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The story of Thailand’s centralized power sector
Palang Thai
Chuenchom Sangarasri Greacen5 October 2009
MeeNet, Thailand
1. The origin
Electric tram in Bangkok (powered by a wood-fired steam engine) in 1884.
Bangkok’s first paved road (New Road)
Electricity was introduced by King Rama V.
Late 1800s – early 1960s
• Initially electricity served mainly the elites• With series of wars and coups, not much
happened in terms of spreading electricity• By early 1960s, only 2% of Thais had electricity• No consensus on form of
ownership: private or state or coop model• Diverse forms of ownership: over 200 separate
small cooperative, municipal or privately owned
utilities
At a cross road: centralized or decentralized model?
• Like the US Bonneville Power Authority, Thai National Energy Authority (NEA) was created to regulate hundreds of small utilities and built early power plants. – Also served as the MRC secretariat and pushed
large dam projects on the Mekong.
• With WB advocating central planning, fragmented state-owned enterprises– Metropolitan Electricity Authority, Yanhee Elec
tricity Authority, Northeast Electricity Authority, and the Lignite Authority
Decentralized Micro-hydro technology
Source: Inversin, A. R. (1986). Micro-Hydropower Sourcebook.
Centralized generation
โรงไฟฟ�าสายสงไฟฟ�าแรงส�ง
สถานี�ไฟฟ�าแรงส�ง
หม้�อแปลงจำ�าหนีาย
สายจำ�าหนีาย
แรงดั�นีไฟฟ�าระดั�บส�ง
แรงดั�นีไฟฟ�าระดั�บกลาง
High voltage transmission
Centralized generation
Medium voltage distribution
Transformer
Deciding factor: Cold War politics
• USAID poured in billions of dollars to Thailand, seen as a regional power to be court
ed in containing communism• USAID advisors considered micro-
hydroelectricity but dismissed the option for large central generation with transmission and distribution – In contrast to China’s extensive adoption of
community-owned village-scale micro-hydro• The USAID pre-feasibility study adopted verba
tim as Thailand’s rural electrification master plan – Electricity used to win the hearts & minds in
“red/pink areas”
The birth of centralized utilities
• Creation of Electricity Generating Authority of Thailand (EGAT) – By merging 3 SOEs– With Metropolitan Electricity Authority
(MEA) & Provincial Electricity Authority (PEA) in charge of distribution
Moral of the story…
• Centralized grid: in many cases, makes economic and technical sense, however…
• Control of a central grid need not be monopolized by one group– Structure of centralized control
determined by Cold War politics, not technical superiority
• Electricity played a political role
2. The Evolution
1970s – 1980s
• Centralized structure and control facilitated rapid expansion of grid, rural electrification– Monopoly status with state power to
provide essential public service– Generous support from WB in particular– Cost-plus structure
• State-owned utilities also grew in size and political power
1990s – Neo-liberal agenda
• With rise in global private capital, WB & IMF pushed privatization agenda– Sale of EGAT’s assets: EGCO, Ratchaburi– Giving “concessions” to private power
producers (IPPs, SPPs) to generate & sell power
– Plan to create “Power Pool” and privatize the 3 utilities
2000s – National champion
• EGAT resisted neoliberal reforms– Power Pool plan aborted
• EGAT aspired to be partially privatized “National Champion” but effort thwarted by civil action
• Still an SOE, EGAT has monopoly and public rights but with profit-seeking aspirations– Use of profit-seeking subsidiaries to expand and
pursue commercial interests– Large capital and captive consumer base allows
EGAT/its subsidiaries to invest abroad in competition w/ other transnationals
Power Grid & Pipelines
are analogous to a giant’s
arms reaching to
grab resources to feed its endless
appetite.
Changing role of electricity
• Electricity changes from a public service to a profit-making commodity
• With cross-border grid extension or regional grid, “Energy commons” (e.g. rivers w/ hydroelectric potential, natural gas) in countries surrounding Thailand are become a transnational commodity
3. The Character
Unchecked centralized power
• “A minority must sacrifice for the greater good”
• “out of sight, out of mind”• Results:
– Structural violence– Inequality– waste
Electricity productionand consumption(GWh)
1700 families relocated
Loss of livelihood for > 6200 families
Loss of 116
fish species 44( %)
Fishery yield down 80%
65MaeHongSong
Sou
rce: M
EA
, EG
AT, S
earin
, Gra
ph
ic: Gre
en
World
Fou
nd
atio
n
Dams Malls Province
Pak
Mun
Impacts of Pak Mun Dam alone
MBK
123
81
75
Siam Paragon
Central World
http://www.soho-properties.com/condobangkok-leraffine31/
Unlimited living?
The Champagne Glass
UNDP, Human Development Report, 1998
Nam Theun 2• 1000 MW• Mainly to serve Thailand• 6,200 people in Laos
resettled• Dam will dry Nam Theun
River and swell Xe Bung Fai River
• Endangered species, elephant habitat to be flooded
4. The driver
Cycle of (over-)expansion under the centralized monopoly system
Power demand (over-)projections
Deterministic planning basedon demand forecast leads
to over-investmentin capital-intensive
power projects
Tariff structure that allows pass-through of unnecessary investments
Utilities’
Profits
11
22
33
• Financial criteria for utilities link profits to investments– Thailand uses outdated
return-based regulation– WB’s promoted financial
criteria such as self financing ratio (SFR) also have similar effects
• ROIC (Return on Invested Capital means: the more you invest, the more profits
Incentive structure for utilities:the more expansion, the more
profits
ROIC = Net profit after tax Invested capital EGAT 84 %
MEA PEA
48.%
Result : Demand forecast have systemic bias toward over-
projections Too many expensive power projects get built
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
50,000
55,000
2550 2551 2552 2553 2554 2555 2556 2557 2558 2559 2560 2561 2562 2563 2564
MW
2550 – 25 54 average
increase 1,38 6MW
2555 – 255 9 average
increase 1,877 MW
2560 – 25 64 average
increase 2,315 MW
1,4441,268
1,410
1,361
1,629
1,759
1,832
2,035
2,131
2,178
2,235
2,287
2,399
2,477
Demand increase per year
1,449
27,996 27,996 MWMW
37,382 37,382 MWMW
48,958 48,958 MWMW
Economic Development Plan
(years)
Average GDP growth rate/year
Average demand growth rate/year
10th plan -2550255(
4 )5.0 5.86
11th plan -2555255
9
5.6 5.95
1 2th plan -2560256
4)5.6 5.54
แผนีพั�ฒนีาฯ ฉบ�บที่�% 10 แผนีพั�ฒนีาฯ ฉบ�บที่�% 11 แผนีพั�ฒนีาฯ ฉบ�บที่�% 12
Power demand projection Sep 2007(PDP 2007 revision 1)
ที่��มา กฟผ.
Power Demand: Projections vs. Actual 1992 – 2008If no systemic bias, the
chance of over-projecting demand 12 times in a row
should be 1/4096!!MW
8,000
12,000
16,000
20,000
24,000
28,000
32,000
36,000
40,000
44,000
48,000
1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020
ม.ย.-93
ธ.ค.-94
ต.ค.-95
เม.ย.-96
ต.ค.-96
ม.ย.-97
ก.ย.-97
Sep-98(MER)
ก.พ.-01
ส.ค.-02
Jan-04(LEG)
Jan-04(MEG)
Apr-06 (MEG)
ม�.ค.-07
ACTUAL
ธ.ค.-08
Why assume exponential growth?Linear vs. exponential extrapolation
฿0
฿10,000
฿20,000
฿30,000
฿40,000
฿50,000
฿60,00019
85
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
2015
2017
2019
2021
Pea
k d
eman
d (
MW
)
2007 Forecast Historic peak demand
31 powerplants
Planning of capacity additions(Total capacity requirement = peak demand 15+ % reserve margin)
Many questions for PDP 2007
• Why only 1700 MW of distributed generation allowed?
• Why 4000 MW of nuclear in all options?
• Why DSM/energy efficiency not considered as an option?
L = low case B = base case H = high case1=“lowest cost” 2=“as much coal as acceptable” 3=“LNG +imports”
ก�าล�งการผล&ตใ หม้ที่�%ถ�กบรรจำ)ใ นีแผนี PDP2007 (MW)
0
5000
10000
15000
20000
25000
30000
35000
40000
45000
L1 B1 H1 L2 B2 H2 L3 B3 H3
SPP Nuclear Gas Coal Gas Turbine Import
New capacity added to the PDP 2007
หมายเหต� 1. ใช้�สมมตฐานว่�าต�นที่�นร้�อยละ 12.4 ของค�าไฟฟ"ามาจากธ�ร้กจสายส�ง 2. ใช้�สมมตฐานว่�าต�นที่�นร้�อยละ 14.5 ของค�าไฟฟ"ามาจากธ�ร้กจจ$าหน�าย 3. ค�า CO2 ที่�� 10 ย%โร้/ต'น
4. ค�า Externality ตามการ้ศึ)กษา Extern E ของสหภาพย�โร้ป และน$ามาปร้'บลดตามค�า GDP ต�อห'ว่ของไที่ย 5. การ้ศึ)กษาของ World Bank 2005 6. ตามร้ะเบ�ยบ SPP 7. ที่��มา : กฟผ. 8. Cost of liability protection, Journal “Regulation” 2002 – 2003
Supply options
Cost estimate (Baht/kWh)
Generation
Transmission1
Distributio
n2
CO2 3 Other
envi impacts
4
Social impact
s
Total
DSM 0.50 – 1.505 - - - - - 0.50 -1.50
SPPcogeneration(PES > 10%)
260. 6 - 0.44 0.08 0.71 - 3.83
VSPP(Renewable)
Bulk supply tariff
(~ 3) +Adder
(0.3 – 8)
- 0.44 - 0 – 0.63 0 – low 3.3 – 11.0
gas CC 2257 0.37 0.44 0.09 0.79 low –
medium
3.93
Coal 2117 0.37 0.44 0.15 2.76 High 5.82
Nuclear 2087 0.37 0.44 - 0.15 +
1.008
High –very high
4.04
• ROIC (Return on Invested Capital means: the more you invest, the more profits
Lack of accountability in demand over-projection and over-investment made of possible by guaranteed rate of return for
utilities
ROIC = Net profit after tax Invested capital EGAT 84 %
MEA PEA
48.%
Guaranteed rate of return means central planners are rewarded, not held accountable, for their
repeated errors in demand forecast
Cycle of over-expansion under the centralized system with return-based
regulation
Power demand (over-)projections
Deterministic planning basedon demand forecast leads
to over-investmentin capital-intensive
power projects
Tariff structure that allows pass-through of unnecessary investments
Utilities’
Profits
11
22
33
5. The alternatives
Centralized generation
โรงไฟฟ�าสายสงไฟฟ�าแรงส�ง
สถานี�ไฟฟ�าแรงส�ง
หม้�อแปลงจำ�าหนีาย
สายจำ�าหนีาย
แรงดั�นีไฟฟ�าระดั�บส�ง
แรงดั�นีไฟฟ�าระดั�บกลาง
High voltage transmission
Centralized generation
Medium voltage distribution
Transformer
Centralized & decentralized generation
โรงไฟฟ�าสายสงไฟฟ�าแรงส�ง
สถานี�ไฟฟ�าแรงส�ง
หม้�อแปลงจำ�าหนีาย
สายจำ�าหนีาย
แรงดั�นีไฟฟ�าระดั�บส�ง
แรงดั�นีไฟฟ�าระดั�บกลาง
Gasifier
Cogeneration
High voltage transmission
Centralized generation
Medium voltage distribution
Transformer
Thai civil society created an alternative PDP that meets govt’ objectives, is more economic and
cleaner. But it was not considered by the government
24,755
8,117
3,424
14,804
2,254302
4,000
28,108
4,117
3,424
7,800
4,553
6,410
5,200
-
10,000
20,000
30,000
40,000
50,000
60,000
70,000
MW
PDP2007 PDP-Renewables
The Comparison of Installed Capacity in Two PDP Options
DSM
Nuclear
Renewable
Cogen-SPP
Import
Hydro
Oil
Coal
Natural gas
ที่��มา ม%ลนธนโยบายส�ขภาว่ะ 2552
Supply curve of Pacific NW
0
2
4
6
8
10
12
245 514 1598 2202 2560 3444 4934 6735 8945
Cumulative Resource Potential (Average Megawatts)
Real Le
veliz
ed C
ost
(C
ents
/kW
h -
2000$) EE
Renewables
Coal
Gas turbines
Combined cycle
Resource potential for generic coal, gas & wind resources shown for typical unit size. Additional potential is available at comparable costs.
Source: Northwest Power and Conservation CouncilNorthwest Power and Conservation Council
