Can We Have an Open Discussion About Electricity? Please Leave Your Guns at the Door.

Chris Greacen, Independent energy analyst.
Tuesday, April 3, 2007

Opinion piece by Dr. Chris Greacen published in the Bangkok Post that highlights shortcomings in Thailand's energy planning process and calls for reform.

Ten days ago the Ministry of Energy announced a plan to initiate a large-scale public relations campaign that includes changing school curriculums to "educate" children on the "merits" of coal and nuclear mega-projects to meet Thailand's alleged vast future demand for electricity. Then key power planning documents were removed from the Ministry website just as the Ministry announced that the long-awaited public hearing on its Power Development Plan (PDP) - scheduled for 3 April -- would be held in a military compound surrounded by over a hundred armed soldiers. Perhaps we are moving in the wrong direction?

Can we please have instead an open and broad discussion of issues and the numbers, preferably with no armed intimidation?

Let's squarely face the problems that brought us to this point. There are a number of different perspectives. It would be good to get them out in the open. My opinion is that the key problems are rooted in the power planning process.

One key problem is that the urgent call to build new power plants is based on government electric load forecasts that have a notorious track record of overestimating actual demand. Every single base-case forecast ever issued (there have been twelve since 1993) has predicted demand for electricity that failed to materialize, and the latest one is only a slight make-over of its discredited predecessor. Vocal members of the public have lost trust in the forecasts and the committee that does them, raising questions whether the forecast committee might face unbalanced incentives to overestimate future demand.

Forecasts that consistently over-estimate electricity demand cause the government to set inappropriate policy - for example by creating a false sense of urgency to build new power plants. Perceived bias in past forecasting also erodes trust and gives those who oppose new power plants more ammunition. "Why should we let a power plant be built in our community", protesting villagers argue, "when the so-called demand for the power plant is just an appearance resulting from bad forecasting?" This distrust will likely extend to periods in the future when the country really does need to build new power plants. To avoid crucial misunderstandings tomorrow it is important to build trust today by reforming the forecasting process through increased transparency, accountability and public participation. A key component of this reform is improving the forecast methodology to employ more detailed "bottom-up" data on electrical end uses and trends.

The load forecast problems discussed above lead to too many power plants being built. The Power Development Plan (PDP) compounds the problem by specifying the wrong kind of power plants. Studies by the Thai government , the World Bank , and utilities have determined that Thailand has significant potential for a variety of clean, cost-effective, decentralized options. In fact, these studies indicate more than enough economically viable decentralized clean energy potential to delay the need for new mega-power plant contracts for a couple years -- even in the unlikely event that Thailand's electricity demand does materialize as quickly as the 2007 load forecast speculates. (Let's not forget that there are ten major power plant projects already in the pipeline).

The clean distributed resources include big opportunities in energy efficiency (saving electricity is almost always cheaper than building and fueling power plants); combined heat and power (CHP) projects (that significantly reduce overall fuel consumption by building power plants at scales and in locations where the "waste" heat they produce can be used productively); renewable energy (especially biomass); and turbine inlet cooling for existing gas-fired power plants to increase generating capacity in hot weather.

None of these options are radical. Distributed generation last year accounted for more than a quarter of electricity generated by new power plants worldwide in 2005, and is the fastest growing trend in electricity. Thai electrical efficiency programs have already saved several power plants worth of electricity, at a fraction of their cost. Distributed generally faster to build than mega projects - leaving less time for reality to diverge from forecast expectations, thus reducing the risk of overbuilding. And decentralized alternatives typically produce power where and when needed, reducing the burden on the grid that delivers electricity from power plants to consumers. These options should be developed anyway to lower economic cost of electricity services, to reduce Thailand's reliance on energy imports, and to protect the environment. Yet they play only a minor role in the current PDP. Remarkably, the optimization software used by the Electricity Generating Authority of Thailand (EGAT) to develop the PDP is configured only to select among large coal, gas, fuel oil, and nuclear projects. Moreover, it only considers capital and operating costs - but not social and environmental costs, fuel price volatility, or the impacts of different options on the costs of delivering electricity to consumers.

A root of the problem is that there is an overall lack of checks and balances in the Power Development Plan (PDP). The PDP is drafted behind closed doors by EGAT - which is problematic because the monopoly utility's core business is building and operating big centralized power plants. EGAT is ambivalent about energy efficiency because it earns less money when customers save energy. And competition from pesky private distributed generation reduces EGAT market share.

Considering the situation with the persistent forecast bias, the problematic planning process, and the untapped potential of decentralized options, it would be much wiser to delay bidding for two or three years. (Waiting would have the added benefit of lowering investor risk - and thus lending rates - because as it stands the current government will not be in office when it comes time to sign power purchase agreements... and who knows what an elected government might choose to do.)

Thailand should use the precious time instead to carefully set up an independent energy regulatory authority (which, tragically, Thailand still lacks) and to establish a systematic, least-cost planning framework that incorporates public participation in a meaningful way. That way when we do need electricity generation additions we will have selected them through a careful, transparent and accountable process.

In the USA and Europe, true least cost planning uses a framework called Integrated Resource Planning (IRP). In IRP, demand side management and clean decentralized energy competes on an equal footing with conventional centralized power plants. Electricity infrastructure investments are chosen based on the criteria that they provide reliable energy services at the lowest economic cost to society (including social and environmental costs as well as risk) - not just the lowest cost to investors. Major decisions are made through a process that includes informed, rigorous and meaningful public participation.
The activities described above would help align the interests of utilities and private investors with those of broader society. As such, they would go a long way towards winning public trust, and dispelling the tensions that now lead the Ministry to hold a "public hearing" in a military complex surrounded by armed soldiers.