Thailand Power System Flexibility Study

About this report

With the growing share of renewable energy and emerging technologies, establishing and maintaining adequate flexibility is an important part of Thailand’s power system development and modernisation, and the country’s clean energy transition. Power system flexibility is crucial for ensuring security of supply.

Thailand’s power sector has two main avenues to enhance its flexibility. One is to enhance the technical flexibility of the system. The other is to change or reform commercial and contractual structures. This study examines flexibility from both the technical and contractual angle, and their interactions, using the current context of Thailand’s power system.

For technical flexibility, the report analyses the flexibility requirements and assesses the value of technical flexibility options, including flexible power plants, pumped storage hydro and battery energy storage systems.

For contractual flexibility, the report analyses the impacts of existing power purchase agreement and fuel supply contract structures on system flexibility. This report provides recommendations for the system to be able to use the full range of flexibility options in the most cost-effective and secure way.
Executive Summary

Establishing and maintaining sufficient flexibility is important for the development and modernisation of Thailand’s power system, and for the achievement of a transition to low-carbon energy. While the Thai power system has significant latent flexibility and a high reserve margin, it will nevertheless need to adapt to the greater need for flexibility that comes with ongoing changes on both the demand and supply side.

Thailand’s power sector has two main avenues to enhance its flexibility. One is to enhance the technical flexibility of the system through investment in flexible power plants, the electricity network, and storage and distributed energy resources. The other is to change or reform commercial and contractual structures – including power purchase agreements and fuel supply contracts – to allow current assets to operate more flexibly. Thailand needs both avenues to ensure that it can use flexibility optimally from the perspective of the overall system. But in order to utilise the system’s latent technical flexibility, its institutional and contractual structures must allow it. Thus the interaction between technical and contractual flexibility is critical, and is examined in this report.

This study consists of two main components: 1) technical flexibility and 2) contractual flexibility. The technical flexibility section analyses the value and impact of a range of options as a growing share of renewables comes online. The contractual flexibility section analyses the impacts of existing power purchase and fuel supply contract structures on system flexibility. This study was conducted in the context of the current “enhanced single-buyer model”, which is used in Thailand. While market reform can be a highly effective option to increase flexibility, it is outside of scope of this study.

Technical flexibility

Advanced production cost modelling, which simulates the cost-effective and reliable operation of the Thai power system on a 30-minute basis, was conducted to understand its flexibility requirements and to assess the value of flexibility resources from the technical and economic perspective. The analysis considers a set of technology deployment scenarios for 2025 and 2030. For each of the modelled years, the model uses a primary set of scenarios to assess the value and impact of individual technical flexibility options, including: flexible power plants; pumped storage hydro (PSH); battery energy storage systems (BESS); and a combination of these options. These scenarios build on the current plan, which aligns with Thailand’s latest Power Development Plan (PDP 2018 Revision 1). The scenarios consider the share of VRE according to the PDP (4% in 2025 and 6% in 2030), and the progressive VRE scenarios (6% in 2025 and 15% in 2030) to explore the value of the options under different annual VRE uptakes. The study also considers the implications of flexible fuel supply contracts for technical flexibility options.

New technical flexibility options are not a priority for Thailand’s power system in the short to medium term

Under the existing arrangement of Thailand’s power system, the modelling results suggest that the system has latent technical flexibility to integrate up to 15% VRE by 2030, but barriers surrounding power and fuel procurement often prevent that flexibility from being accessed. The benefits of investing in technical flexibility options – including retrofitting the generation fleet to improve plant flexibility and deploying new storage options, either PSH or BESS – are not significant, and these option are therefore not a priority in the short to medium term.

Given the constraints in fuel and power purchase contracts currently in place, plant retrofits provide limited benefits to the system from both an economic and operational perspective at this level of VRE penetration. With the share of VRE at 4% in 2025 and 6% in 2030, as per the PDP, the operational cost savings from plant retrofits are less than 0.05%. Although the cost savings increase with higher deployment of VRE, the savings from plant retrofits remain modest in the scenarios with accelerated VRE uptake. Meanwhile, the investment cost of targeted plant retrofits would far outweigh the operational cost savings. Instead of plant retrofits, modifications to certain plant operational procedures (especially for independent power producers) or market and regulatory incentives should be considered as an option to potentially unlock latent power plant flexibility.

The deployment of PSH and BESS can lead to the more efficient use of cheaper generation sources during off-peak periods, while displacing more expensive peaking capacity. Despite their technical capability in providing system services, the operational cost savings with new PSH and BESS (both in isolation and paired with flexible power plants) are still modest (less than 0.1%), even with an accelerated VRE target of 15% in 2030. The small cost savings are due to the current fuel supply and power purchase contracts. At this stage, the cost of investing in PSH and BESS would still outweigh the operational cost savings. 

Generation by fuel type during the period of minimum net demand (1-2 Jan) in 2030 with 15% share of VRE with flexible power plants


As more VRE is deployed, power plant flexibility and storage may become highly complementary options

As Thailand further accelerates its clean energy transition, the country should still consider using a combination of flexibility options in its long-term planning to accommodate greater ambition for renewable energy deployment. Beyond 2030 as the system move towards higher shares of VRE, investing in plant retrofits and new storage options may become a viable option once the operational practices are addressed and there have been institutional changes to fuel and power procurement contracts.

From the technical standpoint, the most constrained dimension of power plants in the model is the minimum stable level (MSL). Hence reducing the MSL should be one of the priorities for EGAT when investing in a new power plant or negotiating a new power purchase contract. As the share of VRE continues to grow, storage options will play a larger role in providing flexibility services. From a purely technical perspective, given various levels of VRE penetration in 2030, BESS see greater utilisation compared to PSH due to their higher efficiency, fast response time and capability for more flexible operation, which suits Thailand’s demand and supply patterns. On this basis, it is important to ensure Thailand has the appropriate policy and regulatory frameworks to enable BESS to provide the full range of services they are technically capable of. 

The value of technical flexibility resources are highly dependent on the structure of fuel supply contracts

The existing fuel supply contract arrangement in Thailand, which is subject to minimum take-or-pay quantities, prevents the use of otherwise available and cost-optimal resources in the system. This leads to unnecessary increases in system operational costs. Under the modelling scenarios that feature flexible fuel supply contracts in 2025 and 2030, the results demonstrate a significant reduction in operational costs (up to approximately 2%) as system operators can access a large amount of latent flexibility in the system and dispatch the system in a more cost-effective manner. Designing fuel supply and power purchase contracts with sufficient flexibility leaves headroom for lower-cost energy sources such as VRE to participate in the market. While relaxing fuel supply constraints is not simple to implement in practice, the potential for cost savings means that it merits further exploration.

Operational cost savings from a flexible fuel supply contract in 2030 based on 15% VRE penetration


Contractual flexibility

In order to be able to enhance flexibility, it is important to ensure that prevailing contractual structures allow the system’s technical capabilities to be used. In Thailand many independent power producers are contracted through physical power purchase agreements that have minimum-take obligations, defined as the minimum generation EGAT is contractually obligated to buy. Minimum-take obligations in Thailand are different during the peak versus the off-peak: a 100% minimum-take obligation is typical during the peak consumption hours, while the corresponding obligation during the off-peak is 65% of capacity.

Thailand has an enhanced single-buyer system, which means that the vertically integrated utility buys power from both its own generation assets and from independent power producers. This study is conducted in the context of the enhanced single-buyer system, and identifies contractual flexibility within this scope. Thailand is also set to increase its share of renewables in electricity generation, which creates a need for more flexible generation from the thermal fleet to accommodate variable renewables.

Yearly evolution of minimum-take capacity in all contracts in Thailand, 2019-2049


Minimum-take obligations create structural inflexibility

This study analyses the actual minimum-take obligations both from independent power producers and imports from the Lao People’s Democratic Republic against projected renewable generation and consumption. It constructs scenarios to reflect high levels of renewable generation combined with low levels of consumption, and vice versa, in order to study whether the contractual structures – and specifically the minimum-take obligation – creates structural inflexibility for the Thai system.

The analysis shows that the minimum-take obligations, particularly in the off-peak, lead to the over-commitment of generation, which pushes up operational costs and leads to uneconomic VRE curtailment. During the off-peak, consumption is too low to absorb both high levels of renewables and the contractual minimum-take generation. This can potentially be solved by increasing flexibility in imports, which also shows the importance of developing more flexible models for multilateral trade with neighbouring countries. Thailand should study the level of import flexibility that is technically possible from a security perspective, and whether potential grid enhancements can increase this flexibility if needed. Future power purchase agreements should seek to reduce general minimum-take obligations and move to more flexible contracts so as to provide the contractual flexibility needed to integrate higher shares of renewables. The level that minimum-take obligations should be reduced to would depend on the contractual flexibility of the wider power portfolio, as well as the technical capabilities of the generation fleet. 

Fuel supply contracts can create inflexibility, which can be mitigated by portfolio procurement

In addition to the minimum-take obligations of power purchase agreements, EGAT also has take-or-pay obligations in its fuel supply contracts for gas. These have elements of daily take-or-pay obligations, which significantly limit flexibility and increase system operational costs.

EGAT’s gas contracts are reviewed every five years. It is recommended that, at review, the take-or-pay obligations are relaxed to allow for greater flexibility to integrate renewable energy in the dispatch of generation.

LNG provides a good option to increase flexibility in gas supply contracts, since LNG contracts tend to be more flexible. It is important to note that adding further LNG to Thailand’s supply contracts would require a corresponding reduction in the take-or-pay amounts in current gas contracts. In general, it is important for EGAT to implement a portfolio approach to gas procurement, which mixes less-flexible long-term contracts with more-flexible shorter-term contracts. In this way it can optimise fuel supply contracts with respect to cost and flexibility in order to provide the necessary fuel supply flexibility in the future. Increasing gas contract flexibility will come at a cost, and the specific contract terms should be studied against the cost of take-or-pay obligations.