BKK proceeding n ro i nd proceeding ge 66408 Future Scenarios Toward Sustainable Energy Policies and Practice in Thailand Workshop Proceedings Renewable Energy and Energy Efficiency with International Experiences Monday, August 28, 2006 Shangri-La Hotel Bangkok, Thailand BKK proceeding n ro i nd proceeding ge Copyright © 2007 National Economic and Social Development Board (NESDB) Bangkok, Thailand and The International Bank for Reconstruction and Development/The World Bank Washington, U.S.A. All rights reserved This material may be copied, translated and disseminated (as long as no profit is derived there from). This publication has been published to communicate the results of the meeting concerned to the development community with the least possible delay. This document therefore has not been prepared in accordance with the procedures appropriate to formal documents. Some sources cited in this paper may be informal documents that are not readily available. The findings, interpretations, and conclusions expressed in this paper are entirely those of the author(s) and should not be attributed in any manner to the NESDB of Thailand or the World Bank, or its affiliated organizations, or to members of its Board of Executive Directors or the countries they represent. The NESDB and World Bank do not guarantee the accuracy of the data included in this publication and accept no responsibility whatsoever for any consequence of their use. Office of National Economic World Bank Office, Bangkok and Social Development Board 30th Floor Siam Tower 962 Krungkasem Rd., Pomprab 989 Rama I Road, Pathumwan Bangkok 10100, Thailand Bangkok 10330, Thailand Tel. (662) 280 4085 Tel. (662) 686 8300 Fax. (662) 280 1860 Fax. (662) 686 8301 http://www.nesdb.go.th/ http://www.worldbank.or.th/ 2 Future Energy Scenarios Toward Sustainable Energy Policies and Practice in Thailand — Workshop Proceedings BKK proceeding n ro i nd proceeding ge Contents Press Release: New Partnerships Envisioned for Renewable Energies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Workshop Agenda . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Welcome Address NESDB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Arkhom Termpittayapaisith Deputy Secretary General National Economic & Social Development Board (NESDB) Welcome Address World Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Ian Porter Country Director World Bank Office in Bangkok Energy Scenarios & Thailand Experience on Renewable Energy and Energy Efficiency Energy Scenarios: From the Present to the Next Decade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Antonie de Wilde World Bank Thai Experiences in Renewable Energy and Energy Efficiency – 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Chavalit Pichalai Director, Energy System Analysis Bureau Energy Policy and Planning Office (EPPO) Contents Ministry of Energy, Thailand Thai Experiences in Renewable Energy and Energy Efficiency – 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Amnuay Thongsathitya Department of Alternative Energy Development and Efficiency Ministry of Energy, Thailand Thai Experiences in Renewable Energy and Energy Efficiency – 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 Anon Siriaengtaksin Senior Executive Vice President, Corporate Strategy and Development, PTT Renewable Energy: International Experiences Renewable energy policy: Formulation and implementation in China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 Peter Meier ENTEC Renewable Energy Policies: Impacts and Effectiveness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 Jan Hamrin President Center for Resource Solutions Ethanol and Other Biofuels: Panache or Dream . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 Masami Kojima World Bank Energy Efficiency: International Experiences Energy Efficiency in the Global Context: Role and Opportunities for Enhancing Energy Security . . . . . . . . . . 69 Ashok Sarkar World Bank Contents Future Energy Scenarios Toward Sustainable Energy Policies and Practice in Thailand — Workshop Proceedings 3 BKK proceeding n ro i nd proceeding ge Energy Efficiency Policy Development and Planning in Japan: Strategies, Programmes, Impacts and Indicators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84 Takeshi Sekiyama Energy Conservation Center, Japan (ECCJ) International Experience in Energy Efficiency: Drawing Lessons for Thailand . . . . . . . . . . . . . . . . . . . . . . . . . . 97 Vincent David Econoler International Implications for Thailand National Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101 Arkhom Termpittayapaisith Deputy Secretary General National Economic and Social Development Board Renewable Energy is not only Sustainable but also Affordable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106 S Chandrasekar Managing director Bhoruka Power Corporation, Bangalore, India Financing Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114 Anat Prapasawad Executive Officer, Business Development Department, TMB Bank Public Company Limited Financing Considerations for Renewable Sources and Energy Efficiency Projects . . . . . . . . . . . . . . . . . . . . . 121 Guido Delgado CEO, GAAD Inc. Contents Closing Remarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127 Arkhom Termpittayapaisith Deputy Secretary General, NESDB Contents 4 Future Energy Scenarios Toward Sustainable Energy Policies and Practice in Thailand — Workshop Proceedings BKK proceeding n ro i nd proceeding ge Press Release New Partnerships Envisioned for Renewable Energies Bangkok, Thailand, August 29, 2006 – Thailand can look forward to more affordable and cleaner energy as it moves ahead with plans to strengthen nation- al competitiveness and improve the well-being of the population, according to participants at a workshop held in Bangkok yesterday. “Access to adequate, modern and affordable energy services is an important component of a better quality of life,� said Arkhom Termpittayapaisith, Deputy Secretary General of the National Economic and Social Development Board (NEDSB), who opened the meeting. “To reach the ultimate goal of less pover- ty and more welfare in the country, a national and multi-level cooperation is needed to overcome energy problems.� The workshop brought together 70 energy specialists from government bodies, Press Release the private sector and research institutes, including ten from Asia, Europe and North America. Looking at the subject of Future Energy Scenarios towards Sustainable Energy Policies and Practice in Thailand, the meeting focused on national and international experience in renewable energy and energy efficien- cy. The workshop is intended to help boost the country’s strategic planning in New Partnerships Envisioned for Renewable Energies the field of energy, an area the National Economic and Social Development Board (NESDB) is currently developing. “The World Bank is grateful that we can participate in this process by giving access to international experience and expertise,� emphasized Ian Porter, Country Director, World Bank of Bangkok. The World Bank, through the Asia Sustainable and Alternative Energy program (ASTAE), co-sponsored the meeting. A low-carbon future Referring to the new set of challenges Thailand faces, along with many other oil-importing countries, Porter pointed to recent rapid rises in oil prices and predicted changes in the climate, which will require a move away from fuels that emit carbon dioxide and other pollutants into the atmosphere, causing the greenhouse gas effect. “If countries are to improve energy access for all their people, and meet soar- ing demand, while trying to follow a ‘low-carbon path’,� he said, “they will need substantial investment over the next decade—a total of US$ 150 billion each year. Public funding alone will not be sufficient for this investment. The coun- tries concerned will need also to reform their energy sectors to make them more attractive to private sector investors.� Building on achievements, involving private sector With a goal of meeting eight percent of all energy needs with renewable sources by 2011, multiplying their share several-fold from the 2005 level of less than one percent, Thailand will invest heavily in solar energy, hydropower and bio- Press Release Future Energy Scenarios Toward Sustainable Energy Policies and Practice in Thailand — Workshop Proceedings 5 BKK proceeding n ro i nd proceeding ge fuels (fuels from plants, which can replace diesel, mixed with petrol or used on their own). Their use will be promoted in industry and transport, which each account for more than one-third of the nation’s energy bill. More efficient uses of energy and energy conservation will be actively promoted, building upon some achievements in helping households (which use more than 20 percent of the country’s energy) and businesses to save energy, and to decrease their energy bills. During the workshop, experts from abroad stressed the growing role of private finance, alongside public investment. The growth of private companies in power generation, and their influential role in helping businesses and consumers use energy more efficiently, demonstrates the need for banks and other financial institutions to be more involved, especially in terms of investments. Representatives from the banking sector also stated that further studies are required to explore how banks—given national and international guidelines regarding prudential regulations in the banking sector—can expand their portfo- lios in the energy sector. First and foremost, a business proposition Speakers and representatives present at the event also reiterated the fact that ener- Press Release gy is a business, including renewable energy and energy efficiency. This further emphasizes the need for more incentives and information for bankers to see ‘bankable’ projects—in turn, requiring clearer and enforceable regulations, and sound data and statistics. The use of feed-in laws, which regulate the tariff paid New Partnerships Envisioned for Renewable Energies for energy delivered to the national grid by local producers, or of energy portfo- lios which dictate how much of the local energy mix should be from renewable, are two of the many options studied in detail. Least-cost options Most of the representatives at the workshop noted that renewable sources of ener- gy have recently become the least-cost option, replacing fossil fuels. However, this is not true in all cases, given that sometimes there is little wind to ‘fuel’ wind tur- bines, or little rainfall to feed reservoirs for hydropower. Increases in prices of feedstock such as sugar will mean that crops are better sold in food markets than as a basis for biofuels, thus removing their recent popularity in the energy sec- tors. These issues can, with proper research, be accounted for. A series of options was discussed during the workshop. Sharp awareness of market fluctuations will also be an essential asset for energy investors and planners. The only way out Those who attended the workshop agreed to discuss and research the issues fur- ther, as well as to identify the appropriate next steps to translate policy into wider action. “We shall need more systematic data collection and analysis,� said Termpittayapaisith in his closing remarks, “more knowledge creation and more participation from the private sector, financial institutions and government in the energy sector.� He also suggested that very clear policies, based on long-term perspectives and not only short-term responses will be needed, given that energy is a resource which powers other sectors. All in all, he concluded, “renewable energy and energy efficiency is, in Thailand, probably the only way out.� ■ Press Release 6 Future Energy Scenarios Toward Sustainable Energy Policies and Practice in Thailand — Workshop Proceedings BKK proceeding n ro i nd proceeding ge Future Energy Scenarios toward Sustainable Policies and Practice in Thailand Workshop on Renewable Energy and Energy Efficiency with International Experiences Monday, August 28th, 2006 Rattanakosin Room, Shangri-La Hotel, Bangkok, Thailand Workshop Agenda Registration & Welcome Addresses 08:00–08:45 Registration 08:45–08:55 Welcome address: NESDB • Arkhom Termpittayapaisith, Deputy Secretary General 08:55–09:05 Welcome address: the World Bank • Ian Porter, Country Director Workshop Agenda Energy Scenarios & Thailand Experience on Renewable Energy and Energy Efficiency 09:05–09:35 Energy Scenarios: Present to the Next Decade • By Dr. Antonie de Wilde, World Bank 09:35–09:45 Coffee Break 09:45–11:00 Thai Experiences: Renewable Energy and Energy Efficiency Moderator: Dr. Porametee Vimolsiri, Senior Advisor, NESDB Panel: • Amnuay Thongsathitya, Deputy Director General, Department of Alternative Energy • Chavalit Pichalai, Executive Director, Bureau of Energy System Analysis, Energy Policy and Planning Office • Anon Sirisaengtaksin, Senior Executive Vice President, Corporate Strategy & Development, PTT Public Company Limited 11:00–11:10 Open Discussion Renewable Energy: International Experiences 11:10–12:25 International Experiences on Renewable Energy • Renewable Energy Policies: Impacts and Effectiveness – Janice Hamrin, Executive Director, the Center for Resource Solutions Workshop Agenda Future Energy Scenarios Toward Sustainable Energy Policies and Practice in Thailand — Workshop Proceedings 7 BKK proceeding n ro i nd proceeding ge • Renewable Energy Policy Formulation and Implementation in China – Peter Meier, Entec • Ethanol and Other Biofuels: Panache or Dream – Masami Kojima, World Bank 12:25–12:35 Open Discussion 12:35–13:35 Lunch Energy Efficiency: International Experiences 13:35–14:50 International Experiences on Energy Efficiency • Energy Efficiency in the Global Context: Its Role and Opportunities for Enhancing Energy Security – Ashok Sarkar, World Bank • Energy Efficiency Policy Development and Planning in Japan: Strategies, Programs, Impacts and Indicators – Takeshi Sekiyama, Energy Conservation Center of Japan • International Energy Efficiency Development Experience: Drawing Lessons for Thailand – Vincent David, Econoler International 14:50–15:00 Open Discussion 15:10–15:20 Coffee Break Workshop Agenda International Implications for Thailand: National policies, the private-sector experiences, and financing issues 15:20–17:00 Panel/Workshop on International Implications for Thailand Moderator: Dr. Praipol Koomsup, Professor, Economics, Thammasat University • National policies – Arkhom Termpittayapaisith, Deputy Secretary General, NESDB • Private-sector experiences and needs – Chandra Shekar, Managing Director of Bhoruka Power, Bangalore, India • Financing issues/providers – Anat Prapasawad, Executive Officer: Energy and Environment Business Department, Business Development, TMB Bank Public Company Limited; and Guido Delgado, Former MD, Northern Mindinao Development Bank and Former President of Philippine Power Corporation 17:00–17:30 Open Discussions 17:30–17:45 Closing Remarks 18:00–20:00 Cocktail Reception Workshop Agenda 8 Future Energy Scenarios Toward Sustainable Energy Policies and Practice in Thailand — Workshop Proceedings BKK proceeding n ro i nd proceeding ge Welcome Address NESDB Arkhom Termpittayapaisith Deputy Secretary General National Economic & Social Development Board (NESDB) Excellencies, Distinguished Participants, Ladies and Gentlemen, On behalf of the Royal Thai Government and the Office of the National Economic and Social Development Board (NESDB), it is my great pleasure to welcome all of you to this ‘Future Energy Scenarios toward Sustainable Energy Policies and Practice in Thailand’ Workshop on Renewable Energy and Energy Efficiency with International Experiences. I wish to take this opportunity to express our sincere thanks to all the experts who have come here to share their expertise on Renewable Energy and Energy Efficiency, both Thai and International experiences. We are grateful to the NESDB Department of Alternative Energy, the Energy Policy and Planning Office, the PTT Public Company Limited, the TMB Bank Public Company Limited, the Center for Resource Solutions, Entec, Energy Conservation Center of Japan, Welcome Address Econoler International, Bhoruka Power, as well as international organizations, and non-government organizations that have demonstrated their support by participating in this workshop, especially to the World Bank and the Asia Alternative Energy Program (ASTAE) for the cordial reception accorded to us and the excellent arrangements made for this workshop. Ladies and Gentlemen, The Government of Thailand and the World Bank since 2005 have jointly ini- tiated the Country Development Partnership for Infrastructure (CDP-NFRA) program as a knowledge-based partnership for analytical works and actions in key areas of the country’s infrastructure development agenda. This leads to strengthening the national competitiveness and improving the well-being of the population, by supporting the development and implementation of infrastruc- ture strategy, policy and regulatory and institutional actions. Among national infrastructure issues, the energy strategy is one of the key priority areas in this CDP-INFRA. At present, the Energy situation is one of the most concern issues not only for a single country but all countries around the world, particularly these few years as the oil prices surge and fluctuate. Accessing an adequate, modern, and affordable energy services is an important component of better quality of life. Thus, to reach the ultimate goal of less poverty and more welfare in the country, a national and multi-level coopera- tion is needed to overcome energy problems. This includes participation from all in the private and public sectors, as well as individuals. In the meantime, a Welcome Address Future Energy Scenarios Toward Sustainable Energy Policies and Practice in Thailand — Workshop Proceedings 9 BKK proceeding n ro i nd proceeding ge technical study is necessary to guide us to a right direction of the energy strate- gy planning. Balancing among energy availability, energy efficiency and the environment management; as well as renewable energy and energy efficiency, is also important and is a challenge for the sustainable development. Ladies and Gentlemen, For Thailand, His Majesty the King’s initiatives on alternative energy date back to over two decades ago. In 1979, His Majesty the King instructed the Royal Chitralada Project (RCP) to experiment with biogas production from dairy cow manure. The Royal initiative on alternative energy development projects, focusing on biofuels, in particular palm oil, as a diesel fuel substitute and also a cost study for ethanol production from sugarcane, dates back to 1985. And this year marks the 60th Anniversary of His Majesty the King Bhumibol Adulyadej’s Accession to the Throne. At present, Thailand is working to improve the yield of feedstock for bio-fuel production and striving to develop efficient technologies for the best use of alternative energy. The need for clean fuels and vehicle technologies is greater today than ever before. People in Thailand as well as many countries now realized the energy security concerns, alternative energy initiatives and energy efficiency issues associated with meeting rapidly rising energy demand. There is a need to integrate sus- NESDB tainability issues in the design of energy strategy so as to reduce overall social cost, prolong the fossil energy utilization and secure the energy availability in the long run. Welcome Address Ladies and Gentlemen, This workshop is a good starting point to lead to an increase in the share of renewable sources in Thailand’s energy portfolio. Compared with other neigh- boring countries, the renewable sources’ share in Thailand’s overall energy matrix is low. As well, Thailand energy efficiency improvement should be more productive and well-planned for the next five to ten years. The morning ses- sions will be on energy scenarios, renewable energy and energy efficiency dis- cussions. Then, the afternoon is more about implications, policies and prac- tices oriented. This workshop will help us gather inputs from international and national-level consultations for further studies over the next few months, to be concluded early next year with a dissemination workshop. Since we have diverse strengths and experiences, I encourage all participants to work together to make the most of this opportunity to learn from one another, to share research and development, to transfer know-how and address the issues of useful inputs for energy strategies. With the valuable expertise and knowledge of all the distinguished panelists and participants, I am confident that this workshop will generate concrete proposals and recommendations for Thailand’s energy plan. On this note, it is my great pleasure to declare this Future Energy Scenarios toward Sustainable Energy Policies and Practice in Thailand workshop open. I wish you every success in your discussions as well as an enjoyable and memo- rable stay in Thailand. Thank you. ■ Welcome Address 10 Future Energy Scenarios Toward Sustainable Energy Policies and Practice in Thailand — Workshop Proceedings BKK proceeding n ro i nd proceeding ge Welcome Address World Bank Ian Porter Country Director World Bank Office in Bangkok Deputy Secretary General Arkhom, Distinguished Guests, Ladies and Gentlemen, It is my great pleasure on behalf of the World Bank to be welcoming you today to the workshop on renewable energy and energy efficiency policies, which we hope will contribute to the development of sustainable energy policies and practices in Thailand. Like many other countries, Thailand is facing a new set of challenges in addressing its energy strategy. The most immediate, and the most dramatic, is the recent rapid rise in oil prices. Other challenges lie ahead, including the need to deal with predicted changes World Bank in climate, changes that will have different implications for different countries and regions, but that will require us all to move towards a ‘low-carbon’ econo- my. At the same time, we must deal with the needs of today, and with the rising demand for energy. Welcome Address The world’s demand for primary energy is expected to increase overall by a fac- tor of between 1.6 to 3.5 in the four decades up to 2050. In non-OECD coun- tries, including ASEAN countries, demand for primary energy will grow by a factor of between 2.3 to 5.2 over the same period. These countries will need substantial investment over these decades if they are to improve energy access for all their people and to meet this soaring demand while trying to follow a ‘low carbon path’. In this overall context of immediate and longer term supply and demand chal- lenges in the energy sector, every country—and Thailand is no exception—is anxious not only to meet energy demands in a sound way, but also to be do so in a sustainable fashion: in short, to achieve a better energy security. With ener- gy security for all as the ultimate goal, a country has two main targets: (1) to diversify its energy mix; and (2) to improve energy efficiency. In diversifying and improving its Energy Mix, a country has to answer two key questions. Firstly, what energy sources should be selected to reduce and ulti- mately replace crude oil and any other energy imports? And, what should the proportion of renewable sources of energy be? And, secondly, how should the introduction of new energy sources and the decommission of the imported sources (crude oil)—a long and complex process of transition—be managed and achieved? As for improving Energy Efficiency, and reducing energy intensity, there are tremendous gains to be made, that need to accompany changes in the energy Welcome Address Future Energy Scenarios Toward Sustainable Energy Policies and Practice in Thailand — Workshop Proceedings 11 BKK proceeding n ro i nd proceeding ge mix. In the case of Thailand, the relationship between its energy intensity and its GDP, known as energy elasticity, has risen gradually since the early 1980s to the relatively high level of 1.4 to one. In other words, each one percent increase in GDP causes a increase of 1.4 percent in energy consumption. When Thailand’s GDP increases by five percent annually, then with current consump- tion and efficiency patterns its energy use rises by seven percent. That is lower than some other ASEAN countries, but is notably higher than the slowly shrink- ing energy elasticity of most OECD countries. Thailand’s target is to reduce its ratio to one-to-one. The important question is how in terms of behaviour, regulation, and technology adoption, along all the links in the energy chain. What steps will encourage changes on the supply-side and in demand-side management? What energy mix will be most appropriate? And, what changes in consumption can help towards the low-carbon future? The National Economic and Social Development Board (NESDB), is current- ly trying to answer these important questions through in-depth analytical work, and the development of an energy strategic plan for Thailand’s sustainable development in the long term. And, the World Bank is pleased that we can participate in this process, by shar- World Bank ing with the Thai policy makers, our experience in other countries. This dia- logue, which has already begun and which will continue today, is part of a broader infrastructure dialogue, the Country Development Partnership on Infrastructure that is being developed between NEDA and the World Bank. Welcome Address This Partnership will enable Thailand to access international experience and expertise as well as enable the World Bank to share Thailand’s policies in Infrastructure in general and in the Energy sector in particular with other countries in the region and beyond. Ladies and gentlemen, with those words of introduction, let me again welcome you all to what I am sure will be a very interesting day of presentations and dis- cussion. And thank you all for your attention. ■ Welcome Address 12 Future Energy Scenarios Toward Sustainable Energy Policies and Practice in Thailand — Workshop Proceedings BKK proceeding i nd proceeding ge Energy Scenarios: From the Present to the Next Decade Antonie de Wilde World Bank A New investment t its Annual Meeting in Singapore, in September 2006, the Bank will present the ‘Clean Energy and Development Investment Framework’. It characteristics are is seen as a serious response to today’s cascade of severe energy challenges. required to This is against a background in which current development scenarios have failed respond to due to rapid price increases of fossil fuels. Net oil-importing countries have changes, and to lost around 3.5 percent of GDP. Businesses—and the economy—are suffering bring in diverse from higher prices, and heavier costs for energy. Households—and society—are Antonie de Wilde suffering from reduced benefits of energy. ways of operating The evidence of climate change is requiring additional drastic steps in the ener- gy, transport and industrial sectors to adjust to change and reduce further cli- mate change by reducing greenhouse gases from energy use and production. These steps are starting to take shape, as witnessed by such indicators as the 48 Energy Scenarios: From the Present to the Next Decade percent growth in World Bank investment in renewable sources of energies and energy efficiency, and soaring investments in China, Germany, Spain, Japan and many more countries. Yet demand for energy is such—and set to rise by 60 percent by 2030—that public investment cannot meet the needs in full. Policy changes are required to facilitate private sector investment. The new investment characteristics for today’s and tomorrow’s energy portfo- lios are drastically different to those of yesterday. In addition to the imperative of low(er) carbon, they incorporate security and climate change risks and the consequent need to diversify technologies; that is, clean coal, oil and gas fueled, hydro and wind turbine, solar-PV and solar heat, etc. Diversification of operations and ownership Diversifying operations due to less firm energy capacity is also an imperative. Droughts and rainfall fluctuations are leading to empty reservoirs, or changes in wind patterns or no wind, and high costs for gas and oil. Combinations of renewable sources often make sense and meet needs where a single energy source is too vulnerable. This too requires new forms of resource optimization and management, new methods of managing technology. Diversified ownership, in public, private, community forms, are coupled to diversified maintenance and operation standards, and the need for different regulations. These circumstances lead to changing financing terms and conditions, such as longer terms and different risk patterns, loans against Power Purchase Agreements and reinsurance against (in)security and weather conditions. Energy Scenarios & Thailand Experience on Renewable Energy and Energy Efficiency Future Energy Scenarios Toward Sustainable Energy Policies and Practice in Thailand — Workshop Proceedings 13 BKK proceeding i nd proceeding ge Combinations of Despite the many challenges of these emerging situations, what stands out clear- ly are two elements. Firstly, many countries are demonstrating their commit- renewable sources ments to renewable sources and energy efficiency, through renewable portfolio often make sense standards (RPS), feed-in laws, targets, investments in liquid biofuels and more. and meet needs Secondly, the fundamental importance of energy as a key to economic oppor- where a single tunities is never out of sight. The total factor productivity of micro-, small-, medium- and large-scale enterprises can vary by up to more than 60 percent energy source is due to energy and infrastructural factors. too vulnerable These challenges are highly visible in the East Asia and Pacific region, the region with the fastest growth in energy demand of any region in world. Coal will account for nearly half of primary energy, and it has known environmental impacts. Oil imports will rise, with growth in known concerns about energy security. Natural gas supplies are low, the use of renewable sources is low and there is a need for aggressive promotion here. The associated development challenges are also well known. There are global and domestic environmental impacts. One-third of land in China is affected by acid rain. Over the period 1990 to 2004, the number of people affected by cli- Antonie de Wilde mate change events—many people several times during the period—reached 34 million in Thailand and 1.8 billion in China, the latter representing an aver- age of more than 100 million cases each year. A switch in time Energy Scenarios: From the Present to the Next Decade There is much reason for hope. In the week before this meeting, as evidence that renewable sources can be the least-cost energy solution, the Netherlands stopped applications for subsidies for the installation of renewable technolo- gies. And Fiji aims to have its electricity supply 100 percent from renewable sources by 2012 in a least-cost scenario. Elsewhere in the Pacific, shipping and transport companies in Pacific are switching to coconut oil. New financial models and methods are emerging. Long-term finance is com- ing online, even at the micro-level: in Papua New Guinea, loan guarantees to lengthen loan tenure are allowing teachers to reduce their energy costs by switching to renewable sources. At the macro level, the Clean Energy Financing Vehicle and Carbon Finance Business lines, and other World Bank Carbon Finance Products, now represent a total of funds under management of about US$ 1.7 billion. Problems may be almost as numerous as solutions, but many aspects are to be found in the situation of declining supply from the existing hydro plant at Wailoa in Fiji. By mixing in variable power from hydro storage (when it rains extra), plus wind (when it blows), plus biomass (its growth subject to climate), the Fiji Electricity Authority can continue to meet growing demand. The tech- nologies, once separate, are now linkable. The challenge is in the mix and the changing environment. While we may have mastered the technologies, we need to develop the experience to operate systems with multiple energy sources and with variable availability. ■ Energy Scenarios & Thailand Experience on Renewable Energy and Energy Efficiency 14 Future Energy Scenarios Toward Sustainable Energy Policies and Practice in Thailand — Workshop Proceedings BKK proceeding i nd proceeding ge 1 2 3 4 Antonie de Wilde Energy Scenarios: From the Present to the Next Decade 5 6 Energy Scenarios & Thailand Experience on Renewable Energy and Energy Efficiency Future Energy Scenarios Toward Sustainable Energy Policies and Practice in Thailand — Workshop Proceedings 15 BKK proceeding i nd proceeding ge 7 8 9 10 Antonie de Wilde Energy Scenarios: From the Present to the Next Decade 11 12 Energy Scenarios & Thailand Experience on Renewable Energy and Energy Efficiency 16 Future Energy Scenarios Toward Sustainable Energy Policies and Practice in Thailand — Workshop Proceedings BKK proceeding i nd proceeding ge 13 14 15 16 Antonie de Wilde Energy Scenarios: From the Present to the Next Decade 17 18 Energy Scenarios & Thailand Experience on Renewable Energy and Energy Efficiency Future Energy Scenarios Toward Sustainable Energy Policies and Practice in Thailand — Workshop Proceedings 17 BKK proceeding i nd proceeding ge 19 20 21 22 Antonie de Wilde Energy Scenarios: From the Present to the Next Decade 23 Energy Scenarios & Thailand Experience on Renewable Energy and Energy Efficiency 18 Future Energy Scenarios Toward Sustainable Energy Policies and Practice in Thailand — Workshop Proceedings BKK proceeding i nd proceeding ge Thai Experiences in Renewable Energy and Energy Efficiency – 1 Chavalit Pichalai Director, Energy System Analysis Bureau Energy Policy and Planning Office (EPPO) Ministry of Energy, Thailand E From energy nergy is an important factor to the economic and social development of the country. The high volatility of world oil prices and unpredictable efficiency can political tension in major oil exporting countries affects our national come energy energy security. It is in order to strengthen energy security that the Ministry of security, through Energy has initiated strategies and measures to reduce dependency on oil sector-specific imports while enhancing utilization of domestic energy resources. These meas- Chavalit Pichalai ures, under the general heading of implementation of energy conservation, can measures be divided into the following economic sectors: Transport: to reduce oil consumption by 25 percent by 2009 Industrial: to reduce oil consumption by 20 percent by 2008 Household: to reduce energy consumption by ten percent, with the kick-off Thai Experiences in Renewable Energy and Energy Efficiency – 1 of an energy savings campaign on 1 June, 2005 Government: to reduce energy consumption by ten to 15 percent with imme- diate effect Focus on transport, industry and residences The measures are focused on the three key economic sectors: transportation, industrial and residential. They account, respectively, for a share of 37 percent, 36 percent and 21 percent of the total energy consumption. In the Transportation Sector, the target is to reduce 25 percent of oil consumption by 2009, through the promotion of new/alternative transport fuels—to reduce oil demand by 15 percent by 2008. • Gasohol: Eight M litres/day in 2006; replace gasoline 95 as from 1 January 2007 • Biodiesel: 5.2 M litres/day in 2006; 8.5 M litres/day by 2012 • NGV: 180 NGV stations in 2006, to replace ten percent of oil by December 2008; 500,000 NGV-fueled vehicles by 2010, with 740 NGV stations. Measures will also improve transport system efficiency, to reduce oil demand by ten percent, by the following means: • Promotion of rail waterway transport modes, and public transport systems • Improvement of the traffic management system • Promotion of oil transportation via pipelines • The use of town planning to enhance transportation system efficiency • Promotion of energy saving vehicles Energy Scenarios & Thailand Experience on Renewable Energy and Energy Efficiency Future Energy Scenarios Toward Sustainable Energy Policies and Practice in Thailand — Workshop Proceedings 19 BKK proceeding i nd proceeding ge • Application of tax measures In the industrial sector, the target is to reduce 20 percent of energy consump- tion by 2008, through the promotion of natural gas to replace five percent of fuel oil consumption in large industrial factories, through • Promotion of CHP system (Cogen) the gas district cooling (for example at Suvannabhumi Airport) • Promotion of power and cool-water generation using distributed-generation (DG) systems in large department stores We shall also devote great efforts towards improving energy efficiency, to save 15 percent of energy, through the following measures: • Speed up EE improvement in SMEs, including through revolving funds/tax incentives/investment promotion measures via BOI • Promotion of energy services company (ESCO) businesses • Restructuring of the industrial sector to become non-energy intensive In the household sector, the target is to reduce ten percent of energy consump- tion, by way of promoting high-efficiency household equipment, through: Chavalit Pichalai • Minimum energy performance standards (MEPS): air-conditioners, refrig- erators, ballast, fluorescent lamps and compact fluorescent lamps • Energy efficiency labeling • Establishment of the standards of LPG-fired cookers • Promotion of high-efficiency cooking stoves Thai Experiences in Renewable Energy and Energy Efficiency – 1 • Establishment of building code and building material standards • Public awareness campaigns Energy conservation includes promotion of additional sources The Renewable Energy Development Program is a major sub-program of the Energy Conservation ENCON Program, and focuses on the following five areas: • Promotion of the use of biofuels—gasohol/biodiesel • Promotion of RE utilization for power generation • Promotion of RE utilization for heat generation in industrial factories • Policy study and R&D on RE—solar, micro-hydropower and biomass energy • Human resources development, public awareness campaigns In the Promotion of the use of biofuels—gasohol/biodiesel, our targets are as follows: • By 1 January, 2007: Replace premium gasoline (gasoline octane 95) with Gasohol 95 (“E-10� —a mixture of ethanol and gasoline octane 91 at a ratio 1:9) nationwide • From 2008 onwards: Replace gasoline octane 91 with Gasohol 91 The Government’s measures to promote gasohol are, primarily, in price meas- ures, keeping the price of gasohol cheaper than the premium gasoline at 1.50 Baht (~US$ .375)/litre. In terms of government support, this includes BOI investment promotion for fuel-ethanol production plants; the reduction Energy Scenarios & Thailand Experience on Renewable Energy and Energy Efficiency 20 Future Energy Scenarios Toward Sustainable Energy Policies and Practice in Thailand — Workshop Proceedings BKK proceeding i nd proceeding ge of import excise taxes for flexible-fuel vehicles (FFV), and soft-loans for domestic FFV manufacturing. The Government measures to promote biodiesel include steps to increase palm oil plantation by five million rais (approximately 31.25 m hectares) by 2009, and to expand small-scale projects at community level. At present, there are 11 pilot communities; this is expected to expand to 60 in various provinces by the end of 2006. The Government’s measures to promote the use of natural gas vehicles (NGV) are primarily to meet the target of 500,000 NGV-fueled vehicles by 2010, with the major focus on public transport fleets, taxis and government car fleets. In the immediate future, there will be an increase in NGV stations from 60 to 200 stations by the end of 2006, and to 740 stations by 2010. These measures will further include price measures, to set the NGV retail price at 50 percent of the diesel retail price. This may be adjusted to 55 percent and 60 percent of gasoline 91 in 2007 and 2008 respectively. Government support in this field will include soft loans for the installation of NGV conversion kits, the establishment of standards for NGV equipment and Chavalit Pichalai reduced import taxes, plus tax incentives for NGV vehicle manufacturing. In the industrial sector, the use of renewable energy, especially biomass, is being promoted for heat generation through: • the establishment of minimum efficiency of the combined heat power (CHP) Thai Experiences in Renewable Energy and Energy Efficiency – 1 system • measures on biomass management in industrial factories • tax incentives for industries using biomass fuel; and legislative measures on wastewater treatment and waste disposal Natural gas will be In addition, natural gas will be promoted to replace the use of oil, and gas dis- promoted to trict cooling and cogeneration will be expanded. The greater use of RE for power generation will also be promoted, with the key focus on four domestic RE replace the use of sources with high potential: solar, wind, biomass/biogas and mini- or micro- oil, and gas district hydro. cooling and Furthermore, Thailand is seeking cooperation on hydropower development cogeneration will with neighbouring countries: Laos, Myanmar, China and Cambodia. be expanded The role of regulation, and the private sector To support the encouragement of RE use in power generation, a renewable portfolio standard (RPS) measure will be taken. It is expected that 140 MW will be generated by RE by 2011. Measures will also ensure the improvement of power purchase regulations, the introduction of “Feed-in Tariff� such as ROIC ≥11 percent. Finally, fiscal financial incentives, such as tax privileges, soft loans, investment promotion through BOI, measures on externality costs and in terms of carbon tax, will be introduced. In conclusion, the private sector realizes the benefits of energy efficiency and the use of NRE. To facilitate improved energy efficiency, the Thai Government has promoted ESCO services, especially in large factories and buildings. Energy Scenarios & Thailand Experience on Renewable Energy and Energy Efficiency Future Energy Scenarios Toward Sustainable Energy Policies and Practice in Thailand — Workshop Proceedings 21 BKK proceeding i nd proceeding ge Financial measures have been devised to boost investment in EE improvement: soft loans, tax incentives, promotion measures via BOI. For NRE, the private sector has taken part in implementing a number of proj- ects, such as biogas for power generation in livestock farms and for waste water treatment in agro-industry factories. In these efforts, academics and industry have taken part in research and development of NRE technologies, including solar cells for tropical climate, fuel cell development and wind resource assess- ment. The Government’s efforts in policy development in the elaboration of energy conservation strategies, and these measures rely upon private sector cooperation and the energy-saving consciousness of the public. In conse- quence, national energy security will be strengthened and sustainable develop- ment and the well-being of the people will be enhanced. ■ Chavalit Pichalai Thai Experiences in Renewable Energy and Energy Efficiency – 1 1 2 Energy Scenarios & Thailand Experience on Renewable Energy and Energy Efficiency 22 Future Energy Scenarios Toward Sustainable Energy Policies and Practice in Thailand — Workshop Proceedings BKK proceeding i nd proceeding ge 3 4 5 6 Chavalit Pichalai Thai Experiences in Renewable Energy and Energy Efficiency – 1 7 8 Energy Scenarios & Thailand Experience on Renewable Energy and Energy Efficiency Future Energy Scenarios Toward Sustainable Energy Policies and Practice in Thailand — Workshop Proceedings 23 BKK proceeding i nd proceeding ge 9 10 11 12 Chavalit Pichalai Thai Experiences in Renewable Energy and Energy Efficiency – 1 13 14 Energy Scenarios & Thailand Experience on Renewable Energy and Energy Efficiency 24 Future Energy Scenarios Toward Sustainable Energy Policies and Practice in Thailand — Workshop Proceedings BKK proceeding i nd proceeding ge 15 16 17 18 Chavalit Pichalai Thai Experiences in Renewable Energy and Energy Efficiency – 1 Energy Scenarios & Thailand Experience on Renewable Energy and Energy Efficiency Future Energy Scenarios Toward Sustainable Energy Policies and Practice in Thailand — Workshop Proceedings 25 BKK proceeding i nd proceeding ge Thai Experiences in Renewable Energy and Energy Efficiency – 2 Amnuay Thongsathitya Department of Alternative Energy Development and Efficiency Ministry of Energy, Thailand T Changing the he purpose of the presentation is to review the present scenarios and plans for change in terms of Thailand’s energy situation. According to the figures energy portfolio for 2005, Thailand’s consumption is divided 49 percent oil and 51 percent requires a electricity (three percent hydro, 13 percent coal and 35 percent natural gas). It combination of spends 15.7 percent of its gross domestic product (GDP), namely THB 1,150 bil- lion, on energy. The three large consuming sectors are logistics and transporta- Amnuay Thongsathitya market stimulation, tion (37 percent), industrial (36 percent) and residential and commercial (21 detailed R+D and percent). The agricultural sector accounts for the remaining six percent. standards Thailand’s renewable energy (RE) target for 2011 is to generate eight percent of its energy from renewable sources, compared with three percent in June 2006— including hydro. The milestones on the roadmap to that target include: research and development, renewable portfolio standards (RPS) and feed-in Thai Experiences in Renewable Energy and Energy Efficiency – 2 laws, support and incentives and a role of facilitator. Important growth is fore- seen in a mixed portfolio of RE, embracing biomass, municipal solid wastes, hydro, wind, biogas and photovoltaic. For the process of renewable energy development, measures will be taken to Measures aimed optimize research and demonstration, aimed at increasing efficiency, increas- at increasing ing local content and reducing investment costs. efficiency, Incentives measures to enable renewables increasing local A significant role lies in the stimulation of the market, with private and public content and investment being enticed by a combination of RPS, small and very small pro- ducers, feed-in laws and other incentives. These measures will be encouraged reducing and overseen by a national renewable energy committee, under which will be a investment costs national RE development and promotion committee, and a national biofuel development and promotion committee. The key incentive measures are led by an RPS, which requires that five percent of new installed capacity of power generation plants must be from renewable sources, and feed-in laws. Further, biomass producers will be able to bid for top up tariffs; renewable (very) small power producers will be stimulated by differ- ential peak/off-peak tariffs and net metering above a minimum level of 1 MW. Other incentives will include soft loans and excise tax exemptions. Rapid rise in biofuels Great attention is being paid to the development of the liquid biofuels sector. Ethanol production is being encouraged from domestic and imported feed- Energy Scenarios & Thailand Experience on Renewable Energy and Energy Efficiency 26 Future Energy Scenarios Toward Sustainable Energy Policies and Practice in Thailand — Workshop Proceedings BKK proceeding i nd proceeding ge stock, including molasses, cassava and sugar cane, and further stimulated by the obligation of government vehicles using gasohol. Biodiesel production is set to rise from 0.3 ML per day in 2006 to 8.5 ML per day in 2012. This will require the expansion of plantation areas for oil palm and jatropha to more than 6m rai (31.25 m hectares). Key to the promotion of the use of biofuels is the national biofuel development and promotion committee, which, as well as setting and maintaining standards, watches over a set of criteria, measures and conditions for the production, pro- curement, import, export, pricing, sale, distribution, storage, development and promotion of liquid biofuels. An important thrust in this is the encour- agement of gasohol distribution and sales through ‘gas’ service stations, which totaled more than 3,100 in mid-2006. With regard to increasing the use of renewable energy resources, plans have been drawn up for a doubling of biomass use for power generation by 2020. Micro-hydro and photovoltaics are expected to grow by a factor of 10, and municipal solid wastes, wastewater and wind are projected to grow in use by even Amnuay Thongsathitya greater factors. Parallel to these thrusts to increase use of renewable sources are to significantly improve the energy elasticity of the country, namely the percentage increase in energy use for each percentage increase in GDP. In the short-term, these sav- ings are expected to bring the elasticity to 0.85:1 by 2011, from a baseline of 1:1 in 2006. In the longer term, the so-called challenge case target for 2020 Thai Experiences in Renewable Energy and Energy Efficiency – 2 has been set at 0.6:1. In the industrial sector, great savings are planned in terms of energy efficiency through a series of measures, from tax incentives and investment support for technology development and technology transfer, to soft loans (including con- comitant steps with the country’s financial institutions), energy conservation, and sharper, enforceable standards and criteria for energy use. Similar savings are foreseen for the household level, with a great emphasis on public education and awareness building about energy conservation. ■ 1 2 Energy Scenarios & Thailand Experience on Renewable Energy and Energy Efficiency Future Energy Scenarios Toward Sustainable Energy Policies and Practice in Thailand — Workshop Proceedings 27 BKK proceeding i nd proceeding ge 3 4 Amnuay Thongsathitya 5 6 Thai Experiences in Renewable Energy and Energy Efficiency – 2 7 8 Energy Scenarios & Thailand Experience on Renewable Energy and Energy Efficiency 28 Future Energy Scenarios Toward Sustainable Energy Policies and Practice in Thailand — Workshop Proceedings BKK proceeding i nd proceeding ge 9 10 Amnuay Thongsathitya 11 12 Thai Experiences in Renewable Energy and Energy Efficiency – 2 13 14 Energy Scenarios & Thailand Experience on Renewable Energy and Energy Efficiency Future Energy Scenarios Toward Sustainable Energy Policies and Practice in Thailand — Workshop Proceedings 29 BKK proceeding i nd proceeding ge 15 16 Amnuay Thongsathitya 17 18 Thai Experiences in Renewable Energy and Energy Efficiency – 2 19 20 Energy Scenarios & Thailand Experience on Renewable Energy and Energy Efficiency 30 Future Energy Scenarios Toward Sustainable Energy Policies and Practice in Thailand — Workshop Proceedings BKK proceeding i nd proceeding ge 21 22 Amnuay Thongsathitya 23 24 Thai Experiences in Renewable Energy and Energy Efficiency – 2 25 26 Energy Scenarios & Thailand Experience on Renewable Energy and Energy Efficiency Future Energy Scenarios Toward Sustainable Energy Policies and Practice in Thailand — Workshop Proceedings 31 BKK proceeding i nd proceeding ge 27 28 Amnuay Thongsathitya 29 30 Thai Experiences in Renewable Energy and Energy Efficiency – 2 31 32 Energy Scenarios & Thailand Experience on Renewable Energy and Energy Efficiency 32 Future Energy Scenarios Toward Sustainable Energy Policies and Practice in Thailand — Workshop Proceedings BKK proceeding i nd proceeding ge 33 34 Amnuay Thongsathitya 35 36 Thai Experiences in Renewable Energy and Energy Efficiency – 2 37 Energy Scenarios & Thailand Experience on Renewable Energy and Energy Efficiency Future Energy Scenarios Toward Sustainable Energy Policies and Practice in Thailand — Workshop Proceedings 33 BKK proceeding i nd proceeding ge Thai Experiences in Renewable Energy and Energy Efficiency – 3 Anon Siriaengtaksin Senior Executive Vice President, Corporate Strategy and Development, PTT T The multiple he purpose of this presentation is to examine a number of aspects of energy efficiency, and the contribution made by increased use of natural benefits of energy gas. efficiency policies, Underlying the basic principles of energy efficiency policies are the fundamen- aided in part tal tenets that efficiency has highly a domestic initiative, it reduces imports of through natural gas energy, it substitutes new supply, it is cheaper and faster and it reduces pollu- tion. Anon Siriaengtaksin Natural gas contributes by reducing imports of energy, and improves thermal efficiency. Since 1981, the place occupied by natural gas in Thailand’s electricity genera- tion has grown from an insignificant fraction to 31 percent of all energy sources in 2005. This growth has helped to replace imported oil at the value in 2005 Thai Experiences in Renewable Energy and Energy Efficiency – 3 terms of US$ 58 billion. Furthermore, natural gas has improved the thermal efficiency of power generation. More improvements in energy intensity Partly as a result of these changes, Thailand has improved its energy intensity, or the total primary energy consumption per dollar of GDP. However, its level is still twice that of many OECD countries and four times higher than Japan’s. There is a strong need for Thailand to decrease its energy consumption in There is a strong order to increase its competitiveness. need for Thailand to Important roles can be played by natural gas in two key sectors: firstly in trans- decrease its energy portation, where there is a target set for 2010 to have 500,000 cars and trucks running on natural gas, and 740 retail stations providing distribution and consumption in sales. The second sector is in heating and cooling, through greater use of nat- order to increase ural gas in district cooling and in combined heat and power. its competitiveness To meet this growth, the networks for natural gas distribution are set to grow from the 2006 level of 774 km to more than 1,700 km in 2010. The increased use of natural gas in power generation will further reduce pollu- tion and greenhouse gas emissions. ■ Energy Scenarios & Thailand Experience on Renewable Energy and Energy Efficiency 34 Future Energy Scenarios Toward Sustainable Energy Policies and Practice in Thailand — Workshop Proceedings BKK proceeding i nd proceeding ge 1 2 3 4 Anon Siriaengtaksin Thai Experiences in Renewable Energy and Energy Efficiency – 3 5 6 Energy Scenarios & Thailand Experience on Renewable Energy and Energy Efficiency Future Energy Scenarios Toward Sustainable Energy Policies and Practice in Thailand — Workshop Proceedings 35 BKK proceeding i nd proceeding ge 7 8 9 10 Anon Siriaengtaksin Thai Experiences in Renewable Energy and Energy Efficiency – 3 11 12 Energy Scenarios & Thailand Experience on Renewable Energy and Energy Efficiency 36 Future Energy Scenarios Toward Sustainable Energy Policies and Practice in Thailand — Workshop Proceedings BKK proceeding i nd proceeding ge 13 14 15 16 Anon Siriaengtaksin Thai Experiences in Renewable Energy and Energy Efficiency – 3 17 18 Energy Scenarios & Thailand Experience on Renewable Energy and Energy Efficiency Future Energy Scenarios Toward Sustainable Energy Policies and Practice in Thailand — Workshop Proceedings 37 BKK proceeding i nd proceeding ge 19 20 21 22 Anon Siriaengtaksin Thai Experiences in Renewable Energy and Energy Efficiency – 3 23 Energy Scenarios & Thailand Experience on Renewable Energy and Energy Efficiency 38 Future Energy Scenarios Toward Sustainable Energy Policies and Practice in Thailand — Workshop Proceedings BKK proceeding i nd proceeding ge Renewable energy policy: Formulation and implementation in China Peter Meier ENTEC T The elaboration of he purpose of this presentation is to provide some insight into the renewable energy debate since 2000, and in particular to illustrate the a national role of economic analysis in this policy debate. renewable energy Clearly the problem in 2000, after a decade of largely unsuccessful efforts to policy requires bring more renewable sources into the system, was not how to get yet another broad and deep demonstration project, or even how to get carbon finance or the Clean Development Mechanism (CDM), but rather was how to achieve a really large- analyses scale implementation of renewable energy, grid-connected renewable energy, such that China’s potential could be realized. Peter Meier And from this insight, that we needed a policy vehicle to deliver this debate as to what should be the appropriate options, came into being the so-called China Renewable Energy Scale-Up Program (CRESP). It was a collaborative effort of the World Bank, the Global Environment Facility (GEF) and the Government Renewable energy policy: Formulation and implementation in China of China. Wind and water above all Clearly the main challenge in China is the implementation of wind energy. The first large renewable energy project in China—World Bank and GEF-support- ed—started in 2001. It had two main components: off-grid solar PV and wind power. The PV component has been a real success. In 2005, 100,000 solar home systems were sold in China. The price of solar home systems has come down dramatically, quality control has improved, and most of the PV compa- nies are ISO 9000 certified. In short, it has been a great success. Unfortunately, with the wind component, the story is somewhat different. The original design included a US$ 100 million loan for wind farm development projects; of these, only one could be realized. The difficulty was simply to secure a Power Purchase Agreement that was acceptable to the buyer. In the end, the wind component of the project was scaled down to only some 21 MW and a US$ 13 million loan for a wind farm in Shanghai. The big Asian Development Bank (ADB) wind farm project in China suffered a very similar fate. Three large wind farms were planned, no buyer was found to be willing to pay the actual costs and in 2003 ADB cancelled the loan. So today’s situation is that in terms of small hydro, China is the world leader and accounts for about 60 percent of global small hydro capacity. In wind, it is rather more modest; probably accounting for two to three percent of global wind capacity by the end of 2005, with a little over 2,000 MW in place. As noted before, there have been good results for PV. Renewable Energy: International Experiences Future Energy Scenarios Toward Sustainable Energy Policies and Practice in Thailand — Workshop Proceedings 39 BKK proceeding i nd proceeding ge So what were the initial expectations of the policy debate? The table of targets set by the State Planning Commission of the 1990s, which anticipated that, even in the absence of additional policy incentives, wind would reach 3,000 MW and small hydro 28,000 by 2010, and with some additional incentives, in the pol- icy scenario number two, there would, by 2010, be 10,000 MW of wind. Tabulations of targets like this in China are really a residuum of the old State central planning tradition of the State Planning Commission. Given China’s commitment to market reforms, it was quickly realized that, for targets to be meaningful, there needed to be both the carrot and the stick. Yes, there had to be packages of incentives, but there also had to be sanctions for non-compliance. In other words, without penalties for not meeting targets, targets do not make a great deal of sense, other than to demonstrate the Government’s general commitment. When renewables are economical So there was a set of expectations in the senior policy making community that we had to deal with. And in 2000 and 2001, the biggest concerns were China’s impending accession to the World Trade Organization and, more importantly, Peter Meier about the competitiveness of Chinese industry. My colleague Dr. de Wilde talked this morning about the importance of energy and infrastructure to fac- tor productivity—this was a main concern. Yes, renewable energy is fine and good, but it is warranted only if it is economical. Coupled with this was the Renewable energy policy: Formulation and implementation in China more important realization that with China’s energy dependence so heavily focused on coal, the health damage costs in China were particularly serious. In addition to this, the damages from acid rain, the material damage, the whole range of pollutants associated with coal burning and power generation, had serious economic consequences. Therefore, it followed that in the calculation of what was economic, one should consider not just the straightforward produc- tion costs of coal generation, but also the damage costs of coal and fossil gener- One should ation needed to be considered in the economic analysis. There was a fairly early consider not just agreement that, yes, one needed to consider these so-called damage costs in the the straightforward economic analysis but only those that related to local air pollutants: particu- lates, sulphur dioxide, nitrogen oxide—these were the ones that were causing production costs of local health damage costs and the acid rain problem. As for global warming coal generation, CO2 emissions, China acknowledged the seriousness of that, but it was not real- but also the ly part of the national debate. If the global community was willing to pay for damage costs of additional emission reductions of CO2, that was fair and good, but that should not be part of the national target which would be warranted on the basis of coal and fossil national economic considerations alone. generation There was an expectation that, as a large country, most of China’s renewable energy resources are located in the country’s western regions. The map shows darker areas stronger in small hydro resources, and the next map shows most wind resources in Inner Mongolia and the north-east; in the central part there are not so many and in the eastern coastal part there are greater resources. The expectation was that if could develop western regional renewable resources, this would contribute to the economic development of the region, which is a very high priority of the central government in Beijing. Renewable Energy: International Experiences 40 Future Energy Scenarios Toward Sustainable Energy Policies and Practice in Thailand — Workshop Proceedings BKK proceeding i nd proceeding ge The advocates of renewable energy said “what is the problem? Look at Germany. They have a generous feed-in law price for wind of US$ 0.7/kWh. If Germany can put up thousands of MW of wind, we can do 10,000 MW, no problem. All we need is a generous feed-in tariff.� That is of course true; however, the question was to what extent is this a reason- able expectation, and the early failure both of the ADB project and of the wind component of the Renewable Energy Development Project of the World Bank testifies to the fallacy of that expectation. The slide with Figure 6 shows that progress with wind power has been modest. China has over 200 MW in 2004, and that expanded significantly in 2005 when China reportedly added about 500 MW compared with 2,400 in the United States, 1,400 in Germany. Another expectation was better data. It was quickly realised that in terms of wind resource data China was rather poor. Several major projects were started to do a better job of wind mapping and wind resource site assessment. The basic questions So, let us move to the analytical questions that were posed to the CRESP study Peter Meier group, a group of senior policy makers, economists, and some of China’s lead- ing renewable energies resource experts. The questions are as follows: • First question: How much renewable energy generation is justified with and Renewable energy policy: Formulation and implementation in China without consideration of externalities; namely, these damage costs caused by fossil fuel generation? • Second: Given such a target, how is it best achieved? There are many possible approaches that have been tried elsewhere; but what would be best for China, and why? • Third: How do the various policy options perform on criteria other than eco- nomic efficiency, such as, in particular, western region economic develop- ment, employment—a great concern of the government, because employment is being lost in the coal mining industry of which a lot is in the west—and what is the impact of large-scale renewable energy targets on employment, or ener- gy supply diversification? There is the fundamental question about the economic quantity that is justified due to something economists called the supply curve. A supply curve is simply a representation of a cumulative quantity of a particular renewable energy. The slide shows the rising curve of small hydro supply. Where that line intersects the price of coal-fired generation is the economically optimal quantity of small hydro that is warranted on the basis of economics. In the case of wind, that curve is higher. The cost of wind generation is that much more expensive. But the moment you add the costs of the damages associated with coal-fired generation, the higher the true social cost. As a result, a small part of wind gen- eration cost becomes economic, and a much larger part of small hydro becomes economic. This is a fairly traditional economist’s tool to look at supply-demand issues and, in this particular case, at what are the relative economics of the var- ious generation forms. Renewable Energy: International Experiences Future Energy Scenarios Toward Sustainable Energy Policies and Practice in Thailand — Workshop Proceedings 41 BKK proceeding i nd proceeding ge The table of the province of Zhejiang shows which projects above the line of the cost of externalities (damage costs) would be economic. The next tables show the same approach being applied in several countries, firstly in Croatia. The case of South Africa is particularly difficult because ESKOM, the state generating company, has access to coal-fired generation projects that cost almost nothing: mine-mouth projects, lots of projects that were constructed in the days of apartheid with a huge amount of capacity—and a very difficult state in which to implement renewable energy projects. Closer to Thailand, we see the potential of small hydro in Vietnam. It is, thus, a fairly common tool. Issues of capacity The realities are less promising than the apparent potential of renewable ener- gies. Let us look at the realities of the capacity credits of renewable energies. We looked at what would happen if we set a target of 2,600 MW of wind, forced into the north China grid, most of it located in Inner Mongolia. It only displaces about 1,000 MW (880 MW of coal and 250 MW of CCCT—combined cycle combustion turbines driven by steam heated by fossil fuels). Why? Because Peter Meier when you look at the system as a whole, given that wind projects do not operate all day, in order to meet the peak load you need stand-by capacity. Therefore, the capacity credits from non-dispatchable renewable energies (that is, renew- able energies which cannot be turned on and off—dispatched—in response to Renewable energy policy: Formulation and implementation in China shifts in demand) are much smaller than you may think. There is a real eco- nomic cost. In the case of small hydro, the value of a kilowatt hour of electricity to the grid is critically dependent upon the time of day. A pure run-of-river project has relatively little economic value to the grid. Yet providing only just a few hours of peaking storage transforms the economic value of the small hydro project to the grid. In some projects like in Zhejiang, on the eastern coast, which benefits from a lot of large-scale irrigation projects, most small hydro projects had some storage. But in some of the western provinces, such as Sichuan, 64 percent of Sichuan’s hydro projects are pure run-of-river only, thus with no peaking stor- age and their economic value is quite small. Another reality in the economic issue of where do you build renewable energy plant is the fact that the damage costs vary by an order of magnitude, depend- ing upon where you are in the country. In the western region, where popula- tion densities are not quite so high, incomes are low and damage costs are low. In the eastern provinces on the coast, in the big cities, with high population density and much higher incomes, damage costs associated with health, and loss of production in industry and agriculture, are high. The key lessons of the analytical work are as follows: One, given that the wind turbines do not blow all day, we looked at six different sites of turbines in the north and south of the province of Inner Mongolia. The average of wind speeds followed pretty much the same seasonal pattern, whether in the north or the south. There are no real gains to be made by spreading out the sites inside the province. What about different provinces? Looking at Inner Mongolia in the Renewable Energy: International Experiences 42 Future Energy Scenarios Toward Sustainable Energy Policies and Practice in Thailand — Workshop Proceedings BKK proceeding i nd proceeding ge north, or Fujan on the eastern coast, there is the same situation, so you cannot diversify spatially on wind energy. The same problem exists with hydro. Looking at the annual demand curve for Zhejiang Province, we see that conventional models may have a limited ability to portray the value of renewable sources, especially in terms of effects on the portfolio. In Zhejiang, the small hydro projects show a high degree of season- ality, with low output in winter months and high output in the summer. There is a poor match between demand and output. Again, these are unoptimized reservoir operating rules—basically, they are run-of-the-river. To optimize reservoir management rules does play a key role in a portfolio. In terms of wind farms, and their output and demand in Zhejiang, we see the same problem, but in the opposite form. Wind farm output is high in winter, and in summer it is far below the demand curve. When, however, you put the two together, you find that the effect of this com- bined portfolio is to smooth out the output at least on an annual basis. So if you do have some storage capacity, a combination of wind and small hydro will solve the particular problem of seasonal variation. Peter Meier The importance of detailed data Seasonal variation is fine, but what about daily variation? In Zhejiang, the wind farm output on an hourly basis does not match the hourly demand. But when you put it together with hydro, and provided that there is at least six hours daily Renewable energy policy: Formulation and implementation in China peaking storage, using optimised operating rules, just as in the example of Fiji given by Dr. de Wilde earlier, with matching portfolios, you can then solve some of the typical objections that people have to renewable energy. That is, that it is non-dispatchable and does not have a capacity credit. A conclusion to be drawn here is that it is necessary to have a simulation model showing hourly chronological production in order to properly assess the port- folio effects. The same problem of interpretable data applies in the case of wind speed esti- mates, where resource estimated is often too high and projections are too opti- mistic! This was the case in a feasibility study in Sri Lanka, and in Denmark. In the latter, wind speed data from the Danish Windstats database was reviewed for 1,080 turbines with more than six years of operating data, and a comparison was made between the actual annual load factor and the capacity factor which had been estimated in the design phase. The review showed that actual wind speeds were on average 12 percent less than the design estimate! That situation got worse, with the more recent the wind farm the greater the error in the projec- tions. This is a universal problem with wind farms: there is a need for great care with the resource estimates which you think you have. The next lesson is about the importance of year-on-year variations. In Sri Lanka, over the period 1988 to 2002, there was very little difference between the average annual production cost for CCCT (based on actual variations in auto-diesel prices, one of the most volatile fossil-based fuels in terms of prices, and widely used in Sri Lanka) and for energy from the south coast wind farm (based on annual variations in observed wind speeds at Hambantota). It is only Renewable Energy: International Experiences Future Energy Scenarios Toward Sustainable Energy Policies and Practice in Thailand — Workshop Proceedings 43 BKK proceeding i nd proceeding ge since 2002 that the price difference, with all the upward movements in fossil prices, has become truly distinguishable. At the level of implementation, there are three key questions: • Do you set the price, such as in the German feed-in law, and allow the mar- ket to determine the quantity, or do you set the quantity, as in the ‘mandated market share’, and allow the market to determine the price? • Who pays the incremental cost? The market pays the cost of coal generation, but the market does not pay the costs of avoided health damage. Someone has to pay them. In the United States, a large part of this incremental cost is paid through the production of tax credits. In many other countries, the cost is passed on to the consumer, in a variety of formulas. • Who enforces the rules? In China, a concession model has been developed which aims at encouraging the development of an indigenous Chinese wind turbine industry. The model pro- vides guaranteed off-take (purchases), and guarantees for the transmission line, access roads and the length of the concession period (25 years). The model is now emerging in several large projects, but it is too early to report on its benefits. Peter Meier Where is best? The conclusion with regard to where to build renewable energy projects in China is that, from the perspective of economic efficiency, the best locations Renewable energy policy: Formulation and implementation in China are not necessarily those with the best physical resources. Inner Mongolia has the best wind regimes, but it is not necessarily the best place to build farms. It has low damage costs, and it benefits from mine-mouth coal-fired generation and, thus, it has very low generation costs. The avoided cost is low. It also has a small proportion of storage hydro. The eastern coastal provinces, on the other hand, where coal has to be shipped long distances or imported, have high generation costs and the damage costs are much higher. So you need only medium wind resources to make for an eco- nomic wind farm in these coastal provinces, but you need super, really super, resources in Inner Mongolia (which are rare) in order to be able to offset the low damage costs and the low economic price. The question of How much? raises the issue that China is clearly committed to market reforms, and these days there is a bias towards approaches that rely on the market mechanism. We were therefore able to show that, from an econom- ic efficiency point of view, the best system was a mandated market share, or renewable sources portfolio standard, in which it was justified, by 2010, to have about four percent of total generation from renewable energy, excluding large hydro. More recently announced targets are ten percent and 15 percent (including large hydro), both for 2020. The development of the western region is indeed stimulated by the sale of trad- able green certificates. The western provinces benefit from selling their renew- able energy production to, for example, Shanghai, which, instead of building an expensive wind farm, purchases a certificate from a small hydro station in Sichuan. Renewable Energy: International Experiences 44 Future Energy Scenarios Toward Sustainable Energy Policies and Practice in Thailand — Workshop Proceedings BKK proceeding i nd proceeding ge This system of mandated market share does require penalties for non-compli- ance. All energy distribution companies have to purchase at least four percent of their total sales from renewable energy—and you have to penalize them if they do not. Targets without penalties and enforcement mechanism do not make a great deal of sense. As to Who enforces?, the Renewable Energy Law of China is the first step in this process, setting the ground rules. However, the implementing rules and regu- lations are being devolved to the reform commission and to provincial entities. Regarding Who Pays?, the first set of rules implementing the Renewable Energy Law were issued early in 2006. Essentially, it provides that incremental costs are met by the country as a whole. Hydropower will be implemented as now on a provincial basis; the price difference between RE power and the cost of power generation from coal fired projects will be shared across power sales at the provincial level and above nationwide; agricultural power users, Tibet, and cities and counties with their own power grids are exempt from the surcharge; power price for wind projects is set by bidding (‘government guided pricing’) and for biomass, geothermal, and others by ‘government fixed pricing’. Peter Meier The status of the China Renewable Energy Scale-Up program is that it will ini- tially focus on capacity building, institutional strengthening, and implement- ing the Renewable Energy Law, in four pilots at the provincial level (each province with its own investment component), namely Fujan (wind); Jiangsu Renewable energy policy: Formulation and implementation in China (Biomass power plant 110t/h straw-fired boiler, 25 MW); Zhejiang (small hydro rehabilitation) and Inner Mongolia (wind). Finally, as for the question, Will China attain its renewable energy target?, the answer is that it is probably too soon to say. ■ 1 2 Renewable Energy: International Experiences Future Energy Scenarios Toward Sustainable Energy Policies and Practice in Thailand — Workshop Proceedings 45 BKK proceeding i nd proceeding ge 3 4 5 6 Peter Meier Renewable energy policy: Formulation and implementation in China 7 8 Renewable Energy: International Experiences 46 Future Energy Scenarios Toward Sustainable Energy Policies and Practice in Thailand — Workshop Proceedings BKK proceeding i nd proceeding ge 9 10 11 12 Peter Meier Renewable energy policy: Formulation and implementation in China 13 14 Renewable Energy: International Experiences Future Energy Scenarios Toward Sustainable Energy Policies and Practice in Thailand — Workshop Proceedings 47 BKK proceeding i nd proceeding ge 15 16 17 18 Peter Meier Renewable energy policy: Formulation and implementation in China 19 20 Renewable Energy: International Experiences 48 Future Energy Scenarios Toward Sustainable Energy Policies and Practice in Thailand — Workshop Proceedings BKK proceeding i nd proceeding ge 21 22 23 24 Peter Meier Renewable energy policy: Formulation and implementation in China 25 26 Renewable Energy: International Experiences Future Energy Scenarios Toward Sustainable Energy Policies and Practice in Thailand — Workshop Proceedings 49 BKK proceeding i nd proceeding ge 27 28 29 30 Peter Meier Renewable energy policy: Formulation and implementation in China 31 32 Renewable Energy: International Experiences 50 Future Energy Scenarios Toward Sustainable Energy Policies and Practice in Thailand — Workshop Proceedings BKK proceeding i nd proceeding ge 33 34 35 36 Peter Meier Renewable energy policy: Formulation and implementation in China 37 38 Renewable Energy: International Experiences Future Energy Scenarios Toward Sustainable Energy Policies and Practice in Thailand — Workshop Proceedings 51 BKK proceeding i nd proceeding ge 39 40 41 42 Peter Meier Renewable energy policy: Formulation and implementation in China 43 44 Renewable Energy: International Experiences 52 Future Energy Scenarios Toward Sustainable Energy Policies and Practice in Thailand — Workshop Proceedings BKK proceeding i nd proceeding ge 45 46 47 Peter Meier Renewable energy policy: Formulation and implementation in China Renewable Energy: International Experiences Future Energy Scenarios Toward Sustainable Energy Policies and Practice in Thailand — Workshop Proceedings 53 BKK proceeding i nd proceeding ge Renewable Energy Policies: Impacts and Effectiveness Jan Hamrin President Center for Resource Solutions n her Comparison of Feed-in Laws, RPS, and Tendering Policies, Jan Which policies work best under which I Hamrin presented the key National Renewable Energy Policies in terms of a comparison of feed-in laws and tariffs, renewable portfolios standards (RPS) and the tendering approach. Based on a comparison of the results of the circumstances, various approaches, and the primary criteria for decision makers, a set of con- with which clusions was described. For the purposes of facilitating the given comparisons, part of this summary of the presentation is given in a matrix form. objectives and The first of national renewable energy (RE) policies, feed-in laws, is based Jan Hamrin which results? upon a price which is fixed by government, known as a government mandated price. Under this approach, a utility company must take power from eligible facilities and power production sources. These laws are focused on new and emerging technologies. Renewable Energy Policies: Impacts and Effectiveness There are four methods of setting price. First, the price can be based upon the estimated long-term cost plus a reasonable profit. The second method is to take the wholesale avoided cost of power (as in California in the 1980s). Thirdly, the wholesale avoided cost of power can be used as a basis, plus an incentive (as has been practised in China). The fourth method is to take a percentage of the retail electricity rate (as is the case in European feed-in laws). Factors of success The key success factors to the feed-in laws approach are, primarily, that there is the security of a long-term contract, usually between 15 to 20 years. There is a guaranteed buyer, a tariff which gives reasonable rate of return and, finally, there is the flexibility to capture cost efficiencies. These facets require the involvement of the private sector, because utility companies have been, in the past, unfamiliar with such approaches. In the case of renewable portfolio standards (RPS), there is a government man- date which is quantity-based. As with feed-in laws, the approach is focused on emerging and new renewable energy technologies (RET). There is also a requirement placed upon wholesale or retail market participants (such as the utility or grid company). The factors of success in an RPS approach are that the design of the policy is critical to success. The levels of quantity targets are based upon energy and out- put, and increase over time. Once again, new and emerging RE are eligible. There is a need to create a certificate trading platform, which is based upon the tracking of compliance with the stipulated quantities. Renewable Energy: International Experiences 54 Future Energy Scenarios Toward Sustainable Energy Policies and Practice in Thailand — Workshop Proceedings BKK proceeding i nd proceeding ge In the case of tendering policies, there is a government-sponsored competitive bidding process for RE, with contracts awarded to the lowest priced projects. Guarantees are given, by contract, to take all power generated at specified prices over a fixed-time period. In this approach, it is the government which pays the incremental cost of renewable energy. A tendering policy is usually combined with other policies, such as public benefit funds (as with the non-fossil fuel obligation NFFO in the United Kingdom) or resource concessions (as with wind in the case of China). The factors of success with tendering policies are, primarily, that the existence of a long-term standard contract reduces the level of risk for investors. The contracts and tenders that are awarded must be large enough to achieve There must be economies of scale, and they should be awarded every year to create stability. That same stability can be enabled by having a stable source of funding. a clear volume of Compliance can be facilitated by the imposition of appropriate penalties for renewable energy not meeting milestones. for a specified There is a rich mix of primary criteria to be met for successful performance of time. The approach each of these three approaches. must result in both Firstly, there must be a clear volume of renewable energy for a specified time, Jan Hamrin and the approach must result in both cost and price reductions, and of cost and price resources used. Equally, the market for RE must become and remain sustain- reductions, and of able. Furthermore, the approach should lead to the development of local resources used. industry, it must provide certainty of sound performance for investors and Renewable Energy Policies: Impacts and Effectiveness there must be simplicity in implementation. Criteria Feed-in laws RPS Tendering Quantity of RE Development Feed-in laws can produce large If strongly enforced, RPS can meet Tendering: Related only to quantity amounts of RE in a short time period realistic RE targets of RE established by process Cost and Price Reductions n.a. RPS and Tendering are best at Tendering: reducing both cost and price, using As with RPS, plus this approach competitive bidding. is good at reducing cost. Need long-term PPAs There is a need for a mechanism Enforcement of penalties is critical to reduce price over time especially for RPS Must have competition and multiple bidders Volume: large projects, many projects Resource Diversity Feed-in laws: Excellent at bringing in RPS and Tendering: Both approaches See RPS wide diversity of technologies favor least-cost technologies Diversity possible with separate technology targets or tenders Administrative complexity adds costs Sustainability of Market Feed-in laws & RPS: Have been the See Feed-in laws Tendering : Tied to resource Political sustainability needs to be most technically and economically planning process—sustainable if considered (Feed-in more vulnerable) sustainable in international experience planning supported, stable source Most vulnerable to political of funding unsustainability Local Industry Development Feed-in laws: Excellent for RPS & Tendering: Favours least-cost creating local manufacturing technologies and established and infrastructure industry player Needs companion policies Certainty for Investors Feed-in laws: Price guarantee & PPA RPS: Lack of price certainty difficult Tendering: Can provide certainty All 3 policies can be designed to give great certainty to investors for investors if well designed reduce investor risk PPA recommended to reduce Somewhat more risk than investor risk Feed-in Law Simplicity Feed-in laws: Most simple design, RPS: More complex to design Tendering: More complex than administration, enforcement, & administer & complex for Feed-in laws, simpler than RPS contractual generators On the basis of the above comparison, it can be generally concluded that feed- in laws are the simplest to administer and enforce. They provide the greatest Renewable Energy: International Experiences Future Energy Scenarios Toward Sustainable Energy Policies and Practice in Thailand — Workshop Proceedings 55 BKK proceeding i nd proceeding ge resource diversity, and the most development of local industry. However, they may be the more expensive in the short run. This can be mitigated by adjusting the price over time. It goes without saying that the feed-in laws approach works best in regulated markets. The approach using the renewable portfolio standard (RPS) arrives at a good minimization of both cost and price, if it is accompanied by long-term power purchase agreements and if it is well designed. It also encourages a good resource development, through the use of certificates for development in less- populated regions. Additionally, while the approach is more compatible with reformed electricity markets, it is more complex to administer and it may take longer to build local industry and to meet resource targets. As far as the tendering approach is concerned, it is the best way to achieve price minimization, if the industry established—or, it may be noted, in scenarios of volatile, emerging sectors with an uncomfortably broad raft of operators. The tendering approach can be combined with RPS, resource concessions and public benefit funds, and these companion policies are indeed necessary to help build up the market. If the approach is not carefully implemented, it can discourage the formation and development of local industry formation. Finally, there can be Jan Hamrin political challenges to overcome in finding stable sources of funding. A policy you can enforce In conclusion, and by way of comparison, each of these three policies has pros Renewable Energy Policies: Impacts and Effectiveness and cons, with different policies better matched to different goals. Consequently, it is important to articulate and prioritize goals, and to adopt the position that there is no one perfect policy—there are benefits to be gained from developing an integrated policy framework that may change over time. For each policy, the issue of timing is important to infrastructure development. The ability to enforce mandates, and clear policy design, is critical to success. It is worse to have a policy which you cannot enforce than to have no policy at all. ■ 1 2 Renewable Energy: International Experiences 56 Future Energy Scenarios Toward Sustainable Energy Policies and Practice in Thailand — Workshop Proceedings BKK proceeding i nd proceeding ge 3 4 5 6 Jan Hamrin Renewable Energy Policies: Impacts and Effectiveness 7 8 Renewable Energy: International Experiences Future Energy Scenarios Toward Sustainable Energy Policies and Practice in Thailand — Workshop Proceedings 57 BKK proceeding i nd proceeding ge 9 10 11 12 Jan Hamrin Renewable Energy Policies: Impacts and Effectiveness 13 14 Renewable Energy: International Experiences 58 Future Energy Scenarios Toward Sustainable Energy Policies and Practice in Thailand — Workshop Proceedings BKK proceeding i nd proceeding ge 15 16 17 18 Jan Hamrin Renewable Energy Policies: Impacts and Effectiveness 19 20 Renewable Energy: International Experiences Future Energy Scenarios Toward Sustainable Energy Policies and Practice in Thailand — Workshop Proceedings 59 BKK proceeding i nd proceeding ge 21 22 23 24 Jan Hamrin Renewable Energy Policies: Impacts and Effectiveness 25 26 Renewable Energy: International Experiences 60 Future Energy Scenarios Toward Sustainable Energy Policies and Practice in Thailand — Workshop Proceedings BKK proceeding i nd proceeding ge 27 28 29 30 Jan Hamrin Renewable Energy Policies: Impacts and Effectiveness 31 32 Renewable Energy: International Experiences Future Energy Scenarios Toward Sustainable Energy Policies and Practice in Thailand — Workshop Proceedings 61 BKK proceeding i nd proceeding ge 33 34 35 36 Jan Hamrin Renewable Energy Policies: Impacts and Effectiveness Renewable Energy: International Experiences 62 Future Energy Scenarios Toward Sustainable Energy Policies and Practice in Thailand — Workshop Proceedings BKK proceeding i nd proceeding ge Ethanol and Other Biofuels: Panache or Dream Masami Kojima World Bank The potential T here is an increasing global interest in liquid biofuels. There are three impact of biofuels underlying reasons for this. Firstly, liquid biofuels have a strong poten- tial for reducing greenhouse gas emissions (GGE) in the transport sec- raises issues of tor, the sector widely seen as presenting the greatest challenges for the mitiga- competition, from tion of GGE. Secondly, liquid biofuels are perceived as offering significant multiple contributions towards energy security. When produced nationally, through reducing a nation’s reliance on imported oil, and through creating an alterna- perspectives tive source of supply, GGE contributes towards diversification, often seen as a Masami Kojima key facet of energy security. Thirdly, increased activation of the liquid biofuels sector provides, in many countries, a direct opportunity to provide support to domestic farmers. It is considered by some to be a significant driver in the uptake of liquid biofuels, and a driver that must not be overlooked. Indeed, it is sometimes seen as serving almost as a substitute for former subsidies, an Ethanol and Other Biofuels: Panache or Dream income support mechanism for farmers which is rapidly being eliminated in many countries. Among the principal producer countries of feedstock for ethanol and biodiesel, considerable use is made of subsidies to producers, principally in OECD coun- tries in North America (USA) and Europe (Spain, Sweden and France for sugar beet and cereal crops for ethanol, and France, Germany and Italy for oil seeds for biodiesel). Brazil is widely known as the major producer of ethanol from sugar, with subsidized fuel sales prices. In Asia, China produces ethanol from maize, sugar cane and some cassava. Malaysia and Indonesia foresee biodiesel production from palm oil, and India from jatropha, although the logistical challenge of harvesting and shipping from marginal lands should not be over- looked. Elsewhere, Brazil and Argentina are expected to use soybeans extensive- ly as a source of biodiesel. Determined stimulation of the market The market for liquid biofuels, primarily for transportation, is heavily protect- ed. There is a variety of support mechanisms in use. Reductions in fuel taxes and other fuel charges are universal. As well as subsidies to feedstock producers in OECD countries, many countries use tools such as blending and mandated con- sumption requirements, import tariffs, subsidies on vehicles and price support. Among the powerful mandates which have been introduced recently, the United States requires that by 2012, 7.5 billion gallons of renewable fuels will be in gaso- line—approximately five percent of 2005 levels of consumption. Brazil has long required that between 20 to 25 percent of ethanol be present in gasoline. Renewable Energy: International Experiences Future Energy Scenarios Toward Sustainable Energy Policies and Practice in Thailand — Workshop Proceedings 63 BKK proceeding i nd proceeding ge liquid biofuels … Given that liquid biofuels will continue for some time to represent only a small portion of total petroleum fuel production, they are not expected to have any are not expected significant reduction effect on fuel prices. They may have some slight effect on to have any the rate of fuel price rises, but even there it must be recalled that these prices significant are also subject to upward pressure as a result of fuel economy measures. reduction effect on Furthermore, the price level of liquid biofuels is also subject to relatively high energy costs in feedstock production (including fertilizer), in biofuel manufac- fuel prices ture and in shipping and transportation costs. Price levels and the ‘food or fuel’ issue Price levels of liquid biofuels are, from another perspective, subject to compe- tition in agricultural products. Many feedstocks such as sugar and molasses compete in the sweetener market, while maize, cereals, root crops and oilseeds are in demand as food and, increasingly, animal feeds. As well as affecting, or being affected by, other demands for biofuel feedstock, these same feedstock have a relationship with other non-biofuel feedstock, on croplands and even marginal land. Masami Kojima Given the link between petroleum fuel prices and liquid biofuel prices, there is also a direct co-relationship between these prices and the prices commanded by agricultural crops. In Brazil, E5 fuel has been mandated for almost 70 years. Its use, especially the launch of a specialized product in 1975, has been heavily promoted by price Ethanol and Other Biofuels: Panache or Dream guarantees, price subsidies, public loans, and state-guaranteed private bank loans to processors and growers. Nonetheless, after peaking, the sale of hydrous ethanol declined from 1989 to 2004; so-called flex-fuel vehicles and high oil prices boosted ethanol consumption more latterly. However, with high world sugar prices in 2006, ethanol become more expensive than gasoline, and has suffered from millers switching to other sugar-based products. There have been continuing improvements in production efficiency, resulting in large cost reductions through the decades. They have also benefited from the relatively low (rain-fed) production costs of sugarcane and ample land, plus extensive R&D. The apparent alternative of cassava has emerged to less attractive than original- ly thought: it has higher energy costs in processing (no bagasse); its mass culti- vation is sensitive to pests and disease; and harvesting is labour-intensive. The broader picture of broader costs If there was a worldwide mandate to blend five percent of biofuels in gasoline and diesel by 2015, according to a study in 2006 on the impact of biofuel demand for agricultural commodities by LMC International, an additional 50 million hectares would be required for ethanol production, and a similar area for biofuels. The prospects for the biofuels market are therefore tempered by such parameters. The pressures for increased cultivation areas pose environmental problems, and are also confronted by the physical limitations of competition for land and labour. Furthermore, the close and upward (although slowing) relationship of Renewable Energy: International Experiences 64 Future Energy Scenarios Toward Sustainable Energy Policies and Practice in Thailand — Workshop Proceedings BKK proceeding i nd proceeding ge liquid biofuels prices to fossil fuel prices has an impact on other agricultural products. These developments contain additional costs which also need to be weighed alongside the substantial cost of subsidies to the biofuels market which, from a historical perspective, has long appeared to be ubiquitous. ■ 1 2 Masami Kojima Ethanol and Other Biofuels: Panache or Dream 3 4 Renewable Energy: International Experiences Future Energy Scenarios Toward Sustainable Energy Policies and Practice in Thailand — Workshop Proceedings 65 BKK proceeding i nd proceeding ge 5 6 7 8 Masami Kojima Ethanol and Other Biofuels: Panache or Dream 9 10 Renewable Energy: International Experiences 66 Future Energy Scenarios Toward Sustainable Energy Policies and Practice in Thailand — Workshop Proceedings BKK proceeding i nd proceeding ge 11 12 13 14 Masami Kojima Ethanol and Other Biofuels: Panache or Dream 15 16 Renewable Energy: International Experiences Future Energy Scenarios Toward Sustainable Energy Policies and Practice in Thailand — Workshop Proceedings 67 BKK proceeding i nd proceeding ge 17 18 19 20 Masami Kojima Ethanol and Other Biofuels: Panache or Dream Renewable Energy: International Experiences 68 Future Energy Scenarios Toward Sustainable Energy Policies and Practice in Thailand — Workshop Proceedings BKK proceeding i nd proceeding ge Energy Efficiency in the Global Context: Role and Opportunities for Enhancing Energy Security Ashok Sarkar World Bank T Energy efficiency is he rise in primary energy demand is set to expand in particular in devel- oping countries, according to the International Energy Agency (IEA). seen as the most Whereas developing countries accounted for 38 percent of global important demand in 2003, the share is expected to grow to 48 percent by 2030 and to contributor to 55 percent by 2050. Similarly, the CO2 emissions of developing countries are projected to grow faster than other regions, overtaking the OECD set of coun- reduced emissions, Ashok Sarkar tries at some point in the decade 2020. but more Such growth in energy is not sustainable. This business-as-usual expansion sce- indicators are nario cannot be sustained for a number of factors. There are constraints on needed investment on the supply side, and the significance of the current regime of Energy Efficiency in the Global Context: Role and Opportunities for Enhancing Energy Security high oil prices is likely to grow; projections for 2006 are that prices are likely to remain above US$ 70/barrel. This is likely to have a major impact on the growth of net oil-importing countries. Furthermore, there are massive envi- ronmental implications with enormous impacts at local, regional and global levels. All in all, this expansion would lead to energy security. Steps to improve energy security are seen as the single one major way to reduce CO2 emissions, accounting for almost one-half of all energy reductions. According to the IEA, by 2050, improved energy efficiency—that is, reducing emissions by about 40 percent on current standards—can actually reduce total emissions in OECD countries to a third below their 2003 level. In developing countries, by 2050, the total volume of emissions would grow to two-thirds above their 2003 level. Achieving the correct mix of efficiency and alternatives Compared with energy efficiency, other measures take a clear second place, while remaining doubtless important. The use of biofuels in transport would result in about four percent of the global total of reduced emissions, and a fuel- mix in buildings and industry perhaps six percent. The accumulated total of saved emissions in power generation would account for about one-third of all emissions, being the sum of savings achieved in diverse generation scenarios such as coal to gas, fossil fuel generation efficiencies, use of renewable sources. Consequently, improved energy efficiency is seen as the most important con- tributor to reduced emissions. The renewed global interest in energy efficiency is expressed through various initiatives such as those of the World Bank Group, regional development banks, Energy Efficiency: International Experiences Future Energy Scenarios Toward Sustainable Energy Policies and Practice in Thailand — Workshop Proceedings 69 BKK proceeding i nd proceeding ge the European Union, the ASEAN Energy Ministers and such individual coun- tries setting up EE targets, legislations and institutions as China, India, Morocco, South Africa, Tunisia, Sri Lanka and Vietnam. From the perspective of Thailand, there is much to commend in the emphasis placed on improving energy elasticity. Historically, the energy efficiency steps taken in OECD countries since the energy shocks of 1973 are calculated to have led to an avoidance of additional energy use of 48 percent in the period up to 1998. This is slowly leading to a decoupling of energy and GDP growth. Since 1971, each percent increase in GDP has resulted in a 0.64 percent increase in primary energy consumption, globally. Between 2006 and 2030, world GDP is expected to grow by an average of about three percent per year, while primary energy demand is projected to increase only by 1.7 percent per year, to reach 15.3 billion tons of oil equivalent (toe) by 2030. Nonetheless, in Thailand, while many steps have been taken to improve energy efficiency, including standards and labeling criteria, demand-side management measures by utilities and the promotion of energy efficiency funding, the coun- try’s energy intensity still remains on the higher side. Ashok Sarkar The central role of efficient indicators The reason for this is hard to explain, in the absence of systematic energy effi- ciency indicators. These are designed to monitor levels and changes in energy efficiency for the two primary purposes of 1) allowing comparisons between Energy Efficiency in the Global Context: Role and Opportunities for Enhancing Energy Security countries of their relative energy efficiency situations, at national as well as sub- regional levels and by fuel type and sectors, and 2) for understanding and com- municating the impact of energy efficiency policies, legislation and institution- al development, in terms of how these are turned into actions on the ground and how they are implemented. The importance of energy efficiency indicators is that they can underpin the methodology for analyzing energy-use trends, which distinguishes among three main components affecting energy use; namely, 1) activity levels, 2) the struc- ture and mix of activities within a sector, and 3) energy intensities (energy use per unit of sectoral activity). The separation of The separation of impacts on energy use from changes in activity, structure and intensity is critical for policy analysis as most energy-related policies target impacts on energy energy intensities and efficiencies, often promoting new technologies. use from changes Accurately tracking changes in intensities helps to measure the effects of these in activity, new technologies, and changes in energy use within sectors can be analyzed in structure and terms of sectoral activity, sectoral structure, and energy intensity of each sub- sector. The national policy targets are ambitious, comprising a reduction in intensity is critical total energy consumption by 20 percent by 2009; a reduction in energy elas- for policy analysis ticity from 1.4 to 1.0 by 2011; reduced oil use for transportation by 25 percent by 2009, reduced energy consumption in the industrial sector by 25 percent by 2008, and reduced energy consumption in public offices and buildings by 10- 15 percent immediately. The first steps to achieving these targets is to build upon existing successes, such as scaling up demand-side management and expanding it beyond the important Energy Efficiency: International Experiences 70 Future Energy Scenarios Toward Sustainable Energy Policies and Practice in Thailand — Workshop Proceedings BKK proceeding i nd proceeding ge areas of lighting and household appliances with the essential labels, standards and incentives. As well as Thailand’s own progress in these fields, the work of other countries such as Mexico, Brazil and India demonstrates how public awareness and utility incentives can make an important difference. Beyond this, it is necessary to move into a systems approach dealing with motors, pumps and compressors. The latter area—of motor systems energy con- sumption—accounts for about 50 percent of industrial energy conservation opportunities. The energy services company (ESCO) approach, renowned, amongst others, in China and the United States, has provided a model for inducing significant energy efficiencies in the industrial and commercial sectors. The investments made through ESCO could be expanded in important and sustained ways through additional measures in the financial sphere. Similarly, their work could be underpinned by wider use of energy audits, building codes and an enabling environment. ■ Ashok Sarkar Energy Efficiency in the Global Context: Role and Opportunities for Enhancing Energy Security 1 2 Energy Efficiency: International Experiences Future Energy Scenarios Toward Sustainable Energy Policies and Practice in Thailand — Workshop Proceedings 71 BKK proceeding i nd proceeding ge 3 4 5 6 Ashok Sarkar Energy Efficiency in the Global Context: Role and Opportunities for Enhancing Energy Security 7 8 Energy Efficiency: International Experiences 72 Future Energy Scenarios Toward Sustainable Energy Policies and Practice in Thailand — Workshop Proceedings BKK proceeding i nd proceeding ge 9 10 11 12 Ashok Sarkar Energy Efficiency in the Global Context: Role and Opportunities for Enhancing Energy Security 13 14 Energy Efficiency: International Experiences Future Energy Scenarios Toward Sustainable Energy Policies and Practice in Thailand — Workshop Proceedings 73 BKK proceeding i nd proceeding ge 15 16 17 18 Ashok Sarkar Energy Efficiency in the Global Context: Role and Opportunities for Enhancing Energy Security 19 20 Energy Efficiency: International Experiences 74 Future Energy Scenarios Toward Sustainable Energy Policies and Practice in Thailand — Workshop Proceedings BKK proceeding i nd proceeding ge 21 22 23 24 Ashok Sarkar Energy Efficiency in the Global Context: Role and Opportunities for Enhancing Energy Security 25 26 Energy Efficiency: International Experiences Future Energy Scenarios Toward Sustainable Energy Policies and Practice in Thailand — Workshop Proceedings 75 BKK proceeding i nd proceeding ge 27 28 29 30 Ashok Sarkar Energy Efficiency in the Global Context: Role and Opportunities for Enhancing Energy Security 31 32 Energy Efficiency: International Experiences 76 Future Energy Scenarios Toward Sustainable Energy Policies and Practice in Thailand — Workshop Proceedings BKK proceeding i nd proceeding ge 33 34 35 36 Ashok Sarkar Energy Efficiency in the Global Context: Role and Opportunities for Enhancing Energy Security 37 38 Energy Efficiency: International Experiences Future Energy Scenarios Toward Sustainable Energy Policies and Practice in Thailand — Workshop Proceedings 77 BKK proceeding i nd proceeding ge 39 40 41 42 Ashok Sarkar Energy Efficiency in the Global Context: Role and Opportunities for Enhancing Energy Security 43 44 Energy Efficiency: International Experiences 78 Future Energy Scenarios Toward Sustainable Energy Policies and Practice in Thailand — Workshop Proceedings BKK proceeding i nd proceeding ge 45 46 47 48 Ashok Sarkar Energy Efficiency in the Global Context: Role and Opportunities for Enhancing Energy Security 49 50 Energy Efficiency: International Experiences Future Energy Scenarios Toward Sustainable Energy Policies and Practice in Thailand — Workshop Proceedings 79 BKK proceeding i nd proceeding ge 51 52 53 54 Ashok Sarkar Energy Efficiency in the Global Context: Role and Opportunities for Enhancing Energy Security 55 56 Energy Efficiency: International Experiences 80 Future Energy Scenarios Toward Sustainable Energy Policies and Practice in Thailand — Workshop Proceedings BKK proceeding i nd proceeding ge 57 58 59 60 Ashok Sarkar Energy Efficiency in the Global Context: Role and Opportunities for Enhancing Energy Security 61 62 Energy Efficiency: International Experiences Future Energy Scenarios Toward Sustainable Energy Policies and Practice in Thailand — Workshop Proceedings 81 BKK proceeding i nd proceeding ge 63 64 65 66 Ashok Sarkar Energy Efficiency in the Global Context: Role and Opportunities for Enhancing Energy Security 67 68 Energy Efficiency: International Experiences 82 Future Energy Scenarios Toward Sustainable Energy Policies and Practice in Thailand — Workshop Proceedings BKK proceeding i nd proceeding ge 69 70 71 72 Ashok Sarkar Energy Efficiency in the Global Context: Role and Opportunities for Enhancing Energy Security 73 Energy Efficiency: International Experiences Future Energy Scenarios Toward Sustainable Energy Policies and Practice in Thailand — Workshop Proceedings 83 BKK proceeding i nd proceeding ge Energy Efficiency Policy Development and Planning in Japan: Strategies, Programmes, Impacts and Indicators Takeshi Sekiyama Energy Conservation Center, Japan (ECCJ) T Significant results he purpose of the presentation is to describe the evolution and extent of energy conservation in Japan. The promotion of energy conservation in in energy Japan has taken place against a background of increases in energy con- Takeshi Sekiyama conservation sumption gradually moving towards stabilization. In the 30 years since the have followed energy shocks of 1973, consumer sector consumption has risen from a baseline of 100 in 1973 to a level of 220 in 2003. The transportation sector rose to 210, the application but like the consumer sector, it had been a few degrees higher in the late 1990s. of detailed The industrial sector, after a long period from the late 1970s to the mid-1990s Energy Efficiency Policy Development and Planning in Japan: Strategies, Programmes, Impacts and Indicators regulations, below the 1973 level of 100, has slowly increased its final energy consumption including level to 105 in 2003. customised Persistent improvements in energy intensity forms of Behind the picture of these overall rises in consumption, there has been a pos- itive development in the primary energy intensity ratio. After a dramatic fall incentives from the level 1,966 ton oil equivalent (toe) per billion yen after the first oil crisis in 1973, which continued past the second oil crisis in 1979, and lasted until the mid-1980s, the reduction has become more gradual, continuing to 965 toe/bYen in 2003. Much of this is due to vast improvements in industrial processes. Improved caster technology in the iron and steel industry had gains in energy intensity of 81 percent over the period 1973 to 1994; there were gains of 58 percent in the petrochemical industry, 65 percent in cement production and 61 percent in paper and pulp. Such measures in the industrial sector were followed by meas- ures in the residential and commercial sectors in the 1990’s. More recently, all the measures, aimed initially at energy conservation have been extended in efforts to curtail CO2 emissions. As a result, the energy intensity of Japan, according to the International Energy Agency, is 106 toe per US$ million. This compares with a world total average of 317 toe/US$ m, 152 toe/US$ m for Germany, 201 toe/US$ m for all OECD countries, 570 toe/US$ m for Malaysia, 629 toe/US$ m for Thailand and 1,025 toe/US$ m for China. This has been enabled through the law concerning the rational use of energy, also known as the energy conservation law. Enforced initially in 1979, it has Energy Efficiency: International Experiences 84 Future Energy Scenarios Toward Sustainable Energy Policies and Practice in Thailand — Workshop Proceedings BKK proceeding i nd proceeding ge energy efficiency been amended and enforced another five times. It aims to enhance energy effi- ciency in order to achieve the so-called 3E harmonization of economic growth, to achieve the environmental protection and energy security. The law has been supported by so-called 3E the passage of the associated energy conservation and recycling assistance law harmonization of which makes provision for low-interest loans and tax incentives, including economic growth, deductions on tax for the acquisition cost of equipment or special depreciation on these costs. environmental In turn, these measures have been supported by programmes of subsidies for protection and the installation of advanced energy efficiency facilities, co-generation systems, energy security new low-energy buildings, low-emission vehicles, and research, development and support for energy services company (ESCO) enterprises. In this, the ECCJ provides advice and information on the above measures to concerned stakeholders. Smart models In the industrial sector, a special feature in the promotion of energy conserva- tion has been the introduction of legislation to require enterprises to appoint Takeshi Sekiyama energy managers. They must properly maintain energy using facilities and make binding recommendations to company management on improvements in the energy efficiency of these facilities. In the consumer sector, the notion of top runner has played a critical role in improving standards for machinery and equipment. The first batch of 11 top Energy Efficiency Policy Development and Planning in Japan: Strategies, Programmes, Impacts and Indicators runner appliances—air conditioners, vehicles and fridges and freezers—was established in 1999. The full list of 21 items, as of mid-2006, now includes space and water heaters, cookers, ovens and DVD recorders. The top runner scheme, accompanied by labeling and retailer support, has resulted in efficien- cy gains of 40 percent with air conditioners and 83 percent with electric refrig- erators. A new notion is being added alongside the top runner: that of the smart life, which aims at heightened consumer awareness and yet more energy effi- ciency lifestyle and behaviour. The transportation sector has seen similar gains through the idling-stop system of driving style, and through extensive traffic management measures. Underlying these sectoral advances has been the careful work of ECCJ, not only in enabling and supporting legislative measures and in consumer awareness and education, but also through the practice of energy audits. Funded by the Ministry of Economy, Trading and Industry (METI), these energy conservation audits have been undertaken in the factories and buildings of a wide variety of industrial and commercial undertakings, at no cost to the beneficiary. A decent range of economies (energy-saving effects) have been achieved through one-day audits, ranging from 7.5 percent in printing and publishing, to 9.1 percent in chemical industries and up to 12.1 percent in waste disposal. The ECCJ maintains programmes of international cooperation with several dozen countries in Asia, Africa, the Caribbean, the Pacific, Europe and the Americas. A recent project supported by the Japanese International Cooperation Agency (JICA) has aimed at the establishment of Thailand’s National Training and Examination System for Qualification of the Certified Energy Manager. ■ Energy Efficiency: International Experiences Future Energy Scenarios Toward Sustainable Energy Policies and Practice in Thailand — Workshop Proceedings 85 BKK proceeding i nd proceeding ge 1 2 3 4 Takeshi Sekiyama Energy Efficiency Policy Development and Planning in Japan: Strategies, Programmes, Impacts and Indicators 5 6 Energy Efficiency: International Experiences 86 Future Energy Scenarios Toward Sustainable Energy Policies and Practice in Thailand — Workshop Proceedings BKK proceeding i nd proceeding ge 7 8 9 10 Takeshi Sekiyama Energy Efficiency Policy Development and Planning in Japan: Strategies, Programmes, Impacts and Indicators 11 12 Energy Efficiency: International Experiences Future Energy Scenarios Toward Sustainable Energy Policies and Practice in Thailand — Workshop Proceedings 87 BKK proceeding i nd proceeding ge 13 14 15 16 Takeshi Sekiyama Energy Efficiency Policy Development and Planning in Japan: Strategies, Programmes, Impacts and Indicators 17 18 Energy Efficiency: International Experiences 88 Future Energy Scenarios Toward Sustainable Energy Policies and Practice in Thailand — Workshop Proceedings BKK proceeding i nd proceeding ge 19 20 21 22 Takeshi Sekiyama Energy Efficiency Policy Development and Planning in Japan: Strategies, Programmes, Impacts and Indicators 23 24 Energy Efficiency: International Experiences Future Energy Scenarios Toward Sustainable Energy Policies and Practice in Thailand — Workshop Proceedings 89 BKK proceeding i nd proceeding ge 25 26 27 28 Takeshi Sekiyama Energy Efficiency Policy Development and Planning in Japan: Strategies, Programmes, Impacts and Indicators 29 30 Energy Efficiency: International Experiences 90 Future Energy Scenarios Toward Sustainable Energy Policies and Practice in Thailand — Workshop Proceedings BKK proceeding i nd proceeding ge 31 32 33 34 Takeshi Sekiyama Energy Efficiency Policy Development and Planning in Japan: Strategies, Programmes, Impacts and Indicators 35 36 Energy Efficiency: International Experiences Future Energy Scenarios Toward Sustainable Energy Policies and Practice in Thailand — Workshop Proceedings 91 BKK proceeding i nd proceeding ge 37 38 39 40 Takeshi Sekiyama Energy Efficiency Policy Development and Planning in Japan: Strategies, Programmes, Impacts and Indicators 41 42 Energy Efficiency: International Experiences 92 Future Energy Scenarios Toward Sustainable Energy Policies and Practice in Thailand — Workshop Proceedings BKK proceeding i nd proceeding ge 43 44 45 46 Takeshi Sekiyama Energy Efficiency Policy Development and Planning in Japan: Strategies, Programmes, Impacts and Indicators 47 48 Energy Efficiency: International Experiences Future Energy Scenarios Toward Sustainable Energy Policies and Practice in Thailand — Workshop Proceedings 93 BKK proceeding i nd proceeding ge 49 50 51 52 Takeshi Sekiyama Energy Efficiency Policy Development and Planning in Japan: Strategies, Programmes, Impacts and Indicators 53 54 Energy Efficiency: International Experiences 94 Future Energy Scenarios Toward Sustainable Energy Policies and Practice in Thailand — Workshop Proceedings BKK proceeding i nd proceeding ge 55 56 57 58 Takeshi Sekiyama Energy Efficiency Policy Development and Planning in Japan: Strategies, Programmes, Impacts and Indicators 59 60 Energy Efficiency: International Experiences Future Energy Scenarios Toward Sustainable Energy Policies and Practice in Thailand — Workshop Proceedings 95 BKK proceeding i nd proceeding ge 61 62 63 64 Takeshi Sekiyama Energy Efficiency Policy Development and Planning in Japan: Strategies, Programmes, Impacts and Indicators 65 66 Energy Efficiency: International Experiences 96 Future Energy Scenarios Toward Sustainable Energy Policies and Practice in Thailand — Workshop Proceedings BKK proceeding i nd proceeding ge International Experience in Energy Efficiency: Drawing Lessons for Thailand Vincent David Econoler T he objective of this presentation is to briefly report on international Sound comparative experiences in the planning and implementation of energy efficiency data on energy use policies and programmes. It emphasises the importance of how measur- is the key to ing energy efficiency is a very significant part of an energy efficiency policy. It draws on two experiences for that purpose: the United States and its energy effective energy intensity ratio (also expressed as energy elasticity), and the custom-made index Vincent David efficiency developed in Canada. A study of the evolution of the energy intensity ratio over the period 1949 to 2005 shows how it fell continuously throughout the period. However, a detailed analysis shows that from 1949 to 1973, the compound rate of change of International Experience in Energy Efficiency: Drawing Lessons for Thailand this ratio was -0.4 percent per year. From 1973 till 2005, this rate changed to -2.1 percent per year. Clearly, the 1973 oil crisis had strongly changed the per- ception of energy supply security as well as oil prices. Both factors, energy sup- ply security and energy price, proved to be strong motivators for energy inten- sity improvement. Pointers for directions in energy efficiency The energy intensity ratio is a useful instrument for monitoring how efficient- ly energy is used in countries or regions. As such, intensity comparison can Energy intensity provide signals to decision makers about general orientation for energy effi- depends on a ciency trends, but probably not much more. Energy intensity depends on a number of factors, with energy efficiency being one of them. number of factors, An energy efficiency policy should preferably have its own information tool on with energy energy efficiency potentials, and policy and programme impact on energy efficiency being demand. A simple description of changes in the volume of energy use over the one of them period 1990 to 2003 in Canada shows that secondary energy use was 13 percent less than it would have been without energy policy. In fact, a detailed analysis of the different components that impact on energy demand in Canada shows a much more differentiated picture, of great signifi- cance to energy policy design. Compared with 1990, the year 2003 showed: • A 35 percent increase in activity (comprising commercial/institutional and residential floor space, number of households, passenger- and tonne-kilome- tres, industrial gross output, physical production and gross domestic product [GDP]). This resulted in a 2,356.5 petajoules (PJ) increase in energy Energy Efficiency: International Experiences Future Energy Scenarios Toward Sustainable Energy Policies and Practice in Thailand — Workshop Proceedings 97 BKK proceeding i nd proceeding ge • The winter of 2003, which was five percent colder than the winter of 1990, and the summer, which was 24 percent warmer, led to a 71.3 PJ increase in secondary energy demand • Changes in the structure of most sectors in the economy increased energy use; however, these increases were completely offset by a shift in the industrial sec- tor towards industries that are less energy intensive, the net result was savings of 148.2 PJ • Changes in the auxiliary equipment service level (i.e. increased use of com- puters, printers and photocopiers in the commercial/institutional sector) raised energy use by 70.9 PJ • Improvements in energy efficiency saved 883.3 PJ of energy • Furthermore, it is clear that changes in the energy intensity ratio do not fully, or properly, reflect the impact of energy efficiency measures. Sometimes other factors have significant influence on the overall picture. A detailed analysis of the energy intensity ratio over the period 1990 to 2003 shows that the energy intensity ratio underestimates the efficiency effect in the early 1990s and overestimates its impact in the latter part of the period. • Before 1998, intensity improvements appear to be modest because colder Vincent David weather (1992–1997) and a shift towards more energy-intensive industries (1990–1993) in fact masked energy efficiency progress • In 2000, a switch to less energy intensive industries, which began in the mid- 1990s, combined with energy efficiency improvements, accelerated the International Experience in Energy Efficiency: Drawing Lessons for Thailand observed decline in energy intensity These detailed observations have been made possible by the Canada EE Database, operated under the auspices of the Centre for Data and Analysis in Transportation (CDAT), the Canadian Industrial Energy End-Use Data and Analysis Centre (CIEEDAC) and the Canadian Building Energy End-Use Data and Analysis Centre (CBEEDAC). Its data comes from various sources in the community, including university research centers sponsored by the national research facility of Canada and other federal departments, provincial agencies, associations, and energy supply utili- ties. The experience of operating the database for more than 20 years has led to the conclusion that developing and maintaining a good database on energy use is one aspect of a deep-rooted and enduring energy efficiency policy. ■ Energy Efficiency: International Experiences 98 Future Energy Scenarios Toward Sustainable Energy Policies and Practice in Thailand — Workshop Proceedings BKK proceeding i nd proceeding ge 1 2 3 4 Vincent David International Experience in Energy Efficiency: Drawing Lessons for Thailand 5 6 Energy Efficiency: International Experiences Future Energy Scenarios Toward Sustainable Energy Policies and Practice in Thailand — Workshop Proceedings 99 BKK proceeding i nd proceeding ge 7 8 9 10 Vincent David International Experience in Energy Efficiency: Drawing Lessons for Thailand Energy Efficiency: International Experiences 100 Future Energy Scenarios Toward Sustainable Energy Policies and Practice in Thailand — Workshop Proceedings BKK proceedings S4 V2:ASTAE Thailand proceedings V3 22/01/07 22:08 Page 101 National Policies Arkhom Termpittayapaisith Deputy Secretary General National Economic and Social Development Board T Reduced energy he purpose of the presentation is to look forward at a range of future energy scenarios for Thailand. The presentation therefore examines the imports, lower energy problems faced by the country, looks at the issues involved in production cost energy self-sufficiency, and reviews the framework of the 10th National Plan and and minimizing the National Energy Development Plan. pollution are the With more than 80 percent of Thailand’s energy consumption dependent on oil import bills, the continuous series of largely upward fluctuations in oil Arkhom Termpittayapaisith three goals prices and their associated volatility inevitably leads to national account imbal- ances. This does not contribute towards energy security at all, and it adds ele- ments of insecurity and risk into the key oil-dependent sectors of transporta- tion, industrial production and residential and commercial consumption. The extent of self-sufficiency In consequence, it is important to examine the extent to which Thailand may National Policies consider itself to have self-sufficiency in energy. In fact, with energy produc- tion self-sufficiency being at approximately one-third of existing production, for the country to become more self-sufficient, it must either reduces con- sumption or increase domestic production. However, the consumption behaviour will determine what type of fuel is need- ed to be produced. Consumption In its elaboration of the 10th National Plan by NESDB, in its analysis of the behaviour will macro-economic factors which contribute to its energy vulnerability, a frame- determine what work was developed which rooted itself in the philosophy of sufficient economy from His Majesty the King. The philosophy stresses “…appropriate conduct type of fuel is and way of life while incorporating moderation, due consideration in all modes needed to be of conduct, and the need for sufficient protection from internal and external produced shocks.� Through its application in the value system of Thais, in community institutions, and in the economic and administrative systems, the philosophy can facilitate the emergence of the Green and Happiness Society. The new issues and challenges which arise concern the transition towards the Asia centu- ry, characterized by a knowledge-based economy, an ageing society with issues of savings and productivity, energy security and energy efficiency together with opportunities for global consumption. In the elaboration of the national energy development plan, three principal goals have been set: namely, the reduction of energy imports, the leveling down of energy production costs (public energy expenditure) and minimizing pollu- tion created by all economic sectors. In working towards these goals, five oper- ational objectives have been set: International Implications for Thailand Future Energy Scenarios Toward Sustainable Energy Policies and Practice in Thailand — Workshop Proceedings 101 BKK proceedings S4 V2:ASTAE Thailand proceedings V3 22/01/07 22:08 Page 102 • increase the consumption level of new alternative sources of energy to eight percent • increase the energy security of the nation for the next 50 years • increase efficiency in energy consumption of all economic sectors • reduce energy elasticity from 1.4:1.0 • reduce energy intensity in the transport sector A nine-pronged action plan has thus been elaborated, featuring these steps: 1 Short-term management in transportation sector; for example, rail for mer- chandise transportation in the Eastern seaboard area 2 New investment; long-term management in modal shift. To illustrate, a redesign of rail system and mass transit. This includes consideration and seri- ous study about DC, ICD, and CY. 3 New sources of energy supply from both local and international sources to strengthen energy security. Thailand is negotiating a long-term contract for Arkhom Termpittayapaisith natural gas supplies from neighbouring countries, and will purchase addi- tional thousands of MW of electricity from neighbouring countries. 4 Usage of alternative energy in order to increase knowledge and participation. This is to produce and to implement alternative sources of energy by both general public and private sources. 5 Demand management like energy saving and electrical appliances 6 Research and development on alternative sources of energy and renewable National Policies sources of energy. This also includes improving technology on energy saving. 7 Seriously planning for domestic production of bio-diesel from palm oil, also contract farming in neighboring countries 8 Private participation in financing projects 9 Value creation in petrochemical industries ■ International Implications for Thailand 102 Future Energy Scenarios Toward Sustainable Energy Policies and Practice in Thailand — Workshop Proceedings BKK proceedings S4 V2:ASTAE Thailand proceedings V3 22/01/07 22:08 Page 103 1 2 Arkhom Termpittayapaisith 3 4 National Policies 5 6 International Implications for Thailand Future Energy Scenarios Toward Sustainable Energy Policies and Practice in Thailand — Workshop Proceedings 103 BKK proceedings S4 V2:ASTAE Thailand proceedings V3 22/01/07 22:08 Page 104 7 8 Arkhom Termpittayapaisith 9 10 National Policies 11 12 International Implications for Thailand 104 Future Energy Scenarios Toward Sustainable Energy Policies and Practice in Thailand — Workshop Proceedings BKK proceedings S4 V2:ASTAE Thailand proceedings V3 22/01/07 22:08 Page 105 13 14 Arkhom Termpittayapaisith 15 16 National Policies 17 International Implications for Thailand Future Energy Scenarios Toward Sustainable Energy Policies and Practice in Thailand — Workshop Proceedings 105 BKK proceedings S4 V2:ASTAE Thailand proceedings V3 22/01/07 22:08 Page 106 Renewable Energy is not only Sustainable but also Affordable S Chandrasekar Managing director Bhoruka Power Corporation, Bangalore, India I Renewable energy n the energy mix decision, there are two additional elements to the classic trio of availability, affordability and reliability. Factors which can play a role is first and in this scenario are environment and employment. foremost a In the recent past, there has been a general perception in favour of convention- sound business al power, from fossil fuels; while it is recognized as being a limited resource, it proposition is regarded as being reliable and affordable. Non-conventional power, also known as renewable sources, is, on the contrary, recognized as being an unlim- S Chandrasekar ited resource, while it is regarded as being unreliable and unaffordable. That perception is changing, in part under pressure from an additional ele- ment in the energy mix: energy security. In the vision of the President of India, His Excellency Abdul Kalam, “…we can achieve energy independence by 2030� Renewable Energy is not only Sustainable but also Affordable if we focus on renewable energy sources, and if we increase renewable energy sources in the energy mix from five to 25 percent. The firm hand of the laws This political will has been translated into law in the Government of India’s National Electricity Policy of 2005, which states “that the feasible potential of non-conventional energy sources, mainly small hydro, wind and biomass would also need to be exploited fully to create additional power generation capacity with a view to increase the overall share of non conventional energy sources in the energy mix. Efforts will be made to encourage private sector participation through suitable promotional measures.� Referring to the topics of co-generation and non-conventional energy sources, the policy document further states that “non-conventional sources of energy being the most environment friendly, there is an urgent need to promote the generation of electricity based on such sources of energy. For this purpose, efforts need to be made to reduce the capital cost of projects based on non-con- ventional and renewable sources of energy. The cost of energy can also be reduced by promoting competition within such projects. At the same time, ade- quate promotional measures would also have to be taken for the development of technologies and a sustained growth of these sources.� Pricing and targets In order to promote the use of renewable sources, provision is made for a com- petitive bidding process and for differential pricing: “considering the fact that it will take some time before non-conventional technologies compete, in terms of International Implications for Thailand 106 Future Energy Scenarios Toward Sustainable Energy Policies and Practice in Thailand — Workshop Proceedings BKK proceedings S4 V2:ASTAE Thailand proceedings V3 22/01/07 22:08 Page 107 cost, with conventional sources, the (state electricity regulatory) commission may determine an appropriate differential in prices to promote these technologies.� Similarly, with regard to other forms of incentives often used with renewables, the policy makes allowance for targets to be fixed which will encourage the use of renewable energy sources. It is thus stated that: “the appropriate commission shall fix a minimum percentage for the purchase of energy from such sources taking into account availability of such resources in the region and its impact on retail tariffs. Such percentage for purchase of energy should be made applicable for the tariffs to be determined by the (commissions) at the latest by 1 April 2006. It will take some time before non-conventional technologies can compete with conventional sources in terms of cost of electricity. Therefore, procure- ment by distribution companies shall be done at preferential tariffs determined by the appropriate commission.� This enabling environment for renewable sources is of particular value to rural areas. Other than the ecological perspective, renewable sources stand out for the reasons that they are available mainly in rural areas, they add value to local resources, they increase employment opportunities, they improve the quality S Chandrasekar and reliability of power through distributed generation, and they help to improve local infrastructure. In short, renewable sources offer the only reliable route to rural development, moving from a scenario of valueless rural resources to one of high-value rural products. Renewable Energy is not only Sustainable but also Affordable The varied perceptions of risk The private sector is a key player, but it must be recognized that the risk percep- tion held by each player is different, and it is unlikely that one single policy can satisfy all of the stakeholders all of the time. Each step that is taken to mitigate the risk of a particular stakeholder—be it banker, utility company, regulator, private operator or government—will increase the cost of the undertaking. Yet there is often an alternative to either risk mitigation, or expensive risk cover, which is usually expressed in fiscal policies. It is possible to achieve risk avoid- ance, and that is through information. One such piece of information which merits wider awareness is that the initial high cost of renewable energy power, often at 130 percent of conventional power at the outset, drops to 60 percent Renewable sources or 65 percent of conventional power cost after a maximum of 15 years, and con- tinues at a lower level thereafter. offer the only In such circumstances, greater certainty could be assigned to renewable energy reliable route to projects, if the following conditions were met: rural development, • Resource availability studies on a long-term basis are the key to realistic via- moving from a bility projections scenario of • Authentic data needs to be made available by government departments valueless rural • Banks could help in keeping local currency interest rates below ten percent • Banks could also help in increasing the loan tenure to 15 years, thus helping resources to one to keep tariffs down in the initial start-up years of high-value rural • The World Bank through IFC could help in achieving the above two objectives products through long-term dedicated funds International Implications for Thailand Future Energy Scenarios Toward Sustainable Energy Policies and Practice in Thailand — Workshop Proceedings 107 BKK proceedings S4 V2:ASTAE Thailand proceedings V3 22/01/07 22:08 Page 108 • The funds could be for the development of at least 200 MW renewable ener- gy projects initially • Renewable energy projects could serve the World Bank’s objectives of rural development as well as sustainable energy development ■ 1 2 S Chandrasekar Renewable Energy is not only Sustainable but also Affordable 3 4 International Implications for Thailand 108 Future Energy Scenarios Toward Sustainable Energy Policies and Practice in Thailand — Workshop Proceedings BKK proceedings S4 V2:ASTAE Thailand proceedings V3 22/01/07 22:08 Page 109 5 6 7 8 S Chandrasekar Renewable Energy is not only Sustainable but also Affordable 9 10 International Implications for Thailand Future Energy Scenarios Toward Sustainable Energy Policies and Practice in Thailand — Workshop Proceedings 109 BKK proceedings S4 V2:ASTAE Thailand proceedings V3 22/01/07 22:08 Page 110 11 12 13 14 S Chandrasekar Renewable Energy is not only Sustainable but also Affordable 15 16 International Implications for Thailand 110 Future Energy Scenarios Toward Sustainable Energy Policies and Practice in Thailand — Workshop Proceedings BKK proceedings S4 V2:ASTAE Thailand proceedings V3 22/01/07 22:09 Page 111 17 18 19 20 S Chandrasekar Renewable Energy is not only Sustainable but also Affordable 21 22 International Implications for Thailand Future Energy Scenarios Toward Sustainable Energy Policies and Practice in Thailand — Workshop Proceedings 111 BKK proceedings S4 V2:ASTAE Thailand proceedings V3 22/01/07 22:09 Page 112 23 24 25 26 S Chandrasekar Renewable Energy is not only Sustainable but also Affordable 27 28 International Implications for Thailand 112 Future Energy Scenarios Toward Sustainable Energy Policies and Practice in Thailand — Workshop Proceedings BKK proceedings S4 V2:ASTAE Thailand proceedings V3 22/01/07 22:09 Page 113 29 30 31 32 S Chandrasekar Renewable Energy is not only Sustainable but also Affordable International Implications for Thailand Future Energy Scenarios Toward Sustainable Energy Policies and Practice in Thailand — Workshop Proceedings 113 BKK proceedings S4 V2:ASTAE Thailand proceedings V3 22/01/07 22:09 Page 114 Financing Issues Anat Prapasawad Executive Officer, Business Development Department, TMB Bank Public Company Limited T The studious he purpose of the presentation is to review the issues around the creation and attainment of finance for sustainable energy. The presentation use of risk therefore examines the opportunities that are represented by renewable management tools energies (RE), and provides an overview of the barriers and/or risks affecting will lower many investment in RE projects. It continues to address the issues of risk/return analysis for the assessment of each major risk and the means to mitigate its barriers to potential impact on the project. Having discussed the instruments for financial adoption of risk management currently supporting RE projects and those that could be Anat Prapasawad renewable energy developed to reduce uncertainty as barriers, the presentation looks at some innovative financial services. In terms of opportunities for investment, the field of renewable sources and energy efficiency represent a diverse collection. In renewable energies, oppor- tunities exist in biofuel (biodiesel ethanol), PV, biomass generation, co-gener- Financing Issues ation, conversion of waste to energy, wind turbines, hydro and geothermal. Energy efficiency represents opportunities for the many aspects of controlling, replacing and modifying energy production, distribution and use. In the field of fuel switching and machine conversions related to changes of fuel, including from conventional fuel to new fuels, such as liquid biofuels and natural gas, there are equally many opportunities. More frameworks, lower risks Having reviewed the newly established targets for changing the configuration of the national energy portfolio towards greater use of new and renewable ener- gies, and the modalities such as incentives and renewable portfolio standards (RPS) for achieving such targets, the presentation emphasized the importance of financial risk management in dealing with the barriers formed by risks. The presentation reflected the views of the former director of the Division of Technology, Industry and Economics of the United Nations Environment Programme that “financial risk management is a key element of any commercial investment in conventional energy…, yet little attention has been paid to its use in the development of renewable energy technologies, particularly in develop- ing countries, … if used, it can transfer certain types of risks away from investors and lender.� It continued to cite from the World Bank Discussion Paper No. 391 which states that, “The financial incentive package for each country is carefully crafted to suit its economic, legal, and fiscal system. The types of incentives used include concessional import duties, excise tax benefits, corporate and income tax benefits (including tax exemptions, holidays, credits, International Implications for Thailand 114 Future Energy Scenarios Toward Sustainable Energy Policies and Practice in Thailand — Workshop Proceedings BKK proceedings S4 V2:ASTAE Thailand proceedings V3 22/01/07 22:09 Page 115 and deduction as well as depreciation), subsidies against investment cost, low- interest loans, and premium power purchase prices.� Addressing the type of finance, the four main elements were described as being the funding of major capital: • cash flow of the project as sources of fund for repayment • assets of the project as collateral Typical barriers …. • risk management through transfer include analytical • allocation of risks to parties best able and willing to accept barriers (quality Describing the process of project feasibility analysis, with financial, marketing, technical and management aspects, the presentation discussed the major risk and availability of categories during the project cycle. Typical barriers were illuminated, includ- information), ing high transaction costs, relatively small size, low marginal return, the per- cognitive barriers, ceived weak creditworthiness of companies, resource availability and supply risk, unfamiliarity with lack of legal and institutional frameworks to support RE projects, analytical barriers (quality and availability of information), cognitive barriers, unfamil- technologies, and iarity with technologies, and lack of knowledge in the financial institutions. lack of knowledge Anat Prapasawad Measures to change perceptions of risk in the financial Nonetheless, there is a diverse list of risk management instruments, including institutions. contracts, insurance/reinsurance, credit enhancement products (guarantees), alternative risk transfer instruments (various type of asset-backed securities), risk pooling, bundling of small projects (to reduce transaction cost) and carbon Financing Issues finance guarantees. The lessons learned in the process of identifying and analyzing such barriers and opportunities has demonstrated the need for knowledge enhancement on the part of financial institutions, private sector bodies and energy service com- panies. Using the example of the learning processes during the financing of an ethanol project, the presentation emphasized how this applies to various dimensions of renewable energy and energy efficiency projects, including tech- nology, organization, service and energy supply and generation. ■ International Implications for Thailand Future Energy Scenarios Toward Sustainable Energy Policies and Practice in Thailand — Workshop Proceedings 115 BKK proceedings S4 V2:ASTAE Thailand proceedings V3 22/01/07 22:09 Page 116 1 2 3 4 Anat Prapasawad Financing Issues 5 6 International Implications for Thailand 116 Future Energy Scenarios Toward Sustainable Energy Policies and Practice in Thailand — Workshop Proceedings BKK proceedings S4 V2:ASTAE Thailand proceedings V3 22/01/07 22:09 Page 117 7 8 9 10 Anat Prapasawad Financing Issues 11 12 International Implications for Thailand Future Energy Scenarios Toward Sustainable Energy Policies and Practice in Thailand — Workshop Proceedings 117 BKK proceedings S4 V2:ASTAE Thailand proceedings V3 22/01/07 22:09 Page 118 13 14 15 16 Anat Prapasawad Financing Issues 17 18 International Implications for Thailand 118 Future Energy Scenarios Toward Sustainable Energy Policies and Practice in Thailand — Workshop Proceedings BKK proceedings S4 V2:ASTAE Thailand proceedings V3 22/01/07 22:09 Page 119 19 20 21 22 Anat Prapasawad Financing Issues 23 24 International Implications for Thailand Future Energy Scenarios Toward Sustainable Energy Policies and Practice in Thailand — Workshop Proceedings 119 BKK proceedings S4 V2:ASTAE Thailand proceedings V3 22/01/07 22:09 Page 120 25 26 27 Anat Prapasawad Financing Issues International Implications for Thailand 120 Future Energy Scenarios Toward Sustainable Energy Policies and Practice in Thailand — Workshop Proceedings BKK proceedings S4 V2:ASTAE Thailand proceedings V3 22/01/07 22:09 Page 121 Financing Considerations for Renewable Sources and Energy Efficiency Projects Guido Delgado CEO, GAAD Inc. I Regulatory n the Philippines, the power generation mix is dominated by coal (31 per- cent), geo (25 percent) and hydro (20 percent). Natural gas and oil/diesel frameworks are each take approximately 12 percent of the mix, according to 2003 statistics. the only guarantee The power needs requiring attention in the country are those of grid electrici- for the positions of ty, renewable sources in both grid and off-grid distributed generation, and the banker and the energy management. The latter comprises a reduction of consumption, and Guido Delgado proper management of the load profile. energy operator to The Spanish gas and electricity company Unión Fenosa, the country’s third converge largest electric utility behind Endesa and Iberdrola, has a slogan that “the clean- est energy is the energy which is not consumed (saved)�. To this could be added Financing Considerations for Renewable Sources and Energy Efficiency Projects the closing slogan: “and which costs less.� From the perspective of the private sector, it is important that grid tariffs reflect the real costs in the grid load profile. This will provide market opportunities for energy management services (ESCO) and for renewable power. It will further- more reduce actual use of fossil fuels in peak time generation, leading to reduc- tion in emissions. With energy management, a load profile can be more evenly spread across peak and off-peak periods, resulting in noticeable savings. From the perspective of the banker, these elements do not carry the same attrac- tions as they do for a private operator. The issue for the banker is how to ensure that financial savings can be guaranteed. This can only happen under a regula- tory order, or a long-term power sales contract. The same applies in the financial scenario for off-grid solar systems, where the neither the user issue is to spread the initial investment out over a long period of installments— financed from the revenue of the user which accrue from the savings achieved nor the banker has by switching from, for example, diesel to solar. A banker will look carefully at control over the such a scenario, because neither the user nor the banker, has control over the price of diesel, and price of diesel, and thus no genuine control over the savings (to be) achieved. thus no genuine The only genuine guarantee that will satisfy a financier of private sector involve- ment in renewable sources, or energy efficiency, is a clear regulatory frame- control over the work. If this is not available and enforceable, then bank financing for the pri- savings (to be) vate sector will, in part to meet the requirements of the Bank of International achieved Settlements, be based upon collateral and balance-sheet financing. ■ International Implications for Thailand Future Energy Scenarios Toward Sustainable Energy Policies and Practice in Thailand — Workshop Proceedings 121 BKK proceedings S4 V2:ASTAE Thailand proceedings V3 22/01/07 22:09 Page 122 1 2 3 4 Guido Delgado Financing Considerations for Renewable Sources and Energy Efficiency Projects 5 6 International Implications for Thailand 122 Future Energy Scenarios Toward Sustainable Energy Policies and Practice in Thailand — Workshop Proceedings BKK proceedings S4 V2:ASTAE Thailand proceedings V3 22/01/07 22:09 Page 123 7 8 9 10 Guido Delgado Financing Considerations for Renewable Sources and Energy Efficiency Projects 11 12 International Implications for Thailand Future Energy Scenarios Toward Sustainable Energy Policies and Practice in Thailand — Workshop Proceedings 123 BKK proceedings S4 V2:ASTAE Thailand proceedings V3 22/01/07 22:09 Page 124 13 14 15 16 Guido Delgado Financing Considerations for Renewable Sources and Energy Efficiency Projects 17 18 International Implications for Thailand 124 Future Energy Scenarios Toward Sustainable Energy Policies and Practice in Thailand — Workshop Proceedings BKK proceedings S4 V2:ASTAE Thailand proceedings V3 22/01/07 22:09 Page 125 19 20 21 22 Guido Delgado Financing Considerations for Renewable Sources and Energy Efficiency Projects 23 24 International Implications for Thailand Future Energy Scenarios Toward Sustainable Energy Policies and Practice in Thailand — Workshop Proceedings 125 BKK proceedings S4 V2:ASTAE Thailand proceedings V3 22/01/07 22:09 Page 126 25 26 27 28 Guido Delgado Financing Considerations for Renewable Sources and Energy Efficiency Projects International Implications for Thailand 126 Future Energy Scenarios Toward Sustainable Energy Policies and Practice in Thailand — Workshop Proceedings BKK proceedings S4 V2:ASTAE Thailand proceedings V3 22/01/07 22:09 Page 127 Closing Remarks Arkhom Termpittayapaisith Deputy Secretary General, NESDB T his is the last session. We have had a full day of discussions, and they have been very fruitful. As I mentioned in the morning, this is the beginning of our CDP (country development program) on infrastructure. This is the first workshop that the NESDB and the Bank are co-organising as a kick-off workshop for our infrastructure development program. We have learned from all the speakers in Thailand and from abroad as well. As I mentioned, RE—renewable energy—and energy efficiency, perhaps are the only way out to solve the problem of energy in Thailand. Actually, our commit- Arkhom Termpittayapaisith ment, particularly in the NESDB, who is the one who works closely with the government, is to achieve this structure of the energy use in the longer term. Energy is not a single issue but energy issues are related to other economic activ- ities, as I mentioned: you know, building, transport and services that we have to work out with the others. But how can we change our structure? Because as I mentioned we are heavily importing energy, at 80 percent. How to implement is perhaps different for Closing Remarks each country’s experience. And we need more participation from the private sector, from the financial institutions and also from the Government. And I have to say that the Government should indicate very, very clear policies on energy. We have discussed investment costs. At the same time the private sector and the financial institutions need a clear policy on tariffs. And also on our projects, in energy projects, we need to look more at the longer term than the short term, because several things that may work in one country may not work in the other. And some short-term policy has already been announced. For example, the bioenergy and the ethanol projects, we go on. But for the biodiesel we may need some time to investigate whether it’s feasible and viable in terms of finance. And the last one, I think we also need knowledge creation in the energy sector. I liked the presentation of Vincent in Canada. You start from data collection and analysis. In Thailand, too, we need more consistent data collection and analysis. We need this because we need the benchmark for the country and for the firms and for the financial sector to use the idea for consideration. And the last one is knowledge, knowledge creation: not from the Government but from academics. So our academic friends may be able to help us in knowl- edge creation. I think what is very important is the university, industry and community link; it is very crucial for any success in any policy. So, I think, may I conclude, thank you once again for the Bank, and for the honorable speakers and particularly to Antonie who devoted his time traveling Closing Remarks Future Energy Scenarios Toward Sustainable Energy Policies and Practice in Thailand — Workshop Proceedings 127 BKK proceedings S4 V2:ASTAE Thailand proceedings V3 22/01/07 22:09 Page 128 between DC and Bangkok so many times. Next week he’ll be coming back again, so we need to talk about our further work. I’m sure that we need the more in- depth analysis on particularly issues in energy policy. So, may I, thanks once again for all the participants who have stayed with us until late in the evening. I’m sure you’re waiting for the party, so thank you very much. ■ Arkhom Termpittayapaisith Closing Remarks Closing Remarks 128 Future Energy Scenarios Toward Sustainable Energy Policies and Practice in Thailand — Workshop Proceedings