By John Diecker, Lee Enterprises Consulting, Inc.
Special to The Digest
Being a tropical country with a largely agricultural economy, Thailand is blessed with an abundance of biomass. The country ranks among the world leaders in production of palm oil, sugar and cassava which make it a natural location for the manufacture of biofuels.
As approved by the National Energy Policy Council on 17 September 2015 and consistent with commitments made by Thailand at COP 21, the Alternative Energy Development Plan (AEDP 2015) targets thirty percent of total energy consumption from renewables by 2036. Biomass and biofuels will necessarily play a significant role in meeting these targets.
Traditionally, the most significant users of biomass for power and heat generation have been sugar and rice mills. This continued to be the case after 2002 when the Thai government introduced the Very Small Power Producer (VSPP) program and expanded the Small Power Producer (SPP) program to include cogeneration from renewable fuel sources. The system of tariff adders for electricity generation introduced in 2007 motivated many existing mills to upgrade their old low pressure steam boilers to more modern equipment capable of generating electricity in excess of the mills’ needs that could then be sold to the national electric utilities.
Along with the introduction of the VSPP program, several independent biomass-fueled power projects were developed with varying degrees of success. As in other parts of the world, fuel supply volatility and insecurity have been obstacles. Unlike other types of renewable energy projects, the developers of biomass projects often lacked the technical and financial resources necessary to effectively build and operate their facilities leading many to fail. There have also been several instances of conflict between project developers and persons living near project sites over environmental issues; both real and perceived.
AEDP 2015 targets 20.11 percent (19,684 MW) of electricity demand and 36.67 percent of heat (25,088 ktoe) demand from renewables by 2036. The targets for biomass are 5,570 MW of electricity and 22,100 ktoe of heat. At the end of 2014, biomass accounted for 2,452 MW of electricity generation and 5,144 ktoe of heat generation. There is still a long way to go toward meeting the 2036 targets.
Thailand has been gradually increasing the use of biofuels in vehicles since the commercial introduction of B5 (5%) biodiesel in 2005. Currently, the country mandates the sale of B7 biodiesel; a blend originating mostly with palm oil, and E10 gasoline with ethanol produced primarily from molasses (70%) and cassava (30%).
Local problems with biofuels for vehicles stem mostly from market forces. There has been volatility in the market for palm oil and palm oil-produced biodiesel currently costs more than the fossil-fuel product with which it is blended. Ethanol from molasses also suffers from a cost disadvantage in the international market compared to that produced from corn.
AEDP 2015 targets 25.04 percent (8,712 ktoe) of fuel demand from renewables by 2036. This includes 11.3 MLPD of ethanol, 14 MLPD of biodiesel and the more modest contributions of pyrolysis oil (0.53 MLPD) and compressed biogas (4,800 TPD). At the end of 2014, ethanol production amounted to 3.21 MLPD and biodiesel production stood at 2.89 MLPD. As in the case of biomass, there is still a lot of new capacity to be added before 2036.
Recent Policy and Regulatory Developments
In 2015 the Thai government announced a new system of feed-in tariffs for renewables-based electricity generating projects. Biomass-fueled power projects are mentioned as a top priority under this new system. Unfortunately, there has been no announcement of any clear strategy for meeting the country’s AEDP 2015 (and COP 21) goals.
The Office of the Energy Regulatory Commission is currently soliciting proposals for biomass and biogas-fueled power projects in the southernmost three provinces of Thailand. Due to regional political and religious violence, special tariff incentives, in addition to the feed-in tariffs for renewables, are available for projects to be developed there. No timetable for the receipt of proposals for projects in other parts of the country has yet been announced. Transmission capacity issues have been cited as the reason for a moratorium on VSPP projects in portions of the north, northeast and south.
New proposals for renewable energy electricity generation projects are being solicited on a competitive bidding basis. That is, potential developers must submit a cost proposal based on some discount from the maximum allowable feed-in tariff. Bidders must also meet certain requirements for financial capability and are prohibited from selling ownership in a project for a period of three years.
According to the Ministry of Energy, the sustainability of AEDP 2015 is based on five factors:
- Renewable energy zoning reflecting potential supply and future demand;
- Expansion of the power grid in renewable energy production zones;
- Maintaining the country’s energy supply stability and renewable energy merit order;
- Increasing community acceptance and participation; and
- Increasing the usage of local content.
For electricity and heat generation from biomass, the government is expected to promote community-based projects through low-interest loans and other incentives. They have also expressed the desire to promote plantation-grown biomass from short-rotation crops such as Napier grass.
B10 biodiesel is expected to be commercially available by 2018. The use of B10 will then be mandated for government-owned vehicles while some type of tax incentives will probably be made available to incentivize private users. B10 is scheduled to be mandated in all diesel vehicles by 2026 at which time the government will begin promoting B20.
The country will gradually begin phasing out its E10 gasoline blend in favor of E20 by offering increasing levels of price support to the higher ethanol content fuel. As a result of this year’s drought and corresponding reduction in sugar production, the amount of ethanol produced from cassava instead of molasses will likely rise to around 40% compared to the more typical 30%.
About the author:
John Diecker is a Thailand-based renewable energy consultant and, the Southeast Asia Regional Manager for Lee Enterprises Consulting, Inc. He can be reached here.