Lao pdr’s electricity production and exports with environmental sustainability

Nội dung text: Lao pdr’s electricity production and exports with environmental sustainability

1. LAO PDR’S ELECTRICITY PRODUCTION AND EXPORTS WITH ENVIRONMENTAL SUSTAINABILITY Associate Professor Dr. Ngo Thi Tuyet Mai Email: ngothituyetmai@neu.edu.vn; ngothituyetmaineu@gmail.com National Economics University, Hanoi, Vietnam PhD candidate, Phitsanoukone Phonevilaysack Email: zai.ktdn21b@gmail.com National Economics University, Hanoi, Vietnam Abstract Hydropower is one of the very important energy sources, contributing to the socio-economic development of Lao People's Democratic Republic (Lao PDR) over the years. However, in addition to the positive effects, hydropower plants in Lao PDR have caused serious effects such as reducing forest areas, changing flows and ecosystems of rivers and causing environmental pollution. Therefore, in order to achieve the sustainable development goals by 2030, these problems need to be addressed by the Lao PDR government itself with supports from neighboring countries such as Vietnam and international organizations. Key words: Hydropower. Electricity exports. Environmental sustainability. 1. Introduction Lao PDR is a land linked and mountainous country. The country is located in the middle of the Mekong Sub-Region, bordered by the Kingdom of Cambodia, the People’s Republic of China, the Republic of the Union of Myanmar, the Kingdom of Thailand and the Socialist Republic of Vietnam. It has a total area of 240,000 square kilometers (Jica Laos Office, 2018). Lao PDR has changed its economic policy from centrally - planned mechanism to market economy since 1986. The economy has been developing and expanding rapidly. As a result, over the last decade, Lao PDR had remarkably achieved economic growth among the Association of Southeast Asian Nations (ASEAN) countries, averaging 7.7%, with GDP per capita reaching $2,577 in 2018. In the mid- 2018, the country suffered the flooding – related disasters, but its economic growth still remains robust at 6.5% (World Bank, 2019). At the same time period, Lao PDR has achieved significant progress in in poverty alleviation, with poverty rates decreased from 46% in 1992 to 23.2% in 2017. However, the country still depends 958
2. on agricultural sector (accounting for 17.3% of total GDP, and 70% of total population - 6.85 million people in 2018) (Jica Laos Office, 2018). Lao PDR’ economic growth rate of 7-8% has been driven primarily by robust construction, resource development and electricity generation (Jica Laos Office, 2018); and supported by increased resource development and electricity generation, growing opportunities in the non-resource sectors from closer regional economic integration, and economic reforms to improve the business environment, its GDP growth rate is expected to continue to growth in 2019-2020 (World Bank, 2019). Lao PDR has many advantages and is considered an ideal place in the region to produce and export electricity. Due to its special geographical terrain, Lao PDR is richly endowed with hydropower resources and is becoming more urbanized and better integrated within ASEAN, as well as the Greater Mekong Sub region (IHA Central Office, 2017). With the advantage of many rivers, mountainous terrain (80% of the entire land area) and low population density (27 person/km2), Laos is very strong in hydropower development (Jica Laos Office, 2018). In particular, tropical monsoonal rainy season (May-October) comes from two different directions: the first one is from Gulf of Thailand and the second one is from Gulf of Tonkin, resulting in high precipitation and creating favorable conditions for hydropower generation. The Mekong River, which flows through Lao PDR, contributes an estimated 35% of the Mekong’s total inflows, resulting in one of the main sources from where hydropower energy is extracted (IHA Central office , 2017). According to the International Hydropower Association (IHA), Lao PDR belongs to one of the ASEAN countries with most abundant hydroelectric resources. It has about 26.5 gigawatts (GW) of theoretical hydroelectric power capacity. In 2016, Lao PDR has an installed capacity of only 4.17% GW, accounted for 15.7% of the total in unrealized power potential (Angaindrankumar Gnanasagaran, 2018). Laos, one of Asia’s poorest countries, hopes to become the “Battery of Southeast Asia” by selling power to neighbors through a series of hydropower dams (Bangkok Reuters, 2018) However, Lao PDR is highly vulnerable to the impacts of climate change and natural disasters. For example, from 1990 to 2015, Lao PDR had 21 floods and storms. In particular, most of floods occur in the central and southern parts of the country along the Mekong plain (The Government of the Lao PDR in consultation with National and International Partners in Lao PDR, 2018). Global temperatures have been on growing up which has increased the amount of water vapor in the atmosphere. This has resulted in more intense downpours. Together with substandard construction materials, it could lead to a plausible reason for hydropower dam’s 959
3. failure. The rapidly increasing number of hydropower plants in Lao PDR already raised many environmental and social concerns. The objective of this paper is to identify problems and challenges related to hydropower planning and development with environmental sustainability considerations in Lao PDR. 2. Method and Conceptual Framework of Sustainable Development The article uses the method of data statistics, synthesis and analysis. Based on the data collection, statistics and synthesis regarding the impact of Lao PDR’s electricity production and exports with environmental sustainability which are found in reputable articles, scientific journals, archives and mass publications of Lao PDR as well as other related organizations, the authors then analyze the relationship of electricity production and exports with environmental sustainability in Lao PDR. This paper is based on the theoretical framework of sustainable development to study Lao PDR’s electricity production and exports with environmental protection throughout the years. The term "sustainable development" was first mentioned in the early 1980s in the International Union for Conservation of Nature and Natural Resources (IUCN) World Conservation Strategy report. In 1987, the Bruntland Commission published its report namely “Our Common Future”, in an effort to link the issues of economic development and environmental stability. This report defined the term: “sustainable development” as: “Development that meets the needs of current generations without compromising the ability of future generations to meet their own needs” (United Nations General Assembly, 1987, p. 43). This concept has become a popular and important concept, widely used in academic, global and national level (UNECE/OECD/Eurostat WGSSD, 2008, pp.13). So far, the concept of sustainable development, though different in scope, reflects the general nature of development, which is the combination of economic development with social and environmental issues. Harmonious and flexible manner, Vietnam's Agenda 21 was promulgated by the Government in accordance with Decision 153/2004/QD-TTg dated 17 August 2004, aimed at sustainable development of the country on the basis of strict integration, rationality and harmony between socio-economic development and environmental protection. Broadly, the integration of environmental, social, and economic concerns into all aspects of government decision making processes is the key principle of sustainable development. More precisely, this paper refers more on the concept of sustainability in terms of Lao PDR’s electricity production and exports in order to increase its economic growth rate and protect natural environment without affecting the capabilities of future generation. 960
4. 3. Electricity production by source in Lao PDR Hydropower is the main primary energy sources of Lao PDR, using abundant water resources from Mekong River and its tributaries. In the period of 2009-2018, hydropower was the second increase (after coal), at an average rate of 9.8%, higher than average annual growth rate of the total primary energy supply of Lao PDR of 7.5%1. Between 2009 and 2015, hydropower accounted for 98.8% of the total annual electricity production in Lao PDR. Until 2013 and 2014, several biomass and solar power plants were established, and since 2015, coal (as anthracite and lignite) has been consumed to produce electricity only for export purposes (see Figure 1). Figure 1: Electricity production by source Unit: GWh 25,000 20,000 15,000 10,000 5,000 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Hydroelectric Charcoal Sunpower Biomass Source: Ministry of Energy and Mines, Lao PDR (2018); ERIA (2019) In 2017, Lao PDR had 46 operating hydroelectric power plants, with 54 more planned or under construction. Lao PDR currently has 53 hydropower plants with 7,082 megawatts of installed capacity. However, on July 23, 2018, an auxiliary dam, part of the Xe-Pian Xe-Namnoy hydropower project in the southern province of Attapeu, collapsed, killing at least 39 people and more than 90 are still missing. Following this loss, the Lao PDR government decided to suspend approval of new dams and review all existing and under - construction dams (Lao PDR Ministry of Energy and Mines, 2019). 1 The primary energy sources of Lao PDR consist of coal, oil, hydro, and biomas. Between 2000 and 2015, the highest increase of the primary energy sources of Lao PDR during the period was coal at 42.2% per year. One of the main reasons was the Hongsa power plant started its production in 2015, resulting in a significant increase of coal supply that year. 961
5. A large proportion of existing Lao PDR’s electricity products is produced for exports. Lao’s electricity export accounted for 80% of the total production in 2000. However, it declined and accounted for 68% of the total electricity production in 2015 and 79% in 2018 (see Figure 2). Figure 2: Electricity production vs electricity export Unit: GWh 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Production Exports Source: Ministry of Energy and Mines, Lao PDR (2018); ERIA (2019) 4. Electricity exports – imports of Lao PDR Lao PDR is a net electricity exporting country (Figure 3). According the report of Ministry of Energy and Mines, during just the first nine months of 2017, Lao PDR exported more than 18,832 GWh of electricity, worth more than US$975 million, an increase of 25% compared to the samr period in 2016. In 2018, electricity exports reached 27,216 GWh, increased from 1,921 GWh in 2009 (by 14 times), accounting for almost 30 percent of its total exports. Figure 3: Lao PDR's Export and Imports of Electricity Unit: GWh 30,000 25,000 20,000 15,000 10,000 5,000 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Export Import Net trade Source: Ministry of Energy and Mines, Lao PDR (2018); ERIA (2019) 962
6. The Lao PDR exports most electricity products to the neighboring countries including Thailand, Vietnam and Cambodia. Of which, Thailand is the largest importer of energy from Lao PDR. In December 2007, according to a memorandum of understanding signed by Lao PDR government and Thailand government, the Lao PDR government agreed to sell electricity to Thaland with the amount of 5,000 MW by 2015 and 7,000 MW by the end of 2020 (EPD, 2009). In October 2017, the Ministry of Energy and Mines informed that Lao PDR has agreed to sell 100 MWh of electricity to Malaysia via Thailand’s power grid. The country is aiming to export 100 MWh of electricity to Singapore and 200 MWh to Myanmar by 2020 (Angaindrankumar Gnanasagaran, 2018). Lao PDR is looking for to export 15,000 MWh of electricity by 2030, of which 10,000 MWh exported to Thailand, and 5,000 MWh to Viet Nam, Cambodia, and Myanmar collectively (Kouphokham, K., 2016). The Lao PDR also imports electricity mainly from Thailand, China and Vietnam to meet its domestic demand during the dry season, especially in areas near the border that are not connected to the grid. 5. Official goals of the Lao PDR government and policies on hydropower In accordance with the national development goal of graduating out from a least-developed country status by 2020, the Lao PDR government has determined plans for the electricity subsector. The official goals to 2020 for the power sector are: (i) expanding access to low-cost, reliable, and sustainable electricity; (ii) for so doing and earning foreign exchange, tapping the country’s rich hydropower potential; and (iii) becoming the power battery of the Greater Mekong Sub region (ADB, 2010). Since 2006, there are many private investors and developers have involved in hydropower business in Lao PDR1. Because most of these projects are currently in various stages of development in the country, the government has been forced to improve its policies for individual projects including requirements for feasibility studies, resettlement plans, compensation, environmental impacts, etc. These improvements have been motivated by the multilateral banks (notably Thai and Chinese banks) and international organizations (mainly the WB and ADB), and international NGOs who are interested in the potential negative impacts from hydropower development in Lao PDR (ADB, 2010). However, most of investors have revealed limited commitments to implementing best environmental and social performs. There is often more than one hydropower project established on the same river, coupled with mining and irrigation schemes struggling for the same water, resulting to cumulative impacts on the river basins. 1 Regional investors (companies) and financiers (notably Thai and Chinese banks) are the main owners and investors of Independent Power Producer (IPP) hydropower projects in Laos (source: Mattijs Smits (2012), Hydropower and the Green Economy in Laos: Sustainable Developments, Wageningen University & Research. 963
7. In addition, there has been no systematic planning of the location of the hydropower projects in Lao PDR. Once a company gets the green light from the government to start project implementation process, there are no clear dates associated with it. This means that the Lao PDR’s independent power producer strategy is led by private investors and developers as well as Memorandum of Understands (signed by the Lao PDR government and other neighboring governments) rather than by the plans of the government. In other words, there is still lack of a strong institutional, policy and regulatory framework for energy efficiency and sustainability in Lao PRD. As a result, these underway projects do not necessarily correspond to the rural electrification plans, nor does the government have much control over on environmental protection commitments when they start producing electricity (Mattijs Smits, 2012; Global Green Growth Institute, 2017). 6. Conclusion and recommendations Lao PDR is rich in natural resources such as land, forest and river. The Lao government has identified the development of hydropower as a key way to promote economic growth and reduce poverty. Developing hydropower, however, puts pressure on the environment and local people’s livelihoods. In order to achieve the goals of sustainable development, the Lao PDR’s government needs to implement a number of solutions as follows: To achieve sustainable development for future hydropower development, Lao PDR needs to manage its hydropower development to ensure social, economic and environmental sustainability through developing of legal, institutional environment, policy and fiscal framework; strengthening of the institutional capacity of the energy sector; improving knowledge and data management skills; and developing institutional and coordination mechanisms across the government agencies. Focusing on adjusting energy development plans so that it is in line with the natural conditions, domestic and regional demands; reviewing the implementation of all projects, especially focusing on safety inspections of all dams that have been building; Inspecting and adjusting power production projects to be suitable to the actual needs; Strengthening the management and administration of water flows in each dam to ensure safety for the dam and at the same time to help combat drought and flood. Obviously, Lao PDR’s sustainable management of hydropower can be achieved by maintenance of adequate renewable energy resources for sustainable electric power generation. In particular, the main objective of sustainable management of hydropower is to maintain adequate renewable hydro resources for 964
8. sustainable electric power generation, and therefore, to ensure sustainable revenue for the government. In addition, public participation (local communities) in planning and monitoring process of hydroelectric power plants are also needed to contribute to identifying mitigation measures and opportunities for regional development as well as environmental sustainability. In a country with inadequate human resources and capacity in both public sector and private sectors, Lao PDR needs technical and financial supports by international organizations (WB, ADB), and neighboring countries such as Vietnam to contribute to sustainable development of the natural resources that the country will long be dependent on. References 1. ADB (2010), Energy Sector in the Lao People's Democratic Republic, Reference Number: SAP: LAO 2010-42 Sector Assistance Program Evaluation. 2. Angaindrankumar Gnanasagaran (2018, August 4), Lao Dam Failure Creates Hydroelectric Woes, reviewed from failure-creates-hydroelectric-woes. 3. Bangkok Reuters (2018, August 15), Mekong River body welcomes Laos’ decision to suspend new dam projects, reviewed from welcomes-laos-decision-to-suspend-new-dam-projects-idUSKBN1L00GV. 4. EPD (Energy Promotion and Development), 2009, The power to reduce poverty,Vientiane, Laos: Electricite’ du Laos. 5. ERIA (2019), Energy Outlook and Energy Saving Potential in East Asia 2019, reviewed from saving-potential-in-east-asia- 2019/?utm_source=ERIA+Master+Mailing+List&utm_campaign=541423fef0- EMAIL_CAMPAIGN_2018_10_30_06_24_COPY_01&utm_medium=email &utm_term=0_4e7eb77ed9-541423fef0-267373697 6. Global Green Growth Institute (2017, November), Green Growth Potential Assessment Lao PDR Country Report, Report.pdf. 7. IHA Central office (2017, May), 2016 Hydropower Status Report, reviewed from 965
9. 8. Jica Laos Office (2018, September 1), Lao Outlook, reviewed from att/outlook.pdf 9. Kouphokham, K. (2016), ‘Lao PDR Country Report’ in Kimura, S. and P. Han (eds.) in Energy Outlook and Energy Saving Potential in East Asia 2016. ERIA Research Project Report 2015-5, Jakarta: ERIA, pp.193-213. 10. Lao PDR Ministry of Energy and Mines (2019), Laos ‘s No. 1 International Power Generation, Transmission, Distribution and Electrical Engineering Exhibition and Conference, at National Convention Centre Vientiane, Laos, June 2019. 11. Mattijs Smits (2012), Hydropower and the Green Economy in Laos: Sustainable Developments, Wageningen University & Research. 12. Ministry of Energy and Mines, Lao PDR (2018), Lao PDR Energy Statistics 2018, Supported by The Economic Research Institute for ASEAN and East Asia. 13. The Government of the Lao PDR in consultation with National and International Partners in Lao PDR (2018), Lao People’s Democratic Republic: Voluntary National Review on the Implementation of the 2030 Agenda for Sustainable Development. 14. United Nations General Assembly (1987), Report of the world commission on environment and development: Our common future. Oslo, Norway: United Nations General Assembly 15. World Bank (2019, April 4), The World Bank In Lao PDR, reviewed from 966