Abstract
This study aims to determine how much of an economic loss results from the FiT policy and to provide such information to the government, which in turn sets policy for future decisions. Findings from a SUR estimation show that the supply of each energy source does not respond to the purchase price, except in the case of natural gas. Increases in the purchase price of natural gas increases the quantity used to produce electricity by natural gas at a significance level 1 percent. The FiT policy is found to create an economic loss that comes from violating the law of one price and from ignoring an externality cost, amounting to 46.67 and 356.44 billion per year, respectively. Therefore, this study suggests that the Thai government should adjust the electricity purchase price by setting the purchase price by following the law of one price and thus reflecting the full cost pricing in power generation.Keywords: Economic Loss, SUR estimation, FiT policy, Law of One Price, full Cost PricingJEL Classifications: Q41, Q48, Q51DOI: https://doi.org/10.32479/ijeep.9367
Highlights
The electricity market in Thailand is a monopsony in which the electricity generating authority of Thailand (EGAT) monopolizes electricity distribution activities
Demand and Supply of Electricity in Thailand Model Results show that the purchase price is strongly significant in the demand and the supply of natural gas model
This means that these two policies violate the law of one price, which in turn creates an economic loss because they do not provide the correct price signal for power generation
Summary
The electricity market in Thailand is a monopsony in which the electricity generating authority of Thailand (EGAT) monopolizes electricity distribution activities. This is called the “enhanced single buyer model.”. In 2007 the Thai government adopted the “adder” policy to generate incentives for producing electricity through renewable sources of energy. In 2010, the Thai government changed the policy from using adder to feed-in-tariff (FiT) to promote using renewable energy to produce electricity. This changed the electricity purchase rate to Electricity purchase rate = FiTf + FiTv,t-1
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