Confusion reigns over energy plan

Confusion reigns over energy plan

With a power development plan to be considered Monday by the National Energy Policy Council (NEPC), chaired by Prime Minister Gen Prayut Chan-o-cha, questions are re-emerging about transparency.

A worker checks photovoltaic panels at a solar plant in Samut Prakan. Solar and other renewables are thriving with state subsidies, which need to be reviewed. PORNPROM SATRABHAYA

Civic groups have expressed concerns at the plan, which will set a development framework and investment rules for electricity generation for the period 2015 to 2036. The plan has bypassed input from civil society groups. 

"We have been told instead the plan will be open to discussion at a public hearing in January," said Suphakit Nuntavorakarn, of the Healthy Public Policy Foundation. 

That's a back-to-front process. The plan should be discussed by the public before going to the NEPC.

The energy activist has a particular question over cost calculations for power generation — both conventional and alternative types.

When coupled with subsidies for alternative energy production, the result is cost distortion at best, and windfall profits in favour of certain producers at worst.

Recent news reports about Nopporn Suppipat, the CEO of Wind Energy Holding whose massive wealth put him in the Forbes list of top Thai millionaires, has triggered public suspicion over shady goings-on in the alternative energy business. 

The huge profits in alternative energy investment are linked to subsidies given by the state as incentives to promote environmentally friendly power generation.

"The incentives are aimed at boosting the confidence of potential investors in small power-plant and very small power-plant operations so their projects are viable," said Mr Suphakit.

Appropriate subsidies can be an efficient incentive. But what is going on in the alternative energy market bears close scrutiny, he said.

One form of subsidy for renewables is known as "adders" — the additional money given to the producers by the government on top of the electricity price per unit over a period of time — 10 years for solar and wind, and seven years for other renewables.

The "adder" for solar energy is 6.5 baht per unit, down from eight baht in 2010.

In Mr Suphakit's opinion, the 6.5 baht per unit adder may be too high given the production cost of solar energy has dropped markedly since 2011 as a result of a huge decrease in solar panel prices in international markets, making solar energy a thriving business.

The favourable prices of solar energy, combined with the fact the Energy Ministry has suspended new applications for solar energy projects, have led to cases of licence trading among developers which yield high profits.

"It's said that some of those who have licences have traded off the documents for lucrative prices — as high as US$1 million per megawatt," Mr Suphakit said.

He said the Ministry Energy has introduced a new form of subsidy for renewable energy, known as a "feed–in" tariff, which is a price guarantee scheme over a longer period of time, generally 25 years.

Feed-in has already been implemented in the case of solar energy.

The new subsidy is hardly a guarantee that electricity prices will be fairer for consumers given the lack of transparency in the cost-calculation system that fails to reflect cost dynamics.

Under such circumstances, Thai consumers are forced to pay high electricity bills — and will continue to do so.

Another issue of concern involves dubious electricity demand forecasts which seem to create the impression that we need more power plants, despite the fact that we are facing an oversupply of electricity reserves, he said.

Over-estimation has been a problem for more than a decade. The actual peak demand in 2014 was 26,942 megawatts, which is 1,848 megawatts lower than the forecast in the power development plan, compared with the total generating capacity of 33,379 megawatts.

The reserve margin is around 6,400 megawatts, or 24% of the peak demand, against the 15% reserve margin standard set by the Ministry.

Because of that forecast, three large power plants were built too early and most are left idled, Mr Suphakit said.

Yet the billions of baht costs are already included in our electricity bills.

While alternative energy has merit, the sector also requires good governance to prevent unjustified profits as well as loopholes that pave the way for corruption, he insisted.

More importantly, there seems to be hidden motives by energy planners to project a picture of coal as a cheap energy source.

In September, the Energy Ministry cited the figure 2.94 baht per unit at regional public hearings. But Mr Suphakit said the ministry failed to show which cost of coal plant technologies and coal price were used to arrive at that number.

Another presentation by a consultant hired by the ministry showed the price of electricity from coal as being unrealistically low by assuming coal was priced at US$80-$120 (2,550-3,840 baht) per tonne, lower than the world market price trend.

But during 2008 to 2012, prices went up as high as $160.

What is perceived as cheap or expensive energy in the plan is a major deciding factor for policymakers when they pick which type of energy they will promote.

The planners will use this to support their decision to promote coal-fired power plants. If that is the case, the higher cost from the wrong assumption — and all other costs thereafter — will be passed on to consumers.

Unfortunately, energy planners can still escape accountability.

This is because each unit of electricity cost contains not only an energy payment — the amount of money paid for the cost of production — but other issues as well.

It includes availability payment, a system that obliges the state to pay to a power plant as soon as the construction is completed, whether it is used or not.

And that's not to mention dubious subsidies, such as grid connection costs, FT charges, extra costs for unforeseeable source price increases and purchasing prices from private power plants.

Mr Suphakit said some people are preparing their own alternative power development plans to present to the Energy Ministry.

The public could compare the various versions.

"If we give priority to energy efficiency and renewable energy, we should be able to avoid large power plant projects, both coal and hydropower in neighbouring countries, for a decade from now.

"This will provide the country with higher economic as well as environmental benefits," Mr Suphakit said.

Ploenpote Atthakor is deputy editorial pages editor, Bangkok Post.

Ploenpote Atthakor

Former editorial page Editor

Ploenpote Atthakor is former editorial pages editor, Bangkok Post.

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