TANZANIA MINISTRY OF ENERGY AND MINES (MEM)

THAI PROVINCIAL ELECTRICITY AUTHORITY (PEA)

WITH SUPPORT FROM

WORLD BANK

ThailandMarch 13 – March 20, 2010

Chris Greacen (chrisgreacen@gmail.com)

 

Delegates: Please feel free to cut and paste any/all of this material for your own trip reports. Please email me any comments about the study tour (see ‘strengths and weaknesses of tour’ section in this report), and/or reports you write regarding the trip.

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Trip reportTechnical Visit of the Delegation

from the United Republic of Tanzania to Thailand

regarding Thailand’s Very Small Power Producer (VSPP)

program

I have loaded all power point presentations that I received to a 100 MB zipped file at: www.palangthai.org/docs/presentations TZ-Thai VSPP exchange.rar

Additional photos are uploaded at: http://picasaweb.google.com/chrisgreacen/TanzaniaThaiVSPPStudyTour?feat=directlink

Program DescriptionThe Tanzanian delegation traveled to Thailand from March 13 – 20, 2010, for an exchange tour on regulations and program implementation of the Thai Very Small Power Producers (VSPP) program.

Objectives: To promote exchanges and discussion on VSPP regulations, program implementation, and project development through site visits and meetings with professional peers and stakeholder groups in the Thailand. (1) Develop contacts between Tanzania and Thai regulatory authorities and planners regarding tariff setting, grid interconnection of renewable energy (2) Develop contacts between Tanzanian and Thai utilities that can serve as basis for sharing effective technical and administrative practices regarding implementation of VSPP. (3) Visit examples of renewable energy VSPP power plants. Site visits included solar, biomass, biogas, and hydropower projects owned and operated by the private sector.

Background: Tanzania’s recently approved Small Power Producer (SPP) regulations allow privately owned renewable energy and clean cogeneration to connect to the national grid or mini-grids and sell electricity. These regulations are expected to help lower energy imports, increase rural electrification investment, and reduce reliance on emergency generation. Thailand has had similar regulations (known as Very Small Power Producer – VSPP) in place since 2002. This trip was designed to expose Tanzanian decision-makers to Thai counterparts to discuss ways in which both sides have addressed implementation of VSPP, and to visit operating projects that utilize a variety of technologies.

Results:

Tanesco delegates talked with Thai utility counterparts who are enthusiastic and supportive of VSPP in Thailand, and saw firsthand practical methods for implementation;

Developers saw technologies with applicability in their own countries;

Bankers got information about project financing and fund administration; and

Within the group, goverment, utilities, developers and learned together and discussed how what they saw related to their own country.

The Tanzanian delegation was excellent -- interested and articulate, asking many great questions and engaging in lively discussion in all meetings and site visits.

The Thai VSPP program and the people that have been behind its implementation at a practical level (PEA staff, government officials, project developers, financers) have accomplished a lot, and it is evident

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in the numbers, in the quality and size of the projects on the ground and in the pipeline, and in the importance that PEA places in processing applications, signing PPAs, and addressing issues when they arise.

Composition of the Tanzanian delegation to Thailand S/N Name Designation Institution/Company

1 Mr. Bashir Mrindoko Commissioner for Energy and Petroleum Affairs

MEM

2 Mr. Hosea Mbise Assistant Commissioner Energy Development

MEM

3 Mr. Frank Ole Mejooli Project Coordinator-TEDAP MEM

4 Ms. Anjela Shila Principal State Attorney MEM

5 Ms. Wanja Mtawazo Senior Economist –Department of Policy and Planning

MEM

6 Mr. Norbet Kahyoza Manager – Electricity EWURA

7 Mr. Dr. L. Mwakahesya Director General REA

8 Mr. Bengiel Msofe Director of Technical Services REA

9 Mr. Decklan Mhaiki General Manager – Transmission

TANESCO

10 Mr. Charles Shayo Engineer TANESCO

11 Mr. Salvatory Mushumbusi

Admin. Managed Fund TIB

12 Mr. Bryson Mwanga Officer Finance and Operations TIB

13 Mr. Gilead E. Kisaka General Manager Mkonge Energy Systems Co. Ltd

14 Mr. Jaffary Ally Admin. Manager TPCL-Moshi

15 Mr. Menus Mbunda Managing Director Andoya Hydroelectric

16 Mr. Dickson Alifa Gama Bank Supervision Division BoT

MEM - Ministry of Energy and Minerals

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TEDAP – Tanzania Energy Development and Access Expansion Project

EWURA – Energy and Water Utilities Regulatory Authority

REA – Rural Energy Agency

TANESCO – Tanzania Electricity Supply Company

TIB – Tanzania Investment Bank

TPCL – Tanganyika Plantation Company Limited

BoT – Bank of Tanzania

The trip was skillfully led by Ms.Darawan Promkasikorn (ant) Chief, Overseas and New Technology Section peatraining@yahoo.com, and her assistant Ms.Pawika Pumim (aum).

The delegation was accompanied by Dr. Chris Greacen, Palang Thai, who helped draft the Thailand VSPP regulations in 2002 and has helped EWURA draft Guidelines and Rules for the SPP program in 2008/9.

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Day-by-day account of the exchange:

14 March 2010, SundayDelegates arrived and rested.

15 March, Monday

Figure 1: Meeting with PEA Deputy Governor and members of VSPP cell

The exchange began at PEA at 9am with an introductory speech by the Deputy Governor (Human Resource Development), group photo, and exchange of souvenirs. Tanzania delegation head Bashir Mrindoko gave an overview of the electricity situation in Tanzania and context for the SPP program. PEA showed a video overview of who they are and what they do. This was followed by presentations by PEA VSPP cell managers that included functions of the VSPP cell, the application processing process, VSPP tariffs (including subsidy adder), billing and settlement, and how the PEA passes costs of feed-in tariffs through to customers. The presentations were accompanied by lively questions from the Tanzanian delegation, who raised many engaging questions.

Q: (Commissioner Bashir) Is a procurement process needed for VSPP generators?A: No. Because compensation is on per-kWh basis and there is no capacity payment, PEA (and

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therefore Thai rate payers) bears no risk if VSPP generates or not. There is therefore no need for procurement

Q: How many days between application and PPA signing?A: 60 days.Response by Tanzania side: Wow. That’s fast.

Q: What happens if PEA is late in making payments to generators?A: we don’t know. It has never happened.

Q: What happens in the event that a VSPP purchases electricity and then on-sells it to retail customers?A: In Thailand they are not licensed to sell electricity to retail customers.

Q: What financial support and financing programs besides the feed-in tariff does PEA provide to developers?A: PEA is not in the role of providing financial support. PEA is the off-taker of electricity. The Thai government provides a corporate income tax break of up to 8 years, import tax reductions for renewable energy equipment, and a low-interest loan program using government funds that are onloaned through commercial banks.

Mr. Decklan Mhaiki, Director of Transmission at TANESCO was asked whether TANESCO was planning on creating a SPP cell to process applications. Decklan responded, “we are not just planning to create a cell – we have already created it.” TANESCO Engineer Charles Shayo, one of the trip participants, is one of the key people in the cell.

In the afternoon Chuenchom Sangarasri Greacen gave an Energy Planning and Policy Office (EPPO)1 presentation focused on the historical evolution of the VSPP policy (VSPP regulations originated at EPPO) and on some challenges that have evolved. One challenge is the high number of applications (particularly for solar) that were by briefcase companies and are not likely to actually be built. The solution has been that projects over 100 kW are required to file a performance bond of 200 baht per kW. This situation was addressed in the Tanzania context through having the LOIs and PPAs expire after a certain time period if the project is not developed.

In the afternoon’s final session, finishing at 4pm, PEA engineers presented about impacts on their distribution system and ways to address possible technical problems. Impacts included power quality, increases in fault current, relay/fuse/recloser coordination, and possible increased line losses (if generation exceeds local load).

1 Over 100,000 “red shirt” protestors have gathered to protest the current military-coup-selected government. Protests in front of government offices have restricted movement of government employees, locking EPPO employees in their offices and they were unable to attend the meeting. As a last minute emergency, EPPO emailed their presentation to Chuenchom (a former EPPO employee and close colleague of the EPPO person who would have attended) and she came and delivered the presentation.

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In the evening, Chris hosted a dinner with the delegation as well as two Thai VSPP finance and the EPPO policy analyst who were unable to attend the afternoon session with PEA. Thai resource people were distributed among four tables, two focusing on finance and two on policy.

16 March, TuesdayDelegation departed hotel lobby at 7:45 am by van. The day’s itinerary included two site visits, a cassava biogas plant and a solar farm. The biogas plant was located at the Chonjaroen tapioca flour factory, and used waste water from both peel slurry and pulp slurry (from a centrifugal separator). Biogas was used to power a boiler for the tapioca processing, as well as gas engines powering four grid-connected synchronous generators. Currently the generation limit is 2 MW, as that is the size of the facility’s transformer. The facility operates 3 @ 500 kW and 1 @ 1000 kW generators. The site visit was particularly interesting to Mr. Gilead Kisaka from Mkonge Energy Systems, who asked dozens of technical questions. Kisaka has developed a 150 kW biogas SPP using waste water from sisal and he says he has biomass wastewater potential to develop 1 MW at each of five sisal plants .

Q: Was the biogas component built the same time as the factory, and designed in?A: No – flour factory built 40 years ago. The biogas facility was just built 5 years ago”.

Q: Did you receive any assistance from the government?A: Design assistance was provided by the Chiang Mai University biogas project (a project that receives technical support from GTZ).

Q: What were some obstacles you faced?A: We with the Ministry of Industry and Ministry of Energy talked together better since our project required approval from both.

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I found that the cassava biogas project most interesting. We produce a lot of cassava in Tanzania and have factories that make tapioca flour, but we have no biogas plants. I think there is a lot of opportunity for this in my country.

-Ms. Wanja Mtawazo

Figure 2: Left: Gilead asking questions about slurry pH to cassava biogas plant engineer. Covered lagoons filled with methane in background. Right: one of the three 500 kW diesel Chinese generators.

In the afternoon the delegation traveled to Bangkok Solar Power (BSP), Thailand’s largest VSPP solar farm company. The site visit included a presentation of the company profile (now operating six solar farms totaling over 7 MW). The company uses amorphous silicon photovoltaic solar panels manufactured in Thailand by its parent company, Bangkok Solar Corporation, and uses large grid-interconnected inverters manufactured by Leonics in Thailand.

These projects are made viable by the Thai VSPP 8 baht/kWh (about US 24 cents/kWh) adder on top of avoided cost tariffs of about 3 baht/kWh (9 US cents). The projects are also able to arrange financing through commercial banks at interest rates of 6.5% with a debt-equity ratio of 2:1 and project finance (no collateral).

Site visit included a tour of a 1.45 MW plant on the company grounds comprising 41,000 solar panels.

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Figure 3: Left: delegates in front of solar farm array. Right: Twenty two Thai-made 65kW Leonincs inverters convert DC electricity from the solar panels into 1.4 MW of AC electricity injected into the grid.

The delegation flew to Chiang Mai departing 18:50.

March 17In the AM the delegation met at the offices of the PEA northern region (PEA N1) for presentations and discussion. The first presentation focused on PEA statistics (electrification rates, reliability and service statistics, and profitability). The impressive rural electrification rates (99.97% of villages and >98% of households) prompted questions from the delegates about how why any villages remain and how rural electrification was accomplished. PEA’s rural electrification success was also a topic at two subsequent dinners shared with PEA. Key success factors included:

Full support by the King and by the government for the target of 100% rural electrification within 20 years

Comprehensive rural electrification plan (a paper copy of this document written in 1973 was given to the delegation on the final dinner).

Longterm (40 year), concessionary interest (4% or lower), and long grace period. Canadian CIDA’s funding, for example, was 0% interest, 10-year grace period, and 50-year repayment period

Effective billing program and cross-subsidy.

This was followed by a presentation by Senior Engineer Tirapong Kasirawat t_kasirawat@yahoo.com on PEA N1’s experience to date with VSPPs. Kasirawat’s presentation was supportive and enthusiastic about VSPP generators, and gave background information on the projects we visited subsequently in Chiang Mai.

Connected grid Under

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construction

No capacity(kw)

No capacity(kw)

Biomass 1 135 4 11,460

Biogas - - 7 6,200

Mini hydro(50-200kw)

1 220 3 905

Mini hydro(<50kw)

2 80 - -

Waste - - 3 11,260

Wind - - 1 200

Solar 1 28 8 7,050 Table 1: PEA N1's VSPPs – connected to the grid and under construction.

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Following pictures and gifts, we traveled by bus to Mae Kam Pong village about one hour drive east of Chiang Mai, a community with community-managed stand-alone and grid - connected micro-hydropower systems. Mae Kam Pong village commissioned its first micro-hydro project (20 kW) in 1983, powering the then-remote village. As the village grew, another 20 kW hydropower generator was added next to the first. In 1998 a third (40 kW) generator was added downstream from the first two. The projects were built as cooperative projects between community-members and the government Department of Alternative Energy Development and Efficiency (DEDE).

When the PEA power lines arrived in 2001/2 Mae Kam Pong began a process to connect their 40 kW power plant to the grid. This pioneering project helped inspire development of the VSPP regulations, and was eventually interconnected under the VSPP program in 2008. The former village headman, Promin, who met with the delegation explained that 8 months ago the grid-connected machine was closed down – not because of technical issues but because legally the hydropower project is owned by the government even if defacto control rests with the village cooperative. Thai anti-corruption regulations prohibit sale of government assets to private interests and also prohibit government property to be used to produce revenues received by private groups (like the village cooperative). The micro-hydrpower cooperative remains viable through operating the two older machines and selling electricity from these generators to household users.

The example sadly highlights the importance of clear ownership arrangements and the need for flexibility in anti-corruption regulations to allow purchase by cooperatives of government assets (especially if they built it with their own labor!).

After lunch in the village we visited the two 20 kW hydropower units in operation. These are each driven by about 200 liters/second of water dropping 55 meters.

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This study tour and the one organized by Tilak (Siyambalapitiya) to Sri Lanka have been very good. Before the study trips, TANESCO was reluctant to talk to me about connecting my power plant. But now we have seen many of these small power plants together and it is much easier to talk.

-Mr. Menus MbundaManaging Director

Andoya Hydroelectric

Figure 4: Left: Delegates inspecting the 20 kW micro-hydropower project at Mae Kam Pong village. The project provides electricity for about 120 homes and was built in 1983. Right: recently remodeled power house at Mae Kam Pong.

Following Mae Kam Pong we drove to Lampang Province to visit the Ban Koh Khoi chicken farm, about 40 km from Chiang Mai. Ban Koh Khoi and the Lampoon Regional Energy Office successfully completed a 500 m3 biogas project that uses manure from 20,000 egg-laying chickens to create methane biogas that operates a 20 kW generator (modified Toyota car engine connected through an automotive transmission to synchronous generator) and also provides free household cooking gas to 77 households through a gas pipeline that villagers invested in themselves. The generator is not yet interconnected as a VSPP, but plans to be.

Figure 5: Left: biogas digestor. Right: biogas from the chicken mature generates electricity in this 20 kW generator powered by a recycled car engine.

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Figure 6: delegates at Thai Buddhist temple in the village served by the chicken farm biogas project.

In the evening the PEA N1 office hosted a dinner at a restaurant featuring traditional Thai dancing.

18 MarchIn the morning we traveled to the SNV pig farm, which uses pig manure to power two 750 kW generators. Currently the system is synchronized and offsets its own power generation, and will soon be selling electricity as a VSPP. Chiang Mai University provided technical support for the biogas digester, and the project received about 30% capital subsidy for the biogas portion (not including electrical portion). The company representatives emphasized the improved air and water quality, the sales of fertilizer from the effluent of the biogas digester, and electricity production. Thanks to the biogas system, all water in the pig farm is now internally recycled – effluent water is clean enough to be used to wash pig stalls, entering the digester again.

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Figure 7: Left: meeting at SNV office. Right: one of two 750 kW biogas fired generators

Next, a 28 kW grid-connected solar electric installation at the SUS aluminum extrusion factory (www.sus.co.jp) that makes aluminum frames for solar panel racks, windows, and equipment frames. The solar regulations for rooftop systems have recently been revised in favor of solar PV so that gross production, not net production, is counted for the 8 baht/kWh ($0.24/kWh) adder. The factory plans to expand its solar array to >1 MW in the next couple years.

19 MarchIn the AM delegation departed for Supanburi province to visit the Detcha Green. This impressive power plant burns rice husk in a condensing boiler to power a 7.5 MW steam turbine/generator. The power plant was commissioned in March 2009 as a VSPP.

The principal consulting engineer for the project Kachapisit Boonchursri and a Nakorn Luang (SCIB) bank official Thanonnapong Prithaweepong (nickname Pepsi) pepsi_3m@yahoo.com gave a presentation that led to a lively discussion on financing and engineering topics.

About 50% of the rice husk fuel comes from the Detcha rice mill (the parent company of the biomass plant about 1 km away). The rest is purchased locally (there are 30 rice mills within 20 km).

Q: What was the project cost?A: 658 M Baht (about US$20 million). This is a high cost project because high quality (Japanese, German) equipment was used and the project included a number of amenities including attractive housing for all employees, a canteen, and extensive landscaping.

Q: What was the debt to equity ratio?A: The project was financed with a 2:1 debt to equity ratio. The debt portion was composed of two loans. The first 50 million baht loan was low-interest (4%). The remainder was at commercial rates (about 6.5%).

Q: How does the Thai low-interest program work?A: The government collects a surcharge on petroleum fuel sales (Gasoline, fuel oil, diesel,

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kerosene) of 0.4 baht/liter (about 1.2 US cent per liter) to capitalize the Energy Conservation (ENCON) Fund. This fund is used to develop energy conservation and renewable energy technologies in Thailand, a portion of which is used to offer low-interest loans. In 2009 the fund provided about 4 billion baht (about US$120 million) to 13 approved commercial banks at a concessionary annual interest rate of 0.5%. The banks are allowed to charge up to 4% when they on-loan to clean energy developers. Each clean energy project is entitled to up to 50 million baht. Thanonnapong Prithaweepong (contact above) would be a good source of additional information on this program – which sounds similar to the IDA credit line to GOT/REA that is managed by TIB.

Q: What other support did the government provide?A: 8 year Board of Investment (BOI) corporate income tax holiday and another 5 years of 50% income tax exemption.

Q: Why is there no smoke coming out of the chimney?A: There is smoke, but it is not visible because of an electrostatic precipitator system that keeps particulates below the European standard of 50 mg/m3.

Figure 8:Left: Where’s the smoke? Clean combustion and electrostatic precipitators keep particulates below European standard of 50 mg/m3. Right: delegates inspect 7.5 MW steam turbine/generator.

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The delegation returned in the mid-afternoon and hosted a good-bye dinner in the evening inviting half a dozen PEA staff to join. Discussion was lively, and included discussion of opportunities for future collaboration.

Overall strengths and weaknesses of the tourStrengths of tour:

Conversations with PEA on SPP/VSPP implementation helped make the process of implementing seem practical, do-able, and concrete.

Meeting with developers and seeing working examples of a variety of projects at a variety of scales (from 20 kW to 8 MW), using a variety of technologies (biogas, hydro, solar, biomass) provided delegates with very tangible examples of the kinds of business opportunities that can emerge in rural areas with a well-implemented VSPP program in place.

Having PEA arrange the tour and select VSPPs to visit sent a strong message that the utility is supportive and proud of VSPP and that relationship between the utility and VSPP generators is good. PEA has been a gracious host, providing lots of opportunities for discussions with a variety of officials and a warm welcome dinner in Chiang Mai.

PEA and government staff that we met with have been generous with their time and eager to share their knowledge and experience. The same is true for the project developers/operators with whom we have met. Delegates were distributed electronic Powerpoint files from nearly all presentations. Chris has uploaded these presentations to a 100 MB zipped file at: www.palangthai.org/docs/presentations TZ-Thai VSPP exchange.rar

Weakness of the tour:

In hindsight the tour would have been improved if there was a roundtable discussion on financing and government support for VSPP (beyond the feed-in tariffs). As it was, delegates were able to glean this information from a finance expert that attended the delegation dinner on Monday night, and from a knowledgeable banker at Nakorn Luang (SCIB) Bank, Thanonnapong Prithaweepong) who was present during the group’s visit to Detcha Green (19 March).

Planning for the tour was somewhat rushed because of date changes, and all involved in planning were perhaps weary/wary of the many postponements – four times since July 2009. As a result, a courtesy meeting with the Energy Minister wasn’t included (had been in earlier itineraries that were abandoned when the trip was postponed).

Lodging at the Emerald Hotel on Ratchada road in Bangkok was not very good. The group voiced complaints about the smell in the rooms (cigarette & sewer smell in some rooms).

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Transportation coordination was also an issue. The initial PEA pickup at the airport failed because neither side could find each other – first when 13 delegates arrived at 12:05 and later when 3 more arrived at 18:00 the same day. Similarly, coordination with the vans had a minor snafu on Friday afternoon with shopping.

Figure 9: Ms. Wanja Mtawazo, Mr. Hosea Mbise, and Mr. Salvatory Mushumbusi with Mr. Thanonnapong Prithaweepong share a laugh at Detcha Green Powerplant

Figure 10: Delegate leader Mr. Bashir Mrindoko, Commissioner for Energy and Petroleum Affairs from Ministry of Energy and Mines discusses Detcha Green power plant design with Engineer Kachapisit Boonchursri .

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