To fulfill its global commitment to combating climate change and achieving carbon neutrality by 2050, Thailand must prioritize electricity liberalization as a key strategy.
The reasoning is clear: the power sector is the largest contributor to the country’s carbon emissions, accounting for over 42%. The critical question is how to address this issue. Transitioning to clean energy is essential but insufficient on its own—electricity liberalization is imperative.
The big question is how?
Switching to clean energy is necessary, but not enough. Electricity liberalisation is mandatory.
Energy policy planners in every country should prioritize clean electricity, but energy strategies must adopt a balanced approach. Governments need to ensure energy is secure, sustainable, and affordable. However, this balance has been disrupted by soaring electricity prices and insufficient levels of clean energy.
The government must make energy secure, clean and affordable. Unfortunately, the balance has been lost due to ever-rising electricity prices and low levels of clean electricity.
According to the country’s Long Term-Low Emission Development Strategy (LT-LEDS) plan, a blueprint for the country to achieve carbon neutrality, the power sector plays a crucial role, tasked to produce clean electricity constituting up to 74% of the total fuel mix in electricity production by 2050.
Thailand’s clean electricity policies appear commendable, with commitments to solar energy, the phasing out of coal-fired power plants, and ensuring fair electricity prices, along with requiring new power plants to produce at least 50% clean electricity.
The government also pledged to support technologies for energy storage, carbon capture technology, and green hydrogen emission, while capping electricity prices at 5 baht per unit.
Inconsistent policies and the unfulfilled liberalisation of the energy sector, however, make these goals impossible.
For electricity production, the government continues to approve the construction of new gas power plants. With an average life span of 20-25 years, these plants lock Thailand into gas dependence for three decades, hampering the country’s goal to embrace clean energy and putting the energy system’s stability at risk in relying on imported gas.
Adjustment of the purchase price of clean electricity by the government also drives Thai investors to invest in other countries with better returns. About 12% of clean energy in Vietnam, for example, comes from Thai companies. Foreign investors avoid Thailand for the same reason.
Additionally, the Prayut government’s pausing of the net metering plan reduces solar rooftop installations and hurts the solar energy industry.
In the current system, net billing, households with solar rooftops can sell extra electricity to the government but at a lower price than they buy it for.
Net metering — which the government has failed to tap is better because the selling and buying rates are equal. The net metering system is a significant incentivising factor that can accelerate the growth of clean electricity. The system has helped households save on electricity costs by offsetting electricity produced from their rooftops with actual consumption.
For transmission, the government’s existing policy is not conducive to opening the market. Access to transmission systems and grids is controlled and limited to a few private entities.
Actually, the Energy Regulatory Commission — a national committee overseeing the energy sector — already established third-party grid access rules with a service fee called a “wheeling charge”. However, a concrete policy from the government is still lacking.
For distribution, consumers still need to deal with high electricity costs partially caused by over-projection, which leads to the excessive construction of power plants — many of which run on gas.
Many plants are idle because there is a glut in the energy system. The government, nevertheless, has to pay these idle power plants for their energy production availability. This “availability payment” is passed on to consumers in their electricity bills. That defeats the government’s goal to make electricity prices fair and affordable.
Another cause of high electricity prices is the unfairness of the structure cost of natural gas used in electricity production. Thai Gulf natural gas is affordable and high-quality, but part of it goes to the petrochemical industry, leaving little for the electricity sector. Gas imports are then necessary. The unfairness arises as the petrochemical industry does not contribute proportionately to the cost structure of gas used in electricity production.
These policy inconsistencies must end. In the wake of global pressure to attain carbon neutrality by 2050, the government must liberalise the power sector to make it competitive and produce 74% clean electricity as part of the country’s carbon pledge.
In the current “Enhanced single buyer” system, private electricity producers must sell their power to a sole state enterprise, the Electricity Generation Authority of Thailand (Egat) — except for small-scale private power plants that can directly sell to industrial estates. Then Egat, which controls the transmission grid, distributes this electricity for public consumption through the Metropolitan Electricity Authority (MEA) and the Provincial Electricity Authority (PEA).
Thailand needs to move to a ‘liberalised’ electricity system where power producers auction to sell electricity to retailers at the wholesale market level. Retailers, such as state enterprises like the MEA, the PEA, private retailers and household-level electricity producers, can compete to sell electricity to consumers. Consumers have the freedom to choose their electricity supplier through a trading platform or without going through the platform.
How to make it happen? Promoting competition in production, granting access to the transmission system, and selling electricity to the public at fair prices are the cornerstone of the TDRI’s clean electricity policy proposals.
First of all, the government must increase the number of clean power plants.
Although the government has a policy to stop using coal, natural gas still dominates. To achieve the 74% clean energy production target by 2050, the government must set clear timelines to reduce the use of natural gas in electricity production.
Phasing out gas power plants will not be easy. Negotiations are necessary to set a shorter lifespan for gas power plants and reduce the payment for idle power plants. If not, electricity costs will remain high.
However, phasing out all gas power plants in the short term is not feasible, as they still help stabilise the electricity system when clean energy during the transitional period still cannot keep up with public demand. But gas power plants need to be more flexible to produce electricity on demand.
In the long run, gas power plants’ role will gradually diminish, thanks to better energy storage technology and lower costs in clean energy production.
Next, the government should accelerate the net metering system.
The Thailand Power Development Plan 2018 Revision 1 aims to raise the capacity of rooftop solar electricity generation from 350 megawatts in 2020 to 3,000 megawatts by 2025. Only the savings on electricity costs from net metering can help Thailand reach this target.
Importantly, the government must allow accessibility to the transmission power grid with fair service charges.
Lastly, competition in a liberalised market will enhance efficiency in electricity production, ultimately reducing costs.
Although electricity prices will come down through market mechanisms, this will not be as quick and significant in the initial period since Thailand still relies on natural gas power plants to ensure electricity stability, which has a cost. The government might consider regulations requiring consumers to share the cost of electricity stability, which should vary according to the type of business.
Over time, with better energy storage technology and less use of natural gas, electricity prices will be significantly lower than in the current monopoly.
Electricity liberalisation is the key to Thailand’s survival in achieving its carbon neutrality goals and will play a crucial role in efficiently transitioning the country into a low-carbon economy.
Writer : Areeporn Asawapongphan, PhD., is Research Fellow, Thailand Development Research Institute (TDRI). The article is an excerpt of the speech on ‘Energy Reform: Key to Thailand’s Survival’ at the 2023 TDRI Annual Conference.
