How to solve Myanmar's chronic electricity problems

How to solve Myanmar's chronic electricity problems

UPGRADING MYANMAR'S power sector is vital to expand economic growth. Job
creation, tourism, telecommunications, financial services and governance are
all placing increasing demands and strains on its power supply.

Power is also a central element and foundation upon which to achieve
necessary advances in healthcare, education and industrial and
infrastructure development. The country's ability to raise incomes and
living standards and to create a more inclusive and equitable society all
depends on a well-functioning power sector.

Myanmar's installed capacity, however, is only about one-tenth of
neighbouring Thailand. It also loses 20 percent or more of what it generates
during transmission and distribution, and is experiencing rapid growth in
demand estimated at about 12 percent annually.

This has led to blackouts and protests, and it is unclear how long
additional increases can be sustained without major upgrades in generation,
transmission and distribution, all of which constitute major tasks on their
own.

Further, a highly subsidised electricity tariff - amounting to 0.5 percent
of annual GDP - represents a significant entry barrier for potential
investors, both domestic and international. Increasing the tariff is
politically sensitive and will require strategic public communication and
the agreement of top government officials. The situation is particularly
troublesome for manufacturers and commercial users, who are often left on
their own, with a need to balance insufficient and unreliable but subsidised
grid-supplied power with costly backstop solutions.

Myanmar, however, does not lack engineering or technical understanding.
Rather, the nation lacks the capacity and structural foundation needed to
adequately define, plan and build consensus behind a coherent national
electrification strategy. Simply put, Myanmar is a large country with a
challenging geography. The enormity of resources - technical, financial and
otherwise - required to initiate a successful national electrification
effort necessitates the inclusion and cooperation of a far more diverse
range of domestic and international stakeholders than was needed in the
past.

Practices that served Myanmar when it was a closed country - including a
state-owned utility that managed power sector needs almost by itself - are
no longer sufficient. Myanmar needs a dramatic expansion of electricity
capacity in order to transform into a growing, vibrant, open and competitive
economy. Rather than assume direct responsibility for electricity, the
government must adopt a market-oriented approach and introduce policies,
regulations, standards and safeguards that enable others to help it meet
this challenge.

It is estimated that upgrading Myanmar's power sector will require several
billion dollars annually for more than a decade. If increased international
input, participation and capital are to be obtained, a better understanding
of their needs and requirements is essential. Credit ratings, guarantees,
reasonable and competitive policies and guidelines, and a more seamless
structure allowing easier and profitable development of independent power
projects are all critical.

Government decision-making is currently divided. The Ministry of Electricity
and Energy is charged with transmission, distribution and supply within the
grid, while the Ministry of Agriculture, Livestock and Irrigation manages
most off-grid development.

There is little coordination between the two. This creates a structural
barrier: investment in rural electrification is difficult when you can't
predict the timing of ultimate grid access and whether it will be possible
to connect off-grid installations to the grid when access arrives through
mechanisms such as feed-in tariffs. This is essential to maintain pricing
competitiveness and manage project risk.

To improve coordination, the Myanmar government created a National Energy
Management Committee and National Energy Development Committee (NEMC/NEDC)
in 2013 to facilitate cooperation and communication among energy-related
ministries and organisations. This was a major step, but building a shared
vision that extended beyond the individual views of member institutions
proved difficult. While there were proposals to further rectify this problem
by transforming these committees into an independent commission during the
latter days of the U Thein Sein government - with its own staff,
responsibilities and budget - the committees were disbanded in the
ministerial restructuring that accompanied Myanmar's transition to a new
government in 2016.

Fortunately, there is broad agreement on the need for comprehensive energy
and electrification development, and the World Bank, Asian Development Bank,
Japan International Cooperation Agency and other donors are providing
assistance. While there are meetings, conferences and discussions between
donors, government and the private sector on power sector development,
Myanmar presently lacks an ongoing and institutionalised platform that can
balance public-private needs and concerns. This is needed to encourage both
the intra-ministerial cooperation and stakeholder dialogue required to
develop supporting policy, regulatory measures and consensus behind a
functional and socially and politically acceptable electrification strategy.

As a result, new directions, plans and projects are announced, yet
considerable confusion remains over the state of these initiatives and the
legislation and process required to move them forward. It can also be
unclear how social and environmental concerns will be addressed and in what
manner projects will be financed. Consultations with ministries suggest that
even the government itself can at times be uncertain of these details and
lacks the capacity to implement them in the manner intended.

Further, while there are many investors, companies, donors and other
entities interested in developing Myanmar's power sector, lack of a
standardised approach tends to make each transaction unique, creating a
lengthy, cumbersome, and unpredictable negotiation and approval process.
This is unfortunate as even if these issues can be resolved, long lead times
mean it can be years before new projects and capacity come online even after
approvals are granted.

Getting necessary components in place will take time and immediate needs
must be addressed. At the same time, though, inadequate attention to issues
including tariff reform, grid convergence, energy efficiency, certification
and standards are all essential to handle burgeoning demand before the
growth in annual requirements surpasses the ability of the grid to handle
them. Significant attention must also be focused on public education to
inform citizens about the benefits and mechanisms required to craft a
workable electrification strategy so they will understand and be prepared to
endure the required costs and adjustments.

A NEMC/NEDC or similar steering committees should be re-established to
devise policy solutions and more efficient coordination among government
ministries. These entities could be strengthened and supported through
creation of a complementary independent "Myanmar International Energy Centre
(MIEC)" that can facilitate needed examination of important issues to devise
and test ideas and potential policy options.

This would be done with input from stakeholders - domestic and international
- whose participation is desirable or essential to power sector development.
Guided through an inclusive management structure, the MIEC could advance
discussion, and share and analyse relevant information, while facilitating
development of needed public-private partnerships, international involvement
and broad awareness of both Myanmar's needs and the opportunities presented
by the country's opening.

In addition to building consensus on key issues, the MIEC could cooperate
with institutions and entities in ASEAN and around the world, including
universities and organizations focused on power sector development. This
will allow Myanmar to better absorb lessons learned in other markets. Many
of these organizations are eager to help, but presently find it difficult to
find counterparts, and to effectively engage, in Myanmar.

Finally, the MIEC could help Myanmar to draw from the various plans proposed
by donors and other entities working in the energy sector to create a plan
of its own.

While there are many challenges to upgrading Myanmar's power sector,
resolution seems far more dependent on building capacity and consensus
behind viable policy, regulatory, legal and other mechanisms than any
intractable technical and engineering concerns. Similarly there is no lack
of interest from international investors, only an inability to adequately
absorb and utilise the capital they can provide.

Myanmar's government must work together with public-private stakeholders to
build efficiencies and to derive a plan, including the process and ongoing
dialogue needed to meet the country's long-term goals and short-term needs.
Establishment of the MIEC could provide a platform that would help to meet
these challenges and enable Myanmar to overcome many of the obstacles needed
to realise a workable national electrification strategy.

This will help to create growth and employment across a wide range of
sectors, and the development path Myanmar needs to achieve its potential and
promise. It will also help to create a more representative and inclusive
democracy, raise living standards and the overall competitiveness of its
economy.

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Link to Original Article:
http://frontiermyanmar.net/en/how-to-solve-myanmars-chronic-electricity-prob
lems

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John Diecker
APT Consulting Group Co., Ltd.

www.aptthailand.com