What is the long-term outlook for energy demand in Thailand

While often used, GDP growth alone is inadequate in forecasting energy demand. Energy consumption, especially in the consumer-driven sector (comprising the residential, commercial, and transportation subsectors), does not track very well with GDP growth.

What then really drives long term energy demand? Consumer behavior; age and income levels; and urbanization. Consumer demographics make a huge difference. To illustrate this, consider two (representative) individuals. Khun Somporn is 30 years old, earns 10,000 baht a month, and lives in a rural area. Khun Somsajee is also 30, but earns 40,000 baht and lives in Bangkok. The latter spends nearly seven times more on energy than the former.

We develop an in-depth energy demand model using a bottom-up approach to forecast overall consumerdrivenenergy consumption over the next decade. Our methodology has been employed elsewhere but has not been readily applied in Thailand. Our model shows that energy demand in consumer-driven sector will grow from a compound annual growth rate (CAGR) of 3.5% in the past decade to 4% in the next one, or about 1.5 times within the next decade.

Such increasing consumption will create significant supply challenges. Power plant businesses will face challenges in developing new sources of supply to meet the growing demand, especially since resistance against new power plants is unlikely to go away any time soon. Alternative energy sources are likely to continue to be constrained by raw materials and high costs.

The best source of additional energy is to reduce waste and improve efficiency. Production and development of new energy sources require a lot of time and capital. Changing consumer behaviour can yield significant and sustainable improvements in energy outcomes. As an example, if every household used more energy efficient air conditioners (from energy label 3 to energy label 5), the annual energy savings are on the order of 800 megawatts (MW), equivalent to the output of a 20 billion baht power plant.

Because energy demand is likely to continue to outpace energy supply, business as usual may result in brownouts and blackouts, experiences which we have managed to avoid to date. We cannot continue to have it all. We cannot have more cars and more appliances, use energy in the same wasteful manner, while not allowing new power plants to be built. Something has to give. Tough choices have to be made.