1. Introduction
Sustainable Development Goal 7 (SDG 7 or Global Goal 7) - one of 17 Sustainable Development Goals established by the United Nations General Assembly in 2015 - aims to "Ensure access to affordable, reliable, sustainable and modern energy for all". Access to energy is an important pillar for the wellbeing of the people as well as for economic development and poverty alleviation.
The report Our Common Future (also known as the Brundtland report) published in 1987 by the World Commission on Environment and Development (WCED 1987) describes four key elements of energy sustainability: capacity to enhance energy supply to meet growing human needs, economically and efficiently, public health and safety, and protect the biosphere and prevent localized forms of pollution. Since then, sustainable energy has been launched based on the three pillars of sustainable development. Environmental sustainability includes criteria on greenhouse gas emissions, impacts on biodiversity, generation of hazardous waste and harmful emissions; Economic sustainability includes criteria on energy costs, providing energy to users with high reliability, limiting the impact on work related to energy production; Social sustainability includes criteria for preventing conflict in energy supply (energy security) and long-term availability of energy.
The electricity industry is a special economic sector, consisting of four closely related components: electricity generation, electricity transmission, electricity distribution and electricity consumption. In particular, electricity production is a field related to issues of natural resource use, environmental protection and response to climate change. Developing the electricity generation industry in a sustainable way will still include 3 aspects that combine harmoniously and reasonably, economic, environmental and social as mentioned above, but with its own characteristics.
Lao PDR was one of the earliest countries in Southeast Asia to define the Sustainable Development Goals (SDGs) and integrate them into the Eighth National Socio-Economic Development Plan (NSEDP) in 2016, with the NSEDP indicators linked to the SDGs in the three dimensions (economic, social and environmental) of sustainable development.
In the Lao PDR, electricity production plays a very important role in socio-economic development, ensuring energy security, protecting natural resources and the environment. However, the growth of the country's electricity production is still quantitatively increasing, using natural resources including soil, water, forests and minerals, but lacking effective planning and solutions to prevent damage harmful to the environment. Develop electricity production in a sustainable way to achieve greater economic value, ensure energy security, social security, protect natural resources, limit environmental pollution and respond to climate change is one of the urgent issues for Lao PDR.
This paper uses the SWOT analysis method to clarify the strengths, weaknesses, opportunities and challenges for sustainable electricity generation development in Lao PDR, thereby proposing orientations and development solutions to develop this industry in the period to 2030.
2. Strengths and Weaknesses for Electricity Generation Development in Lao PDR
Lao PDR is relatively well endowed with energy resources, especially hydropower, solar power and biomass.
Infact, Lao PDR is a country rich in natural resources, with forests accounting for nearly 47% of the land area and average rainfall ranging from 1,300 to 3,000 mm (UNDP, 2012). Laos has no sea but is blessed by nature with the Mekong River running along the length of the country and many other small rivers flowing from the North to the South.
The amount of water in the rivers of Laos is 334 million m3/ year, which resulted in per capita 60,318 m3/ person/ year. About 35% of the Mekong River's water comes from rivers in Laos, the rest comes from rivers in neighboring countries. The combination of rich water resources and mountainous terrain helps Laos to have great potential in developing energy from hydroelectricity to serve domestic demand and export. Since 1990 resources are being intensively developed to provide electricity for the requirements of the country and neighboring countries. Currently, Laos only uses about 20% of the total potential of 26,000 MW available. The development of hydroelectricity with reservoirs not only ensures electricity production, but also contributes to the prevention of droughts, floods and effective use in other fields such as fisheries, irrigation in agriculture.
Laos is also a country with the potential to generate electricity from biomass, wind and solar energy. In 2015, 1.30 million tons of oil equivalent (Mtoe) of biomass, representing 13.7% of the total primary energy supply (TPES), was used.
Laos is located in the tropical monsoon climate area, with a lot of sunshine during the year with high radiation intensity, so it has the potential to be exploited and used in the production of electricity from solar energy. Especially areas in the central and southern regions with 1,800 hours of sunshine per year or more are considered to have very high potential.
The development of electricity generation from renewable energy contributes to limiting the impact of climate change, does not create any impact on wildlife and wildlife reserves, water reserves and aquatic animal sanctuary. Renewable energy, especially solar power, is classified as a clean energy and does not cause air pollution, especially during operation. The previous development of solar energy was in Lao’s residential areas, water reservoirs, etc. almost did not affect natural forests and protected areas.
The electricity industry of Lao PDR has been established and developed over the years. So far it has always maintained a stable and continuous growth with a relatively high growth rate year after year. By 2020, Lao PDR has 85 power plants with a total installed capacity of 10,437.93 MW, which can generate a maximum electricity output of 54,029.03 million kWh/ year connected to the national power system. In the period of 2009 - 2020, the total electricity output reached 247,055 million kWh, the average growth rate is about 10-20%/ year.
Weeknesses
At present, hydroelectricity and coal-fired power still account for a major proportion in the power source structure (70.67% and 29.08% in 2020). These are two sources that have the potential to affect natural resources (land, forests, and water sources) and produce greenhouse gas emissions, affecting climate change. Renewable energy electricity has not yet developed.
Despite having an abundant water source, it is not evenly distributed between seasons of the year, leading to instability in power output. In the dry season from December to April, especially the last 2 months of the season, the water level in the river drops, so electricity output also decreases. In that period of time, Laos still has to import electricity from Thailand to make up for the shortfall in output.
The development of hydropower plants with reservoirs will create more impact on forest areas, houses, agricultural regions and other areas than hydropower plants without reservoirs. From the data of EDL, MoEM and MoIP, it can be calculated that every 1 million kWh of electricity production will affect/ cause losses of about 1.17 to 1.47 hectares of forest. It is worth mentioning that hydroelectricity not only causes deforestation, but forest loss will lead to severe floods and continue to severely damage lands and forests, affecting biodiversity, life and economy activities of many people living in areas in the river basin.
Coal-fired power plants have been newly developed in Laos since 2014 but have quite a large impact on the environment, especially greenhouse gas emissions. Coal-fired power generates between 66% and 87% of the total greenhouse gas emissions in the Lao power sector. With the development of coal-fired power plants, the greenhouse gas emissions of the power sector increase from 4.866 million tons in 2014 to 23,084 million tons in 2020. In the future, if Laos continues to increase electricity output from coal-fired thermal power plants. the greenhouse gas emission factor will increase rapidly, greatly affecting the Lao’s commitment on emission reduction.
Despite great potential, so far, the number of solar and biomass projects implemented in Lao PDR is very small. Renewable energy from solar and biomass currently accounts for less than 0.5% of the source structure. Wind power is hardly developed in Laos. Such slow development of renewable energy is due to the lack of strong and synchronous incentive policies, the lack of effective financial mechanisms for investment and operation of projects in remote areas. In particular, there is a lack of a master plan for renewable electricity development.
Infrastructure, especially the undeveloped power transmission system, is also a limiting factor in the development of the electricity industry in general and renewable energy in particular. In border areas, because there is no transmission system, Laos still have to import electricity to supply the needs of the people. In 2020, there are still about 5.7% of Lao’s households that do not have access to electricity from the grid system (71,589 households of the total 1,254,748 households nationwide).
The technological level in electricity production has not reached the advanced and modern level. Human resources of the industry are still lacking in both quantity and professional qualifications as well as management capacity. The limited technical knowledge of some officials in the field of electric power in supervising power development projects is also a weakness of electricity production in Laos.
3. Opportunities and Challenges for Electricity Deneration Development in Lao PDR
Oppotuninies
The population and sustained economic growth are the main contributing factors to the increasing energy demand in the Lao PDR.
The economic reform and renovation policy of the Lao Government, which began in 1986, has helped Laos achieve a remarkably high economic growth rate. Figures from the Lao Statistical Office show that the country's average gross domestic product (GDP) growth rate was 7.79% in the period 2000 - 2016, the highest growth rate among all countries member states of the Association of Southeast Asian Nations (ASEAN) during the same period. The increase in GDP scale also helps the real per capita income of Lao PDR to increase rapidly. In 2009, the country's real GDP per capita was US$907, rising to US$2,408 in 2016 and US$2,642 in 2020. Along with such development, per capita electricity consumption also increases from 367.21 kWh/person in 2009 to 1,075.65 kWh/person in 2020.
Also, the fast connectivity in terms of the electricity grid extension to remote areas brings additional demand in tandem with increasing per capita income. In 2009, the percentage of households without electricity accounted for 30.75% of the total 1,011,623 households nationwide. This number drops to 5.71% of the total 1,254,748 households.
Since the establishment of the Ministry of Energy and Mines in 2006, energy infrastructure is being developed and expanded. Also, energy policies are being developed and gaining public attention and support. The policies have gradually evolved from just the power sector policy to broader energy policies and the development of a sustainable and environment-friendly energy sector. The improvement of energy policies could be credited to the strong support from the Association of Southeast Asian Nations (ASEAN) and other international organisations, especially the Economic Research Institute for ASEAN and East Asia (ERIA) for their continued cooperation and support on energy policies of Cambodia, the Lao PDR, and Myanmar to catch up with other ASEAN countries.
Based on the policies of energy exchange in the platform of ASEAN energy cooperation, evidence shows that those countries have high energy demand and support the energy trade and power integration in this region because it can raise regional energy security and sustainable development. The Lao PDR has been trading electricity with Thailand for many decades; and now it expands this policy to other neighbouring countries to support regional energy cooperation. Particularly, the Lao PDR will increase power exports to 15,000 MW by 2030 - 10,000 MW to Thailand and 5,000 MW to Viet Nam, Cambodia, and Myanmar.
International cooperation and attracting foreign investment also bring many opportunities for the development of the electricity/ energy industry in general and electricity production in particular. Currently, Lao PDR has allowed French electricity to study the feasibility of a mixed floating solar energy project on Nam Theun 2 reservoir in Khammuan province with an installed capacity of 240MW, the goal is to build in 2022 and start operation from 2024. The development of floating solar power projects will take advantage of the available space on hydropower reservoirs, save the development of power transmission lines and other works, thereby reducing capital demand for investors. Along with that, Laos has also approved many wind energy projects in Southern Laos invested by Thai, Chinese and Japanese enterprises.
Power exports are projected to increase sharply because of the government’s agreements with neighbouring countries that, the Lao PDR should export to Thailand and to Viet Nam. In addition, in 2018 three hydropower projects are being constructed for the export of power. All export projects are being developed by foreign private investors through the build-operate-transfer (BOT) scheme.
Threaths
The challenge of developing the electricity generation sector depends on responsible resources, skills and investments, taking into account the economic, social and environmental aspects of sustainable management and development.
The biggest challenge that Lao PDR faces when developing renewable energy is the high investment costs and the ability of investors to arrange capital. Financial barriers have hindered economic project implementation due to lack of access to appropriate financial resources or lack of sustainable financing mechanisms. In addition, the power grid infrastructure in some areas with potential for renewable energy is not ready to release capacity, requiring large land use, especially solar power projects.
In terms of import dependency, the Lao PDR imported all its oil requirements and some electricity to meet consumption during the dry season and in the border areas without electricity access. Measuring import dependency is by dividing the total energy import to the total energy production. The total production of the Lao PDR consisted of coal, hydropower, biomass, solar and wind. The import dependency ratio was 19% in 2015, an increase from 17% in 2000 due to the increase in oil consumption, particularly in the transport sector. In the BAU scenario, the Lao PDR import dependency is projected to continue increasing and will reach 26% by 2040. If the Lao PDR increases domestic coal consumption for power generation instead of hydropower generation, the import dependency ratio should decline because of different thermal efficiency between coal power plants and hydropower plants. Nevertheless, oil consumption will increase faster than coal, which will result in an increase of the import dependency ratio.
Governance remains an important challenge that will increase over time, if the government does not consistently implement strategies and actions to strengthen the governance and capacity of the electricity enterprises.
Climate change and its consequences such as: global warming, heavy rain, hurricanes, floods and droughts have been challenges for the development of many economic sectors, including electricity production. As mentioned above, hydropower - the main source of electricity production in Laos today, could be severely affected by drought. Due to the effects of drought, Laos' electricity production has decreased by 10%, from 34,410 million kWh in 2018 to 31,134 million kWh in 2019.
4. Orientation to Develop Electricity Production in Lao PDR until 2030
Based on the actual development of the electricity industry in Lao PDR; Strengths, Weaknesses, Opportunities and Threats as analyzed above; Orientation to develop the electricity production industry in Lao PDR towards sustainability in the coming time should pay attention to:
- Following the policy of the Ministry of Energy and Mines set out in the "Strategy for development of electric energy of Lao PDR for the period 2021-2030" to improve the stable energy system, ready to supply enough electricity for domestic demand and export;
- Strictly implementing the conditions and processes for the development of electric power projects in accordance with the requirements in Laws and reflecting the reality of the project to improve the efficiency and effectiveness of the project;
- Select and develop power production sources with quality, low capital cost, high productivity and suitable production to meet the needs of domestic and export electricity markets;
- The development of power generation sources must be consistent with the master plan on expansion of the power transmission system and the plan on demand for electricity at home and abroad to ensure the system is stable and economically and technically feasible.
- The increase in electricity production output must go hand in hand with maximizing the resource recovery coefficient and protecting the environment in the process of exploiting hydropower, renewable energy and other power sources for electricity production;
- Regarding the import and export of electricity, it is not advisable to confirm the gradual reduction and cessation of electricity imports after year 2020. In order to match the socio-economic situation, the demand for electricity, after Laos joins the WTO and derived from the situation of the industry, it is worth to consider the point of view: "Exporting and importing electricity reasonably on the basis of prioritizing meeting the domestic electricity demand, ensuring socio-economic efficiency and financial balance for the electricity sector is suitable for each period, each locality, and each region according to the needs, electricity production capacity and socio-economic development situation of Lao PDR”;
- Promote the mobilization of human resources in both terms: quantity and quality; improve professional qualifications in technology, professional management and understand the nature of employing energy sources to develop the electricity generation industry. Make a plan to submit to the Ministry of Education for scholarships in accordance with the plan to improve the qualifications of the industry's workers;
- Effectively implement the policy of socializing investment, mobilizing all resources - including international ones, to speed up the implementation of investment projects to improve power production capacity, ensure the construction progress of power plants, especially projects in key hydroelectricity, capable of exploiting more electricity.
5. Solutions to Promote the Development of the Electricity Generation Industry in a Sustainable Way
Policy solutions
- Promulgate, amend, supplement and complete current legal documents to create a favorable legal corridor for the management, exploitation, export and import of electricity according to the market mechanism with the state management and other related laws on the power generation industry in Lao PDR;
- Due to the big difference between domestic and imported electricity prices, it is necessary to have policies to encourage people to save electricity and use solar power instead of traditional electricity.
Solution on power source restructuring
- Restructuring sources to improve access to energy, energy efficiency, reduce greenhouse gas emissions, and increase the share of renewable energy in the energy structure. This alternative vision is consistent with the self-determined national contribution of Lao PDR and international commitments towards the Sustainable Development Goals (SDGs), including Goal 7 “Ensure access to affordable, reliable, sustainable and modern energy for all”. This requires an increase in the number of decentralized power producers; and reduce dependence on energy imports, fuel transportation;
- Continue to give reasonable priority to hydropower development, especially large projects with good flood and drought resistance; increase the proportion of electricity production by renewable energy such as solar and wind power; research and develop other renewable sources; develop thermal power plants with an appropriate ratio, in accordance with the power supply capacity and distribution of raw materials. By 2030, the proportion of hydropower will be 75%, coal-fired power 14% and renewable energy 11%.
Solutions for human resource
- Regarding human resource recruitment: to overcome the situation of the ask-for-grant mechanism, it is necessary to select human resources in a equaly, objective and fair manner; develop recruitment criteria suitable to the power generation industry. Human resource recruitment must be based on the job positions to be recruited, each position needs its own criteria;
- After recruitment, it is necessary to pay attention to training and professional development for newly recruited employees. It is necessary to create conditions for new employees to quickly integrate into the working environment;
- Promulgating and implementing preferential policies, encouraging the attraction of highly qualified professional and technical workers to work in the power generation industry.
Solutions on science and technology development
- Focusing on research into advanced technologies, in-depth investment, renovation, upgrading and modernization in electricity production and consumption towards efficiency, energy saving and minimizing impact on the environment; improve management, sales and customer service; applying 4.0 technology in production and business management.
Investment and financial solutions
- Speed up the progress of hydropower projects through diversifying investment forms to maximize resources and improve investment efficiency;
- Encourage investment in regions with difficulties in traffic, topography, environment and economy;
- Encourage investment in research and application of alternative forms of electricity production; encourage the expansion of investment in the development of overseas power source exploration and exploitation projects;
- Step up capital mobilization from domestic and foreign economic sectors through forms of cooperation, joint venture, association, and shares;
- Encourage enterprises producing electricity to mobilize capital through the stock market and commercial loans to invest in the development of electricity production;
- Allocate state budget capital and other preferential capital sources for the basic survey of electricity resources and formulation of development planning for the electricity production industry;
- The State partially supports from the state budget for research programs on energy efficiency, supports enterprises in the electricity industry with credit loans, ODA capital, etc.
Assoc. Prof. Dr. Le Thu Hoa, lethuhoaneu@gmail.com
Faculty of Urban & Environmental Economics and Management,
National Economics University, Hanoi, Vietnam
Ms. Thipphavanh Southammavong, bg_konun2@yahoo.com
PhD Student, National Economics University, Hanoi, Vietnam
(International Conference ICSEED2023)
References
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