C5 :106. The Alleviation of Prices Impact on Electricity Tariff caused by Renewable Energy Adders in Thailand

Transcription

1 2012 Paris Session http : // C5 :106 The Alleviation of Prices Impact on Electricity Tariff caused by Renewable Energy Adders in Thailand SIRIWAN WORADEJ Metropolitan Electricity Authority Thailand SUMMARY The Metropolitan Electricity Authority (MEA) is a distribution electric utility in Thailand. The country s electricity tariff structure is under the enhanced single buyer policy: The Electricity Generation Authority of Thailand (EGAT) occupies the electricity generation business and purchases up to 52 % of its own generation capacity from IPPs and SPPs; MEA and PEA (Provincial Electricity Authority - the other distribution electric utility in Thailand) purchase electricity from EGAT and then sell to end use customers. Thai government has set up a policy to promote the use of green energy from its end users, in order to stimulate the efficient use of multiple sources in power generation, to release the government s burden in its long term power development plan, and most importantly, to protect environment by reducing the use of fossil and emission of CO 2. The policy creates a group of small scale power producers who are so called Very Small Power Producer or VSPP. They generate electric power from renewable energy sources, i.e. photo voltaic, biogas, biomass, small hydro, wind and rubbish. VSPPs generating capacity is limited to not more than 10 Mw, they enjoy the right in generating electric power for their own usages and selling excessive power back to MEA s or PEA s power grids through the same meters they receive their electric power from the utilities. The principle of net metering is preferably applied, however, due to the sale tax is to be covered in every business transactions, the utilities have to separate taxable sale and purchase amount of energy using single or separate meter. The utilities follow below critera in power purchasing settlement with VSPPs: For generating power 6 MW, twofold price is given: For the amount that is not greater than the VSPP s monthly consumption, the price is an average retail price for all energy VSPPs purchase from the utility plus retail Ft. Or else; the price is an average whole sale price for all energy at all voltage levels the utility purchases from EGAT plus whole sale Ft For generating power > 6 MW: The price is an average whole sale price for all energy at all voltage levels the utility purchases from EGAT plus whole sale Ft The above mentioned tariffs associate with the whole sale and retail Ft, which they are the electricity price adjustment factors that mainly cover the variation of electricity cost caused by the fluctuation of fuel, currency exchange rate and inflation. EGAT releases its burden through whole sale Ft which escalates the original price of every single energy MEA or PEA s purchases from EGAT, while the retail Ft, accordingly, cascades the burden to all of the retail customers.

2 The introduction of VSPPs has caused some burden to electricity end users owing to the price adders which is a kind of incentive used to promote the green energy, e.g. the adder for photo voltaic is 8 Baht/ kwh, on the other hand, these adders impact the retail price as they worsen the whole sale Ft, retail Ft and then upturn the retail price charged to all end use customers. The rocketed sky-high retail Ft situation in Thailand once slow down the promotion of the use of green energy as it deems unfair to other end users. This paper proposes an alternative to deal with the problem by tracking the root causes of Ft contributed by various groups of consumers. A large portion of the price adders would be used to stimulate the change of behavior to those who contaminate while smaller portion or none would be distributed among those who preserve. The paper will fully exhaust the class peak responsibility method to render it an efficient tool to promote the green policy, encouraging more green generators, and more importanty, to bring the causes of high Ft down. KEYWORDS Adder, Class Peak Responsibility (CPR), Ft, Feed in Tariff

3 1. Electricity Structure and Tariff in Thailand Electricity Structure: Thailand s electricity supply industry is under the enhanced single buyer model (ESB) as shown in Figure 1. The state generation system owns by EGAT as well as it is the sole electricity buyer from private generators. EGAT s own power generating capacity presently comes down to approximately 45% (as of September 2011) of the total capacity of the country. The private generators in Thailand which contribute the rest can be classified in 3 categories: Independent Power Producers (IPPs), Small Power Producers (SPPs) and Very Small Power Producers (VSPPs). In addition to the electricity generation and buyer, EGAT is also responsible for the country s transmission system as well as being the system operator. Besides EGAT, there are 2 Figure 1. Enhanced Single Buyer Model geographical separated distribution utilities in Thailand: the Metropolitan Electricity Authority (MEA) and the Provincial Electricity Authority (PEA). MEA is responsible for power distribution, sales and provision of electric energy services in Bangkok Metropolis, and other 2 adjacent provinces: Nonthaburi and Samut Prakran while PEA serves the rest of the country. Electricity Tariff : Thailand s electricity tariff is uniformly applied acorss the country, it comprise 3 parts; Base tariff, Fuel adjustment mechanism and Value Added Tax. The first part, the Base Tariff reflects the marginal cost of the utilities to construct power plants, transmission lines, distribution lines including fuels. It is certain that assumptions had to be made pertaining to fuel prices, inflation and exchange rates before the Base Tariff could be set up. The Base Tariff is further divided into 8 categories according to ones Load Pattern the daily load consumption characteristic of certain group of customers measured in MWh. The second part, the Fuel Adjustment Mechanism (Ft) is activated once the fuel prices, inflation and exchange rates fall off from the assumptions. This happens almost every month however the Ft is preferably adjusted every 4 months to avoid the fluctuation of cost of production, the Ft is therefore deemed to be an unfavourable part that upturn the electricity price. The cause of high Ft is not only the higher fuel cost in power generation by EGAT, private generators (IPPs and SPPs) and neighboring countries who import electric power to Thailand, other government policy such as the Power Development Fund, renewable energy adder, etc are from time to time place burden on Ft. Finally, the Value Added Tax, - it levies % of sale tax on total electricity expense including Ft. 2. Renewable Energy Promotion To promote efficient use of resources within the country, reduce dependency on electricity generation using commercial fuels, which will help decrease expenditure and also alleviate the government s investment burden in electricity generation and distribution systems. Therefore, in year 2001, The National Energy Policy Council (NEPC), chaired by the Prime Minister, passed the resolution to allow the distribution electricity utility - MEA and PEA to purchase electricity from Very Small Power Producers(VSPPs) whose maximum generating capacity is limited to 1 MW and to urge the utility to produce electricity from renewable energy such as wind, solar energy, mini or micro-hydro, sea or ocean waves, geothermal

4 energy and biogas,etc. Later in year 2006, the maximum generating capacity of VSPPs has been raised to 10 MW. In order to reach the target, the Thai government used several campaigns such as the tax exemption for investors on renewable business issued by Board of Investment; venture capital fund for ESCO, etc to encourage investors. Among these incentives, Feed-in Premium commonly known as Adder is the most successful measure which strongly and effectively boosts the renewable market in Thailand, especially solar energy. As the cost of electricity generated by renewable energy is higher than that of conventional energy, it is no way to commercialize renewable energy without an adder In year 2009, the EPPO (Energy Policy and Planning Office) therefore developed a renewable energy adder policy so called feed-in premium in an effort to reduce this gap. The adder rate is different from technology to technology and its installed capacity. The adder table is as follows. Fuel Biomass/Biogas - Installed capacity <= 1 MW - Installed capacity > 1 MW Waste(community waste, not hazardous industrial waste and inorganic waste) - AD&LFG - Thermal Process Wind Power - Installed capacity <= 50 MW - Installed capacity > 50 MW Mini and micro hydropower - Installed capacity kw - Installed capacity < 50 MW Table 1 : Adder rates by technology Adder(Baht/kWh) VSPP SPP Special adder* (Baht/kWh) Bidding Supporting period (Year) Solar power One drawback of the feed-in premium after the policy had been successfully come to effect was that The amount of adder of renewable energy which was mostly the Solar Power was so large that when it was converted to Ft, it made the Ft exceeded 0.08 THB/kWh which was the maximum amount allowed by the policy of the NEPC (National Energy Policy Committee). NEPC then passed a resolution on the 28 th June 2010 to temporarily cease the new projects and reduce the adder from 8 THB/kWh to 6.50 THB/kWh for those under approval ones. The second government issues was the trend to develop a specific Feed-in tariff for rooftop PV and top up the regular tariffs, Impact on Ft Caused by Adder The Adder is the major cause of the upturn in Ft. The Ft value partly bases on the amount of energy generated by renewable sources. As of October 2011, it is evident that the renewable sources are 2,223.0 MW higher than that of 5,900 MW planed in the government s 15-Year Renewable Energy Development Plan (REDP). The excessive renewable sources then impact significantly on Ft. The average affect to Ft is between to per kwh while the maximum Ft will occur in year 2012 to 2016, when maximum power is scheduled to feed into a distribution system.

5 Figure 2 : Status of renewable energy Figure 3 : The amount of Adder Value Figure 2 shows the status of renewable energy in Thailand (as of October 2011), the renewable energy shown is represented by its adder only. The trend of renewable energy growth in view of its adder is quite rapid, while the real impact of the adder to Ft in term of THB/kWh is shown in Figure 3 We can form a formula to calculate the total amount of impact on Ft causes by the adders like this: Total Impact on Ft (THB/kWh (All Thailand) ) equal Total amount of Adder (Total) divided by Total Energy Consumption (PEA, MEA and EGAT direct customers) Or Adder (Total) Total Impact on Ft = Total kwh (PEA, MEA and EGAT direct customers) Adder that passes through to Ft will impact all end users, sence, he or she,no matter what category, has to pay higher electricity bill with such adder. However, electric tariffs have been designed to reflect the principle of marginal cost according to Class Peak Responsibility (CPR) of each category adjudged by each load characteristic. For example,any the business or industrial customer group is more likely to take more burden the utility with the construction of new power plant, transmission or distribution system, than the residential or small business customer group. Figure 4 shows system load characteristics of each category, It is clear that load on electricity consumption of Thai System (as of October 2011) is 11,111 MW. For residential service (consumption less than 150 kwh per month) contributes the system peak at 2,8.14 MW or 4.81% of system profile and residential service Figure 4 : System Load Characteristics (consumption more than 150 kwh per month) contributes the system peak at 3,41.36 MW or 9.22% of system profile, small general service contributes the system peak at 3, MW or 13.49% of system profile, medium general service contributes the system peak at 4,44.66 MW or 19.09% of system profile, large general service contributes the system peak at 9,86.84 MW or 41.22% of system profile, specific business service contributes the system peak at MW or 2.80% of system profile, non- profit service contributes the system peak at 2, MW or 8.0% of system profile and finally, Agricultural service contributes the system peak at MW or 0.6% of system profile.

6 Therefore, in the light of the peak each category burdens the utility, it is fair if NEPC would decide to pass through the adder by means of Ft to all categories to reflect these burden. The adder should not be simply the burden of all the customers equally. In other word, it should be dealt with as the cost items in the base tariff by considering the load characteristic of each customer group.the more burden or cost the category burdens the system, the more it should bare its portion of responsibility. Taking into account the principle of burden on system or CRP, we can simply calculate the portion of responsibility which in turn reflects in Ft for each category. The detailed calculation based on system load characteristics curve in year 2011 is shown in Table 2. Table 2 Portion of responsibility to support renewable sources versus system peak contribution Tariff Category Residential Service (consumption less than 150 kwh per month) Residential Service (consumption more than 150 kwh per month) Peak Contribution (%) 4.81 Renewable Energy Adder (As of year 2011) (MBaht) Portion of responsibility (MBaht) Small General Service Medium General Service , Large General Service Specific Business Service Non-Profit Service Agricultural Service Total 100 1, , Conclusion The renewable energy incentive programs in Thailand have come to an amazing result, for the number of installed renewable sources as of the year 2011, it is already 3% higher than its original target stated in REDP and there are still a lot to come. The majority that enrolled in the program is the solar project which by far 5 times exceed the target, the second and the third runner up are wind energy and waste and biogas respectively. However, minihydro and biomass are lower than the 15-years REDP target. The key success factor is the incentive adders that bring in more and more renewable investors. The incentive adders are converted into retail Ft and passed through to all the customers equally, nevertheless, this causes problem as it upturns the Ft to exceed 0.08 THB/kWh which is the maximum amount allowed by the policy of the NEPC. The

7 government ceases some solar projects and renegotiate with new comers to lower the original adders and may adversely change the adder policy to feed in tariff in the future. These remedies cannot be a long term solutions because firstly, Thailand is desperate for renewable energy sources through adder policy, secondly, when the adders have been replaced with feed in tariff and top the regular tariffs, this not only distorts the marginal cost pricing structure, it also directly impact the cost of distribution utility which in turn recover from the high retail tariff. In this case, a CRP principle can be well applied to the situation: It is not fair to pass through the renewable adders to all end users equally, rather it should follow the rule of responsibility by considering the electric consumption of some categories, e.g. residential service who create only 4.81% of the system burden (cost of construction new power plants, new transmission lines, etc.), while the large general service create 41.22%. In this regard, the large general service should bare more responsibility to support the need of renewable sources than residential service. Other categories can follow the same rule as stated in table 1 Finally, if a feed in tariff does exist to allow renewable energy has its own retail pricing and thus top the other categories retail price, care should be given to follow the CPR in retail pricing so that the marginal cost pricing principle will not be distorted. Now come to the question: If this is the case, should we cease the renewable promotion program since it impacts retail pricing. BIBLIOGRAPHY [1] Regulations for the Purchase of Power from Very Small Power Producers (December 1992 pages 1-) [2] Data in Renewable installed < [3] Data in the amount of Adder < [4] Load Characteristic< [5] V,Lorgirachunkun, Training in Design Electric Tariff, October 2008