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close this bookThe Global Greenhouse Regime. Who Pays? (UNU, 1993, 382 p.)
close this folderPart III National greenhouse gas reduction cost curves
close this folder11 Thailand's demand side management initiative: a practical response to global warming
View the document(introduction...)
View the documentIntroduction
View the documentEnd-use energy efficiency policies
View the documentCosts and benefits of the DSM master plan
View the documentCO2 reductions from the DSM Plan
View the documentWhy should other developing countries adopt DSM?
View the documentThe role of the multilateral development banks
View the documentConclusions
View the documentReferences

Costs and benefits of the DSM master plan

Traditionally, the external costs associated with power production have not been accounted for in the tariff structure. These externalities are the cause of damage to the environment and human health in Thailand and surrounding regions from the normal operation of power plants that burn fossil fuels such as oil, gas, coal, and lignite. By not including these externalities in the cost of electricity, power system planners are assigning a

Table 11.2 Thailand's capital investment choices

  10-year achievable DSM potential = 2,000 MW
  2,000 MW of power plantsa = US$4.5 billion
minus 2,000 MW of DSM = US$1.6 billion
equals 10-year DSM net cost savings = US$2.9 billion
Other major infrastructure projects
  Second stage expressway = US$1.2 billion
  Nation-wide sewage treatment = US$2 billion

a The cost of 2,000 MW of delivered power is calculated based on a 15% reserve margin and 14% power transmission and distribution losses. It is equivalent to 2,817 MW of installed capacity.

This table contains the cost savings accrued by EGAT, government-run utility, for investing in an aggressive 10-year DSM plan. These cost savings are compared to similarly-sized investments that the Thai government is planning for other large infrastructure projects. EGAT plans to add 13,100 MW over the next decade at an approximate cost of US$19.7 billion. The cost of new capacity is US$1,600/kW, while DSM measures for Thailand cost US$800/kW on average (source du Pont and Biyaem 1992). value of zero to the environment. Many state and national governments have recognized this fact and have begun to add an externality surcharge to the tariff. As of mid-l992, the Thai government had not yet established an environmental resource accounting method that could be applied to the power sector. The DSM Master Plan assigns the following credits to DSM measures in comparison to supply side power generation options: 14 per cent for transmission and distribution losses, 15 per cent for the reserve margin, and a 15 per cent environmental credit.

EGAT's long-term avoided cost for new power plants is US$0.0431kWh. After factoring in the recommended credits, EGAT's adjusted avoided cost is US$0.062/kWh. DSM measures will be judged cost-effective if they cost less than this amount. At present, Thailand has no formal environmental regulations that can influence the choices made by utility planners. Clearly, the establishment of an environmental accounting system could allow Thai planners to assess the environmental benefits of demand side management.