Renewable Energy Development in Thailand: A Computable General Equilibrium Model Based Analysis

Thailand’s economy is susceptible to global energy crises due to its dependence on external energy sources, with about half of its energy supplies coming from overseas. Due to the persistent increase in oil prices since 2004, the Thai government has become more aware of the need to promote the development of domestic renewable energy, particularly biomass fuel. Recently, the National Energy Policy Council (NEPC) approved a 15-year renewable energy development plan (2008-2022) focusing on increasing domestic alternative energy use to replace fossil fuel imports. However, at this stage there is limited knowledge about the economic implications of implementing this plan, including the price effects and impacts on other sectors. The main objective of this study is to develop a computable general equilibrium (CGE) model for Thailand which features several energy-specific enhancements. The data base utilizes the 2005 Thailand Input-Output (I-O) table. The model is used to simulate a number of potential policies to achieve the bio-liquid fuel targets contained in the 15-year renewable energy development plan. Examples of simulations include abandoning gasoline-95 use, promoting E20 gasohol-95 use, and replacing B2-biodiesel (B2) with unsubsidized B5-biodiesel (B5). The simulation results indicate that implementing most of the potential bio-liquid fuel promotion policies is unlikely to achieve the set targets. This is because the targets are too high given the current structural constraints. In addition, replacing B2 with B5 needs to be phased to avoid a shortage of biodiesel including palm oil and oil palm. Additional bio-liquid fuel promotion policies such as abandoning gasoline-91 use and promoting B10 use need to be gradually implemented.