A lower power tariff slated to go into effect in Thailand on September 1st not only implies lower electricity costs for individuals and companies in the final four months of the year, but it also helps the debt-ridden Electricity Generating Authority of Thailand (Egat) with its debt-reduction goal.
The Explainer delves into the new power tariff, which is heavily reliant on petrol prices, and explains why Egat is involved in calculating the rates. Despite the fact that tariff prices have been lowering since May, there has been an increase in the installation of rooftop solar panels among homeowners and state entities.
Lower Energy Costs in Thailand
If the newly agreed pricing by the Energy Regulatory Commission (ERC) is 4.45 baht per kilowatt-hour (unit), it will be the lowest tariff for 2023. Before the price of liquefied natural gas (LNG) skyrocketed last year in response to Russia’s invasion of Ukraine, the tariff was less than 4 baht.
In Thailand, natural gas is the primary fuel for energy generation. From May through August, households and businesses pay 4.7 baht per unit.
Businesses spent 5.33 baht per unit in the first four months of this year, up 13% from the previous record high of 4.72 baht per unit, while families paid 4.72 baht per unit.
After soliciting public feedback on three new power tariff rates from July 7 to 21, the ERC decided in late July to cut the power tariff by 5.3% to 4.45 baht per unit. The 4.45 baht per unit fee was the lowest of the three possibilities, which also included 6.28 and 4.7 baht per unit.
The ERC chose the lowest rate in part due to a decrease in petrol costs, which are used to compute the fuel tariff, or Ft, which is a crucial component of the power tariff.
According to the regulator, the computation of the three electricity tariff alternatives was based on a 53% fall in the average price of the gas pool from the May-August cycle to 346 baht per million British thermal units.
The price of gas supplied from the Gulf of Thailand and Myanmar, as well as imported LNG, are used to calculate the gas pool price.
Prices for imported LNG and coal have fallen, while Thailand expects a higher supply of cheap indigenous gas, according to the ERC.
According to Khomgrich Tantravanich, secretary-general of the ERC, the new rate of 4.45 baht per unit reduces the Ft by 26% to 0.66 baht per unit, down from 0.91 baht per unit in the May-August cycle.
Electricity Generating Authority of Thailand Debt
Because a portion of electricity bills is used to reimburse the authority, the new power tariff is based not only on petrol prices and public opinion, but also on Egat recommendations. The ERC evaluated various times to pay back Egat, which incurred a huge deficit after subsidising electricity bills from September 2021 to May 2023, in calculating the new rate.
According to the regulator, the loss will drop to 135 billion baht by the end of this month.
If Egat picked a higher tariff rate, it might settle its loss in less time. The 6.28-baht charge would let the authority to pay off its debt by December of current year, while the 4.7-baht duty would pay it off by September 2024.
During his most recent media interview last week, Egat governor Boonyanit Wongrukmit stated that the authority does not agree with recommendations to reduce the power tariff from 4.45 baht per unit since it would harm future investment in power infrastructure.
He claims that prolonging the return period will have an impact on Egat’s cash flow and credit rating, potentially leading to increased lending rates. This will impede the authority’s investment in power transmission development, harming energy security in the long run, according to Mr Boonyanit.
Solar Energy in Thailand
Solar energy reduces customers’ reliance on the power grid, resulting in lower power bills. Despite the fact that the power tariff will be reduced next month, homeowners, businesses, and government organisations are considering installing rooftop solar panels to better deal with volatility in electricity rates.
The Department of Medical Services, which supervises over 30 hospitals around the country, is interested in clean energy.
The department agreed to examine and prepare a proposal to install rooftop solar panels at a pilot hospital with Energy Absolute Plc (EA), a renewable energy and electric car producer and operator.
If the solar modules do not create enough electricity, the department intends to deploy an energy storage device to provide a consistent supply of green energy.
Amorn Sapthaweekul, EA’s deputy chief executive, had stated that the corporation and the department are in the process of selecting the project’s pilot hospital.
After the cabinet voted on March 22, last year, to encourage agencies to reduce power and oil usage by 20%, in part by considering the installation of rooftop solar panels in collaboration with the business sector, clean energy is getting attention from state agencies.