Negative impact of climate change on EGAT used of renewable energy.

The impact of climate change on electricity company renewable energy choice.

EGAT is the leading state-owned electricity generation and transmission in Thailand. Controlling more than 40%[1] of country’s gross energy generation and nationwide electricity transmission, EGAT controls the future of Thailand electricity production landscape. Climate change has significant impact on EGAT in many aspects. The most intuitive aspect is in downstream where climate change drives incremental electricity consumption in Thailand each summer. Other climate change impact is, however, not so straight forward. In 2011 and 2015, Thailand faced two extreme of climate change.

1In 2011 Thailand faced the worst flood in half a century causing $46.5[2] billion in economic damage. EGAT was blamed, despite its effort to clarify[3], as the public held EGAT responsible for its mismanagement of water level in Bhumibhol Dam that later cause “The great flood”. Four years later, in late 2015, Thailand faced the worst drought in 10 years. The EGAT’s dams are drying up resulting in 28%[4] declined in electricity generated through hydropower in 2015 when compared with 2014.
As climate change drives an increase in Thailand, demand for electricity consumption of grew 3.2%[5] in 2015. Thais energy consumption growth put pressure on EGAT to grow at a faster rate if it were to maintain the position of leading electricity company. However, EGAT struggles to keep up with the 2generation effort. To illustrate, in 2015 EGAT faced a decline in electricity generated of 5% vs. 2014 (from 73,335 to 69,840 million kWh). A number driven by drought, another negative impact of climate change affecting EGAT. The Thai electricity giant rely too much in its Hydropower. EGAT’s 22 Hydropower plants account for 22% of total installed capacity, yet generated only 5% of EGAT total energy generation in 2015. Each year due to climate change yearly rainfall become more and more difficult to predict, making it difficult for EGAT to fully leverage its Hydropower source[6]. Not to mention the risk from climate change when the company is trying to fully utilize the dam to generate electricity is so great as we have seen in 2011 and 2015.

The trend of climate change affecting reliability of hydro power is consistent across the globe. Research in Brazil, a country where 93.2% of electricity generated locally is through hydro power plants[7], confirmed that like Thailand Brazil faces high degree of vulnerability from the risk of climate change.

The pressure to find alternative source of energy is high as EGAT need to balance three challenges. First, EGAT need to diversify from its reliance
on Hydropower, which has become much less reliable due to climate change and present high risk of managing at the optimal level. Second, EGAT must grow at least as fast as the market to maintain its the no.1 position as demand continue to grows. Third, EGAT to maintain the share of renewable energy in its production mix due to the focus of “Energy Industry Act 2007”[8] emphasizing the importance of renewable energy.

3Having hydropower as a key part of electricity generation used to be beneficial to EGAT. However, EGAT is at the cross road where it need to shape the future landscape of electricity power generation mix of itself and Thailand. The challenge that EGAT need to overcome is whether to choose an easy path to diversify away from hydro quickly through fossil based power plant or choose sustainable path of alternative renewable energy. So far the company shows good intention in concentrating most of its future power source on renewable energy. In 2012, EGAT along with Thailand Ministry of Energy, and The Department of Alternative Energy Development and Efficiency (DEDE) developed Alternative Energy Development Plan (AEDP). The plan that is considered one of the most aggressive renewable energy plan in Southeast Asia targeting alternative energy of 25% within 2021[9].

However, EGAT action move against its vision. Since 2013 electricity generation from clean energy (non-hydro) compound annual growth rate is -27.4%. Clean energy share is in fact shrinking in absolute term from 5,938 million kWh in 2013 to 3,128 in 2015. Moreover, number of Clean Development Mechanisms (CDM) project power plants drops from 8 to 4 projects in 2015[10].

4

The decision faced by EGAT is tough. It is now time for the company to “walk the talk”. The company vision is certainly in the right direction with clear sustainable objective, however, can EGAT stay true to its goal given a rise in pressure to be power generation leader in Thailand and the need to diversify from existing hydropower to mitigate the risk in climate change?
In 2015, the new version of AEDP[11] was launched with the target of 30%[12] final energy from renewable energy sources by 2036. The revised plan place emphasis on solar and wind energy.

(793 words)

 

Source: http://www.renewableenergy-asia.com/Portals/0/seminar/Presentation/04-Overview%20of%20Alternative%20Energy%20Development%20Plan%20(AEDP%202015).pdf

 

[1] “EGAT Annual Report 2015.” Electricity Generating Authority of Thailand. EGAT, Jan. 2016. Web. 4 Nov. 2016. http://www.egat.co.th/en/images/annual-report/2015/egat-annual-eng-2015.pdf

[2] “Thai Flood 2011.” World Bank. World Bank, 2011. Web. 4 Nov. 2016. http://documents.worldbank.org/curated/en/677841468335414861/pdf/698220WP0v10P106011020120Box370022B.pdf

[3] “Floods: Blame the Weather, Not Humans.” Bangkokpost. Bangkokpost, 3 Nov. 2011. Web. 4 Nov. 2016. http://www.bangkokpost.com/learning/learning-news/264569/floods-blame-the-weather-not-humans

[4] “EGAT Annual Report 2015.” Electricity Generating Authority of Thailand. EGAT, Jan. 2016. Web. 4 Nov. 2016. http://www.egat.co.th/en/images/annual-report/2015/egat-annual-eng-2015.pdf

[5] “EGAT Operation in 2015 and Direction in 2016.” Electricity Generating Authority of Thailand. EGAT, n.d. Web. 4 Nov. 2016. http://www.egat.co.th/en/index.php?option=com_content&view=article&id=303&Itemid=146

[6] “EGAT Annual Report 2015.” Electricity Generating Authority of Thailand. EGAT, Jan. 2016. Web. 4 Nov. 2016. http://www.egat.co.th/en/images/annual-report/2015/egat-annual-eng-2015.pdf

[7] Andrade, Eurídice M., et al. “Sensitivity of Hydropower Performance to Climate Change: A Case Study of a Brazilian Company.” African Journal of Business Management, vol. 6, no. 32, 2012., pp. 9250-9259doi:http://dx.doi.org.ezp-prod1.hul.harvard.edu/10.5897/AJBM11.2695.

[8] “Energy Industry Act 2007.” Enegy Regulatory Commission. ERC, n.d. Web. 4 Nov. 2016. http://www.erc.or.th/ERCWeb2/Upload/Document/Enery%20Act%20(unoffical%20Translation%202012)%20FINAL.pdf

[9] “The 10-Year Alternative Energy Development Plan …” N.p., n.d. Web. 4 Nov. 2016. http://weben.dede.go.th/webmax/content/10-year-alternative-energy-development-plan

[10] “EGAT Sustainability Report.” Electricity Generating Authority of Thailand. EGAT, 2015. Web. 4 Nov. 2016. http://www.egat.co.th/en/images/sustainable-dev/csr-report/Sustainability-Report-2015-EGAT-EN.pdf

[11] “Alternative Energy Development Plan (AEDP) 2015.” Renewableenergy-asia. Ministry of Energy Thailand, 2015. Web. 4 Nov. 2016. http://www.renewableenergy-asia.com/Portals/0/seminar/Presentation/04-Overview%20of%20Alternative%20Energy%20Development%20Plan%20(AEDP%202015).pdf

[12] “Thailand Electricity Security Assessment 2016.” International Energy Agency. IEA, n.d. Web. 4 Nov. 2016. https://www.iea.org/publications/freepublications/publication/Partner_Country_Series_Thailand_Electricity_Security_2016_.pdf

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5 thoughts on “Negative impact of climate change on EGAT used of renewable energy.

  1. Very interesting writeup! Just to add to everything that you have said, this report (http://www.egat.co.th/en/images/about-egat/PDP2015_Eng.pdf) states the AEDP is also planning to focus on waste, biomass, and biogas power generation as alternative sources of renewable energy. This report says that about 3000 MW of power could be generated from such sources. Another interesting source of power mentioned in this report was Cassava, which could be used to produce about 1500 MW of power. There are many sources available for EGAT, it will be very interesting to see which approach they end up choosing.

  2. Nice write up. It’s really interesting hearing about the challenges facing hydro power – I had thought of hydro power as a clean energy source but didn’t realize how susceptible it was to climate change and maybe even exacerbates some of the effects (like the flooding you mentioned above). China is facing similar challenges with the three gorges and other dams (http://www.nytimes.com/2015/11/30/world/asia/chinese-report-on-climate-change-depicts-somber-scenarios.html).
    I wonder if there are technological or analytical tools that may help optimize dam operations that could help minimize the effect of any shortages or floods.

  3. Great article. I hadn’t considered how climate change could affect hydro-power infrastructure performance. EGAT faces a tough challenge of scaling up its electricity production to match rapidly growing demand. I wonder how new environmental standards for public financing might play a role in EGAT’s decision-making process for which energy types to invest in. For example, in late 2013, Japan’s export credit agency JBIC signed a nearly $200 million loan agreement KEGCO, “a Thai company in which Mitsubishi Corporation (MC) and Tokyo Electric Power Company, Inc. (TEPCO) have equity stakes indirectly. KEGCO will build and operate a gas-fired combined cycle power plant in Nakhon Si Thammarat Province in southern Thailand, and plans to sell electricity generated to Electricity Generating Authority of Thailand (EGAT) for 25 years from 2016” (https://www.jbic.go.jp/wp-content/uploads/interview_en/2014/04/20278/JBIC_interview_11_en.pdf). As a result of the 2015 Paris Agreement, export credit agencies in OECD countries agreed not to finance coal-fired power plants outside of the poorest countries starting in 2017, so JBIC would not be able to finance coal-fired power plants in Thailand, but could continue to support gas-fired plants (https://www.ashurst.com/en/news-and-insights/legal-updates/oecd-restricts-ecas-on-coal-ipps/). Chinese agencies are not party to the agreement, however, so if EGAT did want to secure financing for coal-fired plants with Chinese turbines, they could turn to Chinese export credit agency export financing.

  4. Interesting read. Given the geographic location, it seems that flood is an issue Thailand often deals with. I am wondering whether this is a change that is exacerbated by global warming or other environmental issues? If so, how does the government play role in planning and making sure that the energy needs are met?
    In terms of finding alternative energy sources, I thought about wind or biomass that does not result in pollution and still maintain a relatively high level of energy efficiency. Does Thailand have land or infrastructure that is conducive to developing such energy sources? If capital is a problem, I thought that is something the government can step in and provide subsidies to motivate major players to participate in, as was the case with many developing countries in Asia.

  5. Very interesting article! I was surprised to see how a government-owned company has specific plans to take preemptive measures to climate change and transform its existing portfolio. For such a large company that has the biggest impact on electricity generation in Thailand, its seems like there might be some difficulties in maintaining the implementation of the plan, which is expected to be done under a long-term time horizon. Do you think there are measures that can be taken by the private sector to assure that the government-owned company executes the shift in their portfolio? Also coming from a country that the generation of electricity is mainly done by a state-run company, I am curious about how to incentivize the government to take necessary measures in the future.

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