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8 February 2023

Unlocking Thailand’s power system flexibility will bring economic and climate benefits

Enhancing the flexibility of existing thermal power plants in Thailand will facilitate the integration of renewable energy. This can reduce operating costs by up to $3.48 bn over 20 years and help efforts towards climate neutrality.

Unlocking Thailand’s power system flexibility will bring economic and climate benefits

Thailand is highly vulnerable to the effects of climate change, with extreme heat and rising sea levels threatening parts of the country, including its capital Bangkok. At COP26, Thailand announced its goals of reaching carbon neutrality by 2050 and net zero greenhouse gas emissions by or before 2065. Solar power will play a fundamental role in reaching these objectives. But the planning and operation of the Thai power system need to become more flexible to handle the variability and uncertainty of solar power, allowing the system operators to balance demand and generation reliably and cost-effectively. Thus, power system flexibility is becoming increasingly important for policymakers and system planners to facilitate the uptake of renewables.

Various flexibility options exist, such as interregional grid exchange, demand-side response, battery storage, and sector integration. But the lowest hanging fruit in terms of flexibility in Thailand is to operate the existing thermal power plants, especially gas power plants, more flexibly, with minimum generation, quicker start-up time, and quicker ramp-up rate.

According to the IEA, the key operating characteristics of typical power plant technologies in Thailand’s system are generally less flexible than the typical global average values of the same technology, particularly for minimum generation levels. Retrofitting power plants to enhance the key operating parameters could improve technical flexibility even further (see Table 1). These inflexible operational characteristics not only result from technical but also political and regulatory constraints

Economic benefits from a more flexible power system

A recent study shows that a more flexible power system allows using variable renewable energy (VRE) more efficiently and can thus significantly help reduce variable renewable energy (VRE) curtailment, especially for solar to below 30% (see Figure 1). Additional flexibility, such as battery storage and/or sector integration – electrification of transport and industry low-temperature heat – can further minimise curtailment. Increasing thermal generation flexibility can facilitate the integration of a 60% share of VRE  in 2042, in line with the country’s net-zero commitments. The increase in renewable energy would result in saving fossil fuel costs, bringing overall economic benefits to society of about 3.48 billion USD over 20 years (2022 to 2042).

The study analysed two scenarios: A business as usual (BAU) with Thailand’s average flexibility and a system with best-enhanced flexibility (see Table 1). Long-term system operating costs and VRE curtailment were calculated based on a unit-commitment model developed for Thailand to derive system operating costs and the generation profile of the two scenarios on representative days each year.

Regulatory reforms are as important as new technology solutions

To improve the flexibility of thermal power plants, Thailand needs to reduce technical, regulatory, and political-economic barriers. Retrofitting some components of existing power and replacing them with state-of-art flexible solutions can significantly help increase system flexibility. SHURA Energy Transition Centre has estimated a range of costs for retrofitting three different sizes of power plants, as shown in Table 2. However, the flexibility needs to be assessed in detail to ensure that other cheaper options, such as demand-side response or, in the future, battery storage, won’t deliver similar services at a lower cost. In addition, the investments need to be compatible with net-zero objectives. This means that gas power plants will need to become green hydrogen-ready in the future.

Importantly, regulation must promote operational flexibility. According to the IEA, the existing fuel supply contract arrangement in Thailand, which is subject to minimum take-or-pay quantities, prevents the use of otherwise available and cost-optimal resources in the system. It significantly limits flexibility and increases system operational costs. Thailand would benefit from mixing less flexible long-term contracts with more flexible shorter-term contracts. The actual minimum-take obligations in power purchase agreements (PPAs) from independent power producers and imports from Laos are also limiting the provision of flexibility and should be reviewed. The minimum-take obligations, particularly in off-peak time, lead to the over-commitment of generation, pushing up operational costs and uneconomic VRE curtailment. Those refinements can be brought into the current enhanced-single buyer model of Thailand.  
Future power purchase agreements should also seek to reduce general minimum-take obligations and provide the contractual flexibility needed to integrate higher shares of renewables. Reducing minimum generation is the most crucial feature, as it reduces most curtailment. The level of minimum obligation could be based on the contractual flexibility of the wider power portfolio, as well as the technical capabilities of the generation fleet. Moreover, it is important to ensure that Thailand has the appropriate policy and regulatory frameworks to enable battery energy storage systems (BESS) to provide its full range of services. Flexibility improvements can be done step by step depending on the VRE share and integration challenges.

In the longer run, a broader political-economic market reform will be required to align the power system operation and planning practices with net-zero objectives. Incentives for providing flexibility should be available in all market segments, and tariffs need to be redesigned to facilitate cross-sectorial integration such as the electrification of transport and industrial heat, and production of green hydrogen. Broader power system restructuring may be required, so that flexibility providers can gain incentives and investment signals from short-term electricity markets. More competition in the market would incentivise cost-effective flexible systems at lower costs, allowing them to value every kwh of renewable electricity.

A more flexible power system that will enable a fast ramp-up of renewable energy will not only reduce operating costs and thus bring economic benefits, but also increase energy independence and help address the climate crisis.

This guest post is written by Veeraya Imcharoenkul from the Chulalongkorn University, Thailand, who was a fellow in the EnerTracks training programme in Autumn 2022. EnerTracks aims to deepen and foster international expertise on how to tackle the energy transition worldwide.