As oil prices dip, now is time for energy sector reform, expert says

In his keynote speech at a dinner talk held by the German International Cooperation Agency on Thursday, Piyasvasti, a former energy minister and current chairman of energy conglomerate PTT, said energy pricing policy and mandatory standards were the two key elements to promote energy efficiency and renewable sources.

He suggested that the Energy Conservation Act be amended to allow the Energy Ministry to issue compulsory efficiency standards for appliances, equipment and buildings. The Energy Industry Act should be amended to make the Energy Regulatory Commission a true “one-stop centre”, becoming more proactive in protecting consumers and creating competition, strictly overseeing regulations related to power grids, and ensuring the regulatory body ensures the least costly transmission of electricity.

In the short term, power-transmission grids and dispatch centres should be spun off from the Electricity Generating Authority of Thailand, which would remain responsible only for producing electricity. In the long term, retail competition and an electricity market should be established, he said.

“There is no better time to reform [energy policy]. Because oil prices have come down, price restructuring will be easier. We hope to see pricing reforms, a necessary step for promoting energy efficiency,” Piyasvasti said.

World oil prices have dropped more than 20 per cent from their June peaks. Brent crude, a benchmark for more than half the world’s oil, slumped to a four-year low of US$83.37 a barrel on the ICE Futures Europe exchange in London on Wednesday. 

Energy is one of the 11 areas in which the recently formed National Reform Council is tasked with recommending substantial changes during the tenure of the current military regime. 

Piyasvasti said it was the duty of the government to create environmental and regulatory frameworks for sustainable and competitive growth in green technologies.

“In the case of Thailand, distorted energy pricing policy and the lack of certain rules and regulations have led to inefficient energy use and misallocation of resources, thereby undermining green growth,” he said. 

Piyasvasti said he was surprised that policy-makers were complaining that costs resulting from the promotion of renewable energy have made retail electricity tariffs too high. In setting tariff allowances for renewable-energy facilities, policy-makers should either consider “avoided cost”, which appears to be costly liquefied natural gas (LNG), or through organising competitive bidding for renewable-energy producers.  

“Within not so many years, 50 per cent of the gas supply will be imported LNG, which is twice the price of domestic gas, so the avoided cost seems to be that of LNG,” he said.

“It’s a waste of time to sit down and think what should be the suitable feed-in tariffs for each [type of] energy.” 

He said solar energy was already competitive and the only thing missing was a financing programme to accelerate its adoption.