Key Players, Roles&Policies


Thailand’s electricity transmission system and most of the country’s generation are under the control of the state-owned Electricity Generating Authority of Thailand (EGAT). Rural electrification is the responsibility of the Provincial Electricity Authority (PEA). The Metropolitan Electricity Authority (MEA) distributes electric power to the Bangkok Metropolitan area and two adjoining provinces. According to PEA, 99.7% of Thai villages are now electrified, but demand continues to grow in step with Thailand’s residential, commercial and industrial growth.

Since they were formed in the late 1950s and 1960s, the crucial role of electricity in powering Thailand’s industrialization made the three power utilities (EGAT, MEA and PEA) very strong politically. By the 1970s, the three utilities were effectively self-regulating, with the exception of basic financial requirements set by the Ministry of Finance.

EGAT is particularly strong in this regard. EGAT was the first state-owned enterprise established by its own legislative act (EGAT Act) which provided it with a monopoly on electricity generation and established the organization to operate under the powerful Office of the Prime Minister.

Independent Power Producers

High levels of EGAT debt, high electricity demand growth, pressure from the World Bank and pro-market Thai governments led in 1992 to an amendment to the EGAT Act, allowing private Independent Power Producers (IPPs) to gain long-term supply concessions. While EGAT retains control of transmission system operation and the dispatching of power plants, private power producers generate electricity under longterm Power Purchase Agreements (PPAs).

To ensure healthy profits and low risk to private investors, most PPAs used “take or pay” contracts so that in the event of low demand for electricity, EGAT and Thai electricity consumers remained obliged to pay (Greacen and Greacen 2004). Of the total electricity generation capacity, about 39% is currently owned and operated by IPPs.

Small Power Producers (SPP): CHP and Renewable Energy

In 1992, the same year as the IPP program, Thailand also began the Small Power Producer (SPP) Program – probably the most important Thai program for clean, decentralized energy. The Small Power Producer (SPP) program applies to renewable energy and to fossil -fuel-fired Combined Heat and Power (CHP). SPP generators connect to PEA or MEA lines and sell electricity under power purchase agreements (PPAs) to EGAT.

Of all SPP generators, 1,107MW (including self-consumption48) or 535MW (excluding self-consumption) were renewable energy. While prices paid for electricity vary somewhat from contract to contract, generators whether coal, gas or renewable receive the same levelled tariff. SPP generators are broken into two categories: firm and non-firm, depending on their ability to guarantee availability. Firm fossil fuel-fired SPPs must generate for at least 7,008 hours per year and must generate during the months March, April, May, June, September and October.

Furthermore, monthly capacity factor must exceed 0.51 and not exceed 1.0. Shut-down for maintenance shall take place during off-peak months of January, February, July, August, November and December and may not exceed 35 days in a 12-month cycle. For renewable energy firm generators, all requirements are the same as for fossil-fuelled generators, except the requirement to generate 7,008 hours per year is relaxed to 4,670 hours per year and must include March, April, May and June.

Based on an average of actual payments to SPP generators from October 2001 to September 2002, firm SPP generators were paid 2.20 baht/kWh comprising an energy payment of 1.37 baht/kWh and a capacity payment of 479.7 baht/kW/month. Actual payments to SPP non-firm generators from October 2001 to September 2002 averaged 1.77 baht/kWh.

Difficulties with the SPP program

While Thailand’s utilities are to be commended for accommodating the SPP program, a number of private power producers have not been satisfied with interconnection arrangements. Some generators argue that interconnection charges and back-up power charges are either discriminatory or are not reflective of actual costs. Generatorshave complained that utilities force them to pay for unnecessarily expensive upgrades to the utility distribution network in order to interconnect, when they felt that less expensive upgrades would suffice from a technical perspective. At the same time, some SPP generators are concerned that if they complain they may face reprisals from the Thai utilities that are their sole market for power export.

There were also complaints that SPP licenses were granted predominantly to large industrial power customers, but were denied to many potential power producers (hospitals, shopping malls, universities, rural cooperative and municipalities). The lack of a permanent independent regulatory body leaves many important decisions to the utilities and offers little recourse in the event of disagreements.

On the other hand, EGAT had complaints that in some cases the SPP program was abused by generators who took advantage of favorable SPP tariffs but did not generate useful steam as promised.

Citing the capacity glut that followed the Asian Financial crisis in 1998, a Cabinet resolution allowed EGAT to stop accepting applications for power purchase from new CHP (renewables are still eligible). The “boom and bust” cycle that this created is evident in the flood of SPP contracts signed in 1998 and the relative dearth thereafter. EGAT has subsequently started building new centralized power plants (indicating that the capacity glut argument no longer holds) but has not re-opened the program for fossil-fuelled CHP (biomass CHP remains eligible). Since then, a few CHP projects implemented by utility joint ventures are planned or have come on line (such as the MEA/PTT/EGAT Suvarnabhumi International Airport project – but the private sector has been unable to compete. The Thai government should help utilities and generators to resolve differences and develop a new SPP program that encourages private sector participation in CHP.

Very Small Power Producer (VSPP) program

The Very Small Power Producer Program (VSPP) reduces the cost and administrative burden for small scale renewable energy generators to connect to the grid and export up to 10 MW electricity to either the MEA or the PEA at 80% of the retail cost of electricity.

As of April 2006, 94 generators are supplying 13.4MW to the grid under the program. By the end of 2006 the Ministry of Energy is expected to approve an upgrade to the regulations further streamlining interconnection requirements and raising the export limit to 10MW per site. The new VSPP regulations will also allow fossil fuel CHP as VSPP generators.


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