Time to promote alternative energy for future security

Thailand relies pretty much on imported energy, which accounts for 60 per cent of our total commercial energy consumption, at an approximate value of Bt900 billion each year. In addition, more than 90 per cent of the energy supply is from fossil-based sources. Therefore, Thailand is in a risky position in terms of energy security and greenhouse gas emissions. That is why renewable energy must be a key policy for future energy security and an environmentally friendly society in Thailand.

Common types of alternative energy are solar energy, wind energy, geothermal energy, biofuel and ethanol, and hydrogen. Each of these so-called alternative energies is generated from a different source and serves different purposes. Solar energy is the generation of electricity from the sun. It is split into two types – thermal and electric energy. These two subgroups mean that solar energy heats up homes (and water) and generates electricity, respectively. Wind energy is the generation of electricity from the wind. Geothermal energy uses hot water or steam from below the Earth’s surface for heating buildings or electricity generation. Biofuel and ethanol are plant-derived substitutes for gasoline for powering vehicles. Hydrogen is used as clean fuel for planes, spaceships and some cars.

It is unfortunate that Thailand has not really been able to develop its alternative energy capacity despite its geographical advantages. Thailand is rich in domestic sources for alternative energy, with plenty of sunlight, water and some moderate wind spots. As an agricultural country, Thailand is full of crops that can be turned into various types of alternative energy, like biofuel produced from sugar cane, cassava or oil palm. By-products such as waste from the agricultural and industrial sectors can also be used to produce electricity, heat and fuel. It seems the only impediments to our success in promoting alternative energy are the lack of appropriate technological expertise and government incentives.  

Thailand has a 15-Year Renewable Energy Development Plan, which aims to increase renewable energy consumption to 20.3 per cent of the country’s total energy consumption by 2022, which would reduce dependency on imported energy sources and, at the same time, reduce greenhouse gas emissions.  

However, the new government has a more aggressive goal, with the Ministry of Energy recently putting together a new Alternative Energy Development Plan (2012-2021), with a revision of the renewable energy consumption target to 25 per cent within 10 years. This plan aims to meet energy demand through various types of energy generation such as solar, wind, hydro and bio-energy.  According to the official estimates, the plan is expected to yield benefits to the country. 

It is expected that the cumulative final energy saving up to 2030 will be about 289 million tonnes of oil equivalent, or an annual average of 14.5 million tonnes of oil equivalent. In terms of financial benefit, the energy expenditure saving will be approximately Bt5.4 trillion, or an annual average of Bt272 billion. In terms of CO2 emission reduction, about 50 million tonnes can be achieved.   

To achieve this lofty goal, it is necessary for the Thai government to use policy tools to promote alternative energy. The alternative energy policy framework comes under three categories: 1) regulation; 2) fiscal incentives; and 3) public financing.  

First, an appropriate regulatory framework to promote alternative energy is at least as important as subsidies for alternative energy. Two main types of regulatory policies have been used internationally to promote alternative energy. One is to guarantee price; another is to ensure market share through government-mandated targets or quotas. They are applied in order to give renewable energy a considerable role in the electricity generation and transport fuel markets. In segregated partial markets, competitive bidding for alternative energy concessions and green energy tradable certificates also constitute mandated market policies. In some cases (e.g. rural or off-grid areas where previously no market existed), government policy must actually organise markets and the necessary institutional development.  

Second, fiscal incentives constitute policies that are focused on cost reductions and improvement of the relative competitiveness of alternative energy technologies in given markets. These incentives include capital grants, third-party finance, investment tax credits, property tax exemptions, production tax credits, sales tax rebates, excise tax exemptions, etc. Some of these measures can be well applied to alternative energy technology invested in by the users themselves. Taxes on fossil fuels also improve the competitive position of renewable energy and are particularly appropriate to internalise negative external effects on environmental or energy security.  

Finally, the availability of funding for alternative energy development is essential for the continued growth of these technologies. Two main methods of public financing are the ways in which governments assist in allocating the necessary capital to the alternative energy sector. The government can assist in the distribution of funding for implementation of alternative energy projects. Financial support from national and sub-national governments helps to fund infrastructure development and facilitate private-sector participation in the alternative energy sector. 

I think it is time for Thailand to really push forward towards sustainable energy usage in the future, otherwise the Thai people will have to suffer the consequences socially, economically and environmentally. 

 

Dr Chodechai Suwanaporn is executive vice president, economics & energy policy, PTT Public Company Limited ([email protected]).