DSM in Thailand: A Case Study October 2000 Joint UNDP/World Bank Energy Sector Management Assistance Programme (ESMAP) DSM in Thailand: A Case Study 1 DSM in Thailand: A Case Study by Jas Singh and Carol Mulholland Abstract In 1993, Thailand initiated a US$189 million demand-side management (DSM) program to help curb electricity demand growth and promote more energy-efficiency equipment and cost-effective energy services within the country. Since then, EGAT's DSM Office has developed a strong portfolio of DSM measures, including 19 DSM programs targeting a wide range of sub-sectors and end-uses, and substantially surpassed its original peak reduction and energy conservation targets. EGAT has created substantial public awareness of energy conservation and actively promoted private sector participation in providing such services. And, EGAT's DSM Office has been recognized internationally for its success in designing DSM programs that fit within an Asian context as well as its innovation and partnerships with other agencies. While the overall Program results have been positive, EGAT has had limited impacts in certain areas and experienced a number of implementation issues, many of which are now being resolved. This paper examines the creation of Thailand's DSM Program, discusses programs and results to date, offers analyses and lessons learned from the Program and discusses future prospects for DSM programs in Thailand and elsewhere. I. Introduction working capital, grants and subsidies to promote In the early 1990s, Thailand had one of Asia's and facilitate energy conservation measures and fastest growing economies, with GDP increasing select renewable energy initiatives. Under the over 10 percent on average from 1990-93, and ENCON Act, the Department of Energy showed signs of continued economic expansion. Development and Promotion (DEDP) was Such economic growth was expected to require appointed as the executing agency for the substantial investment in the power sector, with Compulsory (energy audits and public/private average annual growth projected at 14 percent building efficiency investments) and annually, or about 2 GW per year. To meet this Complementary3 (public relations and training) challenge, the Government of Thailand (GOT) Programs and the National Energy Policy Office established a strategy for the power sector that (NEPO) was authorized to manage the Voluntary required: (a) increasing power sector investments Program (demonstrations/pilots, renewables and substantially; (b) accelerating the pace of research and development). In parallel, and by privatization in the power supply industry; (c) Cabinet resolution, the Electricity Generating making a strong thrust towards energy Authority of Thailand (EGAT), the national conservation; and (d) placing an increased generation and transmission utility4, established a emphasis on environ-mentally-sound and National DSM Program, with support from sustainable development. NEPO, to improve the capability of the power sector to deliver cost-effective energy services To support energy conservation activities, the and promote the adoption of energy-efficient GOT passed the Energy Conservation Promotion equipment throughout the country. Act, or ENCON Act, in 19921, to provide a regulatory framework for energy conservation In 1993, EGAT launched a US$189 million DSM and efficiency programs and investments. This Program, with primary financing from an Act included the creation of an Energy automatic tariff mechanism (Ft).5 In addition, the Conservation Promotion Fund2 (ECF) to provide 3 Responsibility for the Complementary Program was shifted from DEDP to NEPO in late 1999. 1 The ENCON Act was not made effective until the 4 In 1999, EGAT had over 15 GW in installed capacity, Ministerial Order was released in 1995. over 90 TWh in electricity sales and more than 136 2 The ECF was initially endowed with 1.5 billion Baht billion Baht (US$3.5 billion) in revenues (source: (about US$60 million in 1992) and receives annual EGAT 1999 Annual Report). revenues of about 2 billion Baht ($57 million) from a 5 While the Ft does support DSM, it is primarily a fuel levy imposed on petroleum fuels. adjustment mechanism. DSM in Thailand: A Case Study 1 Program received a $9.5 million grant from the II. Program Design Global Environment Facility (GEF), $6.0 million The original five-year DSM Master Plan called grant from the Government of Australia and a for EGAT to design and implement programs $25 million concessional loan from the Overseas Economic Cooperation Fund of Japan (OECF).i targeted to all three major sectors (e.g. A DSM Office (DSMO) was established within residential, commercial and industrial). The Program components included DSM program EGAT to develop, implement and evaluate design, implementation and evaluation, DSM national DSM programs and measures, with an overall target of reducing peak demand by 238 funding mechanisms, energy efficiency codes and standards, testing facilities and protocols, MW and achieving annual cumulative energy savings of 1,427 GWh by the end of 19986. The integrated resource planning, load management DSMO reports to EGAT management for day-to- and private sector DSM capability building. At the time the DSM Program was established, day operations, but is also overseen by a DSM Thailand had no experience with designing or Sub-Committee, chaired by the Prime Minister's implementing DSM programs. As a result, the National Energy Policy Council, which reviews program plans, discusses related policy issues World Bank, in partnership with the United Nations Development Program (UNDP) and the and coordinates DSM in concert with other International Institute of Energy Conservation energy-related government agencies, including NEPO, DEDP and both regional electricity (IIEC), an international non-governmental distribution companies, MEA and PEA7. organization, assisted EGAT in developing initial program strategies. Objectives The initial program design was largely based on EGAT's stated objectives for DSM are: the U.S. experience, relying on manufacturer and · To implement and pursue energy efficiency consumer rebates, since there were no other demonstrated models at the time.iii During early and load management programs to maximize implementation, DSMO staff determined such benefits for consumers and the country; · To offer education, increase awareness and approaches to be inconsistent with Thai culture, fearing that financial incentives to manufacturers actively promote energy conservation among and participating customers may be perceived as electricity consumers and affect a change in inequitable. The DSMO thus shifted its strategy public attitude; during implementation to focus more on · To stimulate local manufacturers and voluntary manufacturer negotiations than importers to produce or import energy- financial rebates, using its financial resources to efficient appliances; and support major marketing and publicity · To build sufficient institutional capacity in campaigns, bulk purchase of high-efficiency the electricity sector and the energy-related products, and other information dissemination private sector to deliver cost-effective energy activities (e.g., labeling, energy audits, services throughout the economy.ii demonstrations, data collection/analysis, etc.). This paper seeks to examine EGAT's national Program Staffing DSM Program, results to date, overall conclusions, experience and lessons learned and The DSMO was staffed initially with about 40 implications for the future of DSM in Thailand EGAT employees in 1993, and grew to about 177 and DSM programs elsewhere. permanent staff in early 2000. EGAT has also made extensive use of temporary staff, local and international consultants, expert advisors, etc. to provide specific skills and manpower based on program needs. Such flexible staffing 6 Due to initial implementation delays, the project was arrangements have served the DSMO well, as extended and closed on June 30, 2000. their DSM programs have required changing skill 7 MEA, the Metropolitan Electricity Authority, is responsible for distribution in the greater Bangkok area mixes and staff requirements during various and PEA, the Provincial Electricity Authority, is stages of implementation, and short-term staff responsible for distribution in the rest of Thailand. DSM in Thailand: A Case Study 2 allow a degree of flexibility from EGAT's more even accelerated public acceptance of this rigid employment policies. These staff work transition. Shortly thereafter, the one major under two DSM divisions, DSM Planning and importer of FTLs had also complied with the Administration and DSM Operations and agreement to discontinue distribution of T-12 Implementation, and report to the Deputy lamps. This effective partnership with Governor, Policy and Planning within EGAT. manufacturers provided the DSMO with a III. Implementation positive track record and experience that it then used to launch its subsequent programs. During the first few years, EGAT decided to launch a few initiatives first, in order to gain Refrigerators: Building upon its experience and experience and build in-house capabilities, before success with FTLs, the DSMO approached the expanding its activities. Thus, between 1993-96, five domestic manufacturers of refrigerators in the DSMO initiated four programs to address early 1994 and negotiated a voluntary labeling energy use for lighting, refrigerators, air scheme for all single-door models8, hoping that conditioners and commercial buildings. market forces would be sufficient to achieve a substantial and sustainable transformation of the Initial DSM Programs market. The labeling scheme used a rating scale, Fluorescent Tube Lamps: With about 20% of with the unweighted market average of 485 electricity consumption attributed to lighting and kWh/yr (with load) as a level 3.9 The DSMO fluorescent tube lamp (FTL) sales increasing partnered with TISI to test the domestically 10% per year, the DSMO targeted this end-use in available refrigerator models and provided labels its first DSM program in late 1993. Given the to manufacturers directly. low number of domestic manufacturers (five in As with the FTL program, EGAT sponsored a 1993), the DSMO decided to negotiate directly large publicity campaign to educate consumers with manufacturers to switch production from T- about the energy labels and aggressively 12 40 W/20 W to T-8 36 W/18 W FTLs, or "thin promoted the level 5 label. Since many of the tubes." EGAT also entered into a partnership level 5 models only had a marginal incremental with the Thailand Industrial Standards Institute cost, no financial incentives were offered by the (TISI) to test the FTL life and lumen output for DSMO to the consumers. In early 1997, GOT each manufacturer to ensure consistent quality implemented a complete phase out of CFC-based under the program. coolants, which resulted in a slight decline in While T-8 lamps were already proven technology refrigerator efficiency. In this regard, the DSMO in developed countries, the manufacturers were adjusted the labeling scheme upward by 10%. concerned over public acceptance in such a In early 1998, the DSMO worked with the Thai dramatic shift in production. EGAT agreed to Consumer Protection Agency and made single- support the cost of an approximate US$8 million door refrigerator labeling mandatory and, in early public campaign, using major stars and TV 1999, the DSMO reached agreement with the advertisements, to educate the public about the manufacturers to increase the requirements for benefits of these "thin tubes" in exchange for the each label level for single-door models by 20% manufacturers' agreement to phase out by January 2001, contingent upon EGAT's production of T-12 lamps. Since the production agreement to sponsor promotional campaigns to technology was readily available and the inform consumers about this change. In mid- incremental cost for T-8 FTLs was minimal (T-8s 1998, the DSMO also began labeling two-door require less material to produce), no additional financial incentives were offered to the manufacturers or consumers. 8 Initial program included sizes from 150-180 liters (l) and was expanded in 1997 to include 90-210 l The results were dramatic. Within one year, all capacities. manufacturers had completely switched 9 Models with consumption within 10% of the average production to thin tube lamps and EGAT's receive level 3 labels; those with 10-25% less than mean receive a level 4; models with greater than 25% advertising campaign substantially facilitated and below the mean are rated as a level 5. Since the labels were voluntary, level 1 and 2 models were not labeled. DSM in Thailand: A Case Study 3 models,10 and it is expected that these labels will level 5 models during promotional summer become mandatory by 2002. periods.12 Program impacts were slower than with the FTLs Results of the AC program have been less than but no less dramatic. In 1994, only one model anticipated. Due to the higher incremental cost, qualified as a level 5, although it was produced in the DSMO estimates that only about 38% of ACs anticipation of the DSMO's labeling program, have a level 5 label and none of the lower and only 2% of single-door models sold were efficiency models are labeled at all. Despite level 5. To date, all single-door and 60% of the EGAT receiving approval from the DSM Sub- two-door refrigerators sold in 2000 meet the level Committee to make AC labels mandatory in early 5 requirements. The DSMO estimates that about 1999, the DSMO has been unable to reach 84% of all refrigerators sold in Thailand now agreement with the AC industry on a suitable have the level 5 label and that the program has timetable for mandatory labels or increased contributed to a 21% reduction in overall requirements for each level of the label scheme. refrigerator energy consumption. On average, Without this agreement, it is unclear how further refrigerators receiving the level 5 label in efficiency gains or energy savings impacts can be Thailand are slightly less efficient than those achieved under this program. qualifying for the "Energy Star"label in the U.S. Green Buildings: In late 1995, the DSMO Air Conditioners: In late 1995, the DSMO launched a program to promote the adoption of targeted air conditioners (ACs) as its next end- energy-efficient end-uses in existing commercial use and proposed a voluntary label system buildings. Under this program, the DSMO offers similar to the refrigerator scheme. The labels participants preliminary and detailed energy were based on an energy efficiency ratio (EER) audits as well as investment consultation for high of 7.4, which represented the average of models return efficiency retrofits for lighting, cooling, sold locally, and rated on a scale similar to the load management and building envelope refrigerators. TISI tested the models, including measures. This program was designed to support both split-system and unitary (window) models11, DEDP's Compulsory Program, which requires and the DSMO began supplying labels to the audits and adherence to the building code in manufacturers by early 1996. "designated buildings."13 Despite initial positive indications from the label Since the program began, over 433 building program, the DSMO found that level 5 ACs were owners/managers have applied to participate in substantially more challenging to promote than the program, with about 240 being designated the refrigerators. In contrast to the small number buildings. The DSMO has focused on designated of FTL and refrigerator manufacturers, the Thai buildings, as the audit costs are partially AC industry was more diverse and fragmented, reimbursable through the ECF. The DSMO had with more than 55 different manufacturers, many conducted 252 preliminary audits by early 2000, of which are small, local assembly operations.iv however, only 34 have been approved, due, in And, the incremental cost for higher level ACs part, to a backlog of audits currently under was significant. Therefore, the DSMO worked review by DEDP. with local credit card companies to offer interest- In addition to the audits, the DSMO implemented free loans for the incremental cost of level 5 ACs. four demonstration projects, by providing The DSMO also offered 500 Baht rebates to shop interest-free loans to replace lighting and chiller owners (under a Green Shop initiative) who sold equipment. The DSMO also procured and installed 120 ELCONTROL load management systems in customer premises to demonstrate the 12 Both financial incentive programs were discontinued in 10 Sizes range from 160-500 l. 1999 due to budgetary constraints. 11 Program initially included capacities from 7,000- 13 Under the ENCON Act, a designated building is 24,000 Btu/hr and incorporated sizes up to 30,000 defined as a commercial building with demand over 1 Btu/hr in late 1999. MW. DSM in Thailand: A Case Study 4 potential benefits of managing customer loads. unit within MEA (first three contracts now under While interest from building owners has negotiation). remained high for this program, significant impacts may not be possible unless DEDP's audit IV. Program Evaluation approval process is significantly improved and When EGAT's DSM Program was first the DSMO is able to identify viable financing established, systematic evaluations of its DSM mechanisms, to follow-up audits with programs was considered a critical component. investments. It is also noted that there is The evaluation component was meant to allow considerable room for improved coordination and regular impact reporting to the DSM Sub- collaboration between the DSMO and DEDP to Committee and Program donors as well as to help complement each agency's efforts on promoting improve program designs for existing and new efficient end-uses in commercial buildings. DSM initiatives. The GEF also requested the use of an Independent Monitoring and Evaluation DSM Program Expansion Agency (IMEA) to assess and confirm the In 1996, the DSMO began to expand its portfolio validity of EGAT's evaluation results. of DSM programs and target new end-uses and sectors and, between 1996-98, launched about 15 Due largely to limited in-house expertise, the DSMO relied on engineering estimates to new DSM operations. While a number of these determine energy/demand savings and later programs employed similar strategies and approaches, some were substantially more greenhouse gas (GHG) emissions reductions attributable to each DSM program from 1994-98. innovative. A summary of these programs can be However, the DSMO recognized the need for found in Table 1 (pp. 6-7). increasing the precision of these estimates with Complementary Programs supplemental information, such as customer/ In addition to customer-oriented programs, the manufacturer surveys, vendor sales data, end-use DSMO initiated three programs to strengthen its metering, billing information, etc. to improve program planning and implementation efforts: (i) engineering assumptions (e.g., penetration rates, end-use load research to create end-use profiles, coincidence factors, free rider rates, etc.) and determine future end-use priorities and better enhance the statistical accuracy of program estimate program impacts; (ii) integrated impacts. resource planning (IRP) to catalogue end-uses In 1999, the DSMO hired consultants to conduct and DSM measure for each sector and assess market and other studies, as well as determine expected impacts, cost effectiveness and preliminary impact estimates, to support EGAT's technical feasibility; and (iii) a DSM evaluation efforts of the initial programs through management information database to allow 1998. The IMEA provided an independent improved integration of program data to support review of these studies and reported impact planning, evaluation and administration efforts. estimates. The results, now complete, have MEA Programs offered a number of key findings regarding program design and implementation and have Recognizing that EGAT, as the generation and been used to support EGAT's IRP and future transmission utility, does not sell directly to end- DSM program design and selection. Based on users, EGAT entered into a strategic partnership the experience gained by DSMO staff from the with MEA in 1996 to support a number of consultant work, the 1999-2000 evaluation work mutually beneficial DSM efforts. These was conducted entirely in-house, with included: (i) establishment of a motor testing methodology endorsed by the IMEA. facility (expected to be operational by December 2000); (ii) development of an end-user load Conservation Programs research program within MEA's service territory EGAT classified five programs as conservation (ongoing); (iii) initiation of a load control programs ­ FTLs, refrigerators, ACs, CFLs and program (on hold due to existing capacity street lighting. The supplemental evaluation surpluses); and (iv) creation of an ESCO business work involved five major data collection DSM in Thailand: A Case Study 5 Table 1. EGAT's Expanded DSM Program Portfolio Program Sector Program Description Incentive Mechanism Compact Residential, Agreement with distribution outlets to sell CFLs Bulk distribution and partnership Fluorescent Commercial from participating manufacturers. EGAT bore with franchised retail outlets Lamps (CFLs) advertising costs of program and tested/labeled allowed substantial reduction in lamps to ensure consistent quality. transaction costs. Street Lighting Municipal Pilot program with PEA to procure and distribute Grant funds used to pay for high-pressure sodium vapor (HPS) street lamps to higher incremental cost of HPS municipalities throughout Thailand. lamps to demonstrate technology. Green Leaf Commercial Audits and certification of energy-efficient hotels Free workshops and audits/ (hotels) based on predefined measures; dissemination of certification for hotels. Results information on energy efficiency and comprehensive disseminated through national resource management in hotels. tourism publications. New Buildings Commercial Analysis of viability of all efficiency measures in Demonstration buildings, buildings and support to construction companies for technical assistance and possible all viable efficiency measures that exceed building financial incentives. code requirements. Brown Rice Residential, Promotion of less energy-intensive and nutritional Promotional campaign in Agricultural, brown rice through advertising and labeling; partnership with Ministries of Education distribution of brown rice in public school lunch Health, Agriculture, Interior and programs. Education. High- Industrial Catalyzation of HEM market through testing/ EGAT-sponsored promotional Efficiency labeling, demonstrations, information dissemination campaigns, interest-free loans and Motors (HEMs) and manufacturer negotiations. Future efforts may demonstrations. include brochures on motor sizing, HEM payback periods and technical assistance for rewinding and drive systems. Low-Loss Commercial, Promotion of low-loss magnetic ballasts through Labeling and informational Ballasts Residential, bulk distribution arrangement and through green campaigns sponsored by EGAT. Industrial buildings/industrial cost reduction programs. The program would promote new ballasts only and not retrofits of existing equipment. DSM in Thailand: A Case Study Table 1 (continued) Program Sector Program Description Incentive Mechanism Pilot ESCO Industrial Demonstration of ESCO concept through EGAT bore development and development of four pilot projects and dissemination audit cost for pilots and would of results. seek an interest subsidy from the ECF. Industrial Cost Industrial Similar to the Green Buildings Program, this Audits and technical advice is Reduction program promotes retrofits and investments in provided to participants as well as industrial end-user premises. assistance in accessing ECF funding. Small and Commercial, Preparation of action plan and workshop to support EGAT sponsored workshops, Medium Industrial predefined efficiency measures in SME premises; brochures and standardized Enterprises proposed plan to include concessional ECF applications for certain end-uses, (SME) financing. concessional financing. Load Commercial, Voluntary programs to encourage load management Participants are eligible for a Management14 Industrial through stand-by generation, interruptible load and concessional tariff scheme. time-of-use tariff schemes. Thermal Commercial Demonstration 350 kW thermal storage system was Construction of demonstration Storage constructed on EGAT premises for testing and facility. assessment of commercial viability. Attitude Residential, Comprehensive portfolio of publicity campaigns for EGAT-sponsored public Creation Commercial, specific DSM measures as well as energy campaigns and advertising; grants Industrial, conservation in general through all media. Program to schools to support Green Educational also includes a Green Learning Room in public Learning Room equipment and schools to educate students on the importance of training materials. energy conservation and the link between energy and the environment. 14 Since these load management initiatives all involve tariff incentives, they were launched and are managed by NEPO, not EGAT. However, EG provided some assistance in customer recruitment and the DSMO has evaluated some of these programs to determined the impacts and custome DSM in Thailand: A Case Study measures: participating and non-participating sample participant and non-participant metering residential customer surveys; participating/non- to compare actual load shapes and consumption participating non-residential customer surveys; with EGAT's pre-program projections. interviews with lighting/appliance manufacturers However, due to very limited baseline data, poor and importers; interviews with EGAT DSMO program monitoring, and other problems, these and Systems Planning Department personnel, and impact numbers were not reported. PEA staff (street lighting only); and sample end- use metering to determine operating hours for Attitude Creation Programs lighting and appliance compressors. EGAT's program to promote energy efficiency through advertising campaigns, strategic Reported Versus Evaluated Savings: There were partnerships with various ministries and other considerable differences between EGAT's engineering estimates and those evaluated by the agencies, and energy conservation public education was also evaluated, using extensive consultants for these conservation programs, market surveys and focus groups. While this demonstrating that engineering estimates alone evaluation effort did not generate specific impact are insufficient to determine accurate DSM program impacts. The main factors included: (i) figures, it did assess the overall impacts of the public campaigns and found that 87 percent of differences in wattage assumed for baseline the Thai population was aware of public energy refrigerator and CFL programs; (ii) measured coincidence factors varied from EGAT's conservation programs. Based on consumer surveys, the consultant found that consumers assumptions for ACs and CFLs; (iii) FTL sales were generally aware that EGAT sponsored these data was lower than EGAT's assumptions, partly due to the 1997 financial crisis; (iv) EGAT's low programs and EGAT received higher favorable ratings than either MEA or PEA, which can be estimate for energy savings from using the thin partially attributed to the DSMO's efforts. The tubes with the standard magnetic ballasts; (v) Green Learning Room initiative with schools was differences in estimated and measured average daily run time of AC compressors; and (vi) particularly noted as effective in raising awareness among students and teachers in energy differences in the estimated refrigerator use and its links to the environment. efficiency loss when non-CFC refrigerators were introduced.v Overall Impact Results Load Management Programs Despite the differences between EGAT's engineering estimates and the evaluated results, it EGAT also evaluated several load management is clear that EGAT exceeded their overall targets and reduction efforts, including the Green Buildings Program and NEPO's three voluntary (see Table 2). From 1993- June 2000, EGAT's DSM programs have resulted in an aggregate tariff load reduction programs. The supplemental peak load reduction of 566 MW, or 4 percent of evaluation work involved surveying participating customers, interviewing program staff and EGAT's total 1999 capacity, and cumulative annual energy savings of 3,140 GWh, Table 2. DSM Program Savings Through June 2000 Launch Savings Targets Evaluated Results Percent of Target Program Date Peak Energy CO2 Peak Energy CO2 Achieved (MW) (GWh/yr) (tons) (MW) (GWh/yr) (tons) Peak Energy CO2 Lighting Sept. 1993 139 759 - 399 1973 1,457,807 287% 260% Refrigerators Sept. 1994 27 186 - 84 849 627,365 310% 456% Air Conditioners Sept. 1995 22 117 - 84 318 235,314 381% 272% Motors Dec. 1996 30 225 - - - - - Commercial BuildingsOct. 1995 20 140 - - - - - TOTAL 238 1,427 1,160,000 566 3,140 2,320,486 238% 220% 200% DSM in Thailand: A Case Study 8 representing more than double the original the phase out of CFC-based coolants was not energy savings Program targets. The Program anticipated in 1992 and, as a result, original also reduced CO2 emissions by 2.32 million tons targets may have been high. per year. It is, of course, difficult to conclude whether the Program Targets Versus Results: While it is clear original program impact targets were in fact that the DSMO surpassed the original impact reasonable. Clearly, much of the difference targets, there were a few key Program between the targets and evaluated results can be assumptions that were substantially different than attributed to the much higher penetration rate for actually observed, which may indicate that the the FTLs than was initially projected, with FTL original targets were not appropriate. First, the program impacts accounting for 68% of the total original DSM Program had a five-year Program peak reduction and 60% of total implementation period, whereas the actual Program energy savings. However, this was less project life was about six-and-a-half years. This of an underestimation of the original targets than suggests that the original targets may have been an over achievement by EGAT in its highly low for the actual Program period. Second, the effective manufacturer negotiations. Neverthe- original plans assumed that the peak period, less, it is instructive to identify where original which was 6-9pm in 1992 would remain program assumptions differ from actual results, constant. However, in 1997, EGAT's peak in order to better understand Program period shifted from the evening hours to 2-5pm. performance and assess results. Since many of the DSMO's programs targeted residential sector end-uses, this shift in peak time Process Evaluations reduced the coincidence factors and thus the load The consultants also gauged the DSM programs shaving impacts of these measures. Third, the in terms of their overall effectiveness, market unforeseen 1997 financial crisis in Thailand had transformation effects and cost-effectiveness. a considerable adverse impact on DSM program Major findings from these efforts are summarized savings, causing substantial reductions in in Table 3. Snap back effects were not observed equipment sales and baseline energy based on the surveys and persistence could not be consumption. In the absence of the crisis, the determined, since many of the programs had only DSMO's impacts would have been significantly been in operation a few years. higher. Finally, the GOT's implementation of Table 3: Process Evaluation Results Market Impacts Program Baseline % Results % Recommendations FTL (T8) 40% 100% Promote low-loss (magnetic/electronic)ballasts Refrigerators 2.3% 100% Update labeling scheme (single-door) Improve testing speed and accuracy Target promotions to sales people Provide more info about CFC phase-out Air conditioners 19% 38% Introduce minimum performance standards (Level 5) Simplify loan programs Decrease testing lead time CFL 6-10% 6-10% Include all CFL sizes in program Use conventional outlets to sellCFLs Provide information on trade-offs between price and quality Green Building -- -- Define priority customer groups Calibrate and standardize customer services Improve customer communications TOU Tariffs -- -- Provide more information on differences between TOU and TOD tariffs TOD Tariffs -- -- Consider changing billing and charging annual subscribed energy demand level, beyond which excess energy demand will be surcharged DSM in Thailand: A Case Study 9 In terms of free ridership, none of the programs, From the table, it is clear that the portfolio of except the AC program, offered financial DSM programs was cost-effective, based on incentives, thus no free ridership was these tests. The FTL program was clearly the experienced. For the AC program, free ridership most cost-effective, with very high benefit-cost was estimated at 14% of those that participated in ratios, and both the refrigerator and AC programs the interest-free loan initiative. Participants that had ratios above 1.0. The CFL program passed responded to surveys indicating that they would the Utility and Participant Tests, but not the TRC. have purchased the efficient equipment with or This was likely due to the high costs to non- without the DSMO programs were not participants, or those rate payers that incurred the considered free riders, but were accounted for in DSM surcharge but did not participate in the the baseline projections. program. The street lighting program was clearly It is important to note that EGAT's baseline not cost-effective, due to the high local costs of scenario for its programs was considered to be the high-pressure sodium vapor (HPS) lamps and static over the program life. While this may not low coincidence factor, although these tests may seem reasonable or intuitive, both the consultants not be appropriate ratios due to the nature of this and IMEA determined that it was unreasonable to program. assume any significant efficiency gains without While these tests may be useful indications of some government intervention. Also, since the cost-effectiveness, their use alone is insufficient number of domestic manufacturers for these end- to capture the comprehensive impacts of EGAT's uses was relatively small, it was concluded that Program. For example, the Participant Test the DSMO should take full credit for all changes assumes that higher cost equipment is for in production given the comprehensive nature of improved efficiency only, when in fact some of EGAT's market interventions and depth of their the higher costs can be attributed to additional campaigns. features that are energy neutral, such as longer Program Cost-Effectiveness: There are a number lasting components, aesthetics, etc. Also, since of tests commonly used to assess a DSM EGAT's programs were largely focused on program's cost-effectiveness, developed in the public awareness building and market U.S., based on perspectives of various transformations, for which quantified economic stakeholders in the process. The first two benefits are less easy to determine, such tests do analyses used by EGAT are based on the not adequately reflect program benefits. Nor do perspectives of the utility and the participants these tests capture benefits from delayed new (known as the Utility Test15 and Participant capacity investments, improved customer service, Test16). A more comprehensive tool is the Total sectoral externalities, such as environmental Resource Cost Test (TRC), which compares the benefits, reduced fuel imports, or other benefits avoided cost of supply with both the utility and commonly associated with DSM programs. participant costs of a DSM measure. A benefit- It should also be noted that these tests were cost ratio of more than 1.0 indicates that, for the developed in the U.S. context to assist the particular group of economic actors, program regulator in determining the appropriateness and benefits outweigh costs, and the program can be justification of for various utility DSM programs considered cost-effective. For all these tests, the and may not be appropriate for EGAT's benefits and costs are relative to the perspective programs. For example, a DSM measure that and converted into present value terms. Table 4 passes the DSMO's Utility Test implies that the summarizes these tests results for EGAT's program is cost-effective to EGAT, when in fact evaluated conservation programs. each kWh of DSM savings represents a reduction in total electricity sales. V. Analysis of DSM Program 15 The Utility Test measures the net costs of DSM as a resource option based on costs incurred by the utility While the overall assessment of the DSMO's against the avoided costs of supply. results should be considered very remarkable, a 16 The Participant Test measures the quantifiable benefits number of key issues have now been identified, and costs to the customer for a given DSM measure. DSM in Thailand: A Case Study 10 Table 4: Program Cost Effectiveness* Benefit Cost Ratio Air Street FTL CFL Conditioner Refrigerator Lighting= Total** Participant 54.6 2.3 1.6 6.5 0.8 5.3 Utility 28.5 2.2 14.5 17.5 0.003 15.9 TRC 13.8 0.7 1.1 1.6 0.005 1.9 * The following assumptions are used in calculating cost-effectiveness: Marginal cost of electricity production 0.8198 Baht/kWh (US$0.0205) Marginal cost of new capacity 6,999 Baht/peak kW (US$175) Discount rate 10% = While the cost tests clearly indicate that this program was not cost-effective, and the DSMO accepted the result, these tests may not be appropriate to properly assess the unique nature of this program. ** These totals are based on these five programs only and not all the DSM programs implemented to date. which will need to be addressed if the DSMO is Until 1999, there had been no formal program to maintain its successes in the future. evaluation to identify areas within the program Key Program Issues To Date design process that could be improved. While the DSMO has taken steps to remedy this Program Selection, Design and Evaluation: Since weakness, the evaluation late in the Program development of the initial DSM plans in the early prevented sufficient feedback to improve 1990s, the DSMO's process for identifying program implementation and incorporate program priorities and designing appropriate evaluation findings into new program designs. promotional strategies has lacked a systematic Future periodic evaluations will be needed to and rigorous approach. This is due, in part, to continue improving planning and program design EGAT's view that its programs serve a public techniques and efforts. purpose and, therefore, should offer programs for all key customer segments and end-uses. The During early implementation, it became clear that lack of a formal process for identifying, DSM program approaches from other countries selecting, implementing and evaluating programs could not be implemented without adaptation for has led to programs being fielded before they are Thailand. An unintended result was that EGAT fully developed, or before market research perceived many program screening techniques assessing their potential has been conducted or used and tested elsewhere as also being "too completed. As a result, some of EGAT's Western" and thus did not apply them, nor programs were designed based more on anecdotal develop viable alternatives. Also, EGAT rejected information than market research. many Western DSM strategies, such as customer rebates, but failed to develop and test new Another issue was the lack of proper baseline strategies, often relying on early approaches such data and end-use profiles to adequately determine as manufacturer negotiations and labeling, which end-use priorities, program selection and now appear to be insufficient for more complex evaluation impacts. While EGAT now has an end-use markets with higher incremental costs, active end-use load research program, the effort such as ballasts and motors. was launched only in 1998, after many of the end-use programs had already been selected. It is EGAT has now accepted the need for more noted, though, that EGAT faced pressure to get systematic planning and its current IRP plans programs on the ground and had to make trade- have incorporated considerably more rigorous offs early on between its data collection/market analyses and coherent strategic plans. EGAT has research efforts and program implementation. also taken measures to improve the links between program planning and implementation functions and develop evaluation plans with program plans. DSM in Thailand: A Case Study 11 Labeling: The success of EGAT's labeling efforts Identify DSM Champions: Without the strong to shift the market to higher efficiency proactive approach taken by the second DSMO refrigerators and AC models can be attributed to director, it is unlikely that EGAT's program two main factors: manufacturer willingness to would have developed and grown over the years. label their products; and consumer awareness and DSM programs require strong management and understanding of the labels. The labels have had marketing, both to utility management and to the a well-documented, positive effect on modifying public, to ensure that programs receive the consumer purchasing behavior, and evaluation support needed to meet their objectives. Utilities results clearly demonstrate that they achieved should also seek measures to help insulate DSM measurable market shifts. operations from periodic management changes. An unintended consequence of EGAT's highly Define Clear DSM Program Objectives: EGAT effective "level 5"label promotions has been that continually confronted competing objectives, only these highest rating labels are recognized as e.g., public purpose or commercial, and EGAT quality models. Manufacturers, who label their management commitment to DSM wavered, products voluntarily, are reluctant to affix any particularly in the face of capacity surpluses after label below level 5 on their products, with the the 1997 financial crisis. An important lesson is result that consumers effectively have only two that DSM objectives should be clearly defined up choices: level 5 models and unlabeled models. front and have long-term in addition to shorter- The outcome is that the voluntary labels, term objectives, to help maintain continuity in combined with active promotion of the highest operations. These objectives should address such level labels have served to create of a "level 5" issues as: public purpose or commercial; load quality brand label, rather than the rating scale management or energy conservation; economic/ originally designed. EGAT's plans to expand its environmental benefits or financial gains; labeling efforts to a wider range of refrigerator sectoral priorities; etc. The priorities identified and AC models, as well as low-lossballasts and will drive how programs develop. high-efficiency motors, may have limited results Establish DSM Programs in Context of Reforms: unless EGAT takes steps to educate consumers EGAT's eventual privatization was not on the rating aspects of the labels. considered at the time the DSM Program was Lessons Learned first established. Potential privatization and Based on the overall DSM Program results and restructuring, tariff reforms, etc. should be taken recent evaluation findings, a number of lessons into consideration at the time DSM programs are have emerged and are under consideration by considered, and an appropriate framework EGAT as it plans future activities. These lessons designed. Program financing is a key component may also be useful for those implementing or of this framework, and should be able to considering DSM programs elsewhere. The accommodate eventual pricing reforms and lessons include: include appropriate regulation, oversight, institutional and incentive schemes, e.g., DSM Design Programs Based on Local Context: operational expenses and lost revenue cost EGAT's most effective initiatives were recovery schemes. implemented using a Thai approach of combining manufacturer collaboration and public Generation Versus Distribution Utility DSM: promotions. Local cultural aspects are also Some of EGAT's programs were partially crucial to ensure high consumer acceptance and constrained because EGAT does not sell directly participation in such measures. It may be more to end-users and, therefore, did not have previous useful to limit outside expertise to discrete relationships with consumers. In many cases, assignments and training activities, leaving the distribution utilities may be a more appropriate local utility staff to design the programs based on home for most DSM programs. In those market research conducted and strategies countries that still have vertically-integrated developed in-house. utilities, any introduction of DSM efforts should explicitly involve the distribution staff and provide for gradually shifting appropriate DSM DSM in Thailand: A Case Study 12 program responsibilities to distribution utilities as mechanisms, since they provide no incentives for reforms progress to make use of their established manufacturers to label lower efficiency models. and unique customer relationships. In those countries where voluntary labels are the Systematic Planning and Evaluation: Proper preferred option, a simple quality brand label program prioritization and screening play a key would be the preferable option. role in designing and implementing successful VI. Conclusion DSM programs. Evaluation plans should be Overall, EGAT has substantially met its DSM developed concurrently with program plans to identify clear objectives and performance Program objectives of creating substantial institutional capability within EGAT to design, indicators that will be used to assess program implement and evaluate DSM programs and performance. Program designs should also include proper development of end-use achieving increased supply and adoption of high- efficiency equipment in Thailand. EGAT has consumption patterns, market research and maintained strong ownership of the Program and baseline data. The design phase should consider has developed DSM programs suited to Thai a range of intervention strategies and assess the cost-effectiveness of each option. There should conditions and culture. EGAT has exceeded its energy savings targets based on verified also be a functional process for feeding evaluation figures. EGAT's DSMO is widely evaluation results back into program design and make relevant adjustments. recognized for its innovative programs, such as its Green Leaf, Green Learning Room and public Phased Implementation: EGAT's experience campaigns, as well as its strong management and demonstrates the importance of implementing capable staff. EGAT has also worked well with programs using a phased approach, although this several other GOT agencies, such as the could have been further strengthened by timely Ministries of Health and Education, the Bangkok evaluation and program redesign. It is preferable Metropolitan Administration and MEA, to jointly to implement pilot initiatives, and then evaluate develop programs that meet shared goals. and refine them before expanding and scaling-up However, there are a number of areas in which implementation efforts. A second advantage of the programs can be improved in the future. The this approach in countries/utilities new to DSM is that it allows staff to gradually build their DSM Sub-Committee, established in part to ensure proper coordination between EGAT and competency and improve their program design ENCON Act agencies such as NEPO and DEDP, and analysis skills. has not been very effective. The result is that a Financing Facilities: EGAT's limited success in number of energy efficiency programs, such as its commercial and industrial sector programs labeling and commercial/industrial programs, was largely due to a lack of viable financing appear to be competing and/or overlapping. This sources. Thailand's future DSM efforts, and has caused confusion among consumers and programs elsewhere, should actively address this created some inter-agency disputes regarding barrier and arrange for complementary financing institutional roles and responsibilities. programs to support industrial and commercial energy audit programs, ESCO development and EGAT's residential programs have achieved strong public recognition and participation, but non-residential end-use programs, such as motors the commercial and industrial programs have had and chillers. Where viable financing and other limited impacts due, in part, to a lack of viable programs for energy efficiency exist, such as the framework of the ENCON Act in Thailand, clear financing sources. EGAT's programs include successful activities such as the FTL, refrigerator links should be established between utility DSM and Green Leaf programs, but other programs, programs and other government efforts to ensure adequate coordination and complementarity notably ballasts and motors, have not achieved significant results. EGAT's greatest successes between initiatives. are with technologies for which the incremental Voluntary Versus Mandatory Labeling: cost for the higher efficiency equipment was not Voluntary labels are not effective as rating substantial (e.g., FTLs, refrigerators), while the DSM in Thailand: A Case Study 13 DSM Program has had only marginal impacts industry is likely to target only large end-users when larger price differentials existed (e.g., air with strong financial backing. It is unlikely that conditioners, CFLs, ballasts, motors). Given the the private sector would be willing to work with relative youth of EGAT's Program, the overall local manufacturers to upgrade existing results have still been remarkable. In future production lines, to offer services to small and years, however, the DSMO will need to become medium enterprises or the residential sector, or to more sophisticated with its analysis and program target efficient end-uses rather than packaged strategies and should be evaluated on this basis. services, all of which the DSMO has been doing. Some of EGAT's programs have shown limited Second, it may also be unrealistic to shift progress over the past few years, which EGAT responsibility for the DSMO's program to the attributes largely to the uncertainty of future public sector. Despite the GOT's commitment to operations because of the power sector energy efficiency, the ENCON Act has not yet restructuring and EGAT's movements towards shown significant achievements andimplementa- privatization. While no programs have been tion results. The DSMO is the only government- cancelled, no existing programs have been supported efficiency program with a proven track expanded nor new initiatives launched. Donor record in program implementation over the past funds have largely been exhausted and the GEF several years, and its staff have unique skills and grant finally closed on June 30, 2000. These experience in program identification and design, developments, along with the recent decision to implementation and evaluation. Any sudden eliminate DSM funding from the Ft, have raised shift in institutional arrangements, such as trans- serious concerns over the DSM Program's ferring DSMO staff to another government sustainability and the appropriateness of entity, would severely compromise the maintaining existing institutional arrangements. effectiveness of DSMO's operations and have The Future of DSM in Thailand major staffing implications. In 1998, Thailand embarked on a plan to Third, while the DSMO has largely met its privatize its electric supply industry (ESI). In performance objectives, there is room for September of that year, GOT endorsed NEPO's improved Program implementation and Privatization Master Plan, which envisions that coordination. In the restructured ESI, the DSMO Thailand's ESI will open to competition in three oversight function could be strengthened by stages between 1998 and 2003. While many of shifting to a power sector regulator, rather than the details are still being determined, the general remaining with the DSM Sub-Committee. DSM direction in which the industry is moving is clear Program funding, could be subject to increased as is the fact that existing institutional and competition, thus forcing the DSMO to be more financing mechanisms used to support DSM in cost conscious and judicious with future efforts the past may no longer be appropriate. and even compete with other agencies for funding. There may be scope for the DSMO to The future ESI plans calls for EGAT's privatiza- increase its efforts in promoting private sector tion and end to supporting DSM through the Ft. participation in DSM activities, through more New funding mechanisms will be essential for ESCO development activities, bidding out DSM programs and operations to be sustained. As program implementation and services, or EGAT proceeds with privatization plans, the allowing new DSM agencies, independent or continued placement of the DSMO within EGAT private, to compete for public funding for various may become increasingly inappropriate. EGAT DSM programs. and NEPO are now considering mechanisms for continued DSM program support. It is not obvious, nor is there currently consensus, on how DSM activities should be sustained in the There are a number of issues to be considered future, if at all, and how such programs would be surrounding DSM in restructured ESI. First, it institutionally and financially supported. NEPO probably is unrealistic to assume that the private and EGAT have considered a number of short- sector is in a position to deliver services offered term and longer-term solutions which include: (i) by the DSMO. Thailand's nascent ESCO using ECF funds for public purpose programs DSM in Thailand: A Case Study 14 and either maintaining the DSMO in the of appropriate incentives for all stakeholders, government-owned portion of EGAT, linked to equity of financing mechanisms and costs of such the system planning function, or shifting the efforts. DSMO under NEPO; (ii) transferring responsi- Financing DSM remains a significant issue in bilities for DSM implementation to the distribution utilities under appropriate regulatory most places. Many countries, like Thailand, have imposed DSM taxes within power tariff schemes regimes; (iii) requiring independent power ­ usually with greater demands for accountability producers or other private integrated energy service providers to package and bid on a than those imposed on EGAT. Other govern- ments have opted to fund DSM programs for combination of supply and DSM electric low-income customers as a social program, and services; and (iv) ceasing all publicly-supported DSM and allowing the private sector to provide effectively pay the utility to implement the program. Some countries are interested in services where the returns are sufficient. introducing DSM as an integral part of their In the near-term, EGAT and NEPO have now power sector development plans, but face reached agreement that the DSMO can recover considerable hurdles with bringing electricity DSM administration costs through EGAT's base tariffs to cost recovery levels that make DSM tariff and remain within EGAT for at least the surcharges unfeasible at present. In any case, next few years. The DSMO is now preparing a DSM financing should be linked to the decision detailed funding proposal, which will include a whether or not to implement DSM programs, five year program, with targets of 612 MW in with financing mechanisms designed in the peak load reduction and annual energy savings of context of the program goals. 3,949 GWh at a cost of about 1.5 billion Baht. Regardless of the objectives and mechanisms a While this plan may allow the DSMO to continue country might prefer, Thailand's DSM program operating with minimal changes over the short- offers considerable insights into the major issues term, it is unlikely to be a viable longer-term solution. How the DSMO's role will develop in associated with implementing DSM programs, and of the potential benefits that can accrue. Not the context of the restructured ESI and over the all of its DSM programs have achieved their longer term remains to be seen. intended impacts, but EGAT achieved its overall Implications for DSM Programs Elsewhere peak and energy reduction goals at a cost far less DSM program implementation should depend on than would have been needed to add new a country's or utility's objectives for power generation during this period, benefiting the sector development and whether DSM can offer country from an economic point of view. While cost-effective, viable solutions. Objectives every country's and utility's context is unique, relating to environmental protection, commit- EGAT's experience offers a number of useful ment to energy efficiency, energy security and lessons that cut across geographical boundaries. other related concerns also need to be defined. And, whether or not Thailand decides to sustain While DSM can be considered a viable tool to its DSM activities, the markets that the DSMO help address some of a country's concerns, it helped transform and energy savings achieved remains a contentious intervention mechanism. will continue. In countries with severe power shortages and capacity constraints, utilities may have incentives i Thailand Promotion of Electricity Energy Efficiency to reduce peak loads to delay new capacity Project, GEF Project Appraisal Document, April 1993. ii investments or to target load management Thailand Promotion of Electricity Energy Efficiency Project, World Bank/GEF Mid-Term Review Report, programs in areas of high network congestion. September 1996. Other potential incentives include implementing iiiThailand Promotion of Electricity Energy Efficiency energy conservation in low tariff customer Project, Pre-Investment Appraisal Report, IIEC, October classes, and bundling DSM services in order to 1992. iv recruit additional customers. Such concerns need du Pont, et. al. "Lessons from Thailand: Experience Implementing Energy Efficiency Programs."June 1997. to be carefully weighed against potential conflicts v Sulyma, et. al. "Taking the Pulse of Thailand's DSM between DSM and utility revenues, introduction Market Transformation Programs." August 2000. DSM in Thailand: A Case Study 15