Field: Energy efficiency in buildings, Energy efficiency in industry, Providing financing
Global Technical function: Informing, Providing incentives, Setting regulatory requirement
Technical Function Unit: Introducing a tax instrument, Performance standard, Raising consumer awareness
Geographic Area: Thailand

Thailand National Energy Efficiency Programme

The government of Thailand has embraced energy conservation as a cost effective way to reduce greenhouse gas emissions in the country, while also strengthening energy security. A complementary set of policies have been implemented, setting standards for industry and incentivising energy efficient projects across society. Financed through a sales tax on petroleum products, the programme has been a great success, significantly reducing peak demand in the country.

The challenge:

Thailand experienced rapid economic growth during the early 1990s, with Gross Domestic Product growing on average 10% per annum during the first half of the decade. As a result, demand for energy increased rapidly during the period. To ease the strain on supply, the Thai government sought a cost-effective method to temper energy demand without jeopardising economic growth.

The measure:

The government recognised the huge potential of energy conservation, which can contribute to energy security while also reducing household expenditure, production and services costs, trade deficit, and pollution and greenhouse gas emissions.

The first action taken was to pass the Energy Conservation Promotion Act in 1992, setting regulatory requirements and performance standards for energy efficiency in industry. The 1992 act also established the Energy Conservation Promotion Fund. The fund is providing financing to energy conservation related programs and activities, such as energy efficiency improvements, renewable and alternative energy development, support to R&D in public sector and industry, human resources development, public education and campaigns for informing citizens. The fund was financed by introducing a tax instrument: a sales tax on petroleum products. Approximately €43 million per year are raised by the tax.

During this period the Thai government also launched a Demand Side Management Plan to better control electricity consumption. The programme was supported by capacity building grants and loans from overseas.

In 2002, the Energy Efficiency Program was expanded through the creation of the Energy Efficiency Revolving Fund. This fund aims at supporting private demand by providing incentives to private banks to streamline procedures for appraising and financing energy efficiency projects. It provides 0% interest rate loans to local commercial banks as an incentive to encourage the banks to lend to projects (especially for energy efficiency in buildings) and ESCO companies. The Revolving Fund was established with capital from the Energy Conservation Promotion Fund.

These cumulative efforts meant that by 2012 peak demand had been reduced by an estimated 2.6GW. At the same time, the population with access to electricity increased from 93 percent in 1990 to almost 100 percent.

In order to build on these successes, the Thai government recently announced a new long term energy efficiency development plan. This targets a further 20% reduction in energy consumption by 2030.

Lessons learnt:

A number of factors have contributed to the success of the programme. Starting with a lack of expertise on energy efficiency topics the government quickly had to train many staff. Making use of international support for institutional and human resources capacity building ensured effective transfers of knowledge. The petroleum tax also proved to be a strong measure, simultaneously raising capital and addressing price distortions that encouraged high energy use.

By incentivising private banks the Revolving Fund has also played a vital role byraising consumer awareness and unlocking the financing bottleneck that often blocks energy efficiency projects.

Further deployment:

Each of the policies were designed to take into account specific conditions in Thailand. However, bearing in mind the vast potential for energy conservation in all territories, many of the successful measures implemented in Thailand are equally applicable in other parts of the world. It is estimated at GML 9.

Links:

http://www.eppo.go.th/index.php/en/policy-and-plan/en-tieb/tieb-eep

http://www.wri.org/sites/default/files/Transformational_Climate_Finance_An_Exploration_of_Low-Carbon_Energy.pdf