Officials discuss new deals with small power producers

An Energy Ministry source said last week that the Energy Policy and Planning Office, National Energy Regulatory Commission and Electricity Generating Authority of Thailand (Egat) represented the government side.

The SPPs sell electricity to industrial zones and Egat. They are keen to renew contracts and build new plants at the existing locations of their old plants without the need to bid for new SPP contracts.

They also want to have long-term contracts of 25 years in order to keep their existing customers in the industrial zones.

The customers want these SPPs to assure them that they can continue to supply them with electricity and steam after their contracts end.

The ministry is concerned that the electricity reserve will exceed the appropriate level if Egat has to continue purchasing power from the SPPs after the contracts end in 2017.

The ministry source said the meeting raised a resolution by the National Energy Policy Council that disallows the extension of power purchase contracts after maturation. But new contracts can be forged if there is actual demand for electricity.

The source said this meeting focused on seeking ways for SPPs to make new contracts. However, not all of these 25 SPPs will be awarded new contracts.

"The 25 SPPs generate collectively over 1.7 gigawatts or 100 megawatts each on average. About 30 per cent is provided to industrial estates and the rest to Egat. The country’s demand for electricity has declined, so there is no need for Egat to purchase all the output from these 25 SPPs," the source said.

One possible solution is before making the new SPP contracts, there needs to be negotiations between the state and the SPPs to make them agree to develop smaller plants and sell electricity from the new plants at a lower price.

This would prevent a hike in the country’s electricity production cost. The current price is Bt3.40 per unit.

Paitoon Paisarnsookvithaya, vice president of the association, said the meeting produced a good sign, since SPPs would have a chance to sign new contracts, which would benefit industrial zones.

However, as long as the new contracts have yet to be made, the businesses in the zones still lack confidence in the power stability of the zones.

If the new contracts could be made, the SPPs are likely to agree to sell the electricity from the new plants at lower prices.

The SPPs want authorities to finish the negotiations on these issues by June. Construction of new plants is a time-consuming process. They also need to conduct environmental impact assessments and construction will take about two years.

If they can reach a final agreement with state authorities, they might be able to finish construction before the power purchase contracts lapse.

Watcharapong Thongrung

The Nation

Energy authorities recently met with the Association of Private Power Producers to consider ways to proceed after the first group of 25 small power producers see their contracts expire in 2017.

An Energy Ministry source said last week that the Energy Policy and Planning Office, National Energy Regulatory Commission and Electricity Generating Authority of Thailand (Egat) represented the government side.

The SPPs sell electricity to industrial zones and Egat. They are keen to renew contracts and build new plants at the existing locations of their old plants without the need to bid for new SPP contracts.

They also want to have long-term contracts of 25 years in order to keep their existing customers in the industrial zones.

The customers want these SPPs to assure them that they can continue to supply them with electricity and steam after their contracts end.

The ministry is concerned that the electricity reserve will exceed the appropriate level if Egat has to continue purchasing power from the SPPs after the contracts end in 2017.

The ministry source said the meeting raised a resolution by the National Energy Policy Council that disallows the extension of power purchase contracts after maturation. But new contracts can be forged if there is actual demand for electricity.

The source said this meeting focused on seeking ways for SPPs to make new contracts. However, not all of these 25 SPPs will be awarded new contracts.

"The 25 SPPs generate collectively over 1.7 gigawatts or 100 megawatts each on average. About 30 per cent is provided to industrial estates and the rest to Egat. The country’s demand for electricity has declined, so there is no need for Egat to purchase all the output from these 25 SPPs," the source said.

One possible solution is before making the new SPP contracts, there needs to be negotiations between the state and the SPPs to make them agree to develop smaller plants and sell electricity from the new plants at a lower price.

This would prevent a hike in the country’s electricity production cost. The current price is Bt3.40 per unit.

Paitoon Paisarnsookvithaya, vice president of the association, said the meeting produced a good sign, since SPPs would have a chance to sign new contracts, which would benefit industrial zones.

However, as long as the new contracts have yet to be made, the businesses in the zones still lack confidence in the power stability of the zones.

If the new contracts could be made, the SPPs are likely to agree to sell the electricity from the new plants at lower prices.

The SPPs want authorities to finish the negotiations on these issues by June. Construction of new plants is a time-consuming process. They also need to conduct environmental impact assessments and construction will take about two years.

If they can reach a final agreement with state authorities, they might be able to finish construction before the power purchase contracts lapse.