Open discussion on energy needed

Chris Greacen
Tuesday, April 3, 2007

Article from Bangkok Post

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.

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's website just as the ministry announced that the long-awaited
public hearing on its Power Development Plan (PDP), scheduled for April
3, 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 a demand
for electricity that failed to materialise, 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 overestimate 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 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, decentralised options. In fact, these
studies indicate more than enough economically viable decentralised
clean energy potential to delay the need for new mega-power plant
contracts for a couple of years _ even in the unlikely event that
Thailand's electricity demand does materialise as quickly as the 2007
load forecast speculates. (Let's not forget that there are 10 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 in 2005, and is the fastest growing trend. Thai electrical
efficiency programmes have already saved several power plants worth of
electricity, at a fraction of their cost. Distributed generation is
generally faster to build than mega projects, leaving less time for
reality to diverge from forecast expectations, thus reducing the risk of
overbuilding. And decentralised 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.

A root of the problem is that there is an overall lack of checks and
balances in the PDP. The PDP is drafted behind closed doors by the
Electricity Generating Authority of Thailand (Egat), which is
problematic because the monopoly utility's core business is building and
operating big centralised 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's market share.

Considering the situation with the persistent forecast bias, the
problematic planning process, and the untapped potential of
decentralised 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 is 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 United States and Europe, true least-cost planning uses a
framework called Integrated Resource Planning (IRP). In IRP, demand-side
management and clean decentralised energy competes on an equal footing
with conventional centralised 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

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 Energy Ministry to hold a "public
hearing" in a military complex surrounded by armed soldiers.

Chris Greacen, Ph.D., is an independent energy analyst