Accelerated Rural Electrification Programme of Thailand
Electrification received high priority in the government's development strategy in Thailand. To extend electrification to different parts of the country, in the early 1970s, the government planned to provide electricity to every village within a period of 25 years to improve the quality of life in rural areas. In 1973, the government of Thailand adopted the National Plan for Thailand Accelerated Rural Electrification. This plan began an intensive program of rural electrification for the country that resulted in virtually all parts of the country having access to electricity service. In 1972, only around 10% of people living outside the Bangkok Metropolitan Area had access to electricity. Thirty years later, however, more than 99% of Thailand's villages receive electricity service. This stemmed, in large part, from the government's commitment to developing and improving living standards in rural areas.
To extend electricity supply to all rural villages in Thailand.
Rural villages and households.
During the Accelerated Rural Electrification Program Stage (1976-1996), the rate of access to electricity in rural areas grew from 20% to 98%. In 1981, the number of villages electrified and the share of total villages electrified (%) was 22,525 and 44% respectively and by 1996, the number and share of villages electrified had increased to 64,228 and 98% respectively .
In 1976, the Royal Government of Thailand reaffirmed its decision to move ahead rapidly with its rural electrification program through 'Accelerated Rural Electrification Programme'. This was implemented by the Provincial Electricity Authority (PEA), which is responsible for electricity distribution in the provinces.
PEA started the rural electrification program in 1977 based on the 25-year ''National Plan for Accelerated Rural Electrification'' (ARE) which was divided into five-year plans in line with the five-year national economic and social development plans (NESDPs) of the country .
Consultations with the local community were held before electrifying a village, to discuss its electrification plans as well as issues such as right-of-way, financial contributions, communities' needs and constraints . The selection of the villages was based on the priority given to the economically backward and politically unstable region (e.g. Northeast) .
The creation of distribution network was funded through grants and low-interest-rate loans from the government and bilateral/multilateral agencies. End-users also had the option of contributing towards the cost of electrification .
The tariff structure was based on cross ‐ subsidy between customer categories, and the residential customers paid lower tariff compared to commercial and industrial consumers.
The Electricity Generating Authority of Thailand (EGAT), a state enterprise that develops, owns and operates electricity generation capacity as well as nation's transmission network, charged PEA 30% lower than it charged to Metropolitan Electricity Authority (MEA), the electricity utility company responsible for electricity distribution in Bangkok and its periphery. Retail tariff rate structures were charged at higher rate to the users that consumed more than the ones who consumed less. Both PEA and MEA were required to use the same retail rate structure and thus PEA was compensated from the 30% saved by bulk rate purchases from EGAT .
The funds for the programme were mobilized from various sources in many ways:
Financial support: PEA received financial support from various sources; government's budget, and local and foreign financial institutions in the form of soft loan. Between 1977-1986, the rural electrification projects under the Fourth and Fifth National Economic and Social Development Plans cost around 621 million US Dollars in total . The loan borrowed by PEA from World Bank for the first and second phase of programme (1977-1986) was equivalent to 100 million US Dollars [5, 6].
Cross subsidies and cost recovery: The revenue generated from sales of electricity helped PEA to cover its operational costs thereby enabling PEA to use new resources allocated for rural electrification for the expansion of electricity distribution. PEA partially used cross-subsidy from its commercial and industrial consumers to residential consumers (e.g. subsidy, as percentage, received by the poor through cross-subsidization from over PEA consumers, and the overall average sale price was around 16% in 1999). PEA also bought power from EGAT at a lower tariff compared to MEA (e.g. subsidy received by PEA from EGAT, as percentage of total PEA cost, was up to 20% in 1996) .
End user contribution: End-users had the option of contributing towards the cost of developing the distribution network, though a significant part of the funds contributed by the end-users (villages) was by local government contributions . End-users (villages) willing to bear part of the cost or the whole cost of developing the distribution network were moved up the priority listing for electrification depending on their contribution. For example, 30 % contribution to the cost accorded the village a higher priority and 100 % contribution led to immediate electrification of the village .
Rural electrification was identified to be a necessary precondition for socio-economic development. Since the programme was initiated by the government, suitable policy and institutional environment were put into place. The programme was in line with the five-year national economic and social development plans (NESDPs) of the country, where each plan set specific targets for increasing electricity access in rural areas. Like other major infrastructure investment proposals, NESDPs ensured that rural electrification was an integral part of the country's overall development strategy .
The national plan outlined the full scope of the rural electrification program, including the justification for and objectives of the expansion program, as well as specific guidelines for implementing each step for successful completion . The plan served as a blueprint for the government, the PEA, and officials responsible for the program . Office of rural electrification (ORE) was set up within PEA for planning and implementing the programme, and had control over the budget.
Similarly, the organization of the electricity industry in Thailand had significant implications in the way in which the rural electrification program was implemented. The national plan for accelerated rural electrification was developed in close cooperation with National Economic and Social Development Board (NESDB) to ensure the coordination of rural electrification with other rural development activities of the country . Although, power generation and distribution were divided among three different public companies- EGAT, PEA and MEA, the ability of PEA to focus solely on public distribution in areas outside the Bangkok Metropolitan Area contributed significantly to the program's success. Initial grants from USAID to conduct feasibility studies and soft loans from Japan, World Bank and Asian Development Bank were crucial .
PEA helped in building local capacity and skills by involving village heads and local people in planning, designing and constructing the connection system. By explaining the local people about hook-up policies and connection fees, filling of application forms and by hiring or contracting local laborers during the construction period, PEA educated villagers and promoted the adoption of electricity by people in the village, thereby enhancing their capacity and skills .
Evaluation of the PEA's capacity indicated that organizational capacity of PEA was excellent and it had high capacity to execute projects . PEA had extensive training programmes; clearly defined technical standards and job specifications actually practiced at local sites; clear organizational objectives and corporate values shared among employees; established system to secure accountability to stakeholders; and an appropriate incentive structure to execute projects efficiently, effectively and fairly, which led to successful execution of rural electrification programme .
Strong local support and cooperation during all phases of system development, such as in surveys, construction, electrification, operation, and maintenance were sought and received. As part of public relation strategy of PEA, local meetings (monthly) were held at district headquarters including village heads and community leaders to inform the villagers about the electrification effort and to seek their advice . PEA representative sought general public support on issues such as land rights-of-way or the cutting of certain trees along the planned route for electric lines and poles . Local respected individuals such as school teachers and village heads were hired to carry out meter reading and revenue collection for PEA . The villagers also provided important in-kind contribution during the construction period, by granting rights-of-way and the right to cut trees without any financial compensation .
The investment under the Accelerated Electrification Programme was a critical component of the government's programme to improve the socio-economic status of economically backward and politically unstable areas of the country (e.g. Northeast provinces) . According to an evaluation study on the impact of electrification on poverty reduction , the electrification led to an increase in the number of new social, business and commercial/retail shops, and rice mills in rural Thailand. In many villages, electrification contributed to the establishment of new occupations such as welding, food processing and battery charging, and increased productivity in vegetable gardens and rice mills due to access of irrigation made possible through the use of electrical water pumps. Lighting helped in improving education and better access to knowledge through radio and TV and availability of lighting for increased night studies. Similarly, improved safety, consequent to household lighting and street lighting, and relatively less use of firewood, were other benefits that accrued to project beneficiaries. The study also showed that about 40% of respondents believed that electricity connection led to increase in income mainly achieved through increased non-farm employment such as commercial/retail shops, food processing, welding, battery charging occupations etc.
Since the cost of electricity distribution per customer decreases with increased electricity connection (economy of scale), PEA ensured lower costs per customer by promoting maximum household adoption which was made possible through their strategy of maintaining direct and personal contact with villages . Initially, PEA also established low connection fees and a credit line for homeowners (2,000 Baht i.e. US$98 per household for the initial house wiring and other connection costs) as an incentive for the villages to opt for connections which was later provided by local contractors. Later it became easy for local contractors to learn and apply the newer wiring and connection technology due to system's high degree of standardization. This resulted in an increased number of local, private electrical contractors providing services in the villages and with an incentive to secure an expanding market, the contractors provided various types of credit and/or instalment schemes to customers and created their own individual marketing strategies . In order to make electricity affordable to the poorest people, lifeline tariff were designed and since the consumption from such customers is minimal, it did not adversely affect the PEA's financial performance .
Provincial Electricity Authority (PEA), village heads and locals.
A defined technical standards and consistent performance for electricity connection and operation were crucial for the success of the programme. Efforts to maintain the quality of the service regularly was done by involving PEA technicians who measured the voltage at specified locations (every month) during peak hours and submitted the results to the main office . Similarly, to ensure bill collection on time, PEA hired school teachers, village heads, or village elder, who were required to post a security deposit or bond. The bond was based on land holdings or on future salary (for government employees) and guaranteed that the bills of the village would be collected and paid. This also helped to develop a sense of program ownership, which was reflected in low incidences of theft and billing problems . Customer requests for service connections were acted upon promptly, and for example, in 1993 94% of request of less than 30 amperes connections were completed within six working days . Consequently the number of villages electrified steadily increased from 22,525 villages in 1981 to 64,228 villages in 1996 . According to an evaluation study , between 1989-1994, the consumption of electricity in Thailand grew at an average annual rate of 13.6%. The growth in consumption in rural areas (PEA service areas) reached 16.7% compared to Bangkok Metropolitan areas (MEA service area), mainly because of rural electrification and decentralization of industry. Since 1990, In terms of sales volume, PEA has surpassed MEA.
The successful accomplishments of the rural electrification programme can be attributed to number of factors, and while some of these are unique to Thailand, others could be easily replicated in other countries. The factors such as establishment of a dedicated distribution company (PEA) for rural customers, commitment to financial soundness, financing expansion through cross-subsidies and concessional loans, bulk tariff subsidies as compensation for universal electricity pricing structure, and local support gain are some of the important lessons that can be considered for scale up and replicability in other areas and countries.
Provincial Electricity Authority (PEA)
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Name:Accelerated Rural Electrification Programme of Thailand
Provincial Electricity Authority (PEA) of Thailand, an autonomous government agency for electricity distribution. PEA had the operational mandate and control for developing and implementing the programme.
Provincial Electricity Authority (PEA)
- Unspecified grid electricity
- Energy supply
- National Grid
Project status:Completed project