Govt urged to extend purchase deals with SPPs quickly

The two associations jointly held a press conference yesterday. The top executive of Sumitomo Rubber (Thailand) Co, a customer of an SPP at Amata City Industrial Estate in Rayong, also took part in the event.

Anchalee Chavanich, president of the Thai Industrial Estate and Strategic Partner Association, said the first batch of 25 SPPs whose PPAs were due to expire in April 2017 should have their contracts extended for another 25 years. She said this was needed because it would take plants at least two years to install new power generators to service their clients in industrial estates.

She said the government should view SPPs as a necessary infrastructure for industrial estates and include their PPAs in the new Power Development Plan that was to be announced shortly. Energy Minister Narongchai Akrasanee has voiced his opposition to extending the contracts and awarding new SPP concessions, citing the high tariff rates granted to the plants for the portion of electricity they sell back to the national power grid.

According to the national electricity cost structure the minister detailed on his Facebook page on December 19, the SPPs’ average tariff of Bt3.63 per kilowatt-hour makes them the second-most-expensive source of electricity, constituting 11 per cent of the total electricity-generation cost. Renewable energy at Bt5.40 per kilowatt-hour is the dearest.

The current retail of the electricity tariffs is Bt3.86 per kilowatt-hour, he said.

Paitool Paisalsukwittaya, vice chairman of the Association of Private Power Producers, said SPPs could reduce tariffs charged to the national grid by up to 10 satang per kilowatt-hour if the government awarded them new contracts to build new power plants to replace old ones.

He said the government could organise a competitive bidding round for new SPP projects at new locations, but should not do so for the existing producers because of the risk of new developers failing to complete projects because of difficulty obtaining rights-of-way from industrial-estate operators, many of which own SPP plants.

The first SPP bidding round was held more than 20 years ago, resulting in the first batch of 25 projects that have a combined generating capacity of 2,908 megawatts, 1,787MW of which must be sold to the national grid with the rest going to industrial estates.

Other sources

"If there are no contract extensions, the state will have find [other sources] to fill the shortfall," Paitool said.

"Some customers will have a big problem, since they won’t have space left to build their own boilers. In some areas, there will be a problem obtaining an EIA" – environmental-impact-assessment approval to build utilities.

SPPs typically use highly efficient co-generation technology to produce and supply both electricity and steam to industrial estates. Thanks to their close proximity to users, co-generation plants also offer a stable power supply and help reduce power losses and the state’s investment in the transmission grid.

Paitool said SPPs, most of which run on natural gas, could reduce their electricity tariffs further if PTT cut gas prices. He said PTT currently earned a 5.33-per-cent profit margin on natural gas it sells to SPPs, compared with a 1.75-per-cent margin it charged large private power plants under the Independent Power Producers scheme.

Toru Nagahata, president of Sumitomo Rubber (Thailand), said a stable electricity supply was very important for a tyre manufacturer like his company because a power failure of only 0.6 of a second would lead to a production loss of 1,000 tyres.

Nagahata said Sumitomo had incurred no production losses from power failures last year after switching to buying electricity from SPPP Amata B Grimm Power in Rayong, while it endured five power failures in 2013.

He said Amata B Grimm’s tariffs were 5-10 per cent less than the Provincial Electricity Authority’s.