VZCZCXRO6403
RR RUEHCHI
DE RUEHBK #4889/01 2220518
ZNR UUUUU ZZH
R 100518Z AUG 06
FM AMEMBASSY BANGKOK
TO RUEHC/SECSTATE WASHDC 0849
INFO RUEHCHI/AMCONSUL CHIANG MAI 2278

UNCLAS SECTION 01 OF 03 BANGKOK 004889 
 
SIPDIS 
 
SIPDIS 
 
E.O. 12958, AS AMENDED: N/A 
TAGS: ECON ENRG TH
SUBJECT: THAILAND'S ENERGY PLANS 
 
¶1.  Summary: Despite rising energy prices and environmental 
concerns, Thailand expects to continue its reliance on traditional 
fossil fuels for its energy demands for the near future.  Although 
varying alternatives to carbon-based fuels have attracted some 
government support, costly production practices, conflicts of 
interests and a lack of technical expertise lead energy experts to 
doubt their growth as a percentage of Thailand's consumption.  One 
exception may be a reduction in petroleum usage for transportation, 
as Thailand flirts with measures promoting natural gas and ethanol 
to power vehicles.  However, some observers have expressed 
reservation at the government's commitment to ethanol as well, 
noting both the dearth of available biomass for conversion and 
inconsistent incentives. End summary. 
 
¶2.  Largely reliant on natural gas and petroleum to satisfy its 
energy demand, Thailand is attempting to shift the composition of 
its fossil fuel usage.  The Energy Policy and Planning Office 
(EPPO), which develops its research for the Ministry of Energy, 
forecast increasing substitution of coal over natural gas as a 
source of electricity.  Other government policies are promoting 
natural gas and ethanol-mixed gasoline to replace petroleum and 
diesel in transportation.  However, others contend that without 
greater support for non-carbon based alternatives, Thailand's energy 
growth may not be commensurate with economic growth.  Dr. Prida 
Wibulswas, energy specialist and a member of the prestigious think 
tank Royal Institute, noted that EPPO's own figures put the current 
ratio at 1:1.4, with energy lagging behind economic development. 
 
¶3.  According to Ms. Narupat Amornkosit, director of the power 
division at EPPO, Thailand currently derives around 70 percent of 
its electricity from natural gas. At current usage rates, Thailand 
has sufficient domestic natural gas reserves for another 25 to 30 
years.  To ensure these reserves are not tapped too quickly, Narupat 
said the Electricity Generating Authority of Thailand (EGAT) seeks 
increased coal usage for the immediate future, identifying as a 
source bituminous coal from Australia.  Coal also benefits from 
still large global reserves and low prices, a primary concern for 
profit-oriented EGAT.  She conceded the challenge of convincing 
affected communities to accept new power plant construction, but 
stressed that public education and outreach efforts have improved 
since beginning the controversial Banpu Public Company (BLCP) plant 
in Rayong province in 2003, which generated widespread opposition in 
the community and whose opening subsequently has been delayed 
repeatedly.  Independent Power Producers (IPP) like BLCP now engage 
directly with community leaders and provide financial incentives, 
said Narupat.  These private companies must take the initiative in 
community development, as some 70 to 80 private sector projects, 
including Small Power Producers (SPP), now produce nearly half of 
all electricity generated in Thailand. 
 
Do renewable energies have a future in electricity generation? 
--------------------------------------------- ------ 
 
¶4.  Experts disagree on the ability to expand certain renewable 
energy supplies.  For example, hydropower now contributes around 7 
percent of Thailand's electricity, including 2 percent purchased 
from Laos.  Narupat does not expect any significant increase in 
hydropower production, stating that Thailand lacked major internal 
waterways.  However, Prida asserted that Thailand still has untapped 
70 percent of its own hydropower capacity, mostly through smaller 
dams.  He suggested EGAT's hesitation in pursuing new hydropower 
projects in Thailand is because it emphasizes more profitable, 
larger dams.  But Narupat countered that the problem is 
bureaucratic, since new proposals for small dams must go through a 
separate Royal Irrigation Department.  She opined that these 
institutional complexities make any significant construction of new 
dams unlikely.  (Note: Because of the political sensitivities 
surrounding potential electricity purchases from controversial 
Salween dam projects in Burma, EPPO avoided comment on their role in 
future planning. End note.) 
 
¶5.  The Thai government has set policies to promote other renewable 
energies.  The Department of Alternative Energy Development and 
Efficiency (DEDE) reported that biomass composed 16 percent of 
Primary Energy Consumption (PEC), but mostly for traditional energy 
like cooking and rural heating.  The Energy Conservation (ENCON) 
program in 1994 has helped subsidize production of 16 biomass 
projects since 1995, including 1 billion baht (USD 25 million) for 
pig farm biogas projects.  Nonetheless, biomass still only 
contributes just over one percent of total electricity generation, 
according to Energy for Environment (E for E), an EPPO-funded NGO 
and self-described "Biomass Clearing House". 
 
¶6.  Many with whom we spoke were less sanguine about any significant 
expansion for biomass electricity generation.  Thailand has enough 
land to supply agricultural conversion products, especially rice 
husks and straws, believed Mr. Winai Praphakornkiat, information and 
engineering manager at E for E.  But the high costs of current 
production technologies and still minimal government support 
proscribe wider development.  Winai blamed government indecision and 
its lack of political will to promote biomass-generated electricity, 
so now few producers can compete with cheaper natural gas 
alternatives.  Both Narupat and Prida also agreed that biomass 
 
BANGKOK 00004889  002 OF 003 
 
 
conversions will have supplementary roles at best.  As an 
alternative, Winai proposed wider usage in heating as a substitute 
for fuel oil, as biomass offers a "good payback". 
 
Bureaucratic and policy failures 
-------------------------------- 
 
¶7.  Prida noted the percentage of renewable energy use for PEC has 
actually decreased in the past ten years.  He blamed some of these 
failures on funding mismanagement.  For instance, he claimed the 
government has directly used only 12 percent of the allocated 20 
billion baht (USD 525 million) from oil sales to develop and 
publicize alternative energies over ten years, and much of the money 
went to inefficient or unrelated projects.  He also stated that too 
often MoE members have vested interests in steering energy policies 
towards sources like coal, as they may personally operate mines or 
processing plants.  However, EPPO reiterated its preference for coal 
because of its relative abundance and political viability. 
 
¶8.  A weak, short-term outlook at the Ministry of Energy also 
contributes to Thailand's desultory policies, suggested Prida.  He 
personally advocated a concerted effort promoting nuclear power, but 
recognized the many obstacles to actual plant construction. 
However, without domestic educational development, Thailand now has 
only two available experts on nuclear energy in EGAT, both of whom 
are expected to retire soon.  He is also concerned about some 
popular fears over safety and recognized that the government would 
have to educate the public.  Prida estimated that the total time for 
Thailand to prepare and construct a working nuclear power plant 
would be 16 years.  He feared, however, that Thailand lacked the 
required foresight and economic objectivity for such coordinated 
planning. 
 
Saying no to petrol, yes to natural gas 
--------------------------------------- 
 
¶9.  Some of these concerns extend to the transport sector. 
Composing 37 percent of Final Energy Consumption (FEC), government 
policies have promoted natural gas vehicles (NGV) and gasohol, a 
blend of petroleum and ethanol.  Tax incentives were initially 
granted for vehicle alteration to compressed natural gas (CNG) usage 
and the purchase of E20 cars, which are specially made to run with 
20 percent ethanol content in the petroleum.  By the end of this 
year, the government has mandated the phasing in of 10 percent 
ethanol gasoline for all 95 octane fueling stations. 
 
¶10.  However, industry figures in agricultural products doubt the 
Thai government's commitment to ethanol.  The government officially 
reports that an increasing number of licensed ethanol producers can 
supply Thailand with one million liters per day by the end of this 
year and three million by the end of next year.  Producers, however, 
are not so optimistic.  They worry that despite its gasohol 
measures, efforts to secure enough ethanol production are 
progressing too slowly, currently at only 300,000 liters per day, 
far short of the one million target for next year.  Like biomass 
electrical generation, costs are prohibitively high without improved 
subsidies.  While there are more licensed producers now, only a few 
are actually making ethanol.  The Thai Sugar Producers Association 
considered that current high sugar prices prevent its industry from 
processing sugar into ethanol content.  Moreover, a spokesman from 
U.S. agricultural company Cargill also worried about Thailand's 
ability to secure tapioca chips from its cassava output, the second 
largest potential ethanol source in the country.  He noted that 
instead of selling domestically, Thai producers sell three million 
tons of tapioca chips to China each year, leaving little available 
for conversion to ethanol. 
 
¶11.  Finally, some are concerned whether the government will put 
more emphasis on natural gas.  Mr. Arnupab Tadpitakkul, government 
affairs director at Ford Motors in Thailand, noted the example of 
the government's sudden decision to postpone excise tax reductions 
from Ford's E20 car imports until January 2009 while maintaining the 
same reductions for CNG vehicles.  Ford's requests for a rationale 
last year were diverted from one ministry to another, each fingering 
others for the decision.  However, he speculated that since the 
now-private Petroleum Authority of Thailand (PTT) controls 
significant portions of Thailand's natural gas reserves, CNG 
promotion would boost its profits.  Local press also reported in 
June that PTT has decided to manage a 7-billion-baht fund to finance 
CNG conversions, set up jointly by PTT and the Energy Conservation 
Promotion Fund.  Arnupab also noted that Toyota, one of Thailand's 
largest investors, has only NGV-capable vehicles, possibly 
influencing the postponement. 
 
¶12.  Comment: Thailand's current plans seem to favor less radical 
approaches despite considerable government talk about renewable 
energies like ethanol as a means to achieve greater energy 
independence and improve farmer incomes.  Preparations for renewable 
energy will require the political will to allow higher energy prices 
and shoulder the costs of subsidies.  This requires the 
collaborative support of various ministries to share the same goal. 
However, the cheaper access and more lucrative profits in fossil 
fuels seems for now too alluring, thus resisting a genuine 
 
BANGKOK 00004889  003 OF 003 
 
 
commitment to renewable energy. End Comment. 
 
Arvizu