Price reforms necessary for free electricity transition: TDRI

 

The Thailand Development Research Institute (TDRI) has called for a comprehensive overhaul of the country’s electricity pricing structure with an eventual transition towards a free electricity market. 

 

These measures are crucial to address rising electricity costs, ensure long-term energy security and attract foreign investment, TDRI said. 

 

At the "Expensive Electricity...How to Solve It? Shake Up the Price Structure, Move Towards a Free Electricity Market" seminar on Tuesday, the TDRI offered recommendations for a fairer electricity pricing system and a market-driven approach to clean energy generation. 

 

Dr Areeporn Asawinpongphan, TDRI research fellow in energy policy, highlighted the limitations of price controls, saying they can stifle innovation, distort energy consumption patterns and undermine the financial viability of independent power producers. 

 

 

The TDRI proposed a three-pronged approach to addressing immediate concerns:

• Promote gas price competition: Encourage competition among LNG suppliers and implement measures to ensure fair market access.
• Reform pipeline transit costs: Review transit cost calculations so they reflect actual construction costs and improve pipeline management efficiency. 
• Re-evaluate availability payments: Review electricity demand forecasts to reduce the construction of unnecessary power plants, and renegotiate existing power purchase agreements to share construction costs more equitably. 

 

However, the TDRI admitted that these were only temporary solutions, adding that to tackle the root causes of high power prices and ensure long-term energy security, Thailand must transition towards a free electricity market. 

 

 

 

 

 

Chakorn Loetnithat, TDRI senior researcher, outlined two key steps towards this transition:

• Phased market liberalisation: Grant private entities greater access to transmission and distribution networks, starting with export-oriented sectors and large manufacturing industries committed to 100% renewable energy.
• Transparent and cost-reflective network charges: Implement a transparent and cost-reflective framework for transmission connection fees and network system costs, with regular reviews to ensure accuracy.

 

 

TDRI president Dr Somkiat Tangkitvanich said that while market liberalisation may lead to short-term price fluctuations, it will eventually drive down prices through increased competition. He also stressed the importance of accelerating the transition to clean energy to mitigate price volatility risks associated with fossil fuels. 

 

 

The TDRI has cautioned that failing to embrace a free electricity market and speeding up the transition to clean energy could have severe impacts, namely: 

• Economic: Increased production costs for businesses can hinder competitiveness and foreign investment, while the Carbon Border Adjustment Mechanism (CBAM) poses a significant threat to exports. Thailand also risks losing billions in foreign investment due to insufficient clean energy supply. 
• Social: Job losses in carbon-intensive industries and potential social inequality as green jobs tend to offer higher wages.
• Environmental: Continued reliance on fossil fuels will undermine efforts to achieve carbon neutrality and exacerbate climate change.

 

 

 

 

The TDRI urged the government to include the transition to a free electricity market with clean energy in the upcoming Power Development Plan (PDP) 2024, emphasising its critical importance for Thailand’s economic, social and environmental sustainability. 

 

 

The TDRI’s proposal also aligns with former PM Thaksin Shinawatra’s ambitions to reduce the cost of household electricity. Thaksin outlined plans to reduce electricity costs as part of a strategy to attract major technology investments, particularly in data centres and artificial intelligence hubs. 

 

Speaking at the "Chat with Tony: Bull Rally of Thai Capital Market" event held by Kaohoon TV Online on Monday at Dusit Thani Hotel, Thaksin said that negotiations were underway for potential investments exceeding £40 billion (1.69 trillion baht) to establish Thailand as a regional technology hub.

 

Drawing parallels with the United Arab Emirates, which views data centres and AI facilities as modern-day refineries, Thaksin emphasised the importance of competitive energy prices in attracting such investments.

 

The former premier also disclosed plans to cut the price of electricity to about 3.70 baht per unit, asserting that initial assessments have shown these reductions are quite feasible. 

 

 

"We're merely trimming unnecessary expenses that have been passed on to the public," he explained, addressing concerns about recent declines in energy stock prices.

 

Thaksin added that he has discussed the initiative with Energy Minister Pirapan Salirathavibhaga. He said that the cost of solar power has dropped to 2 baht per unit, adding that power plants with operating costs that exceed green energy alternatives could be phased out. 

 

"Global electricity rates stand at roughly 6 cents per unit, whilst Thailand's rate is 13 cents," he noted. 

 

The proposed reductions would involve streamlining costs across three electricity authorities and implementing stricter controls on public electricity usage, including addressing wasteful practices by local organisations.