1. The story of Thailand’s centralized power sector
Palang Thai
Chuenchom Sangarasri Greacen
5 October 2009
MeeNet, Thailand

2. 1. The origin

3. Bangkok’s first paved road (New Road)
Electricity was introduced by King Rama V.
Electric tram in Bangkok
(powered by a wood-fired
steam engine) in 1884.

4. 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

5. 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 Electricity Authority, Northeast Electricity Authority, and the Lignite Authority

6. Decentralized Micro-hydro technology
Micro-hydropower harnesses energy from falling water. Typcially some water is diverted from a stream using a weir. Water is then transported by a channel or pipes to a powerhouse downstream where the pressurized water spins a turbine, generating electricity.
Source: Inversin, A. R. (1986). Micro-Hydropower Sourcebook. 6

7. Centralized generation
High voltage transmission
Transformer
Centralized generation
Medium voltage distribution

8. Deciding factor: Cold War politics
USAID poured in billions of dollars to Thailand, seen as a regional power to be courted 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 verbatim as Thailand’s rural electrification master plan
Electricity used to win the hearts & minds in “red/pink areas”

9. 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

10. 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

11. 2. The Evolution

12. 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

13. 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

14. 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

15. Power Grid & Pipelines are analogous to a giant’s arms reaching to grab resources to feed its endless appetite.

16. 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

17. 3. The Character

18. Unchecked centralized power
“A minority must sacrifice for the greater good”
“out of sight, out of mind”
Results:
Structural violence
Inequality
waste

23. Siam Paragon MBK Central World Pak Mun 65 Dams Malls Province
123 81 75
Siam Paragon
Central World
Electricity production
and consumption
(GWh)
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 23

24. Unlimited living?

25. The Champagne Glass Human Development Report 1992
UNDP, Human Development Report, 1998

26. 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 26

27. 4. The driver

28. Cycle of (over-)expansion under the centralized monopoly system
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

29. 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

30. Power demand projection Sep 2007 (PDP 2007 revision 1)MW
Economic Development Plan (years)
Average GDP growth rate/year
Average demand growth rate/year
10th plan ( )
5.0
5.86
11th plan ( )
5.6
5.95
12th plan ( )
5.54
48,958 MW
2,477
2,399
2,287
37,382 MW
2,235
2,178
2,131
2,035
27,996 MW
1,832
Demand increase per year
1,759
1,629
1,361
1,410
1,268
1,444
1,449
2550 – average increase 1,386 MW
2555 – average increase 1,877 MW
2560 – average increase 2,315 MW
แผนพัฒนาฯ ฉบับที่ 10
แผนพัฒนาฯ ฉบับที่ 11
แผนพัฒนาฯ ฉบับที่ 12
ที่มา กฟผ.

31. Power Demand: Projections vs
Power Demand: Projections vs. Actual 1992 – 2008 If no systemic bias, the chance of over-projecting demand 12 times in a row should be 1/4096!! MW

32. Why assume exponential growth? Linear vs. exponential extrapolation
31 power
plants

33. Planning of capacity additions
(Total capacity requirement = peak demand + 15% reserve margin)

34. 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?
New capacity added to the PDP 2007
L = low case B = base case H = high case
1=“lowest cost” 2=“as much coal as acceptable” 3=“LNG + imports”

35. Cost estimate (Baht/kWh)
Supply options
Cost estimate (Baht/kWh)
Generation
Transmission1
Distribution2
CO2 3
Other envi impacts 4
Social impacts
Total
DSM
0.50 – 1.505 -
SPP
cogeneration
(PES > 10%)
2.60 6
0.44
0.08
0.71
3.83
VSPP
(Renewable)
Bulk supply tariff
(~ 3) +
Adder
(0.3 – 8)
0 – 0.63
0 – low
3.3 – 11.0
gas CC
2.25 7
0.37
0.09
0.79
low – medium
3.93
Coal
2.11 7
0.15
2.76
High
5.82
Nuclear
2.08 7
High – very high
4.04
หมายเหตุ ใช้สมมติฐานว่าต้นทุนร้อยละ 12.4 ของค่าไฟฟ้ามาจากธุรกิจสายส่ง
2. ใช้สมมติฐานว่าต้นทุนร้อยละ 14.5 ของค่าไฟฟ้ามาจากธุรกิจจำหน่าย
3. ค่า CO2 ที่ 10 ยูโร/ตัน
4. ค่า Externality ตามการศึกษา Extern E ของสหภาพยุโรป และนำมาปรับลดตามค่า GDP ต่อหัวของไทย
5. การศึกษาของ World Bank 2005
6. ตามระเบียบ SPP
7. ที่มา : กฟผ.
8. Cost of liability protection, Journal “Regulation” 2002 – 2003

36. 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 8.4%
MEA
PEA
ROIC (Return on Invested Capital means: the more you invest, the more profits
4.8%
Guaranteed rate of return means central planners are rewarded, not held accountable, for their repeated errors in demand forecast

37. Cycle of over-expansion under the centralized system with return-based regulation
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

38. 5. The alternatives

39. Centralized generation
High voltage transmission
Transformer
Centralized generation
Medium voltage distribution

40. Centralized & decentralized generation
High voltage transmission
Transformer
Centralized generation
Cogeneration
Medium voltage distribution
Gasifier

41. Thai civil society created an alternative PDP that meets govt’ objectives, is more economic and cleaner. But it was not considered by the government
ที่มา มูลนิธินโยบายสุขภาวะ 2552

42. Supply curve of Pacific NW
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 Council 42

43. Thank you www.palangthai.org