A win-win for nature and the economy
The Nobel Prize in Chemistry this year went to three visionary scientists for "creating a rechargeable world". Their works can help recharge the Thai economy too if the government does the right thing to support the lithium-ion industry.
Before we discuss policies, let's remember that every time we recharge our mobile phones and laptops, we owe it all to these three great minds: John B Goodenough, M Stanley Whittingham, and Akira Yoshino.
The fruits of their revolutionary inventions do not stop at our wireless world. At a time when Mother Earth is facing the climate crisis, the development of lithium-ion batteries has paved the way to a fossil-fuel-free world to save humanity.
"This lightweight, rechargeable and powerful battery is now used in everything from mobile phones to laptops and electric vehicles. It can also store significant amounts of energy from solar and wind power, making possible a fossil fuel-free society," lauds the Royal Swedish Academy of Sciences to honour them with the Nobel Prize.
The wide-ranging benefits of lithium-ion batteries and the increasing demand for them worldwide has triggered rapid growth in the battery industry, particularly in the electric car and renewable power industries. According to the Joint Research Centre of the European Commission, the global market of batteries in 2040 could be worth up to 200 billion euros (7 trillion baht) annually, up from its current value of 15 billion euros.
Such rapid market growth has attracted new players who want to cash in on the lucrative battery industry including the manufacturers in the automotive industry. Thailand is one of them. Since the middle of this year, Thailand has started producing batteries for electric cars, thanks to the country's firm foundation as one of the world's biggest manufacturers of cars and auto parts.
The automotive industry greatly benefits from the government's policy incentives to usher the country into a clean energy society. Under this policy, the manufacturers will get an extra cut in excise tax if they also produce the batteries for electric vehicles domestically. At present, the investment in electric cars and batteries of various makers in Thailand is worth about 50 billion baht as of December of 2018.
Although much still needs to be done to make electric cars affordable and more widespread, it is a step in the right direction not only for the environment but also for the car manufacturers themselves.
In the near future, the lithium-ion battery will soon become the auto part with the highest value. The production of batteries for electric cars is also necessary to keep the country's automotive industry competitive with other car manufacturing bases elsewhere.
The power sector also needs a similar policy boost to promote the use of lithium-ion batteries for grid energy storage. The power generation industry itself has much to gain from increasing the volume of clean renewable energy in the current electricity generation system.
For starters, the battery for grid energy storage saves power-generating state enterprises from having to build more power plants to serve consumers during peak hours. The battery for grid energy storage also strengthens frequency regulation and stabilises intermittent renewable energy so it can be connected to the power grid more smoothly and efficiently.
Thailand should quickly seize this battery opportunity by opting for domestic production instead of imports. The production of high-quality lithium-ion batteries will subsequently strengthen the manufacturing industry and the national economy.
Although Thailand does not have the minerals to produce lithium-ion batteries, we can still benefit from the many value-added processes to serve the markets. According to research by the Clean Energy Manufacturing Analysis Centre (Cemac), the cell production and the battery pack assembly can increase the value of the product by 60%.
Here's the problem. At present, the use of batteries for grid energy storage is still very limited. They are used mostly in pilot projects of state agencies and private companies. And all of them are using imported batteries.
At present, there are only five battery manufacturers in the country. Due to very limited domestic use of the battery in the energy sector, they need to turn to outside markets in other Asean countries or focus on the electric car markets which have more market potential than the power grid industry.
Strong policy support can overcome this hurdle. According to a study by the Thailand Development Research Institute (TDRI), we have found that there is little use of the lithium-ion battery in the energy sector throughout the entire electricity supply chain -- right from the Electricity Generating Authority of Thailand (Egat) to private power companies and the consumers -- because the investment costs still exceed the returns.
The government's policy intervention is thus crucial to make the investment in battery use cost-effective.
To promote more use of batteries in the power grid industry, the government should offer concrete incentives to cut production costs and stimulate market demand.
For short-term measures, the end-users should receive state subsidies to set up their behind-the-metre energy storage. The subsidy rates can be reduced in accordance with the cost of technology which becomes cheaper over time.
For long-term support, state authorities should review the electricity retail prices to reflect the real-time unit cost of production, especially during peak periods. This price review is necessary when public consumption of clean and renewable energy becomes substantial and shifts the peak period from night time to day time.
The government should also adjust the excise tax rates to include environmental costs. This adjustment will significantly reduce the tax burden of lithium-ion batteries because they affect the environment much less than conventional batteries made from lead. As a result, the cleaner batteries will become affordable to the public.
Apart from giving tax breaks to lithium-ion battery producers, other value-added businesses such as those in battery management systems and energy storage system integration should also receive similar support.
Supporting the use of lithium-ion batteries will allow Thailand a smooth transition towards clean and renewable energy while strengthening both the car manufacturing and energy industries.
Thailand is at an energy crossroads. The country can achieve this goal by implementing a set of policies to support domestic production and use of lithium-ion batteries. Or it can let this golden opportunity pass to protect old interests in the energy industry.
Sunthorn Tunmuntong is a researcher at the Thailand Development Research Institute (TDRI). Policy analyses from TDRI appear in the 'Bangkok Post' on alternate Wednesdays.