Energy Conservation Promotion Fund

Section 6: POLICY STUDIES TO DETERMINE IMPLEMENTATION STRATEGIES FOR THE ENERGY CONSERVATION PROGRAM: PHASE 2

The first five-year implementation of the ENCON Program came to an end on 30 September 1999. In this connection, NEPO had carried out studies on various aspects in order to establish implementation strategies for Phase 2 of the ENCON Program to effectively achieve the objectives of the Program. Details of the studies can be summarized in the following:

6.1 ESTABLISHMENT OF A POLICY ON PROMOTING SOLAR CELL UTILIZATION

The Solar Energy Research and Training Center (SERT) of Naresuan University was hired by NEPO to undertake a study in order to develop strategies to promote solar cell utilization in Thailand, and the study was completed in November 1997. Workshops were organized to exchange views and opinions from experts, high-ranking officials and energy-related agencies, both local and international, with a view to determining guidelines and criteria on the use of ENCON Fund allocations to encourage various agencies or organizations to utilize solar energy in the form of both thermal energy and electricity.

6.2 ESTABLISHMENT OF A POLICY ON PROMOTING ENERGY CONSERVATION IN THE TRANSPORTATION SECTOR

The International Institute of Energy Conservation (IIEC) was hired by NEPO to undertake a study in order to develop a policy on energy conservation promotion in the transportation sector, and the study was completed in July 1998. The severity of the traffic congestion has resulted in enormous inefficient energy consumption. Although successive measures have been introduced during the recent period, they focus mainly on problems of the traffic system itself, without improving the city planning of major urban cities and their vicinities to be in harmony with each other. No competition has been introduced in the mass transportation and the service quality is poor. Charges on goods transportation are unfair as there is no competition in the service either. Therefore, the traffic congestion problem remains severe. Hence, in order to promote energy conservation in the transportation sector, support should be provided to potential agencies, including state universities, to carry out studies on the following aspects:

Recommendation on reasonable charges/fees for each category of transportation, which reflect the actual economic costs.

Improvement of the mass transportation system by encouraging more competition, increasing service efficiency, specifying appropriate directions and routes of bus-lanes to be in line with the city plan of the Bangkok metropolis and that of other major urban cities.

Development of energy-efficient vehicles or vehicle part prototypes to conserve energy and promote clean energy utilization in transportation.

Development of an information network linking basic information on transportation of various agencies so that they can efficiently cooperate with each other.

6.3 DETERMINATION OF PRICING SUBSIDIES FOR POWER GENERATED BY RENEWABLE ENERGY

With support from the Danish Co-operation for Environment and Development (DANCED) of Denmark, a consultant company, RAMBOLL, was hired to assist NEPO in developing guidelines on determination of purchasing prices for power generated by renewable energy. The study was completed in October 1998, giving details of the pricing mechanism to promote the use of renewable energy, in particular for Small Power Producers (SPP) in order to assess the pricing incentive levels, taking into consideration the benefits to be obtained from the use of domestic renewable energy sources instead of fossil fuel sources. DANCED has proposed two methods of subsidy provision, i.e. a subsidy for investment and a subsidy for production. Each method has both advantages and disadvantages. However, DANCED has recommended a subsidy for production as this method will help accelerate the change of technology used, from the current low-efficiency system to a high-efficiency one, to convert energy to electricity. Promotion of renewable energy utilization will be beneficial to the environment as well as the society. Compared with power generated by fossil fuel, the value of these benefits equals to 0.6 baht/kWh; two-third of this is the social benefit creating more labor employment in the locality. DANCED is of the opinion that the adder (subsidy) can be included in the power purchasing prices in order to promote power producers using renewable energy.

A major obstacle is the finding for a financial source for such a project. In this regard, DANCED has suggested a solution by providing the adder (subsidy) at a high level during the first 2-3 years. If the level is at 0.8-1.0 baht/kWh, it will be financially attractive for SPPs using renewable energy. Besides, provision of such incentives will help promote the use of more efficient production system and hence eliminate the doubt on renewable energy technologies that have not been well known before. Nevertheless, in the future there is a possibility that SPPs will also use fossil fuel as backup energy. So, there should be a clear regulation stating that provision of the adder will be only for the portion of power generated by renewable energy in order to prevent excessive use of fossil fuel in the renewable energy-based power generation system.

6.4 ESTABLISHMENT OF MINIMUM ENERGY EFFICIENCY STANDARDS OF ELECTRICAL APPLIANCES

NEPO engaged ERM-Siam, a consultant company, to develop guidelines on the establishment of minimum energy efficiency standards of six electrical appliances, i.e. refrigerators, air-conditioners, motors, ballasts, compact fluorescents, and fluorescent tubes, including impact on manufacturers and consumers. In addition, recommendations on measures to be taken to have the minimum energy efficiency standards established were required. Such measures might be in a form of persuasive measures for the general public to choose high-efficiency electrical appliances. Otherwise, they might be compulsory by specifying the minimum standards as a legal requirement under the Thai Industrial Standards Institute (TISI) law or under the Office of the Consumer Protection Board law and hence the energy-efficiency labeling would be enforced. The establishment of such measures had to be taken step by step, taking into account the quality and quantity of products in the current market, as well as the capacity of manufacturers to produce high-efficiency products. Manufacturers had to be allowed sufficient time to adjust their production line systems to correspond with the production criteria that emphasize on energy-efficiency of the products and the changes in the market resulting from the ENCON Program implementation.

The study by ERM-Siam was completed in June 1999. Several seminars were organized with manufacturers and entrepreneurs of each product type. The majority have agreed with and understand the objectives and approaches of the implementation and will cooperate with NEPO in further operation of this task. The outcome of the study indicates that the establishment of such standards should begin in the year 2000 as persuasive measures and should become compulsory in 2004. The implementation of this project is expected to reduce total energy consumption by 3,500 GWh between the years 2004-2011 and reduce capacity demand by 700 MW by 2011. On the consumers’ side, there will be substantial savings on their electricity bills due to the use of high-efficiency appliances, accounting for the net present value of about 30 billion baht in 2004. On the environmental side, it is expected that the emission of green house gas (carbon dioxide) will be reduced by about 2 million tons. The study outcome also indicates that the establishment of the minimum efficiency standards will bring about economic benefits in a shorter time than the natural energy efficiency improvement, which will in turn result in savings in terms of money. Economic, energy and environmental indexes will also be the indicators of the effectiveness of such measures.

6.5 STUDY ON DOMESTIC ENERGY DEMAND AND SUPPLY BALANCE AND ADJUSTMENT OF THE ENERGY CONSERVATION PROGRAM

The Energy Research Institute (ERI) of Chulalongkorn University was engaged by NEPO to evaluate the past implementation under the ENCON Program and to recommend implementation strategies for the next phase. The study also included an analysis on potential energy saving from recycling or reuse of waste materials. The study was completed in August 1999. The analysis on the potentiality for energy conservation during the first five-year period of the ENCON Program was based on the assumptions that the improvement of energy efficiency of equipment and appliances depended on market mechanisms, economic conditions and technologies that have been developed, and that the current policy of Thailand had resulted in a higher level of energy conservation as well as more development and utilization of energy conservation technologies. ERI has estimated the aggregated energy demand/supply and accumulated energy saving under energy conservation conditions, covering the period 1995-2025. It has been found that the transportation sector has a high potential to save energy, i.e. at a rate of 56%, the industrial sector about 30%, the residential and commercial sectors about 6% and 7% respectively. This results from consumption of four main types of fuel, i.e. gasoline (28%), electricity (23%), jet fuel (15%) and diesel (12%). It can be noted that three out of these four types of fuel are used in the transportation sector. As for the potential in saving electric power, the industrial sector has the highest potential, i.e. at a rate of about 54%; next to it are the commercial sector (30%) and the residential sector (17%).

The ERI has concluded that there should be some adjustments to the energy conservation policy of Thailand in the following aspects:

Develop a project on the minimum energy-efficiency standards for new buildings. There should be energy-efficiency testing and labeling according to the types of equipment and electrical appliances.

Support market-driving forces and stimulate a market for energy conservation-related products and services.

Demonstrate examples of efficient energy management through the Voluntary Program to encourage energy management improvement by providing financial incentives for existing commercial buildings for the next 2-3 years. If the implementation does not yield a satisfactory outcome, compulsory measures will then be required under the Designated Building Project of the Compulsory Program.

Improve efficiency of existing factories by providing financial incentives that are different from those provided under the Compulsory Program and stimulate customers to choose high-efficiency equipment and appliances, not just products with the minimum energy-efficiency as specified by laws. In this connection, a subsidy or an incentive may be required to promote the use of such high energy-efficiency products.

The concept underlying the above recommendations is based on financial incentive measures to make energy-efficiency measures acceptable by the general public. Such incentives will gradually decrease in the future in order to let the market mechanism work by itself, which will spur investment in increasing energy efficiency.