A DIFFERENT END OF THE POWER LINE
A change is needed in Thailand's master plan for energy development, which has not yet committed to conservation and renewable energy alternatives.
When Energy Policy and Planning Office (EPPO) officials proclaim that some 2,800 megawatts (MW) of electricity will be available in the near future from the construction of hydroelectric dams along the Salween River inside Burma and on the Thai border, and some other 920 MW from the Nam Thuen II dam in Laos, they make no mention of the disruption these dams will cause to the human beings who live in these areas.They claim their duty is solely to supply more electricity for Thailand's growing needs, as projected in the nation's Power Development Plan (PDP). These master plans for power sector investment forecast energy needs for 15-year periods, and are based on economic indicators. Thus they are constantly being revised, but consistently show an overestimation of future energy use.
The PDP contains a labyrinth of statistics and figures which few laymen can easily understand. A compilation of studies from different government agencies on the 2007 PDP, released by the Ministry of Energy (MoE) and presented recently at the Royal Thai Army Auditorium Hall, was full of figures and graphics, showing future forecasts and demands. However, only a few lines out of the total 47 pages in the handbook showed the actual peak electrical load and the huge inaccuracy of the previous predictions.
For example, the forecast issued in September 1997 (after the financial crisis) predicted the 2006 peak demand at 28,778 MW. The forecast issued one year later in September 1998 reduced the projection by 4,908 MW, but still over-estimated the 2006 actual demand by 1,104 MW. Incidentally the error in the September 1997 forecast led to the signing of several long-term concession contracts to buy power from private power producers.
It also led to several years of surplus capacity and rising electricity rates, as well as the controversial Bor Nok and Ban Krud coal-fired power plant fiasco.
The forecast that came out in April 2006 again over-shot the actual peak, which occurred only one month later, by 899 MW. The power peak demand was at 21,064 MW, a growth of only 2.5 percent per annum against the forecast growth rate of 6.9 percent.
At the Auditorium Hall, Viraphol Jirapraditkul, director of the Energy Policy and Planning Office (EPPO), said that the nation's electricity generating capacity will increase according to the growth of the GDP. Because Thailand's per capita electricity consumption is still low compared to some other developed and neighbouring countries, he reasoned, it is justified to predict a steady growth in power demand of 5.8 percent on average during 2007-2021.
He commented that the EPPO's forecast was based on an average GDP increase of 5.0 to 5.6 percent for the next 15 years and an oil price of around 55 to 60 dollars per barrel.
However, the Finance Ministry forecasts long-term economic growth at only 4.8 percent. The actual economic growth last year was 4.6 percent, and the GDP of the first quarter of this year was less than 4 percent.
Viraphol added that the forecast already took into account new demand-side management (DSM) and new generation from very small power producers (VSPP). It is worth noting, however, that their contributions, according to EPPO calculations, are only 0.1 percent and 1.5 percent, respectively, of total projected load in 2021.
He then moved on to the matter of energy forecasting. Interestingly, he did not discuss the poor accuracy of EPPO's past forecasts, but did mention one projection made by a non-governmental organisation (NGO) in 2001. ''If we used the NGO's numbers, Thailand would have seen blackouts by now,'' he said .
While he did not bring up the inconvenient truth that the 2006 peak demand forecast was actually 899 MW higher than the actual value, he went on to say with confidence that Thailand would see more than a doubling of peak demand, to 49,219 MW in year 2021, an average of 1,867 MW or a 5.82 percent increase per year.
COSTLY OVERESTIMATES
While it may be normal for authorities to overestimate economic growth, this tendency has major repercussions. One might ask why various NGOs and concerned citizens are so frustrated about the overestimates of necessary electricity generating capacity. This is because the overestimates cost the country dearly. Each MW of power generation capacity costs from 500,000 to one million US dollars. Moreover, investing in and operating a 899 MW power plant wastes a tremendous amount of the ratepayers' money if the plant is not needed.
There have been suggestions that the responsibility of energy forecasting should be taken out of the hands of the energy producers. However, Pruetichai Chonglertwanichkul, the assistant governor of the Electricity Generating Authority of Thailand (Egat), said that his agency has the mandate and long-time expertise to provide key input into the forecast process and draw up the PDP to ensure reliability and security of the power system in accordance with the government's policies.
He noted that changes in the type of fuel and type of power plant used to generate electricity will affect the cost of investment significantly.
Pruetichai said that Egat must take these matters into account, as well as the number of aging power plants that must be retired, in formulating the energy policy of the country and maintaining energy security for the long term. He assured that the agency wants consumers to get the lowest cost possible for their electricity.
He also said that the international standard reserve energy margin is 15 percent. However, according to information obtained from Egat itself, Thailand's reserve margin in 2006 was far higher _ 22 percent.
The PDP is the master plan for the next 15 years for building new power plants, based on forecasts of long-term energy demand. The PDP 2007 got approval from the National Energy Policy Council (NEPC) last Monday.
In principle, the approved plan will be forwarded to Egat to modify the details and then be sent back to NEPC before it proceeds to the cabinet for final approval. If approved, the plan would be effective for the period 2007-2021.
Despite its importance, the approval process is taking place without any real public hearings (see related story). There are a number of issues that have not been addressed by the plan, such as an independent regulatory body, renewable energy, DSM and other social and environmental concerns.
Chuenchom Sangarasri Greacen, an independent energy analyst from a small non-profit organisation called Palang Thai, believes that it is very important to ask who should have a say in the formulation of the PDP. She thinks the government should consider an energy regulatory board to oversee the PDP.
''The energy regulatory body should be independent and members should not have conflicts of interest in the energy business,'' she said.
Chuenchom elaborated, saying that at present key members of the forecast subcommittee _ Egat, the Provincial Electricity Authority (PEA), the Metropolitan Electricity Authority (MEA) _ do have a conflict of interest in the demand forecast process because they have a distorted incentive to over-invest. ''This is because the more they invest, the more profits they will make. This is governed by the return-based regulation, called ROIC or return on invested capital, which is the main financial criteria in determining their allowed income,'' explained Chuenchom.
ROIC is a fixed percentage which is multiplied by capital invested. If Egat and the others inflate their investment plan (by inflating demand and thus the need to invest), they are entitled to more profits. This is why past demand forecasts have always erred on the side of over-investment, she explained.
She said that the structural bias is very clear. ''I would argue that the government also has the same bias, though for a different reason. They tend to project GDP growth and thus power demand growth to assure investors of the state of the economy, to appear capable of leading the economy on the right path, and to stimulate investment in the power sector to further boost the GDP,'' she said, adding that this would provide only a short term gain if the investments were made on false demand _ leading the country towards a bubble economy.
She added that the government and utilities can keep on erring on the forecasts and making unnecessary investments without suffering repercussions because of the monopoly nature of the power sector and the lack of sufficient public scrutiny in the decision making processes. Efficient or not, Egat can pass on its costs to ratepayers.
''So at the very least, this cycle of poor forecast, over-investment and unnecessary burden passed on the consumers has to stop. The first step is to make the forecast process independent from conflicts of interest. The independent regulatory body which is required to be established under the proposed Energy Industry Bill (EIB) is best positioned to do the job, because it is supposed to balance the interests of consumers, utilities and affected villagers,'' she said.
Chuenchom concluded by remarking that the government should look at past commitments to have more renewable energy in the plan. This had been stipulated at six percent of the total power generation capacity by the year 2011, but less than one percent was actually achieved last year. Moreover, the planning process should give priority to DSM and energy efficiency as a serious option to meet growing power demand.
GOING NUCLEAR
The MoE has said that the regulatory body called for in the EIB could be appointed this year after the bill becomes law. The ministry has also pledged to focus on fostering small power producers (SPP) and very small power producers (VSPP) and diversifying the country's fuel sources, as Thailand now relies too much on natural gas.
But this is not reflected in the 2007 PDP, which only mentions a 200 MW per year share for SPP, without allowing any real space for VSPP.
The total designated new electricity capacity of Thailand over the next 15 years, as predicted in the 2007 PDP, is 31,790 MW.
Under the EPPO-approved plan, coal-fired plants would supply up to 2,800 MW, 5,090 MW would be purchased from abroad. Gas-fired plants would supply 18,200 MW, SPP 1,700 MW, and 4,000 MW is projected to come from nuclear energy.
Energy Minister Piyasvasti Amranand, former director of the EPPO, has recently come out in favour of nuclear energy. He has said that if no new coal-fired generators were developed during the period, some 90 percent of Thailand's power generation in the next 15 years would have to come from natural gas, up from almost 70 percent currently, which is already considered too much.
Acknowledging that most Thais now oppose the nuclear option, he has discussed a plan to educate young school children on the nuclear energy. ''If the country came to a consensus to develop nuclear power plants, it would need about 10 years to prepare and another five years for construction,'' he added.
Clearly, the choice of energy source is a major concern in adopting a national PDP. According to Egat statistics, about 12.7 per cent of the country's electricity is generated from lignite, 4.5 percent from imported coal and 66.1 percent from natural gas.
Only one percent comes from renewable sources.
CALL FOR CHANGE
Contrary to the members of the Forecasting Committee, many academics who have been studying the country's energy needs and potential are calling for a study of the factors that have contributed to past forecast failures and a search for environmentally friendly solutions.
Dr Bandit Limmeechokchai, of the Sirindhorn International Institute of Technology, reinforced Chuenchom's suggestion that the process of formulating a PDP should be done by an impartial body.
''The agencies involved in generating electricity would naturally advocate producing more electricity, as this is in line with their mandates. However, under the present situation the public can hardly know if their investment is reasonable or not. We can hardly know if there is too much electricity, but surely the cost of investment will be passed on to us,'' he said. He noted that in many foreign countries consumers take part in regulating their energy plans. ''Each area will have its own regulators. They plan together. If it is decided no more power plants are wanted, they have to think about other solutions, such as DSM, or make designs to use more renewable energy,'' he said, adding there should be a systematic way to promote DSM.
''You should not assign the agencies that produce power to handle DSM, as it will not bring them profit, but rather reduce their income. This is another conflict of interest,'' said Dr Bandit.
He also proposed that renewable energy sources should have an equal chance to compete. VSPP, which mainly use renewable energy, at present only win a little share in energy production. They should be diversified and decentralised. He urged that future Thai PDPs should take global warming into account.
Dr Chamnong Sorapipat of the Joint Graduate School of Energy and Environment also wants to see Thailand pay more attention to renewable energy, energy conservation and the Kyoto protocol. He called for a revision of the system that only serves to feed demand, without looking at the waste of energy all around us.
Unfortunately, these academics, with their concern for the cost of poor energy planning to society and the environment, stand outside the ring of policy influence.
Egat and related agencies still go about their business in the same old way, using the same old arguments. To those who question their plans, they say: ''When you turn on the switch, you want the lights to come on, don't you?'' They say we need more electricity from Burma, because ''this is the cheapest energy'', and we'll generate electricity from gas that we purchase from Malaysia, so as not to pay damages under the ''take or pay'' contracts we've signed.
Sulaiman Madyusoh has been to many human rights forums to complain about the gas pipeline and the gas power plants that have been constructed in his coastal district of Chana in Songkhla, and the impact they have had on his livelihood. Sulaiman might have a better opportunity to express his views and his frustrations than Sawta, a Karen living on the Thai-Burmese border, but the two share a similar plight. Apparently their lives are not important enough for the energy policymakers to include in their calculations.