Regional Energy Conference Selling renewable energy profitably to the grid: The evolution and results of Very Small Power Producer (VSPP) Regulations in Thailand and Tanzania Regional Energy Conference Phnom Penh Cambodia 30 September 2009 Chris Greacen chris@palangthai.org 1:15 Good morning. It’s an honor to be here among so many distinguished guests. In this conference we’ve heard a lot about big energy stuff: big plans, big power plants, big transmission lines. I’m going to use my 15 minutes in front of you to put in a word small scale energy. In particular, for regulations that enable small power projects to add up to something substantial. Over the past eight years I have had the good fortune to help governments in Thailand and Tanzania to draft Very Small Power Producer or VSPP regulations. VSPP regulations allow small renewable energy and cogeneration facilities to connect and sell electricity to the grid, and can be useful in helping achieve a wide variety of development goals. As we will see, in Thailand these regulations have been successful in helping add substantial renewable energy generation capacity, consistent with Thailand’s goals of reducing fossil fuel imports, of fostering rural economic development, and encouraging clean energy. Originally I was only going to talk about Thailand – afterall this is a Mekong conference -- but I’ve added Tanzania because it offers an interesting counterpoint. Tanzania is a much poorer country, and its energy challenges have to do with expensive emergency generation, blackouts, and low rural electrification – problems shared by some . In Tanzania essentially the same VSPP regulations are aiming to address these problems. English language versions of the regulations from both countries are available on the internet, and I am hoping this presentation will spark interest by governments in countries represented here to adapt these regulations for their own use as a mechanism for encouraging efficient private sector participation in clean, small-scale electricity generation.

Can’t we hook it up and sell power back? My interest in these types of regulations was sparked by conversations I had eight years ago with people in Thai villages who had built micro-hydropower plants. When the national grid eventually arrived, some villagers asked, “why do we have to abandon our power plant if we want to use electricity from the national grid? Can’t we hook up and sell it back? That way we can make some money for the village, and help our country reduce its reliance on imported fossil fuels.” Fortunately, thoughtful people in the Thai government were thinking along the same lines. Can’t we hook it up and sell power back? 2

These Thai policymakers also knew that rice mills had a lot of waste rice husk. Pig farms have a lot of manure. Sugar factories have sugar cane bagasse. Sawmills have wood scraps. Each of these is a renewable energy source that can contribute to the national power mix, but only if generators have a market for their power. Selling to the national grid is a perfect market because it’s there 24 hours a day. 3

$ VSPP regulations essentially have two components: a set of technical regulations that provide for a safe flow of electricity from these generators to the national grid; and a set of commercial regulations regarding the flows of money to the VSPP generators.

$ Technical regulations: Allowable voltage, frequency, THD variations Protective relays 1-line diagrams for all cases: Induction Synchronous Inverters Single/multiple Connecting at different voltage levels (LV or MV) Communication channels Commercial regulations: Definitions of renewable energy, and efficient cogeneration Cost allocation Principle of standardized tariff determination Invoicing and payment arrangements Arbitration Technical regulations include topics like allowable voltage, frequency variations and specify required protective relays. The commercial regulations focus on how costs are allocated, how tariff amounts are determined, and what happens in the event of disputes. A standardized PPA eliminates lengthy case-by-case negotiations with utilities.

$ Technical regulations: Allowable voltage, frequency, THD variations Protective relays 1-line diagrams for all cases: Induction Synchronous Inverters Single/multiple Connecting at different voltage levels (LV or MV) Communication channels Commercial regulations: Definitions of renewable energy, and efficient cogeneration Cost allocation Principle of standardized tariff determination Invoicing and payment arrangements Arbitration Process regulations: Process of determining tariffs Timelines for application processing Required steps for interconnection Technical regulations include topics like allowable voltage, frequency variations and specify required protective relays. The commercial regulations focus on how costs are allocated, how tariff amounts are determined, and what happens in the event of disputes. A standardized PPA eliminates lengthy case-by-case negotiations with utilities.

Evolution of Thai VSPP regulations 2002 VSPP regulations drafted, approved by Cabinet Up to 1 MW export, renewables only Tariffs set at avoided cost (bulk supply tariff + FT) 2006 Up to 10 MW export, renewables + cogeneration Feed-in tariff “adder” If > 1 MW then utility only pays for 98% of energy 2009 Tariff adder increase, more for projects that offset diesel The Thai regulations were approved in 2002. Projects were allowed to come into the program as long as they used reenewable energy and they exported less than 1 MW. The tariffs were essentially set at the cost per kWh that Thailand’s distribution utilities pay for power they buy from EGAT. In 2006 the utilities felt comfortable enough with the initial VSPP projects to allow an increase in project size to 10 MW export and efficient cogeneration was also allowed. The government also recognized that VSPP could play a larger role in meeting the nation’s commitment of 8% renewable energy by the year 2011 (recently raised to 20% by year 2022). The upgrade to the regulations also created a technology-specific feed-in tariff subsidy adder. In 2009 the feed-in tariff was changed to provide additional payments for projects that offset diesel generation, which is still used in Thailand in some remote mountain and island areas. English versions of the Thai regulations are available at this website: http://www.eppo.go.th/power/vspp-eng/ for English version of regulations, and model PPA

Thai VSPP feed-in tariffs Fuel Adder Additional for diesel offsetting areas Additional for 3 southern provinces Years effective Biomass Capacity <= 1 MW $ 0.015 $ 0.030 7 Capacity > 1 MW $ 0.009 Biogas <= 1 MW > 1 MW Waste (community waste, non-hazardous industrial and not organic matter) Fermentation $ 0.074 Thermal process $ 0.104 Wind <= 50 kW $ 0.134 $ 0.045 10 > 50 kW Micro-hydro 50 kW - <200 kW $ 0.024 <50 kW $ 0.045 Solar $ 0.238 This table shows the current VSPP tariffs. Tariffs have evolved to vary depending on: Fuel type Geographic location (more for provinces in 3 conflict-prone southern provinces) Whether or not the project offsets diesel Capacity The total tariff is equal to this adder pluse the utility’s avoided cost of power. Ultimately consumers pay for the adder through a per-kWh pass-through mechanism to all consumers. Assumes exchange rate 1 Thai baht = 0.029762 U.S. dollars Tariff = adder(s) + bulk supply tariff + FT charge Biomass tariff = $0.009 + $0.049 + $0.027 = $0.085/kWh

Korat Waste to Energy – biogas … an early Thai VSPP project 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 Here are some of VSPP projects in operation in Thailand. Thailand is the world’s second largest producer of Cassava, much of which is turned into tapioca flower. The process generates waste water that, when digested, makes a lot of methane. The digester is a covered lagoon the size of a couple football fields – here you can see the lagoon’s black plastic cover. Methane provides thermal energy and electricity for the tapioca factory and excess is sold to the grid under the VSPP program. 9

Biogas from Pig Farms Reduces air and water pollution Produces fertilizer Produces electricity 8 x 70 kW generator Ratchaburi Biogas from Pig Farms 10

Biogas from Pig Farms 5000 pigs  $31 / day elec.

Micro hydropower 40 kW Mae Kam Pong, Chiang Mai, Thailand This community run 40 kW micro-hydro project produces about $13,000 per year worth of electricity in the VSPP program. 40 kW Mae Kam Pong, Chiang Mai, Thailand

Rice husk-fired power plant 9.8 MW Roi Et, Thailand In Thailand there are many rice mills. This is a 9.8 MW SPP that burns rice husk to generate electricity with a steam turbine.

Bangkok Solar 1 MW PV Project size: 1 MW Uses self-manufactured a-Si Feed-in tariffs have helped strengthen a burgeoning solar electric manufacturing industry in Thailand. This 1 MW plant uses solar panels manufactured in Thailand.

Cambodia peak demand in 2007 = 262 MW Thai VSPP MW applied, received permission, PPA signed, and selling – as of September 2009 Industry has responded strongly to the Thai VSPP program. This chart gives some indication of the pipeline of projects. The columns on the right are MW of VSPP generators that are currently online. There are over 100 projects with a combined capacity of over 725 MW. PPAs have been signed for over 2600 MW. Over 4000 MW have been approved. And over 7200 MW have applied. Clearly not all of the projects that have applied will end up being built, but at the very least it indicates considerable interest by industry. For reference, Thailand’s 2009 peak load was a bit over 22,000 MW. Cambodia’s peak load in 2007 of 262 MW is shown as this blue square.. Cambodia peak demand in 2007 = 262 MW

Evolution of Tanzania SPP regulations 2009 Approved by regulator August Up to 10 MW export, renewables & cogeneration SPP Tariffs at average of LRMC and SRMC Grid-connected SPP tariff (2009): $0.066/kWh In rural mini-grid areas offsetting diesel (2009): $0.26/kWh First 2 PPAs signed September I’ve been recently working with the World Bank to help Tanzania’s regulator to develop similar regulations. The Tanzanian regulator approved them just over a month ago. They allow both cogeneration and renewable energy, up to 10 MW export. Tanzania has power shortages, especially when there is drought. To help meet demand the Tanzanian utility purchased generation capacity and associated energy through emergency procurements. The tariff paid to SPPs connected to the main grid is about 6.6 US cents – lower than emergency energy costs, but sufficient for biomass to be profitable. In Tanzania only about 2% of the rural population has grid electricity. Some of the larger towns are served by 11 diesel mini-grids owned by the national utility. The national utility loses money for every kWh sold. The VSPP tariffs are set lower than what the utility has to pay for diesel generation, but high enough to be attractive to small biomass and micro-hydro developers. www.ewura.go.tz/sppselectricity.html for English versions of regulations, and model PPAs

More than 60 countries have similar regulations in place… More than 60 countries worldwide have feedin tariffs like Thailand. Others have VSPP regulations that pay avoided costs, like Tanzania.

Does VSPP make sense for Cambodia? 90% of electricity from diesel. $0.18/kWh (urban) $0.30 to $0.90/kWh (rural) 400 Rural Energy Enterprises (REE)s providing to 67,000 households Reluctant to upgrade equipment from inefficient old diesels to gassifiers, micro-hyropower, etc. because of uncertain EdC expansion. VSPP regulations provide guarantee of a market for power in areas where EdC expands grid. Yesterday His Excellency Phalla Phan from the Supreme National Economic Council noted that…

A 200 kW Combo Gasifier in an REE I took this slide from SME renewables, a local company with representatives here at this conference. The company is helping rice millers and REEs to use gassifier technology to turn rice husk and fast-growing nitrogen fixing luceana trees into mechanical power and electricity. Gassifiers, microhydropower, and biogas could be making a greater contribution to the power mix if there were VSPP regulations here.

Concluding thoughts VSPP regulations enable small generators together to profitably make substantial contributions to electricity generation. Zero / small carbon footprint Useful for decreasing diesel expenditures for rural electrification VSPP projects help develop local engineering / project development capacity. English versions of regulations available online Read, adapt for your own country

Thank you chris@palangthai.org This presentation available at: www.palangthai.org/docs VSPP regulations available at: http://www.eppo.go.th/power/vspp-eng/ And www.ewura.go.tz/sppselectricity.html