Year 2009

 MARCH

EPPO sticks to green plan
As oil prices revive, so will green interest

By: BUSRIN TREERAPONGPICHIT

The sudden plunge in oil prices and the world recession have raised new questions about the future of the Thai government's policy to promote alternative and renewable energy.

Viraphol: Renewable-energy producers respond to incentives But the need for investment remains, considering how the evaporation of alternative fuels' price advantage over fossil fuels has eroded consumers' interest in greener energy. The shift is apparent in the dwindling waiting lists for installing liquefied petroleum gas and natural gas conversion kits.

The sharp drop in oil demand and prices also poses a massive threat to alternative fuel supply chains, which Thailand has worked hard to establish and was considered far ahead of other Southeast Asian countries.

In any case, fossil fuel prices will most certainly rebound, given supply constraints and reviving demand. And the higher crude prices go, the more interested the public and policymakers become in the alternatives again.

"Maybe the price could stay at $40 or $50 for a while, but the cost of new petroleum fields these days starts at $60 a barrel," says Viraphol Jirapraditkul, the director-general of the Energy Policy and Planning Office (EPPO).

"Who is going to invest in seeking new resources? Prices will certainly roll back into high territory."

EPPO therefore insists it must go ahead with its green energy programmes - even if maintaining the momentum of demand and supply in green fuels is definitely not an easy task.

The agency recently revised its 15-year alternative and renewable energy master plan by increasing incentives for investors while keeping down green fuel prices for motorists.

It has also set a more ambitious target of 20% of total fuel consumption, up from 15%.

"We are very confident in what we have done," said Mr Viraphol. "Recent cheap oil prices may discourage some motorists, but it is just a temporary impact from the world economic storm. It [oil price] will bounce back."

EPPO is working with two categories of alternative fuel to replace petrol: gasohol, a petrol blended with ethanol, and biodiesel, a blend of palm oil with diesel.

When crude prices were climbing rapidly from late 2006 to mid-2008, the agency was able to persuade cautious motorists to give ethanol-based petrol a try. Once they had filled their tanks with gasohol and saw no effects on their engines, they were likely to continue using the cheaper fuel rather than pure petrol.

"It is a psychological effect. People are always sensitive to prices," Mr Viraphol said.

Statistics clearly show the strategy's success, with gasohol now accounting for 60% of the petrol sold in the country.

In February, an average of 12.2 million litres of gasohol 95 and 91 were sold daily, more than the 8.6 million litres of conventional petrol. This equates to a demand for ethanol of 1.3 million litres a day.

Diesel B2, a 2% biofuel mixed with high-speed diesel, sold 52 million litres daily in February. The sales of greener B5 were 19.9 million litres in February, up from 5.3 million in the same month last year.

EPPO's target is to see ethanol demand grow to 3 million litres a day in the next two years and to 9 million by 2022.

The government will continue to subsidise gasohol and biodiesel while raising the levy the Oil Fund collects on petrol to maintain alternative fuels' price advantage.

In the power sector, as in other countries, renewable energy sources such as wind, solar, biogas and biomass are being heavily promoted. In Thailand, the key to success has been the "adder" tariff paid for electricity from renewables, which has prompted investors to make the shift happen.

"Renewables' share in the power sector has stayed at 2% for a very long time. Once the adder tariff programme kicked off, their share jumped almost six points to its current level within just one year," Mr Viraphol said.

EPPO has moved to build on the success of the adder tariff by offering even higher tariffs. Within a few days of its announcement of a new rate, several renewable-energy project applications were submitted to EPPO seeking incentives, with a total capacity of 6,000 megawatts.

"Under the new plan, we aim to see a share of renewables in the power sector of 10% by 2020," said Mr Viraphol. "You can see the effectiveness of the adder. We are very happy with this. Don't worry, we can reach our target for sure."

This article is written by The Nation

16/03/2009

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