Institutional and Governance Aspect of the Energy Transition: Case of Thailand


Various types of renewable energy are becoming cheaper or already cheaper than large-scale power plants. A number of cities, states, and countries already set the target of 100 percent renewable energy system as they are confident on the technical progress and possibilities for totally relying on intermittent renewable energy. But the transition to renewable and sustainable energy requires not only economic or technical factors.

Another decisive factor is the institutions on energy policy, which make decisions on policies, plans, programs, related to energy development. The existing institutions have been set up and evolved around the influence of large-scale fossil fuel industries for many decades. With the aim toward the transition to renewable energy, we have to reduce the resistance and increase the support to renewable energy.

Therefore, it is crucial to firstly understand the current situation and problems of the energy policy institutions and the governance in order to find solutions on institutional improvement or even reform.

There are five key institutions on energy policy in Thailand:

First, Ministry of Energy is directly responsible for energy policy, planning, and implementation. The serious problem is the risks about conflict of interests of the high-level staffs of the Ministry. Some of the present and many of the past high-level staffs are holding position in the Board of governmentally-owned energy enterprises as well as several energy companies. As a member of the Board, they receive meeting allowance and bonus from each enterprise/company that is comparable to or more than their salaries.

Receiving bonus is clearly the risks about conflict of interests. If they, in the position of high-level staffs, make policy or plan that favors the enterprise/company, they will receive more money from bonus as a member of the Board.

Even though, the law to prevent conflict of interests of governmental staffs has been enforced for many years, but there is the exemption in the law and the energy sector is using the exemption.

Apart from Ministry of Energy, present and past high-level staffs of many other ministries and agencies are also member of the board in energy enterprises and companies, including Ministry of Justice, Office of the Attorney General, State Audit Office, Ministry of Finance, Royal Thai Air Force, Royal Thai Army, Anti-Corruption Organization of Thailand, etc. They also receive both meeting allowance and bonus as well.

Second, three state-owned electricity authorities are responsible for generation, transmission, distribution, and retail services. Electricity Generating Authority of Thailand (EGAT) is responsible for generation, about 35% of total power generation, and the transmission system. The other two electricity authorities are responsible for distribution and retail.

The main incentive structure that the government has set for all three utilities is based on Return on Invested Capital (ROIC) with fixed percentage. This directly means more investment - more profits. In addition, all costs can be passed through to electricity tariff. So the three authorities have less responsibility and accountability for wrong or over investment.

The existing incentive structure favors big investment in a few large-scale projects, rather than hundreds of small investment in renewable energy.

Third, the Energy Regulatory Commission is established by law since 2007. The commission is partial-independent as they have the authorities on many regulatory aspects, but they are under the control of Minister of Energy through the selection process, the dismissal from the position on the ground of incompetence, and the approval process of the annual budget.

Fourth, the Energy Conservation Fund was established by law in 1992 for supporting energy efficiency and renewable energy. The present income of the Fund is about 200 million euro per year and they have supported numerous programs and projects on energy efficiency and renewable energy, research, scholarships, as well as many public communication and advertisement. During some governments, the Fund even supports preparation for nuclear power and natural gas for transportation.

But the Fund never provides support on structural changes, institutional improvements, new policy mechanisms, or planning reform. Also, the decision and management of the Fund is so centralized, hence, many communities, organizations, and other stakeholders, who have been working on energy efficiency and renewable energy never have access to the Fund throughout 26 years of its establishment.

Fifth, the supreme mechanism for energy policy is the National Energy Policy Council, chaired by the Prime Minister. It comprises of ministers and directors of some government agencies, so only governmental sector. Furthermore, the decision-making process of the Council has no opportunity for stakeholders or public participation.

Power lines

The ideas for change are being communicated and discussed with stakeholders as well as the public. These include prevention of the conflict of interests, the improvement or reform of the incentive structure for the Electricity Authorities, the independent of Energy Regulatory Commission, decentralization of the Energy Conservation Fund, as well as promoting and set up the mechanism for public participation and accountability of National Energy Policy Council.

With the strong influences from fossil fuel industries on these policy mechanisms, real changes will occur only with strong push from many stakeholders and the public. Over the last ten to twenty years, there are a lot of progress on policy, planning, and actions on energy efficiency and renewable energy in the country.

But with the political and governance context of Thailand, it may take many more years until the policy mechanisms in Thailand will work in favor of the transition to the energy system based on renewable energy.