ASEAN People Forum Thailand’s Perspectives on Energy Industry and Investment in ASEAN 19 October 2009 Chuenchom Sangarasri Greacen Palang Thai www.palangthai.org

ASEAN is energy resource-rich.

ASEAN Plan of Action for Energy Cooperation (APAEC 2010-2015) Program Area Ownership 1. ASEAN Power Grid Heads of ASEAN Power Utilities/Authorities (HAPUA) 2. Trans-ASEAN Gas Pipeline ASEAN Council on Petroleum (ASCOPE) 3. Coal and Clean Coal Technology ASEAN Forum on Coal (AFOC) (ACE as Secretariat) 4. Energy Efficiency and Conservation (EE&C) EE&C-Sub-sector Network 5. Renewable Energy (RE) RE- Sub-sector Network 6. Regional Energy Policy and Planning (REPP) REPP Sub-sector Network 7. Civilian Nuclear Energy A main impetus of ASEAN’s energy cooperation is to link resource-rich countries with those with high energy demand to promote accelerated development and consumption of energy resources to drive economic growth. The areas of cooperation with the most momentum are ASEAN Power Grid and TAGP, where formal institutions have been established to move cooperation beyond just talking and networking towards real implementation. *ACE = ASEAN Center for Energy

Two clusters: the GMS and the peninsular-island clusters.

Indicative Master Plan on Power Interconnection in the GMS Benefits : Exchange energy e.g. during different peak periods Reduce shared reserve margin Maximize efficient utilization of resources in the GMS

Reality of GMS Power Grid: expensive, risky investment US$billion Project cost 43.50 - 44.96 Cost savings* 0.45 - 0.91 % benefit of total cost 1.0 – 2.1% Based on unrealistically cheap hydropower costs NT2 power at 1.4 US cents/kWh Costs excluded in analysis: Control center Water usage Regulator & reliability coordination Transitional costs Increased vulnerability: events in Laos/Cambodia determine reliability of Thai Grid *Cost savings of extended power cooperation scenarios over base case Source: Comments on Indicative Master Plan on Power Interconnection in GMS Countries by Bretton W. Garrett, P.Eng., Ph.D.

ASEAN Power Grid Projects Projects under construction: Thailand – Lao PDR Roi Et – Nam Theun 2 Udon Tani – Nabong Lao PDR – Vietnam Lao PDR – Cambodia Projects under design or study 1) Sarawak – Peninsular Malaysia 2) Peninsular Malaysia – Sumatra 3) Batam - Bintan - Singapore 4) Sarawak - West Kalimantan 5) Philippines - Sabah 6) Sarawak - Sabah - Brunei 7) Thailand - Myanmar 8) East Kalimantan - Sabah Idea of “Regional Grid” unlikely (technically, politically and economically) so only bilateral projects that make economic/commercial sense will be pursued. From Thailand’s perspective, the “ASEAN Grid” is merely a grid extension beyond Thai borders to bring electricity (mostly hydro) from neighboring countries. Source: APAEC 2010-2015

Trans-ASEAN Gas Pipeline Projects No regional gas market like in Europe or North America as long-term take-or-pay contracts are the norm here. Development likely to be negotiated bilaterally if it makes commercial sense. Source: APAEC 2010-2015

Thailand’s perspectives

Projects within Thailand implemented with government’s force Example of the Thai-Malaysian Gas Pipeline

When resistance is tough at home, ASEAN “Grid” allows cross-border exports of environmental, social and HR problems of securing energy 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

ASEAN framework is used to explore and expand business opportunities for Thai energy corporations Power projects by Electricity Generating Authority of Thailand (EGAT)’s subsidiaries RATCH EGCO EGAT International Activities in Laos, Burma, Cambodia, Indonesia Gas/petroleum projects by PTT (partially privatized gas/petroleum utility) PTTEP and its various subsidiaries Activities in Burma, Malaysia, Indonesia, the Philippines EGAT PTT

Energy plan and policy decisions (at national or ASEAN levels) dominated by business interests Program Area Ownership 1. ASEAN Power Grid Heads of ASEAN Power Utilities/Authorities (HAPUA) 2. Trans-ASEAN Gas Pipeline ASEAN Council on Petroleum (ASCOPE) 3. Coal and Clean Coal Technology ASEAN Forum on Coal (AFOC) (ACE as Secretariat) 4. Energy Efficiency and Conservation (EE&C) EE&C-Sub-sector Network 5. Renewable Energy (RE) RE- Sub-sector Network 6. Regional Energy Policy and Planning (REPP) REPP Sub-sector Network 7. Civilian Nuclear Energy Power and gas utilities are main drivers EGAT PTT Support by Government Source: APAEC 2010-2015

Conflict of interest : policy v business Board of directors Permanent secretary of ministry of energy Chairman of PTT Chairman of EGAT Board member of PTT chemical Chairman of Rayong refinery Director general,Energy fuel Dep. permanent secretary Board member of Thai oil Dep. permanent secretary Board member of RATCH Dep. permanent secretary Board member of PTTEP Director general of energy business Board member of PTT Director general of Department of Alternative Energy Development and Efficiency energy Board member of RATCH Director of Energy Policy and Planning official Board member of PTTEP Senior official of ministry of energy Board member of Aromatics PLC Senior official of ministry of energy Board member of Bang chak Board member of RATCH Board member of Ratchaburi generation company Senior official of ministry of energy 17

Energy policy and its impacts on share prices of energy companies in the stock market The coup-installed government announced its policy on energy investment opportunities on 3 Oct 2006 Energy policy, PDP approval and IPP bidding resulted in significant windfall benefits for selected companies 1 year later, the share prices of companies benefiting from the PDP jumped 66% (other companies had a 8.7% rise)

Forecast_Mar07 (Base case) More investments NOT equal to greater benefits for Thais Generation capacity in excess of demand (2007-2008) Under centralized monopoly structure 22,568 22,586 28,153 30,305 Forecast_Mar07 (Base case) Source : EGAT Excess gas/ pipeline capacity/ generation capacity economic waste + excess burden for consumers

Power Demand: Projections vs Power Demand: Projections vs. Actual 1992 – 2009 Repeated number errors with real consequences for affected ecology, communities and consumers MW

Incentive structure for utilities: the more expansion, the more profits 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 ROIC = Net profit after tax Invested capital EGAT 8.4% MEA PEA 4.8% Result : Demand forecast have systemic bias toward over-projections Too many expensive power projects get built

Cycle of over-investment Deterministic planning based on demand forecast leads to over-investment in capital-intensive power projects Power demand (over-)projections 1 2 Utilities’ Profits 3 Tariff structure that allows pass-through of unnecessary investments

Energy security (or handsome profits) at the expense of ???

Siam Paragon MBK Central World Pak Mun 65 Dams Malls Province Electricity production and consumption (GWh) MBK 123 81 75 Siam Paragon Central World Impacts of Pak Mun Dam alone 1700 families relocated Loss of livelihood for >6200 families Loss of 116 fish species (44%) Fishery yield down 80% Source: MEA, EGAT, Searin, Graphic: Green World Foundation Pak Mun 65 Mae Hong Song Dams Malls Province 24

การกระจายของจำนวนผู้ใช้ไฟและปริมาณการใช้ไฟฟ้า Distribution of number of power users & energy consumed Agricultural pumping Government Specific businesses Large industrial/commercial) Small industrial/commercial Small industrial/commercial Large houses (>150 kWh/mo) Small houses (<150 kWh/mo) Number of customers Electricity consumption ที่มา : รายงานการปรับโครงสร้างอัตราค่าไฟฟ้า (มติ ค.ร.ม. วันที่ 3 ตุลาคม 2543)

"Nature has enough for our need, but not enough for our greed." - Gandhi "Nature has enough for our need, but not enough for our greed." -- Ghandi 26

In conclusion ASEAN = expanded ground ?? to which Thailand can export its envi, social & human rights problems from securing energy? from which Thailand’s centralized energy corporations can grow and profit? In which Thailand’s cycle of over-investment and excess consumer burden is aggravated? ASEAN energy decisions dominated by utilities and senior officials with conflict of interests

MEDITATE, CONNECT, EMPHATIZE, BE GENTLER, BE KINDER What to do? Need to empower the grassroots Need to reform the centralized monopoly structure and liberate decentralized solutions (local planning & control, energy efficiency and conservation, small-scale renewable energy) Need to democratize national governments as much as ASEAN (Can we democratize ASEAN without democratizing our own governments?) MEDITATE, CONNECT, EMPHATIZE, BE GENTLER, BE KINDER