Renewable Energy
Supporting Small-Scale
Renewable Energy Producers
Thailand aims for
rapid growth in
renewable energy
Small power producers play key role
The expansion, diversification and greening of the national energy supply to help
meet growing energy demand are key objectives of the Thai government’s Power
1
Development Plan 2010 to 2030. The Ministry of Energy projects that energy
demand will increase nearly 40 percent over the next decade, reaching 100 million
2
tons of oil equivalent per year by 2021. The rapid growth in energy demand is
leading to increased greenhouse gas emissions, with carbon dioxide (CO2) emissions
3
due to energy consumption totaling about 278 million metric tons in 2010. In
addition to growth in greenhouse gas emissions, domestic energy security is a
concern. In 2009, Thailand imported 60 percent of its total energy supply to meet its
4
demand.
The government’s policy to promote development of domestic renewable energy
resources evolved considerably over the past two decades. The new 10-Year
Alternative Energy Development Plan (2012 to 2021) set an overall target to increase
the share of renewable energy from about 9 percent of total energy consumption in
2011 to 25 percent in 2021. The plan is projected to reduce greenhouse gas emissions
by 76 million metric tons of CO2-equivalent per year by 2021 relative to a businessas-usual scenario. The target is considerably more ambitious than the 12 percent
target for 2022 established in the previous 15-year Renewable Energy Development
5
Plan 2008 to 2022. A key component of the government’s strategy is the extension
of a program to provide incentives and remove barriers to renewable generation by
Small Power Producers (SPP) and Very Small Power Producers (VSPP).
Small producers lead the charge
The SPP and VSPP Programs evolved as part of the government’s efforts to
promote diversification of electricity supply and rural electrification by independent
power producers. The Electricity Generating Authority of Thailand (EGAT) controls
transmission and over half of electricity generation, and two public utilities manage
distribution.6,7 The SPP Program was first launched to promote cogeneration
(combined heat and power) and renewable generation under the 1992 Energy
Conservation Promotion Act. The government required the Electricity Generating
Authority of Thailand to purchase output from SPPs with a maximum installed
capacity of 90 megawatts (MW). In 2001, the government augmented the SPP
Program by introducing a five-year pilot “adder,” or feed-in premium, for renewable
electricity generation funded through the government’s Energy Conservation
1
Promotion Fund. Small Power Producer cogeneration projects are not eligible for the
8
adder rates.
In 2002, the government added a VSPP Program to support power producers
with capacity up to 1 MW, particularly biogas producers from pig farms and food
processing industries. The government offered very small producers simplified
regulations and the ability to sell power directly to the distributing utilities and
customers instead of EGAT. The government set rates in relation to the avoided cost
of power, which is the marginal cost to EGAT of producing or purchasing power at
9
market rates. In 2006, the government expanded the definition of VSPP to include
producers of 10 MW or less, and they added a technology-specific feed-in premium
to ensure support for different types of renewable generation. Consistent with this
10
change, the government modified SPPs to include producers of 10 to 90 MW.
Under the current policy settings supporting the new 2012 to 2021 energy plan,
separate adder rates apply for renewable generation according to fuel type
and capacity. Additionally, projects receive special bonuses if they have certain
characteristics, such as replacing diesel and being located in specific provinces. The
additional adder for projects in three southern provinces reflects relative investment
risks in those provinces. The adder rates apply for seven to 10 years once commercial
operation begins. In addition to the adder rates, long-term (five to 25 year) power
purchase agreements with EGAT support Small Power Producers. EGAT carries
the market risk in these agreements, while SPPs carry the operating and fuel price
risks. SPPs do not have direct access to the state-owned distribution grid for general
power distribution, but they can contract directly with nearby industrial customers
using private distribution lines.11
Figure 1: Adder Rates for SPPs and VSPPs Using Renewable Energy
(August 2012)
Adder Rates
(USD/kWh)
Additional
bonus for
projects in 3
southernmost
provinces
(USD/kWh)
Additional
bonus for
projects that
offset diesel fuel
(USD/kWh)
Wind
Installed capacity ≤ 50 kW
Installed capacity > 50 kW
0.14
0.11
0.05
0.05
10
Solar PV
0.21
0.05
0.05
10
Biomass
Installed capacity ≤ 1 MW
Installed capacity > 1 MW
0.02
0.01
0.03
0.03
7
0.02
0.01
0.03
0.03
7
Mini and micro hydropower
Installed capacity 50-200 kW
Installed capacity < 50 kW
0.03
0.05
0.03
0.03
7
Waste
Anaerobic digestion/landfill
Thermal process
0.08
0.11
0.03
0.03
7
Energy Source
Biogas
Installed capacity ≤ 1 MW
Installed capacity > 1 MW
Sources: Olz, S. and M. Beerepoot; Osborne, Christopher.
Subsidized
period (years)
2
Small Power Producers and VSPPs benefit from other forms of financial support
provided under the government’s Energy Conservation Promotion Fund. These
include soft loans and investment subsidies for select types of renewable energy (e.g.
biogas generated from livestock waste, municipal solid waste, and wastewater from
tapioca starch, palm oil and ethanol factories, and electricity from micro-hydropower
generators); technical assistance; and the ESCO Fund. Projects are also eligible for
12
crediting under the Clean Development Mechanism.
Small Renewables Set To Grow
As the government made modifications over time, the effectiveness of the SPP and
VSPP programs increased. By December 2011, 67 renewable energy SPP projects
were under some form of proposal, development or implementation, with a potential
capacity of nearly 2.5 gigawatts (GW); and 1,890 VSPP projects were under proposal,
13
development or implementation, with a potential capacity of 6 GW. The SPP and
VSPP programs have been effective in supporting diversification of energy sources
and improving rural electrification goals of the government’s national plan.
Looking forward, the revised Power Development Plan 2010 to 2030 assumes that
SPPs and VSPPs will supply small but still significant renewable generation and
cogeneration capacity. From 2012 to 2020, small and very small producers are
projected to account for approximately 9.5 GW (with 5 GW from co-generation
14
and 4.5 GW from renewable energy) of growth in generating capacity. To put
this growth in context, in 2011 Thailand’s total installed power generation capacity
was approximately 32.4 GW. The government has announced plans for policy
adjustments to support these targets, including transitioning from the adder for
renewable generation to a fixed-price tariff system, preparing for development of a
Smart Grid transmission system, amending laws and regulations which disadvantage
renewable energy development, and promoting research and public education on
15
renewable energy generation.
References
Chotichanathawewong, Q. and N. Thongplew. 2012.
“Development Trajectories, Emission Profile, and Policy Actions:
Thailand.” Asian Development Bank Institute, Working Paper
352. Web. September 2012. <http://www.adbi.org/workingpaper/2012/04/12/5045.dev.trajectories.emission.thailand/>
Department of Alternative Energy Development and Efficiency,
Thailand Ministry of Energy. 2012. “The Renewable and
Alternative Energy Development Plan for 25 Percent in 10 Years
(AEDP 2012-2021).” Web. September 2012. <http://www.dede.
go.th/dede/images/stories/dede_aedp_2012_2021.pdf >
Electricity Generating Authority of Thailand. June 2012.
“Summary of Thailand Power Development Plan 2012-2030.”
Web. November 2012. < http://www.egat.co.th/en/images/
stories/pdf/PDP2010-Rev3-Eng.pdf>
Olz, S. and M. Beerepoot. 2010. “Deploying Renewables in
Southeast Asia: Trends and Potentials.” International Energy
Agency Working Paper. Web. October 2012. <http://www.iea.
org/publications/freepublications/publication/Renew_SEAsia.
pdf>
3
Endnotes
Note: All currency conversions from THB to USD
were calculated using the exchange rate on August 4,
2012 (1 USD = 31.48 THB).
1
Department of Alternative Energy Development and
Efficiency, Thailand Ministry of Energy. 2012. “The Renewable
and Alternative Energy Development Plan for 25 Percent
in 10 Years (AEDP 2012-2021).” Web. September 2012.
<http://www.dede.go.th/dede/images/stories/dede_
aedp_2012_2021.pdf >
2
Ibid.
3
US Energy Information Administration. “International Energy
Statistics.” Web. September 2012. <http://www.eia.gov/
cfapps/ipdbproject/iedindex3.cfm?tid=90&pid=44&aid=8>
4
International Energy Agency. 2011. “2009 Energy Balance for
Thailand.” Web. October 2012. <http://www.iea.org/stats/
balancetable.asp?COUNTRY_CODE=TH>
5
Department of Alternative Energy Development and
Efficiency, Thailand Ministry of Energy, 2012, op cit.
6
7
8
Olz, S. and M. Beerepoot. 2010. “Deploying Renewables in
Southeast Asia: Trends and Potentials.” International Energy
Agency Working Paper. Web. October 2012. <http://www.
iea.org/publications/freepublications/publication/Renew_
SEAsia.pdf>
Palang Thai. 2010. “Feed-in Tariffs and South-South Policy/
Technology Transfer: The Evolution and Implementation
of Very Small Power Producer (VSPP/SPP) Regulations
in Thailand and Tanzania.” Presentation at the Monterey
Institute for International Studies, Monterey, California, USA, 8
May 2010. Web. October 2012. <http://www.palangthai.org/
en/vspp>
Ruangrong, P. 2008. “Thailand’s Approach to Promoting
Clean Energy in the Electricity Sector.” Paper presented
at the Forum on Clean Energy, Good Governance and
Regulation, Singapore. 16-18 March 2008. Web. September
2012. <http://electricitygovernance.wri.org/files/egi/Thailand.
pdf>
750 First Street, NE, Suite 940
Washington, DC 20002
9
Palang Thai, 2010, op cit.
10
Ruangrong, P, 2010, op cit.
11
Olz, S. and M. Beerepoot, 2010, op cit.
12
Chotichanathawewong, Q. and N. Thongplew. 2012.
“Development Trajectories, Emission Profile, and Policy
Actions: Thailand.” Asian Development Bank Institute,
Working Paper 352. Web. September 2012. <http://www.
adbi.org/working-paper/2012/04/12/5045.dev.trajectories.
emission.thailand/>
13
Wongkot Wongsapai, Assistant Professor, Faculty of
Engineering, Department of Mechanical Engineering, Chiang
Mai University, personal communication to Catherine Leining
on 3 July 2012.
14
Wongkot Wongsapai, Assistant Professor, Faculty of
Engineering, Department of Mechanical Engineering, Chiang
Mai University, personal communication to Catherine Leining
on 3 July 2012.
15
Department of Alternative Energy Development and
Efficiency, Thailand Ministry of Energy, 2012, op cit.
Figure Section
Figure 1: Adder Rates for SPPs and VSPPs Using Renewable
Energy (August 2012)
Olz, S. and M. Beerepoot. 2010. “Deploying Renewables in
Southeast Asia: Trends and Potentials.” International Energy
Agency Working Paper. Web. October 2012. <http://www.iea.
org/publications/freepublications/publication/Renew_SEAsia.
pdf>
Osborne, Christopher. “Thailand’s renewable energy adder
rates.” AsianPower, August 8, 2012. Web. October 2012.
< http://asian-power.com/power-utility/commentary/
thailand%E2%80%99s-renewable-energy-adder-rates>
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