Hydropower in the Mekong: an alternative approach

Hydropower in the Mekong: an alternative approach

A report published in September by the Stimson Center, a Washington
D.C.-based think tank, challenges prevailing notions about the future of
hydropower in the Mekong subregion, an area including Vietnam, Cambodia,
Laos, Thailand, Myanmar, and southwestern China.

The report focuses on Laos, which in years past has proclaimed itself the
future "Battery of Southeast Asia," by aggressively developing hydropower
dams on the Mekong. Laos has already built 29 large dams along the river's
mainstream and tributaries, with plans for over 100 in total. The
land-locked country remains the poorest in Southeast Asia, and has planned
to raise cash by exporting electricity to consumers in neighbouring
countries.

But project developers of these dams - who are typically Thai and Chinese
companies - have faced criticism from civil society groups and international
observers for the myriad social and environmental consequences brought on by
dam construction. The Mekong is home to an estimated 1,000 species of fish,
many of which migrate along the river and replenish the region's fisheries.
By changing the hydrology of the river, these dams threaten the biodiversity
of the Mekong and the livelihoods of fishermen and farmers throughout the
region. In times of drought - as has been experienced this year - the dams
can cause regional insecurity by contributing to water scarcity problems
downriver.

While dam construction has continued apace despite these dangers, the
Stimson report argues that new markets and technologies are creating an
opportunity to change course.

Challenges for Lao hydro

The report highlights new developments that could steer Laos away from
further damming on the Mekong. First, following a period of economic and
political liberalization, Myanmar is emerging as a competitor for energy
infrastructure finance. Myanmar boasts nearly 100 gigawatts of potential
hydropower capacity, far exceeding what is possible in Laos. Such a glut of
potential projects in the region is likely to siphon away financing that
might otherwise go towards hydropower development in Laos.

At the same time, China's economic slowdown could signal the end for cheap
and easy hydropower finance in the region. In previous years, Chinese state
planners encouraged outbound investment in strategic sectors such as
hydropower projects in Southeast Asia. However, the report notes that
government concerns about non-performing loans on the books of Chinese banks
seem to have reduced the funding available for some projects in Laos. Rising
local awareness about the social and environmental costs of these dams also
adds a layer of risk that financiers may find discouraging.

Perhaps most critically, it appears as if planned generation in Southeast
Asia is outpacing the region's appetite for energy. China, once envisioned
as a potential market for Laos power, is already experiencing serious
overcapacity in its domestic power market. Thailand, while still a major
investor in Laos hydro projects, has consistently overestimated its own
consumption levels - and has lots of room to cut demand through energy
efficiency measures. Both Cambodia and Vietnam have planned to reduce their
reliance on imported energy, with the latter investing heavily in coal-fired
power plants.

A new vision for Laos

Taken together, these signals make a compelling case for a new energy
strategy in Laos and in the region as a whole.

First, the report suggests that Lao planners should invest in a backbone
transmission network to connect its patchwork regional grids. This is a good
idea for a variety of reasons. A nationwide transmission system would help
open up markets for Lao electricity both domestically and internationally by
creating a more flexible grid. It would help planners integrate renewable
energy resources like solar and wind. It would also be a great step towards
electrifying the remaining 20% of the country still without power.

Secondly, planners should consider ways to diversify the country's energy
mix with wind and solar. With too much reliance on hydro, the region risks
facing shortages during drought conditions, which will become increasingly
likely due to the effects of climate change.

It also makes good economic sense. Utility-scale solar is now nearly
cost-competitive with hydro in Laos. Solar avoids the social and
environmental challenges associated with hydro that have led to disruptive
public protests and cost overruns, making it a safer bet.

In fact, solar already plays an important role in electrifying Laos' rural
communities. Companies like Sunlabob have pioneered low-cost solar home
systems to provide basic electricity services like lighting and device
charging to remote communities. A new energy outlook from Lao energy
planners would also be a great opportunity to optimize plans to fully
electrify the country, whether by grid connection, solar home systems, or
village-level microgrids.

The need for international cooperation

Lastly, greater international cooperation in energy planning is needed. The
construction of a national power grid will require technical assistance from
international experts. The Asian Development Bank is leading this effort,
and plans to invest $400 million in a national transmission network by 2020.
The US has already begun providing power planning and optimization
assistance through the Department of Energy and its national laboratories.

The US is also supporting renewables in Laos. In advance of President
Obama's visit to Laos in September 2016, the US Trade and Development Agency
committed to funding a feasibility study for a 20 megawatt solar farm in the
country.

China, as a regional power with an abiding interest in Laos' energy sector,
can also benefit from this shift. The world's largest solar module
manufacturers are Chinese, and government support for emerging solar markets
is one way to bolster domestic manufacturers while also rebranding China as
a responsible stakeholder in the region.

Laos' energy future is still uncertain. Energy planners remain convinced
that prioritising dam construction is Laos' ticket to prosperity, despite
the risks. But as the challenges for Lao hydro become ever more apparent, a
new way forward could be in the making.

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Link to Original Article:
https://www.thethirdpole.net/2016/12/05/hydropower-in-the-mekong-an-alternat
ive-approach/

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John Diecker
APT Consulting Group Co., Ltd.

www.aptthailand.com