Article

A string of queries about hastiness in the development of Thailand Power Development Plant, or the so-called “PDP 2010,” had not yet dissolved when the Ministry of Energy presented the PDP 2010, approved by the National Energy Policy Council (NEPC), to the cabinet for acknowledgement and hence considered as a cabinet resolution on 22 March 2010. This led to another issue that was hastily implemented by the Ministry of Energy, i.e. postponement or discontinuation of purchase of power generated from wind and solar energy, which greatly affects renewable energy project investment and development. Even more disheartening, the Energy Regulatory Commission (ERC), which is supposed to regulate the energy industry operation to be fair to all parties, could merely respond to the given policy by taking prompt action, without due consideration of the impact on investors.

At the cabinet meeting of 22 March 2010, apart from the acknowledgement of the NEPC resolution regarding Thailand Power Development Plan 2010-2030 (PDP 2010), the cabinet also passed a resolution assigning the Energy Policy and Planning Office (EPPO) to undertake a review of the “Adder,” or feed-in tariff, rate for the purchase of power generated from renewable energy to correspond with the development of power generation technology using renewable energy as fuel, and present the outcome to the NEPC for further consideration.

When considering the mentioned resolution, it is apparent that a review has been assigned; no immediate deferral or discontinuation of purchase of power generated from renewable energy was mentioned at all. However, what actually occurred as a follow-up was the Ministry of Energy’s speedy appointment of a committee on “Adder” review on the very same day of the cabinet meeting, and two days later the review was completed, which opined that the highly proposed sale of electricity generated from solar and wind energy to the grid would affect the power tariffs for consumers. Consequently, on 25 March 2010 a written notification was issued by EPPO to the ERC to take action accordingly, i.e. to have the three Power Utilities defer the purchase of power produced by renewable energy; the ERC then took immediate action by issuing a written notification to the three utilities within the same day.

Such an act, which was implemented prior to the issuance of official cabinet resolution notification by the Office of the Secretariat of the Cabinet, is understandable, but the point at issue here is whether the Ministry of Energy has acted beyond the cabinet resolution or not, i.e. to order the deferral of the purchase of power produced from wind and solar energy – without the cabinet resolution on the issue. Also, what is the point of the Ministry of Energy’s implementing the foregoing in haste without careful consideration of imminent impacts on investors whose projects are being developed? These investors may have already made some investments in, for example, land procurement, pole construction to survey wind speed potential, engagement for the project feasibility study, deals with financial institutions regarding investment capital, and down payments on necessary equipment. Besides, they are preparing required documents for application to sell electricity to the utility grid. Therefore, the order to defer all of a sudden the power purchase will definitely affect the investors.

According to the general principle of government implementation, prior to the enforcement of any rules, regulations or any implementation that will affect operators or investors, it is required to have the implementation timeframe established so that concerned operators would have adequate time to get prepared or to take action accordingly without creating any negative impact. Nevertheless, the Ministry of Energy has not taken this into consideration. More disappointingly, the ERC whose responsibility is to regulate energy business to create fairness for the operators has not acted as an independent body to maintain the balance of power with that of the policy-makers to ensure appropriateness of the implementation; instead, the ERC promptly responded unquestioningly to the policy makers. Such an act has reflected non-compliance with the rationale behind the law on energy business regulation; then, which reliable institution can energy business operators now turn to?

Undertaking a review of public policies or measures is a normal practice. In foreign countries, the “Adder” measure, or feed-in tariff, for purchase of power generated from renewable energy will be regularly reviewed at rounds so as to reflect the actual costs and changing technologies. Moreover, the purchase duration will be clearly stipulated and the purchase amount in each round clearly determined. In the case of Thailand, under the policy on “Adder” provision in the first round in 2006, the end of the implementation was clearly specified, i.e. at the end of 2008; however, in the second round, which was just announced in mid-2009, the implementation ending was not specified. Hence, a question arose whether the “Adder” provision would be restrained by the targeted level of renewable energy development. To address this point, the executives of the Ministry of Energy had repeatedly clarified that if the potential was greater than the specified target, the level of expected amount of purchase of power generated from renewable energy would be adjusted accordingly. But now, all of a sudden, the purchase of power has been deferred, without prior notification to the private sector or investors for them to get prepared. Wouldn’t such an act create confusions and concerns over the uncertain policy of Thailand?

The impact, stemming from renewable energy subsidization, on power tariffs imposed on consumers is a matter that all spheres should recognize. Yet, the assessment of the Ministry of Energy should be made on the basis of accurate and complete information. Decision-making on a policy or measure at the national level, based on only one-sided information, will bring about adverse impact on renewable energy development of the country. Although there are a great number of applicants wishing to sell electricity generated from wind and solar energy to the grid system, it does not mean that all projects will be materialized eventually. Those proposals have been submitted as a means to reserve their individual project supply capacity, due to the stipulated condition of the closing date to power purchase with “Adder” in the first round. However, in reality, there are still some constraints on the operators’ capability to develop their projects, for example, lack of capital, loan applications turned down by financial institutions, overlapping project sites, lack of knowledge, expensive technology, and inadequate fuel supply. These factors should have been examined and projects that are not viable should have been screened out first so that the outcome of the assessment on the impact on power tariffs would be more accurate. Otherwise, the announcement of the policy promoting renewable energy would contradict what is being done now. Currently, the actual amounts of electricity generated from solar and wind energy and already sold to the grid are only 7.67 MW and 0.38 MW respectively.

Considering the potential assessment of the sale of power generated from wind and solar energy conducted by the Ministry of Energy, one can note contradiction of the assessment. In the development of PDP 2010, the Ministry of Energy has assessed that a small number of such projects will be materialized; therefore, a small capacity of these renewable energy projects is included in the PDP 2010. On the contrary, in the review of the purchase of power generated from renewable energy, it is viewed that a large number or all of wind and solar energy projects will be realized, and hence the postponement of purchase of power from wind and solar energy. So, which is correct? As a consequence of this, should there be any person opposing to the low capacity share of renewable energy in the PDP 2010, the ground for so doing will be credible.

During the past one year, the cost of solar panels has decreased by over 15%, thus making the Ministry of Energy believe that the rate of return of power generation from solar energy will be high and hence the “Adder” reduction is being considered. But, merely the information obtained as such is not enough. It is true that only with a reduced cost of solar panels will make the project cost-effective to implement (IRR 9-12%). If the cost of solar panels was not lowered, we would not be able to see solar energy projects established in Thailand nowadays. However, the reduced cost of solar panels can be obtained only by large-scale projects which have bargaining power to get price reductions; whereas the establishment of small-scale solar projects can barely be realized because they do not have the bargaining power, resulting in a low rate of return of small projects. Moreover, it may be necessary for the government to introduce additional measures if it wants to support the application of domestically manufactured solar panels. Has the Ministry of Energy ever taken these facts into consideration?

The Ministry of Energy once had an unpleasant experience of rushing into action which did not completely follow a required procedure, that is, the privatization of EGAT - the case that was sued and the Ministry lost (but no liable person identified). Today, it may seem that nobody objects to or argues against the implementation of policies or measures on various (doubtful) issues; hence, no serious consideration is given to the completeness or accuracy in taking action. Perhaps it is about time for all concerned spheres to make your voices heard and to help reminding the Ministry of Energy to properly carry out the implementation of various questionable issues, such as whether the PDP 2010 has been developed via correct and complete procedures; whether the present oil price structure is distorted; and whether the Oil Fund utilization is in compliance with the rationale behind its governing law; etc.

With this article, the author very much hopes that the Ministry of Energy would set back for a minute to ponder a review of the order deferring the purchase of power generated from renewable energy to be more appropriate; otherwise, affected persons as a result of such an order will have sufficient grounds to take legal action against the Ministry of Energy.