Political Factors
In considering constructing micro hydropower plants in Northern Thailand, the political factors are very important. As one of the major stakeholders, the Thai government owns the land and rivers where these projects can be started. They also own the electrical grid, and own most of the electricity production in Thailand that already exist. One can say that government is strongly involved in energy-related business in the country, and to start business in this area one will have to cooperate with the government one way or the other.
The Thai government wants to increase the amount of renewable energy in Thailand. In their action plan for the coming years they promise tax benefits potential investors. Policy in this field in general is very supporting when it comes to using the hydro resources in the country for electricity production. Information from the Ministry of Energy when it comes to target levels and support schemes can be found here.
Infrastructure in the area is not the best, but there is a wide-spread electricity grid across the country. This means that connection to the national grid can be done without the biggest investments from neither the government nor a potential investor.
Foreign investment is welcomed by the government. This leaves the door open for any energy company that is willing to invest here. Corruption has been a problem for many years, and is something that will have to be dealt with. This might especially be a problem for a foreign company that needs permits, licences etc to start production on government owned land, using a government controlled resource like water. A comparison to other countries from Transparency International can be done here.
There has also been a problem with political unstable conditions in Thailand. Several parties struggle for power, and violence and coups has been the norm rather than a rarity. This brings uncertainty about long-term conditions and government plans for foreign investors. More information about politics and the thai government can be found here.
The political risk is definitively present, and the biggest uncertainty comes from the instability of government and the corruption level in the country. Except from this, the government seems very interested in both promoting electricity production in the country, and should be very willing to support investment in micro hydropower in Thailand.
Economics factors
Before we get deeper into our topic, I would first like to show the big picture of Thailand’s economic status as this will affect the purchasing power of our target customers and our project’s cost. The following are factors in the macro economy:
GDP (In 2010) : Expands at 7.8%
Interest rates : Thai policy rate is currently 2.5%
Exchange rates : US/TB 30.32 (3.34 p.m. Mar 9, 2011)
Inflation rate (February 2011):
Core Inflation = 1.45 %
Headline Inflation = 2.87 %
From data above, we can conclude that Thai Economy in 2010 has improved considerably (expanding at 7.8%) from last year’s contraction of 2.3 percent.
The positive factors are attributed to:
Higher exports in terms of US dollars that followed the economic recovery of major trading partners, combined with a revival in private domestic consumption and investment. Thailand is also still strong with a current account surplus of 4.4 percent of GDP in 2010.
Interest rates have gone up from 1.25% (since crisis in 2008) to 2.5% as of the 9th of March, 2011 but when compared to the regional (ASEAN), Thailand’s interest rates are still low.
Thai Baht exchange rates have also appreciated since 2001 to 2010 by more than 30% (From US/TB 45 to US/TB 30). This has been a great advantage for importers in Thailand.
Thailand inflation rate (consumer price) is now around 3% and trend to increase due to the increase in oil prices. And the core inflation is around 1.45 %. This is a factor for Bank of Thailand to evaluate the Thai policy rate.
The factors mentioned above have had major impacts on how businesses have operated and decisions made. For example, interest rates affect our total project's cost and therefore affect the breakeven point. Another example is changes in exchange rates which affect the costs of exporting materials and the supply and price of imported materials in economy country.
After we look in Macro Economics of Thailand, we then move to the Economy of Northern in Thailand as that is where our project is based. These figures will give a clearer picture of the micro environment of the northern states of Thailand.
The size of northern economic accounted for over 8.5 percent of the country and the production structure also has a good distribution.
Private Investment Indicators of the Northern Region
Source: Department of Industrial Works, Ministry of Industry
Northern Region Investment and Economic Center, Office of the Board of Investment (BOI)
From the table above, you can see that the investment value of newly registered factories is decreasing every year. On the other hand, the investment value of BOI’s approved projects is increasing especially in year 2010.
Then we look at the import/export of energy in Thailand in the table below.
Value of energy import in Thailand (UNIT: MILLION BAHT)
COMPILED BY: ENERGY POLICY AND PLANNING OFFICE (EPPO)
From the table above, we can conclude that the total value of energy import in Thailand is fluctuate but not much. We therefore say that it is almost constant every year.
Value of energy export in Thailand (UNIT: MILLION BAHT)
COMPILED BY: ENERGY POLICY AND PLANNING OFFICE (EPPO)
From the table above, we can conclude that the total value of enery export in Thailand is almost constant every year except in year 2008 which jumps to 319,212 million Baht.
EXPENDITURE ON FINAL ENERGY CONSUMPTION
(UNIT: MILLION BAHT)
Source: PTT, EGAT, DODE, DEDE
From the table above, we can conclude that the consumption of final energy is increasing every year including renewable energy.
Electricity utilization
(Peak Demand by Month 1996 to 2010)
Source: PTT, EGAT, DODE, DEDE
Source: FSS Research
Based on the graphs above we can assume that government has been persistently and consistently pursuing the development and growth of renewable energy in order to reduce reliance on oil and other imported fossil fuels. Even though the country still has to invest in conventional energy, its growth will be lesser than that of renewable energy due to higher importance being place on the environment by local and foreign governments. The costs of renewable energy has also be considerable lower when compared to the past which makes it a more attractive business venture as it is a viable source of profit for companies.
Social Factors
Stakeholders
There are many stakeholders who will benefit from this project. The stakeholders can involve in many ways such as financing, equipment and technology.
- Central Government – With the support from Department of Alternative Energy Development and Efficiency, Ministry of Energy who encourage and give out many policies for sustainable energy. This project will reduce the nation’s emission and also reduce the imported fuel to generate electricity.
- Local Government – With the authority to develop the local area with government’s budget and also permission of them will help the project to be successful.
- Local People – With the mission to provide electricity to every area especially to the area that electricity polls are not reachable so they can have a chance to have education, news and more productivity on agriculture and handcraft.
- NGOs – Source of fund and keep an eye on impact on environment and social.
- Bank – As an investment or giving a credit part.
- Universities and colleges – with the knowhow of the students and professors in the college that can provide the technology for turbine. This is win-win situation between both sides, the students have a reality project and our project can get the cheap and developed equipment.
- VSPP. SPP. IPP. – in this case is us but we are smaller
- The investors or firm who interest in CSR program – With the new corporate strategy trends, CSR or Corporate Social Responsibility is one tool that firms put the money into the projects which give back to the nature, people and environment. Our project is one kind of Social venture program which these firms can finance and use that amount of money to reduce the tax, according to the government’s policy which encourage producing the alternative energy.
Sustainability
Micro hydro appears to exhibit characteristics that indicate: ‘it is easier to make the profitable social, than to make the social profitable’! In planning micro hydro investments it appears important to consider means of using the plant to secure livelihoods at an early stage, and to then see how the impact can be spread to marginalized people and to social activities such as lighting in health centres, schools, etc.
According to The United Nations Decade of Education for Sustainable Development (2005-2014), for which UNESCO is the lead agency, seeks to integrate the principles, values, and practices of sustainable development into all aspects of education and learning, in order to address the social, economic, cultural and environmental problems we face in the 21st century.
Our Micro Hydro Power Project is a small tool but sustainably impact the people’s life and environment.
Just Distribution
With the purpose of Distance Learning Foundation for the distance learning via Satellite that want to provide the free education to every Thai students to have the good quality of education fairly. But without the electricity, no TV or communication that can support the distance learning. Moreover the equally education gives a chance to people uphill to have more skills, more knowledge to develop the living to have a better life.
Though there are many stakeholders involved in this project but nevertheless, the people who finally can access to the electricity is the one who get the benefit, not the money benefit but it’s a better living.
Efficient Allocation
- Negative externalities
There might be a environmental cost of the project which are not taken into account. For example, some nature will be destroyed, some trees have to been cut down. Also, the life in the river might be suffered from small damn (fish, scallops etc). Also, the flow of the river will be changed, and this could affect people living close to it. The access to electricity might mean that the village people start producing more waste, which is bad for the environment.
- Positive externalities
Access to electricity might help improving the standard of health care, public education in a village, which will increase the standard of living. The benefits gained from the project might be higher than the cost of running a power plant for the government. And also the electricity can let the villagers to work with their handcraft in the evening. The productivity for the agricultural product which is the main product of the villagers will be increased.
Technologial factors
Micro hydropower is a technical production process where mostly production happens without much human involvement. The technology is well known, and several producers have products like small turbines, pipes, generators etc. The chance of this technology becoming obsolete is also small, since it’s already so developed. That means there is little risk when it comes to the technology for producing micro hydropower. For more information about how this works, press here.
In Thailand there are already producers that know this technology, and the government also employs several technicians in the hydropower production throughout the country. Local knowledge might be small, and labor might have to be found elsewhere in the country. Training locals is a possibility for getting the manpower to operate the production sites. R&D investments are not too high in renewable energy has not been high in Thailand, but cooperation with a foreign investor might still be well accepted. An technology index can be found here.(Thailand placed as nr 41.)
The technology is environmentally friendly, and has a very small impact on the surrounding ecology. The biggest risk comes from disturbing the life in the river around the area where the turbine is placed.
Energy output is dependant on two major factors: the stream flow (how much water runs through the system) and drop (or head), which is the vertical distance the water will fall through the water turbine.
Legal factors
For constructing micro hydropower plant in Thailand
Generally, a commercial, renewable energy generator including a micro hydropower plant that is estimated to have a capacity to generate electricity less than 1 mega watt will be subject to the Very Small Power Producer(VSPP) regulations. However, for a non-commercial electricity generating project, it is not required to comply with the regulations.
Also, for any project located in a national park or preserved area, it is subjected to ask permission from the Department of National Parks, Wildlife and Plant Conservation (www.dnp.go.th) to build a micro hydropower plant prior to the construction as some areas might be more sensitive, stricter and more vital than the other, and the department may not allow the construction of any kind.
For regulations related to the impact of the micro hydropower plant on the environment around the power plant, according to the regulations of the Department of Alternative Energy Development and Efficiency (www.dede.go.th) , a power plant that generates electricity less than 10 mega watt is not required to do the Environmental Impact Assessment (EIA).
Public hearing is not required by law, but it is usually considered necessary to see if the need for a power plant exists in the area or not.
Environment Factors
The use of natural energy sources to provide electricity is rapidly increasing in popularity among home owners. The use of more natural and renewable energy sources is needed to take the burden off our current dependency on fossil fuels. The high levels of fossil fuels we burn each and every day are contributing to climate change and the polluting of the air and surrounding environments.
From our research, We found that petrochemical and electricity power plant mostly release carbon dioxide. We can attempt to save the earth from devastation by making the switch to natural and renewable energy sources which is a large step forward in the fight against climate change, and the fight for a cleaner environment. There are many different natural and renewable energy sources such as the sun, wind, tides, and water. Each country chooses the alternatives depended on country’s topography. In North of Thailand, their geographic has waterfall and mountains. People still use waterfall for daily usage and cannot be accessed to electricity. Hydro power is the most suitable source for helping the north people. It only takes a small amount of flow (as little as two gallons per minute) or a drop as low as two feet to generate electricity with micro hydro. Electricity can be delivered as far as a mile away to the location where it is being used. Hydro produces a continuous supply of electrical energy in comparison to other small-scale renewable technologies
Micro hydropower is considered to function as a ‘run-of-river’ system, meaning that the water passing through the generator is directed back into the stream with relatively little impact on the surrounding ecology.
The ecological impact of small-scale hydro is minimal; however the low-level environmental effects must be taken into consideration before construction begins. Stream water will be diverted away from a portion of the stream, and proper caution must be exercised to ensure there will be no damaging impact on the local ecology or civil infrastructure.
Energy output is dependant on two major factors: the stream flow (how much water runs through the system) and drop (or head), which is the vertical distance the water will fall through the water turbine.
Careful design is required to ensure the system has a minimal impact on the local ecology. A small amount of energy compromise may result, but this will ensure that the project does not have an effect on local fish stocks. The Environment Agency requires that stream levels must be maintained at a certain level in order to sustain the life within. Since there is no loss of water in the generation process, these requirements can easily be met.
