Report Highlights:

Thailand's 10-year Alternative Energy Development Plan (2012 – 2021) remains unchanged targeting the use of ethanol at 9 million liters/day and B100 at 7.2 million liters/day in 2021, respectively. Production of both ethanol and biodiesel continues to grow in line with consumption.

Executive Summary:

Thailand's 10-year Alternative Energy Development Plan (2012 – 2021) remains unchanged targeting the use of ethanol at 9 million liters/day and B100 at 7.2 million liters/day by 2021, respectively.

Ethanol production is forecast to increase by 10 percent in 2016 in response to growing demand for gasohol. Molasses-based ethanol dominates the ethanol market, accounting for 70 percent of total ethanol production, with the rest from cassava. The number of ethanol plants is expected to increase from 21 plants in 2015 to 22 plants in 2016, adding another 400,000 liters/day to the current production capacity of 4.8 million liters/day.

Ethanol consumption should rise to 1.27 billion liters in 2015 and 1.40 million liters in 2016 due to growing demand for E20 and E85 gasohol. The higher demand is being fueled by the government's price subsidies and the expansion of E20 and E85 gasohol stations and cars.

B100 or blended biodiesel production is estimated to further grow to 1.21 billion liters in 2015 and 1.25 billion liters in 2016. As for 2016, it is estimated that about 72 percent of B100 production will be derived from crude palm oil (CPO) or refined bleached deodorized palm oil (RBDPO), 21 percent from palm stearin, and 7 percent from palm free fatty acid (FFA). The production trend is in line with B100 consumption which is expected to grow marginally in 2015 and 2016 mainly because the government is likely to maintain its mandatory use of B7 fuel while the diesel market shows only small growth.

Due to fierce competition between Thailand's B100 processors, newcomers have been reluctant to enter the market since 2010. Some establishments have already suspended their operations. As a result, only 10 producers currently have active operations with an estimated total production capacity of 5.4 million liters per day or 1.63 billion liters per annum.

The 10-year Alternative Energy Development Plan (2012 – 2021), which was approved by the Thai Cabinet in 2011, remains unchanged. The objective of the plan is to increase the share of renewable and alternative energy from the existing 9.4 percent of total energy consumption to 25 percent by 2021. The objective is mainly to reduce the country's dependency on fossil fuels. The plan also aims to strengthen domestic energy security, promote integrated green energy utilization in communities, enhance the development of alternative energy industries, and increase research and develop renewable energy technology for competitiveness in the global market.

1.1 Ethanol

The Government's goal is to increase ethanol consumption to 9 million liters per day by 2021. Ethanol consumption increased to around 3.5 million liters per day in the first four months of 2015, up from an average of 3.2 million liters per day in 2014. The Government is still promoting the use of E20 and E85 gasohol consumption through price incentives. The subsidies make ethanol blends 20 to 40 percent cheaper than E10 Octane 95 gasoline. The price subsidies are paid by the State Oil Fund. The Government continues to provide gasoline stations marketing subsidies totaling 1-2 baht/liter (12-23 US cent/gallon) and 2-3 baht/liter (58-70 US cent/gallon) to entice them to expand sales of E20 and E85 gasohol. In addition, the government continues to support the manufacturing of E20 vehicles which are compatible with E20 and E85 gasohol. The excise tax rate for the manufacturing of the Eco-cars (less than 1,300 cc engines with fuel consumption rate of 5 liters per 100 km.) is at 17 percent compared to 30 percent for E10 vehicles. Also, the Government will give an additional 3 percent reduction in the excise tax rate in 2016 for the manufacturing of Eco-cars which use E85 gasohol.

In order to meet the plan's ethanol consumption targets, feedstock supplies must increase in the future. Under the plan, the target is to increase sugarcane acreage and yields to more than 15 metric tons per rai (94 tons/hectare) compared to the current average yield of 12 metric tons per rai (75 tons/hectare). The Government encourages rice farmers in unproductive areas to shift to sugarcane under the 5-year Agricultural Restructuring Program (MY2015/19 – MY2019/20). Planted area of sugarcane is likely increase by 0.7 million rai (112,000 hectares) from MY2015/16 to MY2017/18. The plan also aims to increase the average cassava yield to more than 5 tons per rai (31 tons/hectare) with total production of 35 million metric tons per year.

1.2 Biodiesel

The Thai Government has set a B100 consumption target at 7.2 million liters per day by 2021. The plan focuses on both supply and demand. To meet the demand, the government has targeted oil palm acreage at 5.5 million rai (880,000 hectares) by 2021. Average yields are expected to reach 3.2 MT/rai (30 MT/hectare) in 2021 while crude palm oil crushing rates should be above 18 percent. On the demand side, the government anticipates balancing its compulsory production of biodiesel with domestic palm oil supplies. The plan also introduces pilot projects for B10 or B20 blend use in fleet trucks and fishing boats.

The government also intends to support the research and development with a plan called "Future New Fuel for Diesel Substitution," which encourages cultivation of new energy crops (jatropha and micro algae), diesohol (blending ethanol with diesel), and oil conversion technology (Bio Hydrofined Diesel: BHD, and Biomass to Liquid: BTL) between 2014-2017. The target for new commercial production capacity is 2 million liters per day in 2018 and up to 25 million liters per day by 2021. Thai Oleochemicals Company, a subsidiary company of PTT Global Chemical Public Company, introduced a BHD product into the market in 2013. Total sales of BHD are reportedly about 50,000-80,000 liters per day.

2. Ethanol

2.1 Production

In 2016 ethanol production is forecast to increase to around 1.4 billion liters, up around 10 percent from 2015 in anticipation of growing demand for gasohol. The number of ethanol plants is expected to increase by 1, to 22 with production capacity of 5.2 million liters per day, up 8 percent from 2015. The new plant will produce cassava-based ethanol. Production capacity of cassava-based ethanol plants will increase to about 1.9 million liters per day. Molasses-based ethanol still dominates Thailand's overall ethanol production, accounting for around 70 percent of fuel ethanol with production capacity of around 2.8 million liters per day. Demand for molasses will likely continue to increase to around 4 million metric tons. Meanwhile, the use of rice stocks in ethanol production is likely to be limited to 0.5 million metric tons per year to avoid negative impact on domestic prices of cassava. This rice will come from government stocks. The sole sugar-based ethanol plant is expected to operate at full capacity of around 230,000 liters per day using around 1 million metric tons of sugarcane.

In the first four month of 2015, fuel ethanol plants operated at an average of around 3.5 million liters per day, which was about 70 percent of full capacity. Molasses-based ethanol still dominates Thailand's overall ethanol production, accounting for around 65 percent. The number of operating fuel ethanol plans will likely remain unchanged at 21 in 2015. However, production capacity is expected to increase to around 4.8 million liter per day, up 9 percent from 2014. The increase is driven by growing demand for gasohol. Of 21ethanol plants in Thailand, 14 are molasses-based with production capacity of 2.9 million liters per day. This compares to 2.7 million liters per day capacity in 2014. Some molasses-ethanol manufacturers doubled their production capacity to facilitate anticipated sugarcane acreage expansion for their new sugar facilities. The sole sugarcane-based ethanol plant increased its production capacity by 15 percent to 230,000 liters per day in 2015. The reminding 6 plants use cassava with production capacity likely to increase to 1.7 million liters per day, compared to 1.5 million liters per day in 2014.

Total ethanol production is likely to increase to around 1.265 billion liters in 2015, up 20 percent from 2014. This will result in higher demand for feedstock which will likely to be filled primarily by molasses. The demand for molasses is expected to increase to 3.5 million metric tons, compared to 2.9 million metric tons in 2014. Meanwhile, demand for cassava is likely to decline around 1 million metric tons (producing around 155 million liters of ethanol), compared to 1.9 million metric tons in 2014 (producing around 300 million liters of ethanol) in anticipation of the substitution of rice for cassava, particularly for imported cassava from Cambodia. This is driven by the sales of non-food grade rice from the government stocks. It is expected that around 0.5 million metric tons of the government rice will be used on ethanol production in 2015, producing around 190 million liters of ethanol. This will account for approximately 17 percent of total ethanol production in Thailand.

The production of non-fuel ethanol is controlled by the government. The Liquor Distillery Organization (LDO), which is under the authority of the Excise Department of the Ministry of Finance, has a monopoly on the production of industrial grade ethanol in Thailand with a production capacity of approximately 60,000 liters per day. Meanwhile, domestic demand for industrial grade ethanol, particularly for medical, pharmacy, paints and cosmetics uses, is around 50,000 liters per day. The primary feedstock for industrial ethanol production is molasses and cassava.

2.2 Consumption

In 2016, fuel ethanol consumption is forecast to increase to 1.4 billion liters (3.8 million liters/ day), up around 10 percent from 2015. This is due mainly to growing consumption of E20 (a mixture of 20 percent ethanol and 80 percent gasoline) and E85 gasohol (a mixture of 85 percent ethanol and 15 percent gasoline). The demand for E20 and E85 gasohol will be driven by government's price subsidies and the expansion the E20 and E85 gasohol stations. Gasohol consumption is expected to trend upward to around 9.6 billion liters (or 26 million liters per day) in 2016, up 8 percent from 2015. Consequently, the average ethanol blending rate will likely increase to around 15 percent, compared to 14 percent in 2015.

In the first four month of 2015, ethanol consumption increased to around 0.4 billion liters (3.5 million liters/day), up 17 percent from the same period last year. This was due to an increase in gasohol consumption to 3.6 billion liters (or around 24 million liters per day), up 15 percent from the same period last year. Consumption of gasohol accounted for around 95 percent of total gasoline consumption. E20 and E85 gasohol consumption continued to increase significantly accounting for 20 percent of total gasohol consumption due to the government prices subsidies. Also, consumption of E10 gasohol increased 14 to 15 percent from the same period last year at the expense of premium gasoline. Despite a reduction in petroleum prices, consumption of Octane 95 premium gasoline continued to decline as the retail price is 20-50 percent higher than gasohol prices. In addition, the retail price of E85 gasohol which is still heavily subsidized by the government is approximately 20 percent cheaper than E10 gasohol. Meanwhile, E20 retail price is 7 percent below E10 gasohol. Also, the number of E20 and E85 gasohol stations continued to increase nationwide, particularly for E85 gasohol station which nearly doubled in May 2015, compared to 385 stations last year. The number of E20 and E85 vehicles currently account for more than half of total gasoline vehicles.

In 2015, domestic demand for ethanol is likely to increase to around 1.3 billion liters (3.5 million liters/day). Gasohol consumption is expected to increase to around 9 billion liters (24 million liters/day), up around 10 percent from 2014. The government will likely continue to promote consumption of E20 and E80 gasohol by subsidizing prices 10 to 20 percent below E10 gasohol through the State Oil Fund.

2.3 Trade

Ethanol exports will likely be minimal in 2015 and 2016 due mainly to growing domestic demand for ethanol. In 2014, ethanol exports declined significantly to around 8 million liters.

All ethanol exports are industrial grade ethanol which is primarily exported to the Philippines. Meanwhile, there were no imports of ethanol for gasohol production in 2014 due to sufficient domestic supplies. The Thai government imposes a 2.5 baht/liters (29US cents/gallon) on ethanol imports.

2.4 Stocks

Ethanol stocks are expected to be decline to around 20 million liters in 2015 and 2016 in anticipation of growing demand for gasohol consumption. Most fuel ethanol manufacturers mainly supply their ethanol for domestic refineries for gasohol production. Consequently, their total storage capacities will be limited to only around one month of domestic use.

3. Biodiesel

3.1 Production

B100 or unblended biodiesel in Thailand is currently produced from palm oil derived feedstock such as crude palm oil (CPO), refined bleached deodorized (RBD) palm oil, palm stearin, and free fatty acids of palm oil (FFA). B100 production is solely driven by government mandates, mainly aimed to help palm farmers.

B100 production is forecast to grow 3 percent to 1.25 billion liters in 2016 on a basis that the government's B7 mandate will be applied throughout the year, with only a marginal increase in consumption. It is estimated that about 72 percent of B100 is derived from RBDPO or CPO, 21 percent from palm stearin, and 7 percent from FFA. B100 production in 2015 is also estimated to increase by 3 percent to 1.21 billion liters in 2015.

Feedstock for unblended diesel or crude palm oil is forecast to recover to 2.2 million metric tons (MMT) given normal weather conditions and continued increase in harvested area. Based on a recent survey in major oil palm plantation areas, dry weather conditions throughout Thailand in 2014 and early 2015 are likely to affect oil palm production in 2015. Despite increased harvested area, trade sources reported that unfavorable weather is hurting not only fresh fruit bunch (FFB) output but also overall oil extraction rates, at least in the first four months of the year (Jan-Apr 2015). As a result, crude palm oil (CPO) production for 2015 is estimated to decline by 10 percent to 1.8 million metric tons (MMT) from 2.0 MMT in 2014.

Due to fierce competition between Thailand's B100 processors, newcomers have been reluctant to enter the market since 2010. In addition, establishments, with the total capacity of 350,000 liter per day, have already suspended their operations because of their inability to compete. As a result, only 10 producers currently have active operations with an estimated total production capacity of 4.84 million liters per day or 1.45 billion liters per annum. The New Biodiesel Company expanded its B100 production capacities by 600,000 liters per day (180 million liters per annum) to 1 million liter per day in mid-2015.

3.2 Consumption

The Government is likely to maintain its B7 mandate in 2016. As a result, B100 consumption in 2015 is estimated to grow slightly due mainly to a growth in diesel use. In response to reduced CPO supplies and skyrocketing prices in early 2015, the government temporarily lowered the mandatory vegetable oil content requirement in biodiesel by 50 percent from the mandate of B7 to B3.5 from January 22 to April 16, 2015. The mandatory use of B7 was eventually reinstated on April 17, 2015 onward after increased production of CPO entered the market following the harvest of fresh palm fruits.

B100 producers, especially those that are not part of integrated with CPO processors and petroleum oil refineries are struggling to survive, primarily because of higher production costs.

3.3 Trade/Policy

The Thai Government restricts the import of biodiesel to protect domestic palm growers. Thailand's biodiesel imports and exports are very small. Biodiesel exports were 1,870 metric tons (MT) in 2014, while the imports totaled 2,810 MT.

3.4 Ending Stocks

B100 production is driven solely by contracts between palm growers and refineries. As a result, the country's B100 stocks, held by either B100 producers or petroleum oil refineries, are quite low somewhere around 20-30 million liters or about ten days of utilization.

4. Advance Biofuels

A molasses-based ethanol plant recently opened a second production line using cane bagasse. This second generation biofuel pilot project was established between the Thai Roong Ruang Group, one of the largest sugar mills in Thailand, and the Japanese and Thai governments. The pilot project remains in the experimental stage with a production capacity of 10,000 liters/day mainly because the production costs remain higher than the first-generation ethanol derived from sugar molasses or cassava roots. With current low petroleum prices expected to continue into 2016, the feasibility of this project remains threatened.