Thailand: Biomass in the Service of the Coal and Gas Economy

The experience of Sri Lanka (see previous posting in this series) shows that not all projects that go under the name of “renewable energy schemes” promote local betterment, foster local autonomy, or help in the transition away from fossil fuels.

But other types of “renewable energy” projects may turn out to be of equally questionable climatic or social value when integrated into the carbon market as supports for a system dominated by fossil fuel technologies and corporate expansion. A good example is a “biomass energy” project seeking CDM support in Yala province in Thailand’s troubled far south.

There, an approximately 23-megawatt power plant fuelled by rubberwood waste and sawdust is being developed by a diverse group of companies linked by their interest in the carbon trade. They include:

• Gulf Electric, an independent power producer 50 per cent owned by Thailand’s Electricity Generating Public Company (EGCO) and 49 per cent by Japan’s Electric Power Development Company (EPDC).
• Asia Plywood (AP), a Yala rubberwood processor next to one of whose factories the plant would be located.
• Det Norske Veritas (DNV), a Norwegian ‘risk management’ consultancy in the process of parlaying its experience in certifying the credibility of pioneer carbon schemes such as Yala into a major share in CDM’s consultancy market.

EPDC is a largely fossil-fuel-oriented company and the largest single user of coal in Japan. It operates 66 coal-fired and hydropower stations and burned US$652 million in fossil fuels in 2001 alone. It also has interest in six gas-fired power generating plants in operation or under construction in Thailand, totalling 2,733 megawatts. Nor, with a large new coal-fired power station under construction in Yokohama, does EPDC contemplate any change of direction in the future. “Coal offers stable supply and outstanding economical efficiency,” says a company presentation:

“hence we predict it will support world energy consumption throughout this century. Our great mission is to ensure that coal is burned cleanly thus reducing the burden on the environment.”

Accordingly, EPDC’s main response to global warming is coal gasification, which of course does nothing to halt the flow of fossil carbon to the surface, and the development of a nuclear power plant. For EPDC, the point of investment in Yala would be to gain so-called Certified Emissions Reductions to help it, and Japan generally, maintain current levels of fossil-fuel combustion in the face of Kyoto pressures.

EGCO is also largely structured around fossil-fuel technologies. One of EGCO’s gas-fired power stations, in fact, is operated in partnership with UNOCAL, a US multinational fossil-fuel firm that is a member of anti-Kyoto Protocol and climate-skeptic business groups.

Gulf Electric, meanwhile, with a mainly gas-fuelled generating capacity, has become well-known in recent years partly due to the overwhelming March 2003 defeat of its proposed 734-megawatt Bo Nok coal-fired power plant on the Gulf of Thailand. Local people in Prachuab Khiri Khan province had long been concerned about pollution and other potentially destructive effects of the project and had mounted a successful regional and national campaign against it. Following their victory against Gulf, the company moved quickly to propose a gas-fired subsititute plant further up the coast.

If any further evidence were required that the sponsoring firms are not treating the Yala project as a step away from fossil fuels, there is the fact that they had originally planned to build the power plant without any carbon finance at all. It is only since the depths of the Thai financial crisis, in 1998, that they have contemplated securing supplementary funding through carbon trading. Encouraging them to develop the idea have been subsidies from Thailand’s Energy Policy and Planning Office’s Energy Conservation Promotion Fund as well as portions of both a US$30 million OECF loan under a 1999 five-year Global Environmental Facility (GEF) project and a GEF outlay of $3 million toward commercial risk premiums.

-- Q. But if the point of the Yala project is to help keep corporations using fossil fuels, how can the credits it generates possibly be tokens of measurable climate benefits?

The project’s proponents claim that it would save a measurable amount of carbon by “replacing” some of the electricity in the Thai grid that’s now generated by burning fossil fuels.

-- Q. How do they know that the plant would do that?

The validator, DNV, realized that it had no way of determining that the new project’s power would be replacing either combined-cycle natural gas or oil-fuel electricity in the national grid. It was also told by Thailand’s electricity authority that it was ''often a mistake to see a direct link of displacement between an increase in one component of the grid and a reduction in another.'' So DNV looked at the “average” carbon intensity of electricity from the Thai grid. It then subtracted the figure corresponding to the projected carbon intensity of electricity from the project and multiplied that by the project’s output. DNV argued that the resulting figure is conservative, since expansion plans by the Thai electricity authority featured a “higher carbon intensity than the grid average used by the project", although the authority’s figures were a subject of hot dispute in Thailand and carbon intensity per year varies by about 20 per cent.

-- Q. It all sounds a bit too much like guesswork, given that the object is the calculation of a precise number of tonnes of CO2 saved. How can they possibly be sure that if the project didn’t exist, exactly that amount of electricity would have been generated through nothing better than the current “average” fuel mix?

They can’t. But it’s a procedure that’s acceptable in principle to the UN.

-- Q. I assume the consultancy also factors in how much additional use of fossil-generated EPDC electricity the project might encourage in Japan?

No.

-- Q. Why not? If the project helps reassure electricity consumers or investors in Japan that it’s OK to keep using coal-generated electricity there, doesn’t that add to the carbon debit of the project?

Yes, it does. But Kyoto carbon accounting tends to ignore such realities, not that they could be measured anyway (see previous postings). So DNV was under little obligation to present an answer to your question in any of the hundreds of pages of highly-technical documents on the Yala project. Assessing the many indirect carbon or climatic effects of the project, according to DNV, “is not necessary, in our opinion”.

--Q. Let me ask another question, then. If the project was going to be built anyway, then what exactly does it “save” that deserves a climate subsidy? It’s just business as usual.

That’s right, and the CDM rulebook demands that CDM projects prove that they are not business as usual. As a result, the Yala project proponents have had to produce some evidence that it isn’t business as usual.

-- Q. How have they done that?

With difficulty. At first, project proponents claimed that, without carbon credit sales, the project’s return on equity would be lower than “desirable” or “normal” but that the good publicity associated with a climate-friendly project would make up for this. When NGOs pressed DNV to provide evidence for these claims, DNV said that it did not have permission to make public the “confidential” financial analysis the project proponents had given it. Project proponents also asserted that the planning needed for the project was a “barrier” that required carbon finance to overcome, and that the project was technologically novel in the Thai context. Later on, the project developer also noted that the project was sufficiently financially shaky that it had to be put on hold in 2002.

--Q. But even if that’s true, that wouldn’t prove that the project could be undertaken only with carbon finance.

No. And there’s a lot of evidence that, in fact, the prospective carbon income of the project has no weight at all with the investors. For example, uncertainty about whether the project would ultimately be allowed to be registered with the CDM, or about whether the Thai government would overcome its initially sceptical stance toward CDM projects does not seem to have had any effect on the project’s original construction schedule. What’s more, Sarath Ratanavadi, managing director of Gulf Electric, was quoted in the Bangkok Post on 13 June 2003 as saying that Gulf Electric and EPDC "will go ahead with the 800 million baht project [Yala biomass] even without CDM".

-- Q. What was DNV’s response to that?

It protested that the project’s “non-additionality is not as obvious as asserted" and said that it had consulted with EPDC about Sarath’s statement.

-- Q. From a scientific point of view, that’s not terrifically convincing.

No. For this project to be registered with the CDM would, in fact, probably be a net loss for climatic stability, since it would enable the Japanese government to write down its Kyoto commitment by half a million tonnes of carbon dioxide without providing anything verifiable in return. Nevertheless, the controversy over Yala is representative of the level of debate that still prevails in front of the UN committees and panels responsible for overseeing the CDM.

-- Q. That’s bound to be good news for project developers who don’t have any qualms about pushing projects that have no climate benefits.

Yes.

-- Q. Well, if the project’s benefits for the climate can’t be verified or quantified, perhaps we should forget about looking at it as a carbon project and just view it as a standard development project with an unusual prospective source of funding. Does it at least provide some benefits for local people?

Many local residents in fact quietly oppose the new development on AP’s Yala site as being likely to reinforce local imbalances of power over air and water quality. They’ve long felt animosity toward Asia Plywood for causing pulmonary health and other problems through smoke and ash pollution of local air, water and land, and profess “no trust” in the firm. Subdistrict officials have even alleged that the firm has not paid its full share of taxes.

-- Q. But why should any of that make any difference to their view of the new project?

Because for them, the important thing about the project is not the theory behind it, but who is going to carry it out. Local people might well agree with DNV that the disposal of rubber wood residues at Asia Plywood and other installations is “one of the most serious environmental problems in the Yala community.” But they view corporate reliability as a more important prerequisite for solving such problems than technical proposals. Refusing to abstract from the local political context, they see narrowly technical factors such as new equipment or CDM certification as irrelevant as long as underlying conflicts between company and community are not tackled. “If current problems are not solved,” one local health official interviewed asked, “how are new problems going to be addressed?”

-- Q. Shouldn’t DNV have taken account of such views?

DNV was well aware of locals’ view that AP should solve its existing problems with “noise, wastewater and solid waste” before attempting anything else, and should communicate the details of construction to the community as well as involve it in monitoring. Yet it had few incentives to take villagers’ political and social analysis seriously as relevant to project assessment.

For example, DNV wrote in an anodyne, theoretical way about a “comprehensive public participation program” to “accurately inform local residents, government officials and other concerned members of the public about the Project and expected impacts” and “obtain feedback, mainly from the local communities and concerned government agencies, with regard to their opinions and concerns about the Project”, including the subdistrict administrative authority’s committee and residents in “surrounding villages”. Deadpan, it recorded a meeting of less than one hour with the Lam Mai subdistrict authority. The picture was of a project and its participant firms as “black box” or neutral machine into which formulas for environmental improvement, participation and good community relations could be fed with near-automatic results. Local environmental problems were seen as stemming from a mere technical lacuna – one that the CDM project would help fill.

Similarly, when at an August 1999 public consultation few respondents agreed with the project, DNV put it down to “previous dissatisfaction with the dust caused by AP's operation” and claimed that, following the installation of a new boiler which uses sawdust, “Lam Mai [subdistrict] residents no longer disagree with the Project”.

-- Q. Are you saying that that’s not true?

It’s certainly not the impression given by a number of local residents interviewed more recently. To them, the workings of the firms involved in the project, far from being enclosed in a “black box”, are both open to view and of powerful interest.

Several people interviewed pointed out that DNV’s “public participation program”, instead of involving dissemination of useful information, has featured expenses-paid tours for local people to biomass power plants in Thailand’s central region. Such tours, they reported, have included hotel accommodation, food and free visits for some male participants to local prostitutes, but not any close inspection of the plants in question nor chances to meet local people.

Local residents also pointed to AP’s name on a sala that the company gave to a Buddhist temple adjacent to its factory after temple monks complained about pollution – an act incurring powerful reciprocal obligations. They noted that other modes of persuasion have also been used: one elderly resident interviewed reported receiving no less than three death threats as a result of voicing criticisms of the AP project.

-- Q. So some of the locals aren’t too keen on carbon trading?

Who knows? They understand very well what biomass is, but they’ve never had a chance to discuss the carbon market. Most people are completely unaware of the AP project’s projected role in this new global trade (see previous posting: “No Need to Know? The Secret Economy of Carbon”).

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Information compiled by Larry Lohmann, larrylohmann@gn.apc.org. Thanks to staff at the Alternative Energy Project for Sustainability and other colleagues in Thailand.

by: ProfMKD @ 4:20 pm