Practical Policies for Decentralized Electricity

Generation

Chris GreacenPalang Thai

MEE-Net Workshop18 January 2012

Bangkok

Outline

• What is decentralized electricity?• Centralized vs. decentralized• Practical policies for decentralized electricity

What is decentralized electricity?

• Decentralized electricity: generating electricity from many small, local energy sources– High efficiency cogeneration (CHP)– On-site renewable energy– On-site power

• Centralized electricity: large power plants generally located far from loads– Coal– Nuclear– Large hydropower– Natural gas (CCGT)

4

Decentralized Technologies

Computing:

Internet vs. Mainframes

Telecommunications:

Cell phones vs. land lines

Broadcasting:

Television Eg. You

Tube

Radio Eg. Podcasts

Electricity:

Decentralized energy

technologies

5

The Move to Decentralized Technology

vs.

vs.

Energy efficient end-use

Solar

Wind power

BiomassCustomers

Power plant

Old way New way

Power plant

Biomass

Cost and size of thermal power plants from 1930 to 1990

• Initial cost declines through increasing scale.• 1990s through mass production of smaller turbinesSource: Hunt, Sally and Shuttleworth, Graham. Competition and Choice in Electricity. (England, John

Wiley & Sons, 1996).

Decentralized generation brings down costsIreland – retail costs for new capacity to 2021

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

8.00

100% Central / 0% DE 75% / 25% 50% / 50% 25% / 75% 0% Central / 100% DE

% DE of Total Generation

Eu

ro C

en

ts /

KW

h

O&M of New Capacity Fuel

Capital Amorization + Profit On New Capacity T&D Amorization on New T&D

Worldwide energy waste

Electricity Generation Worldwide (TWh)

(Source: International Energy Agency 2002)

Cogeneration (Combined Heat and Power – CHP)

CHP cools Bangkok’s airport

Suvarnabhumi International Airport in Bangkok cooled by district cooling system powered by a CHP that also generates 52.5MW of electricity.

14 MW cogeneration at University of Massachusetts, Amherst, USA

75% efficient. Provides heating for 200 buildings

DE Benefits – Energy Access

VS

16

Denmark – a transition to decentralized energy

Source: Danish Energy Center

Decentralized electricity policies and outcomes -- Thailand

Practical policies to support distributed electricity

• Access to grid• Feed-in tariffs• Low cost financing• Tax incentives

Thailand’s SPP+VSPP

$

Access to grid

Technical regulations:• Allowable voltage,

frequency, THD variations

• Protective relays• Communication

channels

Commercial regulations:

• Definitions of renewable energy, and efficient cogeneration

• Cost allocation• Standardized tariff

determination• Invoicing and

payment arrangements

• Arbitration

$

+ Standardized Power Purchase Agreement (PPA)

Access to grid

Small Power Producer (SPP) regulations:

• Started 1992• Fossil-fuel cogeneration and renewable energy

up to 90 MW (export to grid)• Low tariff offered for “non-firm” generators

made it difficult for most renewables.

Access to grid

Bangkok Cogen, Rayong, 115 MW

Map Ta Phut Olefins, Rayong, 70 MW Pluak Daeng, Rayong 70 MW

Laem Chabang, Chonburi 100 MW

4494 MW online + 4152 MW with signed PPAs... 75% fossil fuel

Evolution of Thai VSPP regulations• 2002

– VSPP regulations drafted, approved by Cabinet– Up to 1 MW export, renewables only– Tariffs set at utility’s avoided cost

• 2006– Up to 10 MW export, renewables + cogeneration– Feed-in tariff “adder”

• 2009– Tariff adder increase, more for projects that offset diesel

http://www.eppo.go.th/power/vspp-eng/ for English version of regulations, and model PPA

Access to grid

Feed-in tariffs

EPPO 24

Feed-in tariffs

Feed-in tariff policies worldwideFeed-in tariffs

• Thai Government loans funds at 0% interest to commercial banks for investment in:

• Energy efficiency improvement projects• Renewable energy development and utilization projects

January 2003 – present

7000 M Baht

11 local financial institutions have participated.

Max loan amount: 50 MBMax. interest rate: 4% Max. loan period: 7 years

Revolving Fund

Low cost financing

27

A source of venture capital for ESCOs to jointly invest with private operators in energy efficiency & renewable energy projects. The program targets SMEs & small projects.

Investor

Technical Assistance

ESCO Venture Capital Equipment Leasing

Carbon Market

Equity Investment

Credit Guarantee Facility

Fund Manager

Investor

InvestorInvestor

ESCO FundInvestment Committee

Energy Conservation Promotion FundEnergy Conservation Promotion Fund

ESCO FundLow cost financing

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Thailand’s Board of Investment (BOI)’s tax incentives for renewable energy projects:

• Corporate income tax holidays up to 8 yrs. Additional 50% reductions of corporate income tax for 5 yrs

• Import duty reductions or exemptions on equipment and raw materials

Tax IncentivesTax

incentives

Bangkok Solar 1 MW PV

• Signed PPAs for 767 MW of PV (SPP + VSPP)

Lopburi 73 MW PV (over 1,000 rai = 160 hectares)

• Project size: 1 MW• Uses self-manufactured a-Si• Signed PPAs for 767 MW of PV (SPP + VSPP)

Solar thermal electricity• 5 MW, 135 MW planned• 900 Million baht (180 baht/watt) but costs expected to

decrease 20 to 30% to 135 baht/watt• Commissioned in Kanchanburi on Nov 2011• Signed PPAs for 1343 MW of solar thermal

Biogas from Pig Farms

Reduces air and water pollution

Produces fertilizer

Produces electricity

8 x 70 kW generator

Ratchaburi

• Uses waste water from cassava to make methane

• Produces gas for all factory heat (30 MW thermal) + 3 MW of electricity

• 3 x 1 MW gas generators

Korat Waste to Energy – biogas… an early Thai VSPP project

Rice husk-fired power plant• 9.8 MW• Roi Et, Thailand

Feb 2007

Thailand VSPP Status

Application pendingReceived permission, awaiting PPA

PPA signedGenerating electricity

0

200

400

600

800

1000

1200

1400

1600

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2000

Mi-cro-

hydro

Natural gas co-

gen

Coal cogen

Biogas

Garbage

Wind

Solar

Biomass

18 MW online

June 2008

Thailand VSPP Status

Application pendingReceived permission, awaiting PPA

PPA signedGenerating electricity

0

200

400

600

800

1000

1200

1400

1600

1800

2000

Mi-cro-

hydro

Natural gas co-

gen

Coal cogen

Biogas

Garbage

Wind

Solar

Biomass

June 2009

Thailand VSPP Status

Application pendingReceived permission, awaiting PPA

PPA signedGenerating electricity

0

200

400

600

800

1000

1200

1400

1600

1800

2000

Mi-cro-

hydro

Natural gas co-

gen

Coal cogen

Biogas

Garbage

Wind

Solar

Biomass

Application pendingReceived permission, awaiting PPA

PPA signedGenerating electricity

0

200

400

600

800

1000

1200

1400

1600

1800

2000

Mi-cro-

hydro

Natural gas co-

gen

Coal cogen

Biogas

Garbage

Wind

Solar

Biomass

Mar 2010

Thailand VSPP Status

Application pendingReceived permission, awaiting PPA

PPA signedGenerating electricity

0

200

400

600

800

1000

1200

1400

1600

1800

2000

Mi-cro-

hydro

Natural gas co-

gen

Coal cogen

Biogas

Garbage

Wind

Solar

Biomass

Sep 2011

Thailand VSPP Status

1056 MW online (58-fold increase since 2007)

PPAs signed for additional 4318 MW

Solar trends in Thailand

Feb-07

Apr-07

Jun-07

Aug-07

Oct-07

Dec-07

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Apr-08

Jun-08

Aug-08

Oct-08

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Dec-11

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MW Solar installed in Thailand Feb 2007 – Dec 2011

PPAs for photovoltaic (PV) solar: 677 MWPPAs for concentrating solar thermal (CST): 1343 MW

Policies to encourage decentralized mini-grid electricity in rural areas

• Allow off-grid generators to pick their own retail tariff (subject to transparent regulatory approval)– Simple 1-page spreadsheet for

regulators to do this: http://tinyurl.com/SPPevaluator(developed by World Bank for use in Africa)

Policies to encourage decentralized electricity in off-grid areas

• Lower investment risk to mini-grid generator operators in event that “big grid reaches mini-grid” by:– Allowing formerly off-grid generators

to sell back to the grid; and/or– Allowing mini-grid operators to

purchase wholesale electricity for resale to retail customers.

Summary

• Access to grid• Feed-in tariffs• Low cost financing• Tax incentives• Remote mini-grids:

– Flexibility in retail tariff setting– Reduce investment risk by working out details

of what happens when “big grid” reaches mini-grid

Thank youFor more information, please contact chris@palangthai.org

This presentation available at:www.palangthai.org/docs