Policy analysis to identify the barriers to the development of bioenergy in Thailand

Articles

Policy analysis to identify the barriers to the development of bioenergy in Thailand Boonrod Sajjakulnukit, Virach Maneekhao and Veerawan Pongnarintasut Bureau of Energy Study, Research and Development, Department of Energy Development and Promotion 17 Rama 1 Road, Yodse, Bangkok 10330, Thailand

This paper analyses the energy situation in Thailand. Information on past and present use of energy is presented, particularly on biomass energy. Biomass technologies currently being promoted and estimated resource potential, including projections for the years 2005 and 2010, are also briefly explained. National initiatives to promote the use of renewable energy technologies, especially biomass energy technologies and the institutional framework, are reviewed and presented. Finally, barriers to the promotion of biomass energy technologies are analysed and discussed, followed by recommendations and measures to overcome these barriers. 1. Introduction Thailand signed the United Nations Framework Convention on Climate Change (UNFCC) on 12 June 1992. The convention was ratified on 28 December 1994, and came into effect on 28 March 1995. A study on Thailand’s national greenhouse gas (GHG) inventory [TEI, 1997] revealed that energy was the largest GHG-emitting sector (contributing 79 million tonnes (Mt) out of a total of 225 Mt of CO2 equivalent) and that its contribution is expected to increase in the future. On the other hand, Thailand has very limited conventional energy sources. More than 60 % of its conventional energy supply is imported, which is a huge financial burden on the country. Such reliance on imported energy sources also jeopardises future energy security. Thus, it is imperative to develop sound policies and strategies for efficient and effective energy utilisation, and to identify alternative clean and indigenous energy sources. This study aims to examine the past, present, and future trends of the energy situation in the country. National initiatives undertaken on energy development, energy conservation and promotion of renewable energy are also reviewed and analysed. Barriers to the promotion of biomass energy initiatives are also examined. Thailand’s total primary energy supply in 1998 was 3175 TJ, a decrease of 5.0 % from the previous year. About 56.6 % was supplied by the domestic sources and 43.4 % was imported. Of the total, fossil fuel energy (oil, coal and natural gas) accounted for 79.4 %, while renewable energy (RE) (fuelwood, paddy husk, bagasse and hydroelectric power) supplied the rest (20.6 %). After experiencing a sharp decline in 1997 and 1998, the Thai economy recovered considerably in 1999, in terms of both growth and stability. However, the economy slowed down again in 2001, mainly because of the adverse impact of the global economic slump. The Bank of Thailand estimated that the Thai economy was likely to expand by 1.5 %, or slightly higher, in 2001 and expects Energy for Sustainable Development

the economy to grow at around 2 % to 3 %, with no inflationary pressure, in 2002. Before the financial crisis hit Thailand in mid-1997, the total primary energy supply increased during 1989-1996 at an average annual growth rate of 8.9 % (1770 TJ to 3210 TJ). The contribution of fossil fuel to the total primary energy supply increased from 61.1 % in 1989 to 79.4 % in 1998, while the share of RE, although relatively constant in absolute terms, dropped from 38.9 % to 20.6 % of the total during this period. The growth rate decreased significantly in 1997 (3.9 %) due to slowdown in almost all activities during the first year of the ecoomic crisis. The Department of Energy Development and Promotion (DEDP) has been collecting data on energy statistics in Thailand since the early 1970s. DEDP [1999] showed that in 1998, the country experienced a negative energy growth of 5.0 % for the first time. Of the total final energy consumption, the transportation sector had the highest share (41.3 %), while manufacturing, residential and commercial, and agricultural sectors consumed 31.5 %, 22.4 % and 4.1 %, respectively. Biomass is the main RE source and is used mostly in the residential and manufacturing sectors. In 1998, 137 TJ of biomass (mainly fuelwood and charcoal, accounting for about 64 % of the sector total) was used in the residential sector. Another 110 TJ of biomass (mainly fuelwood, rice-husk and bagasse, accounting for 26.4 % of the sector total) was used in the manufacturing sector. Of the total biomass consumption in the manufacturing sector, 91 % (100 TJ) was consumed by the food and beverages sub-sector. The use of bioenergy in the manufacturing sector increased considerably during 19891997 from 90 TJ to 137 TJ and decreased to 110 TJ in 1998 [DEDP, 1999]. As was mentioned earlier for RE, the country’s total biomass consumption during the last ten years has also been more or less constant; increased biomass consumption in the manufacturing sector was actually offset by decrease in the consumption in the residential sector.

l

Volume VI No. 3

l

September 2002

21

Articles

The energy consumption pattern in the residential sector differs significantly between rural and urban areas. The pattern further differs among rural communities depending on their regional location and distance from the urban centres. Rural areas in the more developed and irrigated parts of central and southern Thailand, where people have relatively higher incomes, are in the transition to using modern fuels, while people in the more remote regions of north and north-east Thailand still depend mostly on traditional fuels. Survey results by DEDP showed that although charcoal and wood remain the major fuels used by rural households, their consumption decreased between 1980 and 1996. On the other hand, the use of commercial energy, especially electricity and LPG, increased substantially, from 8.8 TJ in 1980 to 64 TJ in 1996 [DEDP, 1992; 1997]. As rural electrification has been an important policy of the government, the proportion of electrified villages has increased from 62 % in 1984 to 99 % in 1996. Wherever electricity has become available, electric light is replacing kerosene lamps and homemade candles. Wealthier households have also been acquiring electrical gadgets such as fans, rice-cookers, televisions, washing machines, irons and refrigerators. Distribution and marketing of LPG have also improved considerably. Availability of LPG and sufficiency of household income have been factors encouraging the shift from wood or charcoal stoves to LPG stoves. New and renewable sources of energy (NRSE) are domestically available and clean. What is, therefore, needed is for the government to promote their utilisation. However, most NRSE are economically viable only in some specific areas of application. Their competitiveness is still low in general. To promote a widespread use of NRSE, suitable types of incentives and subsidies are necessary in the short term. In the medium and long terms, their competitiveness can be improved through technology research and development (R&D), mass production of NRSE equipment and augmentation of society’s perception that conventional energy technologies have negative effects on the environment. After the devaluation of the baht in early July 1997, the competitiveness of NRSE has considerably improved due to the increased prices in local currency of commercial energy. People’s interest in NRSE and energy-saving has also improved substantially. Negative perception of the use of conventional energy on the environment has markedly increased. With these developments, in addition to other international factors to reduce GHG emission, such as development of the Clean Development Mechanism (CDM) applicable after 2000 and availability of more new and renewable energy technology (NRET) options, it is envisaged that the promotion of NRET will be accelerated and more concrete achievements will be recorded in the near future in Thailand.

ing, and dynamic. The total energy imported in 1999 was 1140 TJ, of which 89.5 % was crude oil [DEDP, 2000]. This was an increase of 7.1 % over the previous year. The total value of energy import was 186.2 billion baht. Taking into account the domestic production, the total energy market currently is in the range of 300 to 400 billion baht per year. It is envisaged that the market value of energy consumed each year will continue to expand at the rate of about 1.25 times the country’s GDP growth in the short and medium terms in the future. This leads to the unavoidable development of energy production and energy infrastructure projects in both public and private sectors. As reform in the energy sector is in progress, new opportunities for the private sector are increasing in power, oil, natural gas, and RE industries. Excessive financial burden due to dependence on energy importation, high oil price, growing pressure from local and international parties concerning environment and the issue of national energy security will lead to more and more support from the government to accelerate the use of RE sources. Biomass and solar energy are specified as the two RE sources that receive high priority for support by the government. However, considering the relatively high cost of investment and imported components of solar systems, providing support to widen applications of solar energy, especially PV, will be limited. In the case of a major food-producing and agricultural country such as Thailand, biomass, among others, is considered a RE source with the highest potential and is expected to play a considerable role in the country’s future energy balance, especially in power production and industrial boilers. The total energy potential of biomass from agricultural residues, new plantation, animal waste, biomass conservation, fuel substitution, municipal solid waste (MSW), industrial waste water, black liquor and palm-oil mill effluent in 1997 was estimated at 475.4 PJ [DEDP, 2002a]. This was equivalent to about 15 % of the total primary energy consumption in the country in the same year. The energy potential has been projected at 715.5 and 1,769 PJ in 2005 and 2010 respectively, as shown in Table 1. 2.2. Bioenergy technologies currently being promoted • Improved cookstoves Cooking is the most energy-consuming activity in the household sector, especially in the rural areas. Traditional cookstoves are inconvenient to use, and they create a lot of smoke and have low energy conversion efficiency (1421 % for wood stoves and 24-29 % for charcoal stoves) [RFD, 1984]. DEDP in cooperation with the Royal Forestry Department (RFD) of the Government of Thailand with financial support from the United States Agency for International Development (USAID) has developed improved wood and charcoal cookstoves. The efficiency of the wood stove has improved to about 27 % and of the charcoal stove to about 34 %. DEDP has since 1985 been disseminating improved cookstoves to users, and found that improved charcoal cookstoves are well accepted by them, while improved wood cookstoves generate less interest. Currently, there are about 20 groups of villagers

2. Biomass energy in Thailand 2.1. Status of biomass energy The energy market in Thailand is already large, expand22

Energy for Sustainable Development

l

Volume VI No. 3

l

September 2002

Articles

Table 1. Energy potential of biomass sources Type

Potential (mtoe)[1]

Potential (PJ) 1997

2005

2010

1997

2005

2010

425.5

501.7

562.5

10.072

1.187

13.316

New plantation

-

-

0.8886

-

-

21.035

Animal wastes

13.0

13.0

13.0

0.308

0.308

0.308

Biomass conservation Residential cooking Industrial sector

-

36.2 48.5

59.4 97.0

-

0.857 1.148

1.406 2.296

Fuel substitution

-

77.6

109.3

-

1.837

2.587

MSW

19.0

20.6

21.3

0.450

0.488

0.504

Industrial waste water

7.8

7.8

7.8

0.185

0.185

0.185

Black liquor

8.8

8.8

8.8

0.208

0.208

0.208

Palm-oil mill effluent

1.3

1.3

1.3

0.031

0.031

0.031

475.4

715.5

1,769.0

11.254

16.937

41.876

Agricultural residues

Total Note

1. 1 mtoe (million tonnes of oil equivalent) = 44.3 PJ

and stove manufacturers, trained by DEDP, producing improved cookstoves for their living, and more than 500,000 improved cookstoves have been disseminated [Sajjakulnukit, 2001]. The national campaign to promote improved cookstoves with a target of 1.8 million stoves over the five-year period is in the process of budgeting for implementation. • Improved charcoal-making kilns The production and use of charcoal as a household fuel is firmly established in Thailand. The available statistics on charcoal production show that 56 % [UNDP/World Bank, 1987] of charcoal-makers countrywide make charcoal in permanent kilns and the remainder use a pit/mound system. DEDP and RFD have developed three sizes of improved charcoal-making kilns (2 m3 mud kiln, 8 m3 and 20 m3 brick kilns). The designs are based on improvements on the existing permanent charcoal kilns, namely mud beehive and brick beehive kilns. These improved kilns could improve charcoal yield from less than 30 % when using traditional kilns to 39 % and 46 % for improved mud beehive and brick beehive kilns respectively. • Improved kilns used in rural industries Fuelwood is a major fuel in rural industries such as brick, lime, palm-sugar, noodle and pottery. In 1996, DEDP allocated a budget to the Faculty of Engineering, Chiangmai University, to study energy use in rural industries and to develop kilns for them. It was found that with minor modifications, kilns used in lime, palm-sugar and noodle production can save about 30 % of fuel [CMU, 1996]. A biomass combustor was also imported from China (model RSL-I-8) and tested for the feasibility of dissemination to rural industries by Kasetsart University with financial support from DEDP. It was found that dissemination of Energy for Sustainable Development

this type of combustor was also feasible [KU, 1996]. At present, DEDP is in the process of preparing a master plan to promote highly efficient biomass combustors for small- and medium-scale rural industries. With assistance from the Australian Government, DEDP has also established a demonstration project to transfer an Australian downdraft kiln to the Thai brick industry. The construction of the kiln has been completed in Surat Thani. A preliminary test by DEDP staff has found that about 30 % fuel-saving can be achieved by the introduction of such a design. Prince Songkhla University has also developed a smallscale energy-efficient brick kiln (EEBK) that obtains a considerable improvement of specific energy requirement of brick production of 9600 kJ/kg compared with 13,10018,800 kJ/kg [Koopmans, 1999] when a typical updraft kiln is used. This is mainly due to the design of four internal cells of the EEBK that facilitates the use of sensible heat and normal loss during the cooling process in a cell to dry wet raw bricks during the drying process in another cell. • Biogas DEDP, the Department of Agriculture Extension, and the Department of Public Health developed and since 1977 have disseminated more than 10,000 small-scale biogas digesters -- a 4-12 m3 fixed dome type -- for a family cooking in the rural areas. During the early stage (19771987), the government gave 1200 to 1500 baht subsidy to any farmer who would like to construct and use a biogas digester. However, it was found later that about 50 % of these digesters were abandoned after two years of use because of some technical weaknesses in design and construction, leading to blockages, and change in l

Volume VI No. 3

l

September 2002

23

Articles

farmers’ economic conditions. For example, if they sell their cows, they become unable to participate in the project. During 1988-1989, the design of the fixed-dome type digester was improved with support from GTZ, Germany. A new standard design with a volume capacity of 8-16 m3 was developed with investment cost ranging from US$ 300 to 500. The standardised digesters were demonstrated by the Department of Agriculture Extension in 1990. The criteria for the selection of participants were also carefully developed by assessing the need, scope for continuation and financial situation of the farmers. During 1996-1998, the Department of Agriculture Extension supported small pig farms and farmers to establish a total of 6028 m3 of fixed-dome biogas digesters and set a target to promote another 22,000 m3 of biogas digesters within 2002. Recently, large-scale biogas plants have been evoking greater interest from industries and animal farms, where the treatment of waste water is a matter of growing concern due to more stringent environmental regulations to be imposed. At present, fourteen biogas plants of 3000 m3 each are being used in distilleries. More than ten biogas plants, 1000 to 4000 m3 each, are being demonstrated in pig farms to solve their pollution problem. For 1997-2002, the National Energy Policy Office (NEPO) set a target to support the establishment of biogas plants of 40,000 m3 total capacity in pig farms for warming piglets and power production. Chiangmai University is the implementing agency for this project. DEDP has also supported the Energy Conservation Centre of Thailand to survey and study the feasibility of energy production from industrial waste water. The most suitable plant will be selected for setting up a demonstration plant. Currently, DEDP has supported Kasetsart University to select and make a detailed design for four demonstration plants. DEDP will bear all the cost for the survey, detailed design, start-up operation and training of factory operators. The plant-owner will bear all construction costs. The project is scheduled to be completed in 2003. • Energy from municipal solid waste (MSW) MSW has become a major problem in Thailand’s cities. A common practice for disposing of it is land-filling, which usually generates land-fill gases (mainly methane, CH4, and carbon dioxide, CO2). Of these, methane can be used as a fuel for combustion. A survey shows that about 8,000 tonnes of MSW is created each day in Bangkok. This quantity of MSW, after recovering of reusable materials, can be used to generate electricity with a capacity of 40 MW. Kasetsart University has set up a demonstration project to generate electricity from land-fill gases in Nakhon Prathom (about 60 km north of Bangkok). The plant, with a total installed capacity of 870 kW, was set up as a stand-alone and successfully tested in 1999-2000. Currently, Kasetsart University is preparing to connect the power production to the national grid. DEDP has also supported Kasetsart University to carry out pre-feasibility study of power from land-fill gases in three major cities -- Nakhon Ratchasima, Nakhon Sawan and Khumpangsan. • Large-scale biomass application Large-scale biomass application based on commercially 24

Energy for Sustainable Development

available technologies has been used in several food-processing (rice, sugar, palm oil, etc.), wood, and pulp and paper industries in Thailand. The technologies used vary from the common fixed and inclined grates to more sophisticated travelling grate and fluidised bed technologies. 3. National initiatives undertaken for sustainable energy development Thailand’s energy and environment policies have focused on providing sufficient energy resources to fulfil the country’s development needs while maintaining a strong commitment to the protection of the environment. In the Seventh National Economic and Social Development Plan (1992-1996), the government defined short- and mediumterm targets and strategies for the energy sector, including the reduction of average annual growth rate of energy consumption from 13 % to less than 10 % during this period. While strategies for energy development during the Eighth National Economic and Social Development Plan (19972001) have emphasized the provision of an adequate amount of energy to satisfy demand at reasonable prices, several targets have been set to reduce the level of energy importation and pollution emission [NEPO, 1997]. The energy development plan has been later modified to take into account the impacts of the economic crisis by accelerating production of natural gas, encouraging use of RE, especially solar and biomass energy, and promoting energy conservation activities. Essential energy policies have been adopted, and are presented in this study. 3.1. The Energy Conservation and Promotion Act The Energy Conservation and Promotion (ENCON) Act was adopted in Thailand on 3 April 1992 to promote energy conservation, RE use and supporting activities. Subsequently, the ENCON Fund was established under the ENCON Act. Article 24 of the Act stipulates that the capital and assets of the ENCON Fund will be derived from the following sources: • money transferred from the Petroleum Fund, the amount to be determined by the Prime Minister; • levies imposed on petroleum product producers and importers at a rate determined by the National Energy Policy Council (NEPC); and • additional sources such as surcharges on power consumption, government subsidies, remittances from the private sector in the country and abroad, and the interest accruing to the ENCON Fund. In the initial stage, on 24 August 1992, an amount of 1,500 million baht was transferred from the Petroleum Fund. In addition, the NEPC imposed a remittance rate of 7 satangs/litre on domestic petrol, kerosene, diesel and fuel oil to raise revenue for the Petroleum Fund, effective from 1 November 1992. The ENCON Fund has been the main financial source to support activities under the Energy Conservation and Promotion Programme. 3.2. Energy Conservation and Promotion (ENCON) Programme The ENCON Programme was launched on 3 August 1994 to set guidelines, criteria, conditions and priorities for the ENCON Fund allocation. In this regard, the ENCON Fund l

Volume VI No. 3

l

September 2002

Articles

Committee was also established for the management of the fund allocation to achieve the objectives of individual implementation programmes and projects. During the fiscal year 1995-1999, an amount of 19.286 billion baht was allocated from the ENCON Fund. The ENCON Programme comprised three sub-programmes based on the nature of the work/projects (Compulsory, Voluntary, and Complementary Sub-programmes). In order to assist the ENCON Fund Committee, three sub-committees were set up to implement these three sub-programmes. Besides, two government agencies, NEPO and DEDP, were given the responsibility of implementing the ENCON Programme. 3.2.1. Compulsory Sub-programme The Science, Technology and Environment Ministry has issued Ministerial Regulations that the owner of a designated factory or building must conserve energy, and audit and analyse energy utilisation in his/her factory/building, in accordance with the standards, criteria, and procedures prescribed by the Ministerial Regulations. The owner of a designated factory/building shall have the following duties. • Assign at least one full-time person to take responsibility with regard to energy programmes. • Submit filled forms and schedules prescribed in the Ministerial Regulations regarding information on energy production, consumption, and conservation to the DEDP. • Keep records of information on energy consumption and installation or modification of machinery or equipment that affects energy consumption and conservation, in compliance with the criteria and procedures prescribed in the Ministerial Regulations. • Submit energy conservation targets and plans for the designated factory/building, in compliance with the criteria, procedures, and schedule prescribed in the Ministerial Regulations, to the DEDP. • Audit and assess the implementation of the plans for energy conservation, in compliance with the criteria, procedures and schedule prescribed in the Ministerial Regulations. DEDP is in charge of regulation and control to make sure that the owners of designated buildings and factories comply with the regulations. 3.2.2. Voluntary Sub-programme NEPO is the implementing agency of the Voluntary Subprogramme. The objective of this Sub-programme is to support and collaborate with other agencies in both public and private sectors, in order to achieve the following: • efficient use of energy in the production processes of both agricultural and rural industries; • wider utilisation of RE, thereby resulting in less adverse impact on the environment; • marketing of products and services contributing to energy conservation; and • promotion of studies and R&D on energy and energy conservation technologies as well as the application of study/research outcomes in factories, buildings and households. Energy for Sustainable Development

The Voluntary Sub-programme comprises three main projects, namely Renewable Energy and Rural Industries, Industrial Liaison, and Research and Development. The ENCON Fund Committee allocated a total budget of 2.781 billion baht for the implementation of the Voluntary Sub-programme during the fiscal period 1995-1999. 3.2.3. Complementary Sub-programme In order to enable effective implementation of the ENCON Programme, this Sub-programme has been launched, comprising three main projects -- Human Resource Development, Public Awareness Campaign, and Management and Monitoring. 3.3. Privatisation of the energy sector Privatisation is part of an overall economic reform programme undertaken by the government. The goal of the programme is to increase the efficiency of the economy to provide a basis for Thai companies to compete internationally, and to ensure that quality goods and services are available to the Thai public at the least cost. A significant development with regard to private sector participation has already taken place in the Thai energy sector, primarily based on extensive use of independent power producers (IPPs) and facilitation of privatelyowned generation and distribution facilities under the Small Power Producer (SPP) programme. The next stage of industrial transformation is seen as building on this model by creating competitive markets across all the stages of the energy supply chain. The Thai energy sector can be segmented into power, natural gas and oil sub-sectors. Various organisations are involved in various aspects of power development -- Electricity Generation Authority of Thailand (EGAT) in electricity generation and transmission, Metropolitan Electricity Authority (MEA) in electricity distribution in greater Bangkok and suburban areas, Provincial Electricity Authority (PEA) in electricity distribution in the rest of Thailand, and IPPs and SPPs in electricity generation. The natural gas sub-sector comprises PTT Gas (gas exploration and development through PTTEP, transmission and trading) and private gas (gas exploration and production). Similarly, the oil sub-sector includes PTT Oil (oil importation and refining through its affiliates, and investment and distribution) and numerous private petroleum companies (petroleum refining and distribution). 3.4. Price policy Deregulation of the oil market in Thailand started in 1991. Before deregulation, retail prices were determined by the government and rarely changed. An oil fund levy/subsidy was used to stabilise retail prices. Retail trade was controlled by four major oil companies (PTT, Shell, Esso and Caltex). Oil imports were controlled by a quota system. To prepare for the deregulation, the several government regulations and the tax structure were revised to increase competition in the domestic oil market. Import control was abolished. Oil companies were allowed to be responsible for setting prices at their service stations but it was closely monitored by the government. Then on 19 August 1991 the government abolished determination of ex-refinery/import and wholesale prices to allow full deregulation l

Volume VI No. 3

l

September 2002

25

Articles

of petrol, kerosene, diesel and fuel oil. The government also has a policy to deregulate the LPG market in the belief that energy use will be most effective and best adaptable to the change in fuel prices without price distortions by government subsidy. However, a certain level of subsidy is still maintained by the government for the LPG price, as it affects food costs and this, in turn, can affect the poor and become a political issue. 3.5. Tax reduction Tax reduction is another measure to support energy conservation and protection of the environment from the adverse effects of industries. A committee with 20 members consisting of representatives from related government and private sector organisations was set up on 10 March 1997. This committee is presided over by the Permanent Secretary of the Ministry of Science, Technology and Environment with the responsibility of reducing tax on importation of machines, materials and equipment that can lead to energy conservation and environment protection from the adverse effects of industries. At present, import tax on machines, materials and equipment, according to the approved proposal, has been reduced to 5 % [MOSTE, 1999]. During 1997-2001, the committee approved 30 proposals. It was estimated that the total tax reduction of 112 million baht from this measure could save 48 GWh of electricity and 200 PJ annually. A target was set to approve another 60 proposals during the next five-year plan [DEDP, 2002b]. Energy-conserving machines, materials and equipment that are eligible for tax reduction are categorised as follows: • items that make use of wastes or waste energy as energy sources; • items that use RE to substitute commercial energy; and • investments for energy conservation having a payback period of within seven years. Machines, materials and equipment for environment protection that are eligible for tax reduction shall be used for the following purposes: • waste water treatment; • air pollution treatment; • reduction of solid wastes; • reduction or prevention of noise from sources in industrial processes; and • research, analysis, measurement and monitoring with regard to environmental protection. 3.6. Supports for renewable energy A new target for accelerating the use of RE has been set to increase the share of RE from 19.8 % in 2001 to 20.81 % and 21.21 % in 2006 and 2010, respectively (www.nepo.go.th/doc/report-2544/18-conserveplan.html). In addition to the general support of up to 50 % investment cost (but not more than 10 million baht) for very small RE projects, a new policy has been implemented to support renewable SPPs. The government has been promoting the use of RE as a fuel in the electricity industry in the form of SPPs under the regulation on power purchase from SPPs for several years. The regulation allows SPPs to sell power, no more than 90 MW each, to a state26

Energy for Sustainable Development

owned power utility, the EGAT. However, as of April 2000 only 180 MW out of 1,580 MW of actual sale was generated by RE. This is mainly due to very low prices set by EGAT. As part of the ENCON Programme, promotion of grid-connected power schemes using non-conventional energy, waste and/or RE cogeneration is envisaged. The government has called new bids for 300 MW of power purchase from SPPs using RE. Bidding prices above the buy-back tariffs set by EGAT will be supported, up to an addition of 0.36 baht/kWh for five years, in the form of incentive payments from the ENCON Fund. This new support, although it can cover all renewable-based SPPs, is mainly aimed at supporting biomass-based SPP projects. As of 15 October 2001, 43 projects with a combined total installed capacity of 775 MW were proposed. The ENCON Fund committee approved 17 projects with a combined total installed capacity of 313 MW on 15 March 2002. This will require a total of 1.956 billion baht support from the ENCON Fund. 14 out of 17 projects are biomass-based with a combined total installed capacity of 279 MW. Currently, the ENCON Fund committee has approved an additional fund of one billion baht to support more renewable-based SPP projects that require support from the fund up to 22.5 baht/kWh. 3.7. Environmental requirements As RE sources are relatively clean and environmentfriendly, more stringent enforcement of environmental standards has been found to result in their increasing use. Thermal power plants with capacity of 10 MW or more are required to prepare an environmental impact assessment (EIA) report, the main content of which should consist of air quality impact assessment which is the present environmental standard related to energy production and utilisation. 4. The institutional framework 4.1. National Energy Policy Office (NEPO) According to the NEPC Act, NEPO was established in 1992 under the Office of the Prime Minister as an administrative unit supporting the NEPC. It is responsible for formulating policies on energy, which includes the power sector in general, RE, energy conservation and efficiency for private/public and domestic/commercial purposes, including transportation. Development of new policies is initiated either by NEPO or in response to proposals made by the ENCON Committee, EGAT or DEDP. New policies are to be sanctioned by NEPC. NEPO performs planning, analysis and strategy development, including broader socio-economic analyses and evaluation of the implementation of the national energy policy. It recommends power prices to be sanctioned by NEPC. Data collection and information dissemination on energy statistics as well as on various energy issues are part of NEPO’s responsibility. It functions as a secretariat for the ENCON Committee that comprises representatives of a large number of ministries. Depending on means from the ENCON Fund, NEPO further sponsors policy studies, R&D, standards development, etc. l

Volume VI No. 3

l

September 2002

Articles

4.2. Department of Energy Development and Promotion (DEDP) DEDP is responsible for the implementation of national policy on energy efficiency, RE and water resources. It is in charge of developing education and training schemes for consultants and energy managers. Under DEDP are Bureau of Energy Regulation and Conservation (BERC), Bureau of Energy Development and Maintenance (BEDM), Bureau of Energy Study, Research and Development (BESRD), four Regional Offices of Energy Development and Promotion (ROEDPs) and six Renewable Energy Centres (RECs) referring to the ROEDP. Each centre has about eight to ten people working as a linkage between DEDP in Bangkok and local people. Their responsibilities are to demonstrate and promote production and use of RE and energy efficiency technologies among the local communities and also to report needs of the local communities to the related bureaux of DEDP. The DEDP relies primarily on funding from ENCON for its activities. It is estimated that 60-70 % of the ENCON Fund is assigned to DEDP, mainly to the Compulsory Sub-programme in designated facilities. The rest is used to support NEPO’s activities, R&D projects and others. DEDP can also propose its budget directly to the Budget Bureau, Ministry of Finance. 4.3. Bureau of Energy Study, Research and Development (BESRD) BESRD is a part of DEDP and takes care of tasks according to the ENCON Act and the Voluntary Sub-programme. The BESRD is authorised to: • research, develop, experiment, demonstrate and develop pilot projects related to production, transformation, transportation, utilisation, distribution and conservation of energy sources, and to transfer energy technology; • promote energy and issue publications as well as act as a centre of collaboration for co-operation on related activities; • conduct surveys and examine sources for energy production, transformation, transportation and utilisation for energy project planning; • collect and analyse hydrological and meteorological data for energy development; • conduct feasibility studies and formulate energy projects and related activities; and • co-operate in or support the operation of related offices and perform assigned activities. 4.4. Bureau of Energy Regulation and Conservation (BERC) BERC is a part of DEDP and takes care of tasks according to the ENCON Act and the Compulsory Sub-programme. It also develops and administers standard measures directed at SME (small- and medium-size enterprises) under the Voluntary Sub-programme. Under the scheme of standard measures, a 30 % investment grant is offered. BERC has taken important steps to speed up the implementation process of energy programmes, for example, by outsourcing certain activities to private companies. It is in the process of fulfilling its role as the leading Energy for Sustainable Development

implementing agency of energy efficiency devices in industries and buildings. 4.5. Electricity Generating Authority of Thailand (EGAT) EGAT has the main responsibility of providing electric energy for the whole kingdom by generating, transmitting and selling bulk energy to two distributing entities, namely MEA and PEA, and also to other energy consumers as prescribed by Royal Decree, and to neighbouring countries. EGAT has constantly pursued the development of RE technologies as well as new energy technologies. Its present development of these is in the demonstration phase with approximately 534 kW of capacity connected to the local grid comprising 42 kW from photovoltaic (PV) power stations, including one PV and two grid-connected PV hybrid stations in Chiang Mai, Sa Kaeo and Phuket provinces, 300 kW from Fang geothermal power plant in Chiang Mai, and 192 kW from wind turbines in Phuket province. A future PV project involves co-operation between EGAT and Japan in a 4.75 MW solar power plant project, the largest PV plant in Thailand, in Mae Hong Son province. In 1998, the Department of Industrial Promotion, Ministry of Industry, in co-operation with the EGAT’s Demand Side Management Office (DSMO), launched the SME Cost Reduction Project. The objective of the project was to remove the barriers to the efficient use of energy in SME. Solar water heaters were one of the energy-efficient technologies promoted by the SME project. Any technology fulfilling the required three-year payback period, among others, is considered for promotion. Biogas from manure has been considered (feasibility calculations are going on to verify the requirement) to be the next RE technology to be included in the list of technologies for promotion. 4.6. Provincial Electricity Authority (PEA) PEA is a state-run enterprise under the Ministry of Interior and is responsible for electricity distribution to all the provinces outside the greater Bangkok area, and the implementation of the rural electrification programme and the accelerated rural electrification programme. 4.7. Office of Environmental Policy and Planning (OEPP) OEPP deals with environmental policy issues. It carries out studies on GHG emission and calculates emissions from new power plants, on the basis of standards. It is in charge of implementation of the UN Framework Convention on Climate Change and the Kyoto Protocol, in which Thailand is listed in Annex 2. In this context, Thailand currently collaborates with Japan on four AIJ (activities implemented jointly) projects. Also, Thailand has had initial talks with Japan and the USA on the CDM. The OEPP is in charge of the Environmental Fund, which can provide soft loans for environmental projects, including projects on RE. The loans are in yen and must be serviced in yen, which implies an exchange rate risk that is estimated to be approximately 10 %. It has 12 Regional Environmental Offices, which also service the l

Volume VI No. 3

l

September 2002

27

Articles

needs of the Pollution Control Department (PCD) and Department of Environmental Quality Promotion (DEQP). 4.8. Energy Conservation (ENCON) Fund The ENCON Fund administers the allocation of resources to energy conversation measures and initiatives. The fund is headed by a committee comprising all stakeholders of the energy sector. It is the coordinating body for the promotion of energy efficiency strategies. NEPO acts as the secretariat of the Fund. Both NEPO and DEDP rely primarily on funding from ENCON for their activities. ENCON is mainly based on a special tax on oil and gas. Over the first six years’ period, 1994-1999, the budget was 17 billion baht, of which about 13 billion baht was for the Compulsory Sub-programme for large industries and buildings and the remainder for the Voluntary and Complementary Sub-programmes. 4.9. Industrial Finance Corporation of Thailand (IFCT) IFCT promotes industrial development in Thailand. It administers a number of funds advancing soft loans to industrial development projects and/or environmental protection and energy-saving projects. 4.10. Thailand Energy and Environment Network (TEE-NET) Sustaining the energy conservation project under the ENCON Act B.E. 2535, BERC has initiated the Thailand Energy and Environment Network (TEE-NET) and set up the Thailand Energy Efficiency Information Service (TEE-IS). The major functions of BERC with reference to TEE-NET and TEE-IS are to encourage all agencies involved in energy management and environmental control to jointly establish TEE-NET as an information centre for energy conservation to minimise the level of redundancy in sharing and exchanging information. All the agencies accumulating and processing their own information shall work as ‘‘nodes’’ of the network and communicate with the others through the Internet. The BERC, as the network centre, is in charge of the management and co-ordination of the entire activity.

5.2. Policy barriers Biased existing SPP policy: The government policy to support renewable energy SPPs through the bidding process, by using the ENCON Fund to offset the higher electricity prices above the buy-back tariff set for SPPs in general, has aroused interest and investments from the private sector. However, this measure has an in-built bias in favour of large-scale and low-production-cost SPPs. Different scales of power production and different biomass sources or renewable sources have not been fully addressed. This will result in a limited number of renewable SPPs being promoted. The needs of smaller-scale or higher-cost biomass sources that have potential to be developed still need to be addressed. 5.3. Technical barriers Lack of standards for bioenergy systems and equipment: It is difficult for a user or a consumer to buy goods without specifications or performance insurance. Lack of standards for bioenergy systems and equipment, as is usual in Thailand, is an essential barrier to the commercialisation of bioenergy technologies. Inadequate experts in the field: As new and advanced BETs are still young in the market, it is, in general, difficult to make a profit from them and hard to create interest among people to work in the field. Therefore, it is necessary that human resource development be properly planned to support the promotion of bioenergy applications. 5.4. Finance-related barriers Difficult access to financing: Most bioenergy projects are relatively small, and therefore their transaction costs are high. The projects are considered highly risky by financiers. Hence, bioenergy project developers face more difficulty in getting finance. Low cost-effectiveness of NRSE technologies: Most RE technologies, including biomass, have high capital investment compared with conventional energy technologies. This is the main reason that most BETs are not financially feasible in the existing competitive market. 5.5. Information barriers Lack of awareness/confidence in available NRSE technologies and applications: Thailand has launched an awareness programme called ‘‘Divided by Two’’, which continuously disseminates information and shows success stories about energy conservation and renewable energy on TV. However, it focuses more on energy conservation. Raising awareness and disseminating information on BETs are still lacking. Lack of success stories: Successful cases of RE and bioenergy applications are still very limited. It is felt that demonstration of successful cases is very essential to build confidence among the private sector in RE. Risks, either perceived or real in applications, should be appropriately absorbed by public funds to support more demonstration biomass projects. Inefficient means of data collection and information transfer: Accurate information on biomass availability, and existing uses and related information such as burning characteristics for particular types of biomass, and

5. Essential barriers to the promotion of bioenergy technologies Although some initiatives have been made to promote renewable energy technologies (RETs), especially bioenergy technologies (BETs), some barriers have been addressed partially while the others have not been addressed at all. The barriers are discussed here. 5.1. Institutional barriers Poor coordination among government agencies and especially with the private sector: There exist several energy agencies with varying functions and responsibilities, as discussed in Section 4. These agencies work under several ministries. Coordination among them is therefore difficult. Government regulations also prevent them from cooperating with the private sector. The government is aware of the problem and is currently working on restructuring these government organisations. According to the new structure, all energy agencies will be under a new ministry called Energy Ministry. It is planned that the restructuring will be finalised and the new ministry ready to perform by the end of 2002. 28

Energy for Sustainable Development

l

Volume VI No. 3

l

September 2002

Articles

collection, preparation and transportation costs, are very important for energy planners, project developers and bioenergy equipment manufacturers. However, this information is difficult to obtain and not adequately available. It is, therefore, essential to put more effort and resources into developing effective means of data collection and transferring the useful information to the target groups. Lack of public support for some policies: Restructuring policy has not received strong support from the public, as a large section of the people are still doubtful about the results. Labour unions, in general, oppose the policy because of the insecurity of their jobs. Similarly, although deregulation of the oil market received much more support from the public than the restructuring policy, deregulation of LPG prices faced difficulty during the slow recovery from the economic crisis and extremely high oil price environment. LPG prices kept low by government subsidy encouraged the shift from the use of biomass to LPG and prevented introduction of modern biomass technologies, especially applications in cottage and smallscale rural industries.

gramme, which aimed at promoting grid-connected power schemes using non-conventional energy, NEPO, in July 2000, gave advance notification of its intention to invite bids for power purchase of 300 MW from SPPs using RE in September-October 2000. Bidding prices above the buy-back tariffs set by EGAT will be supported in the form of incentive payments up to 0.36 baht/kWh for five years by the ENCON Fund. A draft regulation for power production and purchase from very small RE producers has already been prepared and announced during the workshop on Power Purchase from Very Small RE Producers on 3 April 2002 at the Amari Watergate Hotel in Bangkok. It is expected that this regulation will be approved by the cabinet soon. According to this regulation, power produced from renewable energy sources with a capacity of up to 1 MW electricity can be sold to the grid on net settlement basis. RE producers can choose to use either a two-way meter or two separate meters to measure buying and selling units between the plant and the grid. Although this regulation can be applied to all RE producers, its original effort was to solve the problem of excess capacity for power production from large pig farms using a biogas system.

6. Major policies undertaken for promotion of bioenergy

7. Recommendations and concluding remarks

Although all initiatives and policies described in Section 3 have been formulated to support RE, high priority has been given to bioenergy applications, especially in the latest call for bids of a total of 300 MW from SPPs. This scheme is mainly aimed at supporting biomass-based SPPs. At present, 40 out of a total of 43 proposals (733.5 MW out of 775.5 MW) submitted to the NEPO are biomass-based. Major policies undertaken for the promotion of bioenergy are discussed below. 6.1. Support for small RE projects The ENCON Fund can support up to 50 % of investment cost, but not more than 10 million baht in each case, for small RE projects that have economic internal rate of return (EIRR) greater than 9 % and financial rate of return (FIRR) less than minimum retail rate + 5 % (MRR+5). The amount of investment support from the ENCON Fund is the amount that makes the project FIRR equal to MRR+5. 6.2. Support for energy auditing and subsidy for investment in and operation of energy conservation programmes in designated factories This is a compulsory programme which forces highly energy-intensive buildings and factories using commercial energy sources to effect energy savings or look for alternative energy sources. The expenses for energy audit will be supported by the ENCON Fund, up to 500,000 baht for preliminary energy audit and up to 1 million baht for detailed energy audit. The ENCON Fund can also support up to 30 % of total investment cost but not exceeding 2 million baht for each implementation of an energy saving project. 6.3. Support for SPPs A revised energy strategy and policy for Thailand was endorsed by NEPC allowing NEPO to support SPPs by paying an added tariff. As part of the ENCON ProEnergy for Sustainable Development

The Thai government has laid a strong foundation and infrastructures for supporting and promoting the use of renewable energy and energy conservation, especially in the form of necessary legislations and support funds. However, despite several financial incentives, the dissemination rate of the use of renewable energy technologies including biomass energy technologies is still unsatisfactory due to institutional, policy, technical, financial and information barriers. Efforts have been made to try to remove some important barriers such as the ongoing government organisation reform aiming to simplify the line of command and coordination among organisations in the energy sector. More emphasis has been laid on the promotion of renewable energy technologies, particularly biomass energy. It is believed that some barriers have partially been understood and some are not known at all. It is recommended that more systematic and comprehensive study approaches involving extensive participation of stakeholders are needed to fully address barriers and set up effective measures to remove them. Although energy policies adopted by the government are in the right direction, the pace of implementation is slow. A clear policy and a strong signal from the government are needed to disseminate information through public campaigns, and encourage discussion and debate among various stakeholders so as to build a strong foundation to promote energy conservation and commercialisation of RE technologies. These policies and signals must be clear and strong enough for the private sector to be confident and actively participate in RE projects. Restructuring and deregulation should ensure real competitiveness in the energy market, along with cost reduction and better energy services. l

Volume VI No. 3

l

September 2002

29

Articles

Acknowledgements

motion, Bangkok, Royal Thai Government.

The authors would like to thank the Swedish International Development Cooperation Agency (Sida) for financial support provided for this work under the framework of the Asian Regional Research Programme in Energy, Environment and Climate (ARRPEEC). The authors also thank S.C. Bhattacharya and his research group at the Asian Institute of Technology for reviewing the manuscript and providing valuable comments.

Department of Energy Development and Promotion (DEDP), 2002b. Five-Year Energy Conservation Master Plan (2002-2006), Department of Energy Development and Promotion, Bangkok, Royal Thai Government.

References

Kasetsart University (KU), 1996. The Study of High Efficient Biomass Kiln Development for Rural Industries, Bangkok, Kasetsart University.

United Nations Development Programme (UNDP)/World Bank, 1987. Accelerated Dissemination of Improved Stoves and Charcoal Kilns.

Chiang Mai University (CMU), 1996. Feasibility Study for Planning and Development of Biomass Kilns for Rural Industries, Bangkok, Chiang Mai University.

Koopmans, A., 1999. ‘‘Status of biomass energy use in rural industries’’, in Seminar on New and Renewable Energy Development and Utilization for Global Environment Protection, Bangkok.

Department of Energy Development and Promotion (DEDP), 1997. Rural Household Energy Consumption 1996, Department of Energy Development and Promotion, Bangkok, Royal Thai Government.

Ministry of Science, Technology and Environment (MOSTE), 1999. Tax Reduction Manual for Energy Conservation and Environmental Protection Machines, Materials, and Equipment, Bangkok, Ministry of Science, Technology and Environment, Royal Thai Government.

Department of Energy Development and Promotion (DEDP), 1992. Rural Household Energy Consumption 1991, Department of Energy Development and Promotion, Bangkok, Royal Thai Government.

National Energy Policy Office (NEPO), 1997. Strategies for the Energy Development during the Eighth National Economic and Social Development Plan, Bangkok, National Energy Policy Office, Royal Thai Government.

Department of Energy Development and Promotion (DEDP), 1999. Thailand Energy Situation 1998, Department of Energy Development and Promotion, Bangkok, Royal Thai Government.

Royal Forest Department (RFD), 1984. Improved Biomass Cooking Stove for Household Use, Bangkok, Royal Forest Department (RFD), Royal Thai Government.

Department of Energy Development and Promotion (DEDP), 2000. Thailand Energy Situation 1999, Department of Energy Development and Promotion, Bangkok, Royal Thai Government.

Sajjakulnukit, B., 2001. ‘‘Country paper for Thailand’’, Regional Seminar on Commercialization of Biomass Technology, Guangzhou, China, 4-8 June.

Department of Energy Development and Promotion (DEDP), 2002a. Assessment of Potential of Sustainable National Biomass Resources, Department of Energy Development and Pro-

Thailand Environment Institute (TEI), 1997, Thailand’s Country Study on Climate Change 1990, Bangkok, Thailand Environment Institute.

Subscribe now to Energy for Sustainable Development Send a cheque in favour of ‘‘Energy for Sustainable Development’’ to: Executive Editor Energy for Sustainable Development 25/5, Borebank Road, Benson Town Bangalore--560 046, India Subscription rates Individual

Institutional

India

Rs. 120

Rs. 240

Other developing countries

US$ 4*

US$ 8*

Industrialised countries

US$ 70*

US$ 70*

* or equivalent amount in any convertible currency.

Subscriptions may be sent by cheque payable in India or remitted by wire transfer. For wire transfers, the remittance should be made payable to: Account No. CA-105, TIDE Account Energy for Sustainable Development Canara Bank, Indian Institute of Science branch, Bangalore, India Destination Swift Code: CNRBINBBLFD (Canara Bank, Foreign Division, Bangalore) through any one of the following accounts: 04-427-255 with Bankers Trust Company, New York, Swift Code: BKTRUS33 0001-120066-001 with Canara Bank, London, Swift Code: CNRBGB2L 499080630-4711 with Dresdner Bank AG, Frankfurt, Swift Code: DRESDEFF 16-187211-1121 with Union Bank of California International, Tokyo, Swift Code: BOFCJPJT

30

Energy for Sustainable Development

l

Volume VI No. 3

l

September 2002