2012 Paris Session - Cigre

2012 Paris Session
http : //www.cigre.org
C5 :106
The Alleviation of Prices Impact on Electricity Tariff caused by
Renewable Energy Adders in Thailand
SIRIWAN WORADEJ
Metropolitan Electricity Authority
Thailand
sirivan@mea.or.th
SUMMARY
The Metropolitan Electricity Authority (MEA) is a distribution electric utility in
Thailand. The country’s electricity tariff structure is under the enhanced single buyer policy:
The Electricity Generation Authority of Thailand (EGAT) occupies the electricity generation
business and purchases up to 52 % of its own generation capacity from IPPs and SPPs; MEA
and PEA (Provincial Electricity Authority - the other distribution electric utility in Thailand)
purchase electricity from EGAT and then sell to end use customers. Thai government has set
up a policy to promote the use of green energy from its end users, in order to stimulate the
efficient use of multiple sources in power generation, to release the government’s burden in
its long term power development plan, and most importantly, to protect environment by
reducing the use of fossil and emission of CO 2 . The policy creates a group of small scale
power producers who are so called Very Small Power Producer or VSPP. They generate
electric power from renewable energy sources, i.e. photo voltaic, biogas, biomass, small
hydro, wind and rubbish. VSPPs’ generating capacity is limited to not more than 10 Mw, they
enjoy the right in generating electric power for their own usages and selling excessive power
back to MEA’s or PEA’s power grids through the same meters they receive their electric
power from the utilities. The principle of net metering is preferably applied, however, due to
the sale tax is to be covered in every business transactions, the utilities have to separate
taxable sale and purchase amount of energy using single or separate meter. The utilities
follow below critera in power purchasing settlement with VSPPs:
For generating power ≤ 6 MW, twofold price is given:
For the amount that is not greater than the VSPP’s monthly consumption, the price is an
average retail price for all energy VSPPs purchase from the utility plus retail Ft.
Or else; the price is an average whole sale price for all energy at all voltage levels the
utility purchases from EGAT plus whole sale Ft
For generating power > 6 MW:
The price is an average whole sale price for all energy at all voltage levels the utility
purchases from EGAT plus whole sale Ft
The above mentioned tariffs associate with the whole sale and retail Ft , which they are
the electricity price adjustment factors that mainly cover the variation of electricity cost
caused by the fluctuation of fuel, currency exchange rate and inflation. EGAT releases its
burden through whole sale Ft which escalates the original price of every single energy MEA
or PEA’s purchases from EGAT, while the retail Ft, accordingly, cascades the burden to all of
the retail customers.
sirivan@mea.or.th

The introduction of VSPPs has caused some burden to electricity end users owing to the
price adders which is a kind of incentive used to promote the green energy, e.g. the adder for
photo voltaic is 8 Baht/ kWh, on the other hand, these adders impact the retail price as they
worsen the whole sale Ft, retail Ft and then upturn the retail price charged to all end use
customers. The rocketed sky-high retail Ft situation in Thailand once slow down the
promotion of the use of green energy as it deems unfair to other end users. This paper
proposes an alternative to deal with the problem by tracking the root causes of Ft contributed
by various groups of consumers. A large portion of the price adders would be used to
stimulate the change of behavior to those who contaminate while smaller portion or none
would be distributed among those who preserve. The paper will fully exhaust the class peak
responsibility method to render it an efficient tool to promote the green policy, encouraging
more green generators, and more importanty, to bring the causes of high Ft down.
KEYWORDS
Adder, Class Peak Responsibility (CPR), Ft, Feed in Tariff
sirivan@mea.or.th

1. Electricity Structure and Tariff in Thailand
Electricity Structure: Thailand’s electricity supply industry is under the enhanced single
buyer model (ESB) as shown in Figure 1. The state generation system owns by EGAT as well
as it is the sole electricity buyer from private generators. EGAT’s own power generating
capacity presently comes down to approximately 45% (as of September 2011) of the total
capacity of the country. The private
generators in Thailand which contribute the
rest can be classified in 3 categories:
Independent Power Producers (IPPs), Small
Power Producers (SPPs) and Very Small
Power Producers (VSPPs). In addition to the
electricity generation and buyer, EGAT is
also responsible for the country’s
transmission system as well as being the
system operator. Besides EGAT, there are 2
Figure 1. Enhanced Single Buyer Model
geographical separated distribution utilities in
Thailand: the Metropolitan Electricity
Authority (MEA) and the Provincial Electricity Authority (PEA). MEA is responsible for
power distribution, sales and provision of electric energy services in Bangkok Metropolis, and
other 2 adjacent provinces: Nonthaburi and Samut Prakran while PEA serves the rest of the
country.
Electricity Tariff : Thailand’s electricity tariff is uniformly applied acorss the country, it
comprise 3 parts; Base tariff, Fuel adjustment mechanism and Value Added Tax. The first
part, the Base Tariff reflects the marginal cost of the utilities to construct power plants,
transmission lines, distribution lines including fuels. It is certain that assumptions had to be
made pertaining to fuel prices, inflation and exchange rates before the Base Tariff could be set
up. The Base Tariff is further divided into 8 categories according to ones’ ‘Load Pattern’ –
the daily load consumption characteristic of certain group of customers measured in MWh.
The second part , the Fuel Adjustment Mechanism (Ft) is activated once the fuel prices,
inflation and exchange rates fall off from the assumptions. This happens almost every month
however the Ft is preferably adjusted every 4 months to avoid the fluctuation of cost of
production, the Ft is therefore deemed to be an unfavourable part that upturn the electricity
price. The cause of high Ft is not only the higher fuel cost in power generation by EGAT,
private generators (IPPs and SPPs) and neighboring countries who import electric power to
Thailand, other government policy such as the Power Development Fund, renewable energy
adder, etc are from time to time place burden on Ft. Finally, the Value Added Tax, - it levies
7% of sale tax on total electricity expense including Ft.
2. Renewable Energy Promotion
To promote efficient use of resources within the country, reduce dependency on electricity
generation using commercial fuels, which will help decrease expenditure and also alleviate
the government’s investment burden in electricity generation and distribution systems.
Therefore, in year 2001, The National Energy Policy Council (NEPC), chaired by the Prime
Minister, passed the resolution to allow the distribution electricity utility - MEA and PEA to
purchase electricity from Very Small Power Producers(VSPPs) whose maximum generating
capacity is limited to 1 MW and to urge the utility to produce electricity from renewable
energy such as wind, solar energy, mini or micro-hydro, sea or ocean waves, geothermal
sirivan@mea.or.th

energy and biogas ,etc. Later in year 2006, the maximum generating capacity of VSPPs has
been raised to 10 MW.
In order to reach the target, the Thai government used several campaigns such as the tax
exemption for investors on renewable business issued by Board of Investment; venture capital
fund for ESCO, etc to encourage investors. Among these incentives, Feed-in Premium
commonly known as “Adder” is the most successful measure which strongly and effectively
boosts the renewable market in Thailand, especially solar energy.
As the cost of electricity generated by renewable energy is higher than that of conventional
energy, it is no way to commercialize renewable energy without an “adder” In year 2009, the
EPPO (Energy Policy and Planning Office) therefore developed a renewable energy adder
policy so called “feed-in premium” in an effort to reduce this gap. The adder rate is different
from technology to technology and its installed capacity. The adder table is as follows.
Fuel
Biomass/Biogas
- Installed capacity 1 MW
Waste(community waste, not hazardous
industrial waste and inorganic waste)
- AD&LFG
- Thermal Process
Wind Power
- Installed capacity 50 MW
Mini and micro hydropower
- Installed capacity 50-200 kW
- Installed capacity < 50 MW
Table 1 : Adder rates by technology
Adder(Baht/kWh)
VSPP SPP
0.50
0.30
2.50
3.50
4.50
3.50
Special
adder*
(Baht/kWh)
Bidding 1.00
1.00
2.50
3.50
1.00
1.00
3.50 1.50
1.50
Supporting
period
(Year)
0.80 - 1.00
7
1.50
1.00
7
Solar power 8.00 8.00 1.50 10
One drawback of the “feed-in premium” after the policy had been successfully come
to effect was that – The amount of adder of renewable energy which was mostly the Solar
Power was so large that when it was converted to Ft, it made the Ft exceeded 0.08 THB/kWh
which was the maximum amount allowed by the policy of the NEPC (National Energy Policy
Committee). NEPC then passed a resolution on the 28 th June 2010 to temporarily cease the
new projects and reduce the adder from 8 THB/kWh to 6.50 THB/kWh for those under
approval ones. The second government issues was the trend to develop a specific Feed-in
tariff for rooftop PV and top up the regular tariffs,
7
7
7
7
10
10
3. Impact on Ft Caused by Adder
The Adder is the major cause of the upturn in Ft. The Ft value partly bases on the amount
of energy generated by renewable sources. As of October 2011, it is evident that the
renewable sources are 2,223.07 MW higher than that of 5,900 MW planed in the
government’s 15-Year Renewable Energy Development Plan (REDP). The excessive
renewable sources then impact significantly on Ft. The average affect to Ft is between 0.059
to 0.201 per kWh while the maximum Ft will occur in year 2012 to 2016, when maximum
power is scheduled to feed into a distribution system.
sirivan@mea.or.th

Figure 2 : Status of renewable energy
Figure 3 : The amount of Adder Value
Figure 2 shows the status of renewable energy in Thailand (as of October 2011), the
renewable energy shown is represented by its adder only. The trend of renewable energy
growth in view of its adder is quite rapid, while the real impact of the adder to Ft in term of
THB/kWh is shown in Figure 3
We can form a formula to calculate the total amount of impact on Ft causes by the adders
like this: Total Impact on Ft (THB/kWh (All Thailand) ) equal Total amount of Adder (Total) divided
by Total Energy Consumption (PEA, MEA and EGAT direct customers)
Or
Adder (Total)
Total Impact on Ft =
Total kWh (PEA, MEA and EGAT direct customers)
Adder that passes through to Ft will impact all end users, sence, he or she,no matter what
category, has to pay higher electricity bill with such adder. However, electric tariffs have been
designed to reflect the principle of marginal cost according to Class Peak Responsibility
(CPR) of each category adjudged by each load characteristic. For example,any the business or
industrial customer group is more likely to take more burden the utility with the construction
of new power plant, transmission or distribution system, than the residential or small business
customer group.
Figure 4 shows system
load characteristics of
each category, It is clear
that load on electricity
consumption of Thai
System (as of October
2011) is 11,111 MW. For
residential service
(consumption less than
150 kWh per month)
contributes the system
peak at 2,877.14 MW or
4.81% of system profile
and residential service
Figure 4 : System Load Characteristics
(consumption more than 150 kWh per month) contributes the system peak at 3,741.36 MW
or 9.22% of system profile, small general service contributes the system peak at 3,228.44
MW or 13.49% of system profile , medium general service contributes the system peak at
4,744.66 MW or 19.09% of system profile, large general service contributes the system peak
at 9,876.84 MW or 41.22% of system profile, specific business service contributes the
system peak at 869.05 MW or 2.80% of system profile, non- profit service contributes the
system peak at 2,101.32 MW or 8.70% of system profile and finally, Agricultural service
contributes the system peak at 536.08 MW or 0.67% of system profile.
sirivan@mea.or.th

Therefore, in the light of the “peak” each category burdens the utility, it is fair if NEPC
would decide to pass through the adder by means of Ft to all categories to reflect these
burden. The adder should not be simply the burden of all the customers equally. In other
word, it should be dealt with as the cost items in the base tariff by considering the load
characteristic of each customer group .The more burden or “cost” the category burdens the
system, the more it should bare its portion of responsibility. Taking into account the principle
of burden on system or CRP, we can simply calculate “the portion of responsibility” which in
turn reflects in Ft for each category. The detailed calculation based on system load
characteristics curve in year 2011 is shown in Table 2.
Table 2 Portion of responsibility to support renewable sources versus system peak contribution
Tariff Category
Residential Service
(consumption less than 150 kWh per
month)
Residential Service
(consumption more than 150 kWh
per month)
Peak
Contribution
(%)
4.81
Renewable Energy
Adder
(As of year 2011)
(MBaht)
Portion of
responsibility
(MBaht)
64.97
9.22 124.71
Small General Service 13.49 182.35
Medium General Service 19.09 1,352.09
258.09
Large General Service 41.22 557.38
Specific Business Service 2.80 37.90
Non-Profit Service 8.70 117.68
Agricultural Service 0.67 8.99
Total 100 1,352.09 1,352.09
4. Conclusion
The renewable energy incentive programs in Thailand have come to an amazing result,
for the number of installed renewable sources as of the year 2011, it is already 37% higher
than its original target stated in REDP and there are still a lot to come. The majority that
enrolled in the program is the solar project which by far 5 times exceed the target, the second
and the third runner up are wind energy and waste and biogas respectively. However, minihydro
and biomass are lower than the 15-years REDP target.
The key success factor is the incentive adders that bring in more and more renewable
investors. The incentive adders are converted into retail Ft and passed through to all the
customers equally, nevertheless, this causes problem as it upturns the Ft to exceed 0.08
THB/kWh which is the maximum amount allowed by the policy of the NEPC. The
sirivan@mea.or.th

government ceases some solar projects and renegotiate with new comers to lower the original
adders and may adversely change the adder policy to feed in tariff in the future. These
remedies cannot be a long term solutions because firstly, Thailand is desperate for renewable
energy sources through adder policy, secondly, when the adders have been replaced with feed
in tariff and top the regular tariffs, this not only distorts the marginal cost pricing structure, it
also directly impact the cost of distribution utility which in turn recover from the high retail
tariff.
In this case, a CRP principle can be well applied to the situation: It is not fair to pass
through the renewable adders to all end users equally, rather it should follow the rule of
responsibility by considering the electric consumption of some categories, e.g. residential
service who create only 4.81% of the system burden (cost of construction new power plants,
new transmission lines, etc.), while the large general service create 41.22%. In this regard, the
large general service should bare more responsibility to support the need of renewable sources
than residential service. Other categories can follow the same rule as stated in table 1
Finally, if a feed in tariff does exist to allow renewable energy has its own retail pricing and
thus top the other categories’ retail price, care should be given to follow the CPR in retail
pricing so that the marginal cost pricing principle will not be distorted. Now come to the
question: If this is the case, should we cease the renewable promotion program since it
impacts retail pricing.
BIBLIOGRAPHY
[1] Regulations for the Purchase of Power from Very Small Power Producers
(December 1992 pages 1-7)
[2] Data in Renewable installed
[3] Data in the amount of Adder
[4] Load Characteristic
[5] V,Lorgirachunkun , “Training in Design Electric Tariff” , October 2008
sirivan@mea.or.th