For common good or common greed?

Tara Buakamsri
Wednesday, January 16, 2008

Article from Bangkok Post

The evidence is compelling that at this particular moment in Thai history, building new mega power plants is a tragic coupling of bad statistics and misguided thinking

At the start of 2008, the Ministry of Energy approved four new mega-scale Independent Power Producers' (IPPs) power plants totalling 4,500 megawatts (MW). This was 71% higher than the already excessive 3,200 MW announced in the call for bids. In the past, these massive coal- and natural gas-fired projects have met with fierce community opposition.

Many key decision-makers in government and business, as well as key media pundits, have framed this as ''Not-In-My-Back-Yard'' NIMBY-ism: villagers selfishly protecting their community interests (like clean air, sufficient water, intact eco-systems) against projects that benefit the common good. ''The country needs electricity. The power plants have got to go somewhere. Stop being selfish,'' the decision-makers say.

The NIMBY framing hinges on the insufficiently examined assumption that more of these new mega power plants are, indeed, for the common good. To the contrary, the evidence is compelling that at this particular moment in Thai history, building new mega power plants is not for the ''common good,'' but is rather a tragic coupling of (all too) ''common greed,'' bad statistics and misguided thinking.

The first issue is that the Ministry of Energy says we need to build far more power plants than we actually need.

To start with, Thailand's reserve margin, at 27%, is still high above the official target of 15%. What this means is that at least a quarter of all existing power plant capacity is excessive, even during Thailand's highest peak period of consumption.

In 2003, then prime minister Thaksin Shinawatra estimated that accumulated unnecessary investment in the power sector totalled 400 billion baht (US$10 billion). Add in Energy Minister Piyasvasti Amranand's new 4,500 MW of pet projects, and the numbers will rise substantially.

Why has this happened? One big problem is that the Ministry of Energy's electricity demand forecasts _ which serve as the basis for their approval and ultimate existence of new power plants _ are notoriously biased and overestimate how much electricity we need. Every official forecast over a year old (there have been nine since 1993) has predicted demand that has failed to materialise. Thai electricity forecasters seem unable (or unwilling) to recognise that historical demand for electricity has grown linearly for the past two decades. Yet their models always assume exponential growth. Anyone that stayed awake in high school math class can readily explain the huge differences between exponential and linear growth in the long run.

If Thailand follows historic trends, peak demand will reach just over 34,000 MW in 2021. Thailand's most recent (exponential) forecast says 49,000 MW. That's a difference of 24 mega power plants!

Who pays for the over-investment? Who bears the risk? Because of a variety of incentive structure (''cost-plus'' and ''take or pay'' contracts), it is us rate-payers who are saddled with the cost and risk of over-investment. Power plant operators and contractors get paid whether or not the power plants are actually running.

It might come as no surprise in Thailand that power plant developer interests (IPP developers, utilities, gas suppliers) dominate the load forecast committee in a closed door process. This is quite different from North America and Europe, where forecasts are contested in public rate cases by interveners that have their own points of view, and the final result is determined through an open, transparent and participatory process.

The second issue is that smaller, more efficient, clean electricity options are being shut out by the Ministry of Energy.

There is huge potential to build super-efficient small-scale combined heat and power (CHP) power plants at existing industrial sites and commercial ones, using their waste heat to power industry and run chillers to cool big buildings. Minister Piyasvasti's 4,500 MW of IPP mega power projects are at best 40% efficient (the best coal plants) to 55% efficient (the best natural gas CCGT plants). By comparison, CHP plants are routinely 80% or more efficient. Not only are they more efficient, but they are faster to build which, together with their less ''lumpy'' investment, means that the errors that accumulate from faulty forecasts are minimised.

Is CHP some pie in the sky technology? Far from it. There are already over 75 of these plants online in Thailand, some for at least 10 years, supplying over 4,000 MW to the Thai grid.

In Denmark these provide 60% of the nation's electricity. Is there really potential for more in Thailand? Consider that in six months in 2007 alone applications for 2,400 MW of CHP were filed with the Ministry of Energy. But, citing the need to ''wait for the results of the IPP bidding programme'', only 740 MW were approved by the ministry.

What? Why do small, efficient CHP plants in existing industrial sites take second place in the queue only after large, comparatively inefficient, slow to build, centralised power plants in pristine villages? And why, considering the huge amount of applications filed for CHP, were mega projects granted a huge 4,500 MW, far more than originally allocated?

Perhaps Minister Piyasvasti can answer these questions.

The third issue is that in a rational universe, energy efficiency trumps any new power plant _ and we're doing far too little about it.

Back in the 1990s, a World Bank study looked at the cost of energy efficiency investments (more efficient lighting, motors, cooling systems) in Thailand compared to the cost of generating electricity from different sources. Energy efficiency was the clear winner _ about half the cost per kWh of natural gas and about 40% of the cost of coal. It turned out that, in practice, those energy efficiency investments were far cheaper than that.

In over 10 years of running the Electricity Generating Authority of Thailand's electricity saving's programme, the ''cost of conserved electricity'' is only 0.5 baht/kWh _ less than a quarter of the cost of the electricity from the cheapest of the 4,500 MW of approved IPP power plants.

The problem is, while there are committed people in Egat's energy-efficiency programme, they are marginalised by an institution incentivised to sell electricity, not to save it.

When the world finally takes climate change seriously _ and it will, or we will all fry _ then everyone, including those of us in Thailand, will pay high costs for electricity. Then Thailand's accumulated investments in CHP and energy efficiency will be an even better deal than the stellar deal it already is.

Taken all together _ opportunities to do good forecasting, to allow fair access by small-scale clean CHP, and to deploy energy efficiency measures _ means that there is no need to build new mega power plants for at least the next 10 years. (For details, see the Greenpeace report ''Decentralising Thai Power: Towards a Sustainable Energy System'' available at ).

At any rate, it is time to dispel the myth that building mega power projects, right now, is unequivocally in the common good.

The author is an Energy Campaigner for Greenpeace Southeast Asia.