An Update on Thailand’s New Alternative Energy Development Plan and Opportunity for Business

Dr. Sarawut Kaewtathip, Director of Policy and Strategy Management Office

3rd June 2015

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Integration of all energy plans

Governance

EEDPPDP AEDP

Security Economy Ecology

1) Security

2) Economy

3) Ecology

Principles for Developing Integrated Energy BlueprintPrinciples for Developing Integrated Energy Blueprint

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OilGas

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Energy Efficiency

Conventional power (PDP)

Renewables(AEDP)

Biofuels (AEDP)

▪ Remove subsidies to convey market price signal

▪ Accelerate EE execution via bench-marking, accountability and enforcement

▪ Rebalance power mix with clean coal technology deployment for half of all new thermal plants

▪ Three pronged approach for cost effective scale up of renewables:– Drive: Biomass and waste– Pace: Solar– Monitor: Wind

▪ Improve yield to limit imports and benefit rural community

Impact

▪ Limit domestic gas decline rate at ~2-5% p.a. (vs. -11% BAU)

▪ Achieve 30% energy intensity reduction (vs. 0.5% p.a. increase over last 10 years)

▪ Reach 30% coal in power mix vs. 20% today

▪ 20% clean coal vs. only normal coal today

▪ Achieve cost < LNG parity for 20% RES share in power mix (vs. ~8% today)

▪ ~20% substitution in transport (vs. 4% today)

▪ Up to THB 50 Bln/y GDP impact

▪ Channel subsidies directly to target segments in need

▪ Unleash THB ~380B for productive use

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Contents

•AEDP methodology review

•AEDP target overview

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The power AEDP is a renewable power development plan that seeks to increase renewable power generation in accordance with four goals

Energy security

Electricity cost

Environmental impact

High impact job creation

•Thailand is seeking to increase energy security by reducing the percentage or primary energy supply that is imported

•All RE types considered in the AEDP are domestic sources; imported supply potential (e.g. hydro) is not included

•Thailand is seeking to stabilize and eventually lower average delivered energy cost

•The AEDP utilizes RE generation sources according to a merit order which is economically derived

•As part of a global effort to reduce GHG emissions, Thailand is seeking to lower its energy carbon intensity

•Each of the RE sources considered in the AEDP have no net CO2 generation

•Thailand wants to increase job creation with a particular focus on poorer economic sectors (e.g. farming)

•The merit order in the AEDP takes into account job creation and prioritizes biomass derived RE generation

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The AEDP was developed in conjunction with the PDP and EEDP to ensure that the combined plan was consistent with Thailand’s energy objectives

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EEDP development

Integrated plan adjustment

AEDP development

PDP development

• The EEDP defines expected scenarios for energy consumption, taking into account proposed conservation measures

• Any adjustment in demand magnitude, timing, or geographic allocation mandates an update of the other power plans

• Utilizing updated demand projections from EPPO and any adjusted requirements from the joint stakeholder review, a revised AEDP is developed

• Changes in RE power targets affect the balance of power generation requirements

• EGAT incorporates new AEDP scenario into a PDP scenario which meets updated demand projections while providing sufficient reserve margins and reliability

• MEA and PEA check that the results meet local requirements and constraints

• The updated plans were considered in conjunction with each other by a group of internal and external stakeholders

• The plans are reviewed with respect to Thailand’s overall strategic objectives and target adjustments are suggested

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Conceptually, 2015 AEDP targets were set by matching projected electricity demand with RE generation options arranged in a merit order

Demand matching curve, 2015 – 2035TWh

Supply potential by RE type, in merit orderTWh

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Existing generation New generation Projected demand

Supply potential Supply potential utilized

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Matching order

• The objective of supply-demand matching is to optimize new RE build so that the most desirable types of RE generation are built first

• This was executed by developing a matching system which filled incremental demand with RE supply potential according to the merit order established

• In reality, additional constraints, such as physical grid limitations, were also considered in the matching process

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ILLUSTRATIVE

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The merit order of renewable generation technologies was built by calculating a ‘societal’ LCOE for each generation technology

• One of the primary objectives of Thailand’s energy planning is to stabilize and/or lower energy costs

• Levelized Cost of Electricity, which is a measure of long-term marginal cost of generation, was the primary metric used to compare RE gen. types

• Labor creation and GHG abatement are also primary metrics in Thailand’s energy strategy planning; the AEDP LCOE was augmented to incorporate these metrics in the calculations

LCOE calculates the price of electricity required for an RE plant to break even while taking all lifetime project costs into account

The 2015 AEDP incorporated three types of costs in LCOE calculations

Project costs

GHG abatement

Job creation

• All direct costs incurred throughout a project’s lifetime are considered

• Incorporates capital costs, fixed operating costs, variable operating costs, and fuel costs

• “Societal” LCOE incorporates the cost offset from GHG abatement

• Grid factor GHG offset was multiplied by plant generation and EPA societal cost of carbon to estimate cost offset

• “Societal” LCOE incorporates the cost offset from job creation

• Labor portions of capital and operating cost were deducted from total project costs before calculating LCOE

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Contents

•AEDP methodology review

•AEDP target overview

10SOURCE: EPPO online database, AEDP Supply Demand Matching Model

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Biogas Biomass Energy Crops MSW Small Hydro Photovoltaic Wind

Industrial WasteLarge Hydro % Percent bio-derived RE generation

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Industrial WasteLarge Hydro

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Additionally, RE power development will support ~30,000 construction jobs per year from 2015 to 2025 and ~13,000 construction jobs per year from 2026 to 2036