Regional partnerships supplement Thailand's limited domestic energy capacity

The rise of Thailand’s industrial power base, along with ongoing urbanisation of the country’s population, has the government and power producers striving to stay a step ahead of consumers’ increasing appetite for electricity. Since 2002 electricity consumption has increased 55%, from 100,091 GWh to 182,847 GWh in 2016, according to data compiled by the Energy Policy and Planning Office (EPPO).

To meet this growing demand, which is expected to reach a base level of 393,335 GWh by 2036, the government’s energy policy plan calls for not only a significant expansion of domestic installed capacity, but also an increase in electricity imports from the nations bordering Thailand. This strategy is congruent with the government’s plans to improve energy security by diversifying away from natural gas.

Limits At Home

This reliance on foreign-sourced power production is due not only to rising demand and electrification rates, but is also a result of restrictions on power plant construction in Thailand. In addition, proposed power plant projects – particularly coal-fired, nuclear, and large hydropower facilities – have at times faced strong opposition from local communities over concerns related to their social, environmental and economic impacts. With domestic opportunities limited, developers are increasingly looking outside Thailand’s borders for opportunities to supply the domestic market with new sources of power. Over the past decades, this has translated into billions of dollars of new investment in neighbouring countries for the construction of new power plants and transmission lines which can transfer the electricity back to Thai consumers.

This strategy of building large-capacity power projects abroad and allocating a significant amount of offtake for transport back into Thailand has become an increasingly important part of the country’s energy mix. Imported electricity accounted for 9% of all power consumed in the country in 2015, up from 2% in 2003.

Although cross-border power trading has been taking place for decades in the region, Thailand has only been importing significant quantities of power since the turn of the millennium. In 1998 Thailand imported more than 1000 GWh of electricity – a figure that increased steadily to 2473 GWh by 2003 before spiking over the next decade to reach 19,825 GWh in 2016. Imports of coal-fired and large-hydropower-produced electricity are projected rise significantly and boost the contribution of each to the country’s power mix.

Room To Grow

Thailand’s proactive moves to bolster electricity-transmission infrastructure are not only for the benefit of securing its own domestic power supplies, but also as part of the larger, long-term integration of regional grids which are hoped to one day lead to an interconnected power market in South-east Asia. This cooperative trend was solidified in September 2016 when the governments of Thailand, Laos and Malaysia signed a formal memorandum of understanding (MoU) to facilitate the cross-border power trade throughout the greater Mekong sub-region. Under the terms the arrangement, Thailand will not only continue to import power from Laos, but also transmit a portion of it (starting with 100 MW) across its transmission lines and re-export the electricity to Malaysia.

Sharing Structure

These purchases are carried out at an institutional level via a series of MoUs between Thailand’s state-owned power producer and transmission system operator Electricity Generating Authority of Thailand (EGAT) and its partners in Myanmar, China, the Lao People’s Democratic Republic, Cambodia and Malaysia. These transactions differ from the grid-togrid transfers in other regions like Europe, where established national grids are linked and often governed by common power markets so that energy may be traded back and forth to take advantage of optimal pricing.

By contrast, the majority of power plants built in countries near the Thai border are generally islanded from domestic transmission grids, resulting in a situation where the host country lacks the infrastructure to distribute power locally. In lieu of operating within the confines of an integrated regional electricity clearinghouse, the bilateral power purchase agreement (PPA), contracts are constructed in a way which fixes the price of imported power into Thailand, with these costs then passed on to domestic consumers.

Trading Partners

As of 2016, the majority of energy imports were sourced from Laos via the Hongsa Power Company’s mine mouth lignite coal power plant and various hydropower projects. In all, 29 existing power plants are under long-term PPAs with Thailand encompassing thousands of megawatts of capacity and producing more than 16,000 GWh per year. The 1878-MW Hongsa project is a relatively new development, with the first of three 626-MW units ramping up commercial operations in June 2015. The second unit of the $3.7bn project was fired up in November 2015, followed by the third and final unit in March 2016.

Located in the northern Xayaboury Province of Laos and connected to EGAT’s domestic grid via a 67-km, 500-KV power line, the project was developed as a joint venture between three separate organisations. Lao Holding State Enterprise, a state-owned corporation of Laos, has a 20% stake; Thailand’s Banpu Power holds a 40% share; and RH International of Singapore, a subsidiary of Thailand’s largest power producer, Ratchaburi Electricity Generating Holding, controls the remaining 40% of the joint venture.

Adding Capacity

This new coal-fired power plant adds additional capacity to an extensive export-oriented hydropower network that is already in operation in Laos, from which Thailand has been purchasing electricity for decades. Under the terms of the most recent MoU between the two countries, signed in September 2016, Thailand increased its purchases from 7000 MW of generation capacity by 2020 (signed in a 2007 deal) to 9000 MW, according to local press reports. The majority of this output is being sourced from hydro projects, with the previous 2007 deal consisting of 5421 MW of power – 3578 MW of which came from five hydropower plants and one coal-fired power plant – while the outstanding 1843 MW of electricity was expected to be added once three more new hydro projects are completed and start commercial operations in 2019.

After Laos, Myanmar has been the largest deliverer of energy to Thailand, although the original 1997 deal to purchase 1500 MW expired in 2010 and a new MoU has yet to be signed. Historically, power has been exported to Thailand from the 948-MW Dawei and 220-MW Mai Khot coal-fired power plants along with the 126-MW Hutgyi hydro power plant. Although Myanmar has thousands of megawatts of new power generation capacity generation in the pipeline, it remains unclear how much of this power the country would be willing to export given the current dearth of existing capacity and the rapid expansion of its own domestic power needs.