Natural Gas price hikes will lead to higher electricity charges
The Electricity Generating Authority of Thailand (EGAT) recently stated the price of electricity in the country will probably reach five baht per kilowatt-hour by 2015.
This will take it to a level equal with Singapore, the island-state whose economy is stronger than that of Thailand on many fronts. As officials from EGAT pointed out, the price hike will be primarily due to Thailand’s dependence on imported liquefied natural gas (LNG) and the fact production of local gas has peaked and will decline into the future.
Thailand now relies on gas for almost 70 percent of power generation, a 10 percent increase from the situation in 2003.
With the massive seven-year infrastructure project expected to add a further 10 electric train lines to the nation, which will require 1,000 megawatts to operate, EGAT says price increases are unavoidable.
Also, the move by a number of industries to focus on machinery and robotics to help in production also means a greater reliance on electricity.
The peak industrial body, the Federation of Thai Industries, has painted a gloomy picture of the future price increase. After suggesting small to medium businesses have managed to cover the increase in the minimum wage, and the catastrophic floods of 2011, they claim many will not be able to overcome what will amount to a 35 percent price increase in electricity.
The Federation claims quite a large number will probably be forced to close down in Thailand and set up shop elsewhere in the ASEAN region, more than likely in Indonesia, Malaysia or Vietnam.
The latter pair have significantly reduced their reliance on gas in recent years, promoting so-called clean coal and even nuclear power to fuel their industrial sectors. Both Malaysia and Vietnam use less than 40 percent of gas for power generation.
Thailand currently charges 3.704 baht per unit for electricity, but imported LNG runs at around 5.5 baht, so the increasing reliance on the imported material as a source of power generation must, of economic necessity, lead to a price hike.
The Energy Ministry has said the fuel tariff will increase by half a baht each year in line with gas prices, but recognises this could prove a major disincentive for small to medium businesses to set up shop in Thailand into the future.
The ministry realises Thailand needs to begin diversification of its power generation sources as quickly as possible. Officials within the Energy Ministry have said they will be in talks with ASEAN neighbours in an effort to purchase more electricity in an effort to reduce the reliance on gas.