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06BANGKOK4889 THAILAND’S ENERGY PLANS

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“74303”,”8/10/2006 5:18″,”06BANGKOK4889″,

“Embassy Bangkok”,”UNCLASSIFIED”,””,”VZCZCXRO6403

RR RUEHCHI

DE RUEHBK #4889/01 2220518

ZNR UUUUU ZZH

R 100518Z AUG 06

FM AMEMBASSY BANGKOK

TO RUEHC/SECSTATE WASHDC 0849

INFO RUEHCHI/AMCONSUL CHIANG MAI 2278″,

“UNCLAS SECTION 01 OF 03 BANGKOK 004889

 

SIPDIS

 

SIPDIS

 

E.O. 12958, AS AMENDED: N/A

TAGS: ECON, ENRG, TH

SUBJECT: THAILAND\’S ENERGY PLANS

 

1. Summary: Despite rising energy prices and environmental

concerns, Thailand expects to continue its reliance on traditional

fossil fuels for its energy demands for the near future. Although

varying alternatives to carbon-based fuels have attracted some

government support, costly production practices, conflicts of

interests and a lack of technical expertise lead energy experts to

doubt their growth as a percentage of Thailand\’s consumption. One

exception may be a reduction in petroleum usage for transportation,

as Thailand flirts with measures promoting natural gas and ethanol

to power vehicles. However, some observers have expressed

reservation at the government\’s commitment to ethanol as well,

noting both the dearth of available biomass for conversion and

inconsistent incentives. End summary.

 

2. Largely reliant on natural gas and petroleum to satisfy its

energy demand, Thailand is attempting to shift the composition of

its fossil fuel usage. The Energy Policy and Planning Office

(EPPO), which develops its research for the Ministry of Energy,

forecast increasing substitution of coal over natural gas as a

source of electricity. Other government policies are promoting

natural gas and ethanol-mixed gasoline to replace petroleum and

diesel in transportation. However, others contend that without

greater support for non-carbon based alternatives, Thailand\’s energy

growth may not be commensurate with economic growth. Dr. Prida

Wibulswas, energy specialist and a member of the prestigious think

tank Royal Institute, noted that EPPO\’s own figures put the current

ratio at 1:1.4, with energy lagging behind economic development.

 

3. According to Ms. Narupat Amornkosit, director of the power

division at EPPO, Thailand currently derives around 70 percent of

its electricity from natural gas. At current usage rates, Thailand

has sufficient domestic natural gas reserves for another 25 to 30

years. To ensure these reserves are not tapped too quickly, Narupat

said the Electricity Generating Authority of Thailand (EGAT) seeks

increased coal usage for the immediate future, identifying as a

source bituminous coal from Australia. Coal also benefits from

still large global reserves and low prices, a primary concern for

profit-oriented EGAT. She conceded the challenge of convincing

affected communities to accept new power plant construction, but

stressed that public education and outreach efforts have improved

since beginning the controversial Banpu Public Company (BLCP) plant

in Rayong province in 2003, which generated widespread opposition in

the community and whose opening subsequently has been delayed

repeatedly. Independent Power Producers (IPP) like BLCP now engage

directly with community leaders and provide financial incentives,

said Narupat. These private companies must take the initiative in

community development, as some 70 to 80 private sector projects,

including Small Power Producers (SPP), now produce nearly half of

all electricity generated in Thailand.

 

Do renewable energies have a future in electricity generation?

——————————————— ——

 

4. Experts disagree on the ability to expand certain renewable

energy supplies. For example, hydropower now contributes around 7

percent of Thailand\’s electricity, including 2 percent purchased

from Laos. Narupat does not expect any significant increase in

hydropower production, stating that Thailand lacked major internal

waterways. However, Prida asserted that Thailand still has untapped

70 percent of its own hydropower capacity, mostly through smaller

dams. He suggested EGAT\’s hesitation in pursuing new hydropower

projects in Thailand is because it emphasizes more profitable,

larger dams. But Narupat countered that the problem is

bureaucratic, since new proposals for small dams must go through a

separate Royal Irrigation Department. She opined that these

institutional complexities make any significant construction of new

dams unlikely. (Note: Because of the political sensitivities

surrounding potential electricity purchases from controversial

Salween dam projects in Burma, EPPO avoided comment on their role in

future planning. End note.)

 

5. The Thai government has set policies to promote other renewable

energies. The Department of Alternative Energy Development and

Efficiency (DEDE) reported that biomass composed 16 percent of

Primary Energy Consumption (PEC), but mostly for traditional energy

like cooking and rural heating. The Energy Conservation (ENCON)

program in 1994 has helped subsidize production of 16 biomass

projects since 1995, including 1 billion baht (USD 25 million) for

pig farm biogas projects. Nonetheless, biomass still only

contributes just over one percent of total electricity generation,

according to Energy for Environment (E for E), an EPPO-funded NGO

and self-described \”Biomass Clearing House\”.

 

6. Many with whom we spoke were less sanguine about any significant

expansion for biomass electricity generation. Thailand has enough

land to supply agricultural conversion products, especially rice

husks and straws, believed Mr. Winai Praphakornkiat, information and

engineering manager at E for E. But the high costs of current

production technologies and still minimal government support

proscribe wider development. Winai blamed government indecision and

its lack of political will to promote biomass-generated electricity,

so now few producers can compete with cheaper natural gas

alternatives. Both Narupat and Prida also agreed that biomass

 

BANGKOK 00004889 002 OF 003

 

conversions will have supplementary roles at best. As an

alternative, Winai proposed wider usage in heating as a substitute

for fuel oil, as biomass offers a \”good payback\”.

 

Bureaucratic and policy failures

——————————–

 

7. Prida noted the percentage of renewable energy use for PEC has

actually decreased in the past ten years. He blamed some of these

failures on funding mismanagement. For instance, he claimed the

government has directly used only 12 percent of the allocated 20

billion baht (USD 525 million) from oil sales to develop and

publicize alternative energies over ten years, and much of the money

went to inefficient or unrelated projects. He also stated that too

often MoE members have vested interests in steering energy policies

towards sources like coal, as they may personally operate mines or

processing plants. However, EPPO reiterated its preference for coal

because of its relative abundance and political viability.

 

8. A weak, short-term outlook at the Ministry of Energy also

contributes to Thailand\’s desultory policies, suggested Prida. He

personally advocated a concerted effort promoting nuclear power, but

recognized the many obstacles to actual plant construction.

However, without domestic educational development, Thailand now has

only two available experts on nuclear energy in EGAT, both of whom

are expected to retire soon. He is also concerned about some

popular fears over safety and recognized that the government would

have to educate the public. Prida estimated that the total time for

Thailand to prepare and construct a working nuclear power plant

would be 16 years. He feared, however, that Thailand lacked the

required foresight and economic objectivity for such coordinated

planning.

 

Saying no to petrol, yes to natural gas

—————————————

 

9. Some of these concerns extend to the transport sector.

Composing 37 percent of Final Energy Consumption (FEC), government

policies have promoted natural gas vehicles (NGV) and gasohol, a

blend of petroleum and ethanol. Tax incentives were initially

granted for vehicle alteration to compressed natural gas (CNG) usage

and the purchase of E20 cars, which are specially made to run with

20 percent ethanol content in the petroleum. By the end of this

year, the government has mandated the phasing in of 10 percent

ethanol gasoline for all 95 octane fueling stations.

 

10. However, industry figures in agricultural products doubt the

Thai government\’s commitment to ethanol. The government officially

reports that an increasing number of licensed ethanol producers can

supply Thailand with one million liters per day by the end of this

year and three million by the end of next year. Producers, however,

are not so optimistic. They worry that despite its gasohol

measures, efforts to secure enough ethanol production are

progressing too slowly, currently at only 300,000 liters per day,

far short of the one million target for next year. Like biomass

electrical generation, costs are prohibitively high without improved

subsidies. While there are more licensed producers now, only a few

are actually making ethanol. The Thai Sugar Producers Association

considered that current high sugar prices prevent its industry from

processing sugar into ethanol content. Moreover, a spokesman from

U.S. agricultural company Cargill also worried about Thailand\’s

ability to secure tapioca chips from its cassava output, the second

largest potential ethanol source in the country. He noted that

instead of selling domestically, Thai producers sell three million

tons of tapioca chips to China each year, leaving little available

for conversion to ethanol.

 

11. Finally, some are concerned whether the government will put

more emphasis on natural gas. Mr. Arnupab Tadpitakkul, government

affairs director at Ford Motors in Thailand, noted the example of

the government\’s sudden decision to postpone excise tax reductions

from Ford\’s E20 car imports until January 2009 while maintaining the

same reductions for CNG vehicles. Ford\’s requests for a rationale

last year were diverted from one ministry to another, each fingering

others for the decision. However, he speculated that since the

now-private Petroleum Authority of Thailand (PTT) controls

significant portions of Thailand\’s natural gas reserves, CNG

promotion would boost its profits. Local press also reported in

June that PTT has decided to manage a 7-billion-baht fund to finance

CNG conversions, set up jointly by PTT and the Energy Conservation

Promotion Fund. Arnupab also noted that Toyota, one of Thailand\’s

largest investors, has only NGV-capable vehicles, possibly

influencing the postponement.

 

12. Comment: Thailand\’s current plans seem to favor less radical

approaches despite considerable government talk about renewable

energies like ethanol as a means to achieve greater energy

independence and improve farmer incomes. Preparations for renewable

energy will require the political will to allow higher energy prices

and shoulder the costs of subsidies. This requires the

collaborative support of various ministries to share the same goal.

However, the cheaper access and more lucrative profits in fossil

fuels seems for now too alluring, thus resisting a genuine

 

BANGKOK 00004889 003 OF 003

 

commitment to renewable energy. End Comment.

 

Arvizu

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Written by thaicables

July 13, 2011 at 5:16 am

Posted in Economy, Unclassified

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