Laos’s development strategy-

Over the past four decades, Lao People’s Democratic Republic (Lao PDR) has been working towards achieving a self-sufficient power sector. With an estimated hydro potential of about 26,000 MW – one of the highest in the Greater Mekong Subregion (GMS) – the government’s focus so far has been on the development of hydropower. However, now the country is looking to diversify the power generation mix by developing other renewable energy sources, so it can offset low levels of hydropower generation in the summer. Further, the focus is on increasing electricity access in rural areas as well as expanding its high voltage network both domestically and inter-country, not only to boost internal transmission capacity but also to help create a GMS-wide power system.

The government’s latest 10-year development strategy (2016-25) and vision 2030 (2016-30) has been drafted to raise the country’s least developed status by 2020 to an upper-middle-income status by 2030. The energy sector is expected to play a vital role in the development strategy by promoting social and economic growth.

Due to its geographic position, Laos is richly endowed with hydropower resources to the extent that it is called the “ASEAN battery”, and it exports electricity to neighbouring countries such as Thailand, Cambodia and Vietnam. Though hydropower accounts for 98.8 per cent of the total annual electricity production, it alone is not likely to deliver universal electrification or energy security. This is mainly due to the low hydropower generation levels during the dry season and partly due to existing transmission limitations. While hydropower development continues apace, the government is now turning its focus to diversifying the power generation mix. It has set a goal of increasing renewable (excluding hydropower) energy production to meet 30 per cent of total domestic consumption by 2025.

The country’s transmission system does not adequately cover all regions. Despite producing abundant hydropower, some regions still import electricity from Thailand, Vietnam and China to meet their power needs.  By 2020, there are plans to construct around 54 transmission lines and 16 new substations to expand the high voltage network and improve connectivity. Further, several cross-border projects are under way to significantly enhance power trading to help fuel domestic economic growth.

Through rapid rural grid expansions and off-grid electrification schemes, the government has been able to achieve electricity access for nearly 92 per cent of households. Going forward, the country aims to achieve an electrification rate of 98 per cent by 2030 for sustainable and self-sufficient power supply across the country.

Sector overview

Lao PDR’s state-owned power company Electricite du Laos (EDL) is solely responsible for the operation and development of the country’s transmission and distribution assets as well as for the management of electricity imports and exports from neighbouring countries. EDL held the monopoly over power generation until the 1990s when the country’s power sector was opened to private foreign direct investment. While EDL still owns a few generation facilities, the majority of the capacity is operated by independent power producers (IPPs) who sell generated electricity to domestic and export markets. The main offtaker for exports is the Electricity Generating Authority of Thailand (EGAT) in Thailand, and the main off-taker for the domestic market is EDL.

As of January 2017, Laos had 50 power plants producing electricity with a total installed capacity of 6,860 MW, which generated 33,000 GWh of electricity a year. Nearly two-thirds of generated power is exported to neighbouring countries while the remaining is consumed in Laos. Of the total generating power plants, 15 are operated by EDL with an installed capacity of 738.5 MW and 27 are managed by IPPs with an installed capacity of 5,652.45 MW. At present, EDL operates 6,855.32 km of transmission lines across the voltages of 500 kV, 230 kV and 115 kV. In addition, the country has a distribution line network of around 45,522.49 km across the voltages of 35 kV to 0.4 kV.

Sector expansion plans

Laos’s steady economic growth and urban and industrial development have resulted in an increasing domestic power demand. To meet this demand, several power projects are under development.

The country presently has 41 hydropower plants either under construction or in the planning stage with a combined installed capacity of almost 13,500 MW, expected to come online by 2020. In line with the country’s target to increase the share of renewable energy, the country’s first solar power plant (10 MW) was put into operation in Vientiane in February 2017. The project is expected to scale up incrementally to 100 MW by 2020.

Alongside, the focus is on expanding the domestic grid to help evacuate upcoming capacity and boost grid connectivity as well as on strengthening cross-border links. A key domestic project under development is the Xam Neua-Xieng Khuang-M.Naxaythong project, which will meet the future transmission demands for thermal power in Houaphan province and hydropower in the Xieng Khuang and Vientiane provinces in north-central Laos.

Lao PDR has been trading electricity with Thailand for many decades, and is now expanding its electricity trade to other neighbouring countries, which will support regional energy cooperation. Laos has plans to increase power exports to 15,000 MW by 2030 – 10,000 MW to Thailand and 5,000 MW to Vietnam, Cambodia and Myanmar collectively. In addition, Laos is expected to export 100 MW of power to Singapore via power grids in Thailand and Malaysia and 200 MW to neighbouring Myanmar by 2020.

To help achieve these export targets, several cross-border projects are under development.

LTMS PIP: Studies are currently being conducted on this key grid integration project being undertaken by Thailand, Malaysia, Singapore and Laos. This project, also known as the Lao PDR, Thailand, Malaysia, Singapore Power Integration Project (LTMS PIP), is expected to complement the ongoing efforts of the Association of Southeast Asian Nations (ASEAN) member countries to create the ASEAN power grid.

Laos-Vietnam interconnections: Two interconnection projects between Laos and Vietnam have been planned. One entails the construction of a 90 km long, 220 kV line to transfer 100 MW of power from the Nam Mo hydropower plant in Laos to Vietnam. The project is currently under negotiation. The second interconnection entails the construction of a 500 kV Luang Prabang (Laos)-Nho Quan (Vietnam) line, which will enable the transfer of 1,410 MW of electricity from Laos to Vietnam.

Laos-Thailand interconnections: The country is implementing two 500 kV interconnections with Thailand. The first interconnector involves the construction of a 500 kV Xayaburi (Laos)-Tha Li-Khon Kaen (Thailand) link to transfer about 1,200 MW of power from the Xayaburi hydroelectric power plant in Laos to Thailand. The second cross-border link will involve the construction of 230 kV and 500 kV transmission lines to evacuate power generated at the 410 MW Xe-Namnoy powerhouse in Laos to Thailand. Work on both the interconnectors is in progress.

Laos-Cambodia link: The country is also implementing a 230 kV Stung Treng (Cambodia)-Ban Hat (Laos) cross-border link, which involves the upgrade of the existing 115 kV line to 220 kV along with the construction of a new substation at Stung Treng (Cambodia). The project is part of the larger GMS Power Trade Project.

In order to achieve the rural electrification targets defined in the Rural Electrification Master Plan, of providing electricity access to 94 per cent of households by 2020, the country has partnered with the United Nations Development Programme’s (UNDP) Nationally Appropriate Mitigation Actions (NAMA).

Under the partnership, NAMA will construct minigrids, which will predominantly use renewable energy sources (hydro, solar) and will provide electricity for lighting, radios and phone charging for households, and for service and production activities. In the first phase NAMA aims to establish eight minigrids.

The government of Lao PDR has initiated steps to implement a small grid-connected hydro plant in Nam Theun, one of Laos’s largest protected areas, as part of NAMA’s rural electrification scheme. The project will further enhance access to energy and contribute to poverty alleviation by improving energy-dependent income generation opportunities.

Challenges

The abundant resources of the Mekong river and its tributaries provide Laos with the potential to produce more than 25,000 MW of hydropower. However, there is an emerging need to create an institutional base for the medium term to ensure that all new hydropower projects comply with a certain minimum level of environmental and social safeguards. Though the government has formulated a hydropower policy for sustainable hydropower development, there is no integrated energy policy that addresses issues related to environmentally and socially sound practices for the development of hydro projects.

The state-owned EDL is facing the enormous challenge of meeting the government’s 95 per cent electricity access target by 2020, which will require a judicious mix of grid extension and off-grid renewable energy options. Given its limited financial capacity, EDL must continue to improve its operational and financial performance.

Further, the country’s progress towards integrating the GMS-wide power system remains a medium-term goal. So far, only limited progress has been made and it remains confined essentially to dedicated high voltage transmission lines from a few export-oriented hydropower projects. The country must increase the pace of development of high voltage grid interconnections, the lack of which is currently hindering its export potential. For instance, a strong transmission network in Thailand coupled with power import requirements against a weak transmission network in Lao PDR but large hydropower export potential could result in the country losing out on an important export partner. Also, Laos must harmonise standards for transmission regulations, metering arrangements and grid codes, that have been addressed and agreed upon by the GMS countries.

Going forward

The need of the hour is to develop a holistic energy sector perspective. The country needs to maximise the potential from its renewable resources; focus on developing more off-grid energy solutions; and expand the transmission and distribution networks to meet the nation’s economic and social development strategies.