Energy sector development in the Mekong region: current plans, key concerns and alternatives

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Energy sector development in the Mekong region
current plans, key concerns and alternatives

• Chuenchom Sangarasri Greacen
• Palang Thai
• www.palangthai.org
• Workshop on
• Mekong Environment and Livelihood
• The Changing situation and Trans-boundary
  Implications 
• 3-4 February 2010 

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Export to Thailand Export to Vietnam
Lao PDRs electricity forecast (PDP2007)
Future Demand MW 2010
648 2015 1216 2020 1486
Source Department of Energy Promotion
Development Ministry of Energy Mines, Power
Development Plans Transmission Interconnection
Projects Lao PD, Nov 2008. Downloaded
from http//www.adb.org/Documents/Events/Mekong/P
roceedings/FG7-RPTCC7-Annex3.3-LaoPDR-Presentation
.pdf
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MOU Lao PDR to export 5000 MW to VN
Source Ministry of Energy and Mines, Energy
Requirement Sector Development in Lao PDR
presentation in Phnom Penh, Sep 2009
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MOU Lao PDP to export 7000 MW to Thailand
Source Ministry of Energy and Mines, Energy
Requirement Sector Development in Lao PDR
presentation in Phnom Penh, Sep 2009
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Vietnams planned power imports from Laos PDR
Source Progress of Vietnam Power Development
Plan and Transmission Interconnection Project,
Nov 2008. Downloaded from
http//www.adb.org/Documents/Events/Mekong/Proceed
ings/FG7-RPTCC7-Annex3.6-VietNam-Presentation.pdf
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Vietnams planned power imports from Cambodia
Source Progress of Vietnam Power Development
Plan and Transmission Interconnection Project,
Nov 2008. Downloaded from
http//www.adb.org/Documents/Events/Mekong/Proceed
ings/FG7-RPTCC7-Annex3.6-VietNam-Presentation.pdf
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Power Generation and National Grid during 2024 of
Cambodia
Import SPP from Thailand
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Myanmar
Source Myanmar Country Report on Progress of
Power Development Plans and Transmission
Interconnection Projects, Nov 2008. Downloaded
from http//www.adb.org/Documents/Events/Mekong/Pr
oceedings/FG7-RPTCC7-Annex3.4-Myanmar-Presentation
.pdf
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Chinas GMS cooperation projects

• Sino-Vietnam Cooperation
• 1. Power Supply to Vietnam
• 3 220kV 4 110kV lines
• Total by the end of Sep 2008 5.9 TWh
• 2. 500kV Interconnection Project
• Feasibility Study is under progression
• 3. Vinh Tan 1 BOT Coal-fired Power Plant
  (2600MW)
• Under negotiation
• Sino-Thailand Cooperation
• 1. China-Laos-Thailand 500kV Transmission Project
• Suspended
• Sino-Cambodia Cooperation
• 1. Sambor Hydro-Electric Power Project (2600MW)
• Finished the FS and submitted it to Cambodia.

Source China Southern Power Grid, Update For
CSG Power Grid Planning GMS Cooperation
ProjectsChina 2008.
http//www.adb.org/Documents/Events/Mekong/Proceed
ings/FG7-RPTCC7-Annex3.3-LaoPDR-Presentation.pdf
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Chinas GMS cooperation projects

• Sino-Laos Cooperation
• 1. LaosMaster Plan on Electric Power Industry
• Finished by the end of 2007 and submitted to laos
  on Jan.16, 2008.
• 2. Nam Tha 1 Hydro-Electric Power Project
  (356MW)
• Under Negotiation
• 3. Nam Ou Hydropower Station Project (about
  1000MW)
• Initiated by Sinohydro Corporation
• 4. Northern Grid Construction Project
• Under Construction
• Sino-Myanmar Cooperation
• 1. Ta Sang Hydro Power Plant Project (10711MW)
• Signed Frame Agreement to develop in Thalwan
  River
• 2. Development of Myanmar Northern Hydropower
  Projects (total about 1680MW)
• Initiated by China Power Investment Corporation

Source China Southern Power Grid, Update For
CSG Power Grid Planning GMS Cooperation
ProjectsChina 2008.
http//www.adb.org/Documents/Events/Mekong/Proceed
ings/FG7-RPTCC7-Annex3.3-LaoPDR-Presentation.pdf
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Do we need all these projects? Who is going to
pay for them? What is driving the process?
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Case study of Thailand
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Structure of Thai power sectorSingle-buyer
(monopoly)
Generation ( share)
Import (2)
EGAT (50)
IPPs (41)
VSPPs (ltlt1)
SPPs (7)
EGAT (100) SO
Transmission
PEA (67)
MEA (31)
Direct Customers (2)
Distribution
Users
Users
Remarks - Figure of Share in 2008 - ERC
Energy Regulatory Commission
????? EPPO Aug 2009
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Overview of Electricity Generating CapacityPDP
2007 (Revision 2 Mar09)

• Installed capacity as at Dec 2008 29,140 MW
• Total increased capacity (2009-2021) 30,155
  MW
• 2009 - 2015 12,605 MW
• 2016 - 2021 17,550 MW
• Decommissioned plants -7,502 MW
• Total generating capacity up to 2021 51,792 MW

Year PDP 2007Revision 2 PDP 2007Revision 2 PDP 2007Revision 2 PDP 2007Revision 2 PDP 2007Revision 2 PDP 2007Revision 2
Year EGAT IPP SPP VSPP Purchase from Abroad New Projects
2009 - 2015 3,769 4,400 1,985 264 2,187 -
2016 - 2021 8,000 1,600 - 300 2,850 4,800
Total Increased Capacity 11,769 6,000 1,985 564 5,037 4,800
Total Increased Capacity 30,155 30,155 30,155 30,155 30,155 30,155
????? EPPO Aug 2009
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Incentive structure for utilitiesthe more
expansion, the more profits
ROIC Net profit after tax Invested capital EGAT 8.4 MEA PEA

• Financial criteria for utilities link profits to
  investments
• Thailand uses outdated return-based regulation
• WBs promoted financial criteria such as self
  financing ratio (SFR) also have similar effects
• ROIC (Return on Invested Capital means the more
  you invest, the more profits

4.8
Result Demand forecast have systemic bias
toward over-projections Too many expensive power
projects get built
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Power Demand Projections vs. Actual 1992
2008If no systemic bias, the chance of
over-projecting demand 12 times in a row should
be 1/4096!!
MW
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Fictional power demand did lead to real
investments that become waste burden(not to
mention disturbed ecology, communities)
Generation capacity in excess of demand
(2007-2009)
Under centralized monopoly structure
Excess gas/ pipeline capacity/ generation
capacity economic waste excess burden for
consumers
Very little incentives to do energy
efficiency/conservation
Source of data EGAT 2010. ????????
??????????????????????????????????????????????????
???????
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Part of power demand is for subsidized
high-energy-intensity, low-value,
low-competitiveness industries
BOI investment privileges should take into
account energy and environmental considerations
Primary metal industry
High energy intensity
Low value added
Low competitiveness
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Thailand, Vietnam vs. International Energy
Intensity
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Macroeconomic Analysis
Low Quality Education
Low Quality labour
Enabling factors MACROECONOMIC MANAGEMENT
(Low margin/return)
Low Quality for Raw-material, machinery and
equipment
Insufficient inRD Investment
No immunity/ High volatility Financial System
Lack of Saving
Lack of regulation on industrial products
quality control
Low Basic infrastructure and Logistic
development
Slow Technology Development
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Electricity production and consumption (GWh)
Impacts of Pak Mun Dam alone
Source MEA, EGAT, Searin, Graphic Green World
Foundation
Pak Mun
Dams Malls Province
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Per capital CO2 emission (tons/yr)
11.4
7.3
7.1
5.9
5.7
World Avg 1 ton/yr
San Francisco
Tokyo
London
New York
Bangkok
Source Green World Foundation, 2008.
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"Nature has enough for our need, but not
enough for our greed." - Gandhi
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Irreversible losses and sufferingsfor whose
benefits?
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Cycle of over-investment
Deterministic planning based on demand forecast
leads to over-investment in capital-intensive powe
r projects
Power demand (over-)projections
1
2
Utilities Profits
3
Tariff structure that allows pass-through of
unnecessary investments
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When resistance is tough at home, GMS/ASEAN
Grid allows cross-border exports of
environmental, social and HR problems of securing
energy

• Nam Theun 2 (1000 MW)
• Mainly to serve Thailand
• 6,200 people in Laos resettled
• Dam will dry Nam Theun River and swell Xe Bung
  Fai River
• Endangered species, elephant habitat to be flooded

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Regional cooperation framework is used to explore
and expand business opportunities for Thai energy
corporations

• Power projects by Electricity Generating
  Authority of Thailand (EGAT)s subsidiaries
• RATCH
• EGCO
• EGAT International
• Activities in Laos, Burma, Cambodia, Indonesia
• Gas/petroleum projects by
• PTT (partially privatized gas/petroleum utility)
• PTTEP and its various subsidiaries
• Activities in Burma, Malaysia, Indonesia, the
  Philippines

EGAT
PTT
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Conflict of interest policy v business
Board of directors
Permanent secretary of ministry of energy
Chairman of PTT Chairman of EGAT Board member of
PTT chemical Chairman of Rayong refinery
Director general,Energy fuel
Dep. permanent secretary
Board member of Thai oil
Board member of RATCH
Dep. permanent secretary
Board member of PTTEP
Dep. permanent secretary
Director general of energy business
Board member of PTT
Director general of Department of Alternative
Energy Development and Efficiency energy
Board member of RATCH
Director of Energy Policy and Planning official
Board member of PTTEP
Senior official of ministry of energy
Board member of Aromatics PLC
Senior official of ministry of energy
Board member of Bang chak
Board member of RATCH Board member of Ratchaburi
generation company
Senior official of ministry of energy
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Energy policy and its impacts on share prices of
energy companies in the stock market

• The coup-installed government announced its
  policy on energy investment opportunities on 3
  Oct 2006
• Energy policy, PDP approval and IPP bidding
  resulted in significant windfall benefits for
  selected companies
• 1 year later, the share prices of companies
  benefiting from the PDP jumped 66 (other
  companies had a 8.7 rise)

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In conclusion

• GMS framework expanded ground
• to which Thailand can export its envi, social
  human rights problems from securing energy?
• from which Thailands centralized energy
  corporations can grow and profit?
• In which Thailands cycle of over-investment and
  excess consumer burden is aggravated?
• Regional energy decisions dominated by utilities
  and senior officials with conflict of interests

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Do we have alternatives?
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Comparison of trend lines with historical peak
consumption
Exponential
Linear
Past demand trajectory was linear but how come
the official demand projections have always
assumed exponential trend and over-estimated?
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Alternative PDP for Thailand

• 1. Demand forecast
• Adjust to be consistent with historical record
  (linear trend)
• 2. Renewable Energy
• Adjust amount of RE to be consistent with the
  governments own plan
• 3. Energy efficiency/Demand-side management
• Adjust amount of EE/DSM to be more consistent
  with study by academics EGAT DSM Office

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(No Transcript)
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Unnecessary investments worth US30 billion can
be avoided/postponed till 2021
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Benefits of Alternative PDP compared to
PDP2007(rev.2)

• Avoided investments, impacts, conflicts
• Reduced dependency on energy imports
• Only 23.5 instead of 42.5 in 2021
• Reduced per capita CO2 emission in 2021
• Down 6.6 instead of up 51.4 wrt 2009 level
• Reduced electricity bill by 5.8
• More employment, more equal distribution of
  income, more competitive economy

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Comparison of CO2 emissions from approved PDP vs.
Alternative PDP
???????? ?????????????????????? CO2 ???
CARMA ????????? CO2 ?????????????????????????????
?????????????????????
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Reforms needed for the status quo to embrace
alternatives

• Return-based regulation -gt Performance-based
  regulation
• Accountable demand forecast through contracted
  demand (forecast backed up by contracts)
• Supply-side planning process -gt Integrated
  resource planning (IRP)
• Decentralize structure of control and decision
  making

Not possible without broad-based demand for
change