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Keynote speech on “Crucial Strategies for Sustainable Future in Energy”
By Dr. Piyasvasti Amranand, Chairman of the Energy for Environment Foundation (E for E),
     
   
     

          E for E would like to present some excerpts from a keynote speech on “Crucial Strategies for Sustainable Future in Energy” delivered by Dr. Piyasvasti Amranand, Chairman of the Energy for Environment Foundation (E for E), at the recent E for E Annual Seminar.  In his speech, Dr. Piyasvasti Amranand underlined that, in order to properly formulate energy policy, long-term planning should be envisaged, taking into account all stakeholders.  What should be done is setting forth the energy policy framework encompassing all aspects, in both short and long terms, and then determining various approaches to be most appropriate, fair and transparent.  Elaboration on this can be divided roughly into seven points as follows:

          1. The Private Sector.  Presently, the private sector has greater potential in the energy industry, such as petroleum exploration and drilling, power plant development, and energy efficiency and conservation.  As a result, the government should phase out its role, emphasizing instead its function of energy policy making and management planning, including regulation, so that all energy business operators would be treated fairly. This is the main reason why originated the Energy Industry Act, B.E. 2550 (2007).  This Act is an important tool providing many advantages so as to encourage competition in the energy industry and to create fairness.  Unfortunately, its benefit has not been reaped as much as expected as Thailand has long been under the monopolistic system.  Now that legislation encouraging competition in the energy sector has been in place and that the private sector has readily increased their competitive edge, review should be made on how to encourage greater private sector competition and role in the energy sector.

          2. Transparency, Clarity and Certainty of the Government Policy.  Ambiguities in determining policy of the government will have great impact on the private sector investment small power producers (SPPs) and very small power producers (VSPPs) – especially on the operators who have complied with the rules and regulations stipulated by the government, for instance, the change in the policy on “Adder” provision, cancellation or reduction of contributions to the Oil Fund imposed on gasoline and gasohol.  What is of great concern in the long term is that the private sector will lose their confidence, become doubtful and eventually decline to abide by the government policy.  So far, Thailand has been one of the world largest producers of biogas fuel; however, the uncertainty of the government policy will destroy entrepreneurs’ confidence in the long run.  Consequently, if a greater private sector role in the energy sector is expected, clarity and certainty of the government policy, including transparency, will be of the utmost importance.

          3. Energy Pricing Policy.  This is the heart of fostering economical and efficient use of energy.  Price distortion will induce people to make a wrong choice of fuel type.  In the past, Thailand made quite good achievements.  The abolishment of oil price control, by allowing the price to reflect actual costs, has led to efficient use of energy.  Oil price distortion, oil price subsidies or stabilization, initiated by political reasons, will result in inefficient use of oil as well as an increasing debt burden of the Oil Fund.  According to the 2010 annual report of the International Energy Agency (IEA), it is stipulated that in order to address the global warming, one necessary measure is to terminate energy price subsidies.  In the past, oil price subsidization was said to be only a temporary measure, but it has turned out to be on the contrary because it is quite difficult to terminate such subsidization.  This is a major problem that policy makers should seriously consider.  As a matter of fact, the burden of oil price subsidization will eventually be placed on the general public.  At present, other tools/mechanisms to manage oil prices instead of fixing the price or capping retail oil prices are available, but they have not been applied, such as oil price hedging.  If it is required that the diesel price be within the stipulated ceiling, a hedge can be made at the desired level.  By using price hedging together with the Oil Fund mechanism, the oil price ceiling can be determined and the government burden can also be alleviated.

          4. Diversification of Energy Sources and Energy Procurement in the Long Term.  Pursuant to Thailand Power Development Plan (PDP), nuclear power plants were initially slated to play a role in the country’s power supply.  Many countries have anticipated that nuclear power plants will help reduce the problem of global warming.  If there were no nuclear power plants, one would not be able to figure out how to reduce greenhouse gas emissions by 50% by the year 2050.  However, forging ahead with the establishment of a nuclear power station at the present time may become difficult worldwide, including in Thailand, given the recent incident of radiation leakage from nuclear power stations in Japan, caused by an earthquake and a tsunami.  As a consequence of this, Thailand has to turn to other sources of energy supply, e.g. liquefied natural gas (LNG) or renewable energy of which the costs are still higher than fossil fuel prices, thus necessitating subsidization by the government.

          5. Energy Efficiency. This is an important and effective means contributing to reduction of additional energy supply procurement.  However, this approach has not received much attention by the government.  Encouraging millions of energy consumers to follow what the government suggests is more difficult when compared with the construction of 1,000 – 2,000-MW power plants.  Therefore, various supportive measures are needed, such as the revolving fund or soft loan project, the ESCO Fund project, etc.  The implementation has been quite successful so far, being able to create entrepreneurs’ confidence.  Yet, there are still many methods which energy consumers have not been aware of.  Therefore, it remains feasible to further reduce consumption of various energy types.

          6.  Energy Development in Remote Areas with No Access to Electricity.  This is one of the activities being implemented by E for E.  Normally, the government and private sectors will emphasize the development of large-scale projects in areas where the population density is high and which are near the grid system.  Nevertheless, in many remote areas where there is still no access to electricity, there exist energy resources that can be deployed.  This provides a significant opportunity to do many other things.  For instance, the development of small-scale power projects, involving a capacity of 3-20 kilowatts (kW), can be beneficial to the local people and also helps scale down deforestation and oil consumption.  If viewed in terms of the amount of derived capacity, it may not be significant.  However, if such implementation can be undertaken on a continuous basis and if E for E continuously pursues such development throughout the next 5 years, by developing a total of 100 micro-hydro power projects, with a generating capacity of 10 kW each, the total generating capacity will reach 1 MW, which is considered significant and which cannot be overlooked as this will be beneficial to remote areas where there is no access to electricity or where some other expensive types of energy are used for electricity generation.

          7. Global Warming. This is thought by most people to be a matter that is still distant – no impact on them – unlike the problem of sulphur dioxide emissions from power plants.  However, many measures introduced by other countries have inevitably made quite an impact on Thailand.  Therefore, in formulating a policy of the country, it is essential to take into consideration the global warming issue.  It is widely acknowledged that the first policy now bearing fruit and affecting business handling of Thailand is the EU Emission Trading System, which stipulates that as from 2012 both inbound and outbound flights in the EU must emit carbon dioxide within the specified amount.  If the emission is over the limit, purchase of Certified Emission Reductions (CERs) will be required.  In principle, this should be a good practice; however, the stipulated regulations or rules of the game are unfair.  This can be a lesson for policy makers in Thailand – Importance should be attached to the issuance of policies and measures in foreign countries with regard to global warming and close follow-ups are needed.  Another point to raise here is about CDM projects.  Up to the present, 60 projects have been approved by Thailand Greenhouse Gas Management Organization (Public Organization), or TGO, with a total expected reduction of 8.8 million tons of CO2 equivalent per year (MtCO2e/year).  Since the TGO has been established, i.e. 5 years ago, only 6 projects have been certified by the CDM Executive Board (EB).  As a result, Thai Airways International has to buy CERs from China and India.  Just a word of caution – more policies and measures on this matter will be introduced, which will create impact on other businesses.  One obvious example is the environmental policy.  If environmentalists are allowed to set the policy, unusual policy aspects can be expected.  Importance should be given to this issue; otherwise, once a policy is set, any amendment to it will be very difficult.

28 September 2011

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