGAT) is responsible for the generation, transmission and wholesale of electricity. The Metropolitan Electricity Authority (MEA) and the Provincial Electricity Authority (PEA) are distribution utility companies – one responsible for the metropolitan area (Bangkok, Nonthaburi, and Samutprakarn) and the other for the provincial area. This regulated power structure has led to excess reserve capacity, an inflexible power system, and fossil fuel infrastructure lock-in situations in Thailand. The government emphasises affordability, reliability, and supply security as priorities for the energy system.
** Published April 2021
The power sector will move towards a cleaner system with an increased share of renewables and energy efficiency. The energy transition will be driven by disruptive technologies (enablers such as ESS, EV, monitoring and control), political will (high-level signals, government ownership, consistency of policies and strategies) and joint visioning (cross-sector alignment, legitimacy, and coordination of stakeholders); however, it also needs to be socially inclusive (e.g. sustainable liberalisation with consumers benefits, fair and proper market structure to stakeholders).
Investment challenge: Access to capital was identified as one of the most crucial barriers for RE investment in Thailand. The energy transition trend will drive more decentralised power generations from small and community-based RE projects for self-consumption (i.e., prosumers). Such projects currently experience more difficult access to capital due to the nature of uncertain revenue streams and require innovative financial mechanisms. Financial institutions have a lack of understanding on the associated risks of investment and risk mitigation mechanisms in evaluating these projects for loan approvals.
Entry challenge: Grid-access barrier was identified as a central challenge for RE entry in the Thai electricity market since it has linkages to many other key challenges such as access to capital, monitoring and control, reduced use of dispatchable plants, and consistency of policies and strategies. Power utilities usually impose grid-access barriers with the perception that distributed energy resources are threats rather than opportunities. Also, third party access and grid codes need to be addressed and synergised to accommodate the increasing amount of distributed energy resources including VRE, EV, and energy storage.
Grid integration challenge: The issues of monitoring and control and reduced use of dispatchable plants were identified as priorities in Thailand. While Thai power utilities have monitoring and control systems, their systems are not linked together. As the number of prosumers is increasing, utilities and the government are unable to acquire and analyse data related to electricity consumption and production of prosumers. This information is important for operating and planning the power grid. For the issue of reduced use of dispatchable plants, the increasing share of VRE and prosumers leads to a decrease in power generation from conventional power plants. However, since natural gas generators usually have “take or pay” contracts with required payments, the electricity price tends to increase when more VRE penetrates the power system. Furthermore, the lack of flexibility of conventional power plants and the power market structure limits the potential gains from a large share of VRE and automatically impacts tariffs, due to the limit they induce on dispatchability.
Fossil Industry: Just transition policy: Since the energy transition does not only impact the power sector but the society and the economy at large, it is important to analyse its effect in the context of a “just transition” approach inclusive of potential co-benefits and negative impacts, particularly on jobs, skills, local economy, etc. An analysis of the energy transition’s effects should be clear, exhaustive, and transparent and include mitigation approaches together with energy transition plans. When it comes to energy transition, potential impacts on the fossil industry are rarely analysed in depth. Therefore, presenting evidence and analysis based on broader assumptions in the energy sector and analysing their consequences would help facilitate the public debate and decision-making process.
Political will and joint visioning challenge: The issues of high-level signal, cross-sector misalignment, government ownership of energy transition process, and consistency of policies and strategies affecting energy transition were identified as central in the road towards the transition of the Thai power sector.
High-level signal: Thailand has long-term energy targets in the form of five master plans: (1) Power Development Plan (PDP), (2) Energy Efficiency Plan (EEP), (3) Alternative Energy Development Plan (AEDP), (4) Natural Gas Supply Plan (“Gas plan”), and (5) Petroleum Management Plan (“Oil plan”). However, the government lacks an efficient PDCA process (plan, do, check, act). Feedback on the plans during or after implementation are sometimes not efficiently considered when revising the strategies and plans while the assumptions behind the long-term energy vision often remain constrained by certain determinants such as forecasted electricity demand or other possible risks related to forecasting such demand, which prevent thorough review of different options and their consequences.
Cross-sector misalignment: Although energy plans are initiated by the Ministry of Energy (MoE) and focus on the core objectives of energy security and prices, other important objectives, as well as the perception from and impacts on other sectors, are rarely included in energy planning. This results in policies with limited understanding of related co-benefits and negative externalities. In addition, the Thai power sector is at times negatively impacted by a lack of coordination, which includes lack of public and private sector collaboration, lack of collaboration within government agencies and conflict between local communities and authorities (P.Sirasoontorn & P.Koomsup, 2017).
Government ownership of energy transition process: The dispersion and diversity of the energy transition impacts and responsibilities across ministries require collaboration with organisations working together, which remains challenging when this cooperation is not part of their duties, responsibilities, and budgets. The inclusion of broader perspectives would therefore give the opportunity to the MoE to integrate broader assumptions and options.
Consistency of policies and strategies affecting energy transition: The Thai government has set RE targets in a long-term plan, but implementation to achieve the targets and rollback of policies are regular issues. For instance, several projects under SPP hybrid program were postponed since the electricity demand has decreased from covid-19. Also, the target of solar PV program for residential sector was reduced due to low participants based on an unattractive incentive.
Actors and institutional challenges: The challenges identified are legitimacy challenge and coordination of actors and institutions within the power sector. Based on the Thai context, the law and act (The Energy Industry Act B.E. 2550) define the duties and responsibilities of government agencies, including utilities. Consequently, they are not allowed to do anything out of their scope of activities which in turn blocks them from exploring new opportunities. For coordination of actors and institutions within the power sector, the vertically integrated power system and market may represent a hurdle for the energy transition (Sirasoontorn and Koomsup, 2017) as it would require a good technical and regulatory collaboration between TSO and DSOs. Moreover, it would also require strong coordination with private stakeholders and end-users which also represent a challenge.
Windows of Opportunity
The National Energy Plan or NEP (2018-2037) is a new framework of integrated policies and action plans related to energy planning, whose drafting process was initiated by the cabinet on 20th October 2020. It aims to merge five energy plans (PDP; AEDP; EEP; Oil and Gas or the so-called Thailand Integrated Energy Blueprint (TIEB)) with other related plans. The NEP is accordingly a long-term energy plan providing strategic energy directions and guidelines with the integration of top-down and bottom-up approaches so that the NEP could be well-aligned to higher levels of national plan including national strategy and economic and social development plan.
The draft outline of the NEP has been prepared by EPPO since November 2020 with the support of CASE TH. It is supposed to be submitted to the cabinet for official approval in October 2021. During the second and third quarter of 2021, dialogues and workshops with various stakeholders will be organised as a public hearing stage to consolidate other important missing evidence as well as gaps and barriers of national energy transformation into the final outline. Thus, as agreed with EPPO, CASE TH team could support such events alongside EPPO, which would allow the team to integrate RAF results through joint fact-finding and peer-to-peer knowledge exchange with key stakeholders.
Apart from the NEP, CASE TH could also support EPPO’s work through joint development of an implementation mechanism for its action plan (i.e. PDP 2022 and Ministry of Natural Resources and Environment’s strategic plan) including a monitoring and evaluating framework. The development chain will be coordinated, from the central to regional and local administrations under developing tools or mechanisms to enhance integrated development partnerships, including public, private, and academic sectors, civil society, people’s networks and other sectors, to continuously achieve the goals which are set under NEP.