Feed in Tariff grid-connected renewable energy technologies promotion in Thailand Presented by Dr. Prasert Sinsukprasert Director of Planning Division 20 November 2012

Agenda Thai’s Power Generation Overview Renewable Energy Policy Renewable Energy Situation in Thailand Thai’s Feed-in Tariff Program (Adder) Thailand’s Energy Policy why do we need to promote renewable energy : Diversify Our Fuel Mix, running out of natural Gas in the gulf, Co2 Global Trend, Sustainable Energy Development Government Policy Thai’s Adder Program Adder Development Timeline Situation of Solar Energy in Thailand Problems in Solar Energy Development Technical : grid connecting and transmission system operation Target Overshooting : Tariff Burden Prospects for Future Solar Energy in Thailand Put on hold to clear all the projects in pipeline : no new approval FiT replaces Adder

World Fuel Mix in Power Generation Slide ; why do we need to promote renewable energy : Diversify Our Fuel Mix, running out of natural Gas in the gulf, Co2 Global Trend, Sustainable Energy Development เนื่องจาก 1. ปัจจุบัน พึ่งก๊าซธรรมชาติในอ่าวไทยมากในการผลิตไฟฟ้า แต่ก๊าซฯกำลังหมดลง 2. จึงต้องกระจายชนิดเชื้อเพลิง โดยส่งเสริมพลังงานหมุนเวียน 3.แสงอาทิตย์จึงเป็นทางเลือกหนึ่ง Source: The Institute of Energy Economics, Japan

Power Generation in 2011 Total 162,343 GWH As shown in this pie chart, Thailand is heavily dependent upon natural gas as fuel for power generation. The government has set targets to diversify away from natural gas and increase the share of alternative energy, including solar energy. One mechanism for diversifying our energy resources is to encourage the private sector to participate in power generation. Such mechanism includes the introduction of the IPPs, SPPs, and VSPPs to compete with EGAT in power generation. Total 162,343 GWH

Thai’s Government Energy Policy Policy Statement of Prime Minister Yingluck Shinawatra to the National Assembly, Tuesday 23 August 2011 Renewable Energy Policy “ Energy sources and types will also be diversified so that Thailand will be able to meet its energy needs from a variety of sustainable energy sources ” “ Support the production, use, research and development of renewable and alternative energy sources, with the objective of replacing 25% of the energy generated by fossil fuels within the next decade ” Slide; Government Energy Policy มาใส่แล้วอธิบายเหตุผลว่า ต้องการแสดงให้เห็นถึงเหตุผลว่าทำไมประเทศไทยจำเป็นต้องส่งเสริมการผลิตไฟฟ้าจากพลังงานหมุนเวียน โดยคำนึงถึงความมั่นคงด้านพลังงานไฟฟ้า และการพัฒนาอย่างยั่งยืนในระยะยาว ซึ่งเป็นนโยบายของทุกรัฐบาลมาตลอด

Renewable Energy Policy

Financial Mechanism in support of RE Low-Interest Loan: Revolving Fund Venture Capital: ESCO Fund Tax Incentives: BOI privilege Feed-in tariff: ADDER One mechanism for diversifying our energy resources is to encourage the private sector to participate in power generation. Such mechanism includes the introduction of the IPPs, SPPs, and VSPPs to compete with EGAT in power generation. One way to promote greater use of RE is to provide financial assistance to kick start RE projects, which usually require high initial investment costs but are difficult to obtain financing from the banks. 7 7

IRR % Adder Production cost Electricity price Adder program Adder rates vary, depending on the technology used. Support duration: 7 yrs from COD (10 yrs for solar and wind projects). Consumers pay in the form of Ft. Adder rates vary, depending on the technology used. The provision of adders will be for a period of 7 years as from the Commercial Operation Date (COD). For solar and wind power projects, the support period will be 10 years. Adders will be passed through to consumers in the form of Fuel tariff (Ft) which varies in accordance with the fuel cost. With this concept, consumers will have to take the burden of Adders. To balance the impact on Ft which is passed through to consumers, the Adder needs to be reviewed regularly. Details will be talked about later. Base tariff regulation + automatic tariff adjustment mechanism (Ft)

“Adder” Provision -- Evolution 2006 Adder measure approved by the NEPC 2007 Adder provision implemented by utilities Adder rate for wind power projects increased and support period for wind & solar power projects extended (10 yrs) 2009 Adder rates adjusted to promote very small-scale generation Some rules &regulations adjusted (bid bond, dispatch and rooftop solar) 2010 Adder rate for (new) solar power projects was reduced The suspension of power purchase from solar power projects was approved by the NEPC. “Feed-in Tariff” research in progress To further promote power generation using renewable energy, especially by VSPPs, the ADDER measure was initiated in 2006. The main purpose of ADDER is to stimulate power generation competition. Eligible power producers are those using renewable resources and co-generation facilities. The National Energy Policy Council (NEPC) approved ADDER rates in late 2006 in order to induce more investors to produce electricity from renewable energy. After the announcement on the provision of “Adder,” overwhelming response has been received. However, no SPP/VSPP using wind or solar energy participated in the power purchase program. Following a policy research study, it was found that the adder rates for power generation using wind or solar energy were not attractive because the investment in such projects was still not cost-effective. To address this problem and to enhance fuel diversification, on 16 November 2007, the NEPC approved the adjustment of adder provision to encourage investment in power generation using wind or solar energy as fuel. That is, for wind-energy power generation, the adder was increased from 2.50 to 3.50 Baht/kWh; for solar-energy power generation, the adder is 8.00 Baht/kWh still, but the duration of adder provision for both wind and solar energy projects was extended from 7 years to 10 years as from the COD. Adder was again revised in 2009 aiming to (1) promote renewable energy in order to reduce environmental impact; (2) stimulate local technology development and local employment; (3) promote distribution of power generation to remote areas, focusing very small-scale projects; (4) motivate forest and watershed conservation projects. Moreover, former ceilings imposed on power purchase from renewable SPPs have been lifted and replaced by relevant renewable energy targets specified in the 15-year Renewable Energy Development Plan. Because “Adder” is a payment on top of normal power rates and it is passed on to consumers through the Ft mechanism (automatic power tariff adjustment), the higher amount of adders given to power producers, the higher tariffs for consumers. Also, the cost of some technologies has considerably decreased from the time Adder rates were set. “Feed-in Tariff” will be introduced for all new RE generation. It will be calculated based on real investment costs & appropriate rate of return on investment for power producers. Producers have to propose and negotiate tariffs with state utilities. It will be part of the base tariff, and hence less impact on consumers. Now, the appropriate application of Feed-in Tariff is being developed in detail.

Adder Rate

Renewable Energy Situation in Thailand

Renewable Energy Target Development Approved in Jan 2009 RE Target: 20% in 2022 Electricity Target: 5,608 MW REDP Approved in Dec 2011 RE Target: 25% in 2021 Electricity Target: 9,201 MW AEDP Energy/Fuel REDP Target in 2022 (MW) AEDP Target in 2021 (MW) Solar 500 2,000 Wind 800 1,200 Hydro Power 324 1,608 Biomass 3700 3,630 Biogas 120 600 MSW 160 New energy 3 Total 5,607 9,201 REDP was submitted to the National Energy Policy Council (NEPC) in Jan 2009 and further presented and approved by the cabinet in the same month. AEDP was submitted to NEPC in Nov 20011 and further presented and approved by the cabinet in Dec 2011. AEDP: 2555 as based year

Power Purchased from Renewable Energy As of August 2012 COD

Renewable Energy selling to the grid

Thai’s Feed-in Tariff Program (Adder) It was recognized that capital cost for renewable energy was the most important barrier affecting the competitiveness and hence the viability of renewable energy power generation. Therefore, the government initiated “Adder Provision” -- an additional energy purchasing price on top of the normal prices that power producers will receive when selling electricity to the Power Utilities.

Feed-in Tariff Implementation Future prospects Adder provision Existing proposed project continually receive adder till the subsidy duration Feed-in Tariff Implementation 2. RE Project Screening Committee To oversee, support and accelerate the consideration of power purchase from RE in order to meet with the national RE target ปัจจุบันมีการดำเนินงานคู่ขนานกันดังนี้ 1. โครงการที่ยื่นขอขายไฟด้วยมาตรการAdder ยังคงได้รับการพิจารณาตามมาตรการ Adder 2. มีการคัดกรองโครงการ โดยคณะกรรมการบริหารฯ 3. ศึกษาผลกระทบต่างๆที่เกี่ยวข้อง เช่นผลกระทบทางด้านเทคนิค สิ่งแวดล้อม เศรษฐกิจ ทั้งนี้ เพื่อเตรียมไปสู่การประกาศใช้ Feed-in Tariff 3. Study on impact of RE promotion System reliability, environmental impact, Ft Impact, etc.

Thank you for your kind attention