Laos sees its renewable energy capacity as the ‘battery of South East Asia’

Upgrading infrastructure is a key part of Lao PDR’s strategy to transform the land-locked and from ‘Least Developed Country’ status, a milestone which policymakers hope to achieve by the mid-2020s.  Lao PDR’s national plans envision it becoming the Battery of Southeast Asia by exporting electricity to the region.

While Lao PDR is a landlocked country, its central location between China, Thailand, Myanmar, Cambodia, and Vietnam means that it plays an important role in regional transit and offers significant opportunities for it to be developed as a key transportation hub.

With limited domestic financing available, infrastructure development in Lao PDR has relied on the assistance of bilateral and multilateral donors and foreign direct investment. China, Japan, and South Korea are among the largest bilateral donors and creditors to Lao PDR.

China is now the biggest foreign donor and investor of Lao PDR, with Chinese railway and road investment aligning with Lao PDR’s national strategy of turning from a “land-locked” to a “land-linked” country.

Construction site of dam of the Nam Ou drainage basin hydropower project in Luang Prabang, Laos. (Jan 2019) Photo courtesy of the Laos company of Powerchina Resources Ltd.

Laos is undergoing rapid socio-economic changes and the provision of sufficient energy is an important factor in the response to continuing sustainable development. Hydropower is a key driver of economic development (see below). However, according to the Vientiane Times (1 Feb 2022) a stronger emphasis is also being put on solar power, with total of 58 solar power plants having been completed or under construction across Laos with a total installed capacity of 7,656 MW.

In 2021, the Lao government vowed to diversify sources of energy by building solar, wind and coal-fired power plants to address the electricity shortage during the dry season, when reservoir levels drop and less hydropower can be produced.

Current Status of Power Generation

Lao PDR has capitalized on its estimated 26,000 MW of technical hydropower potential and aims to become the Battery of Southeast Asia by exporting electricity to neighboring markets. A massive investment program increased the installed capacity in the system from only 640 MW in 2000 to around 9,480 by 2020. The Mekong Infrastructure Tracker shows that most power generation is supplied from 63 hydropower dams totaling 7,559 MW in generation capacity. The remaining power is produced by the Hongsa coal plant (1,878 MW), a few biomass plants (35 MW), and 8 solar projects (42 MW).

As of 2020, 50 dams were under construction. Twenty-one of these are anticipated to come online by the end of 2020, boosting installed capacity to above 10,700 MW. The Lao PDR Ministry of Energy and Mines dam database lists more than three hundred more dams in the design/negotiation/feasibility study stage.

Japan’s Mitsubishi Corp to develop a massive onshore wind farm in Laos that will supply electricity to Vietnam.

Lao PDR is also exploring other renewable energy projects (solar, wind). By 2030, it is planned that Laos will produce another 5,559 MW of electricity. Of this amount, 77.59 percent will come from hydropower and the rest will come from solar, wind and coal-fired power plants. Laos’ capacity for solar power is expected to range from 10,000 MW to 15,000 MW, while wind power potential is estimated at about 100,000 MW, according to a report in Xinhua

In early 2020, a Chinese firm has signed an MOU to build a 1200 MW floating solar plant on the Nam Ngum 1 reservoir, which will be the world’s largest floating solar plant when complete. The Thai renewable energy company Impact Energy Asia is currently negotiating with the Government of Lao PDR to build a 600 megawatt wind-farm in southern Lao PDR, with construction forecast to be complete in 2023.

102MW floating PV project in a coal mine subsidence area of China’s Anhui Province. Image: Sungrow Floating.

Although approximately 70% of Lao PDR’s generation capacity has been dedicated for export, domestic demand has been growing rapidly. Lao PDR’s per capita electricity consumption is among the lowest in ASEAN but is rising rapidly at an average rate of 14.5% annually over the past 10 years.20 Over 92% of households nationally had electricity access by the end of 2016, years ahead of the target set for 2020.21 Lao PDR’s national Energy Policy 2015 establishes broad goals for the power sector including provision of affordable, reliable, and sustainable electricity; improving and expanding transmission networks to facilitate power exchange; and expansion of the role for renewable energy to 30% of the power mix using a reasonable feed-in tariff scheme.

As of the start of 2021 and across all project statuses (operational, under construction, planned), Thailand is the largest investor in Lao PDR’s power generation sector with full or partial ownership in 12,984 MW of generation capacity (hydropower 10,567 MW, coal 1817 MW, wind 600 MW). China ranks second highest with full or partial ownership in 8,063 MW of generation capacity (hydropower 6863 MW, solar 1200 MW). Vietnam ranks third highest with full or partial ownership of 2380 MW of hydropower generation.

The Nam Ngum Dam is a hydroelectric dam on the Nam Ngum River, a major tributary of the Mekong River in Laos. It was the first hydropower dam built in the Lao PDR.

Further development of the energy sector in an affordable, inclusive, and sustainable way has been prioritized in Lao PDR’s  8th Five-Year National Socio-Economic Development Plan [NSEDP] (2016-2020). According to the Initial Concept on the 9th NSEDP (2021-2025), the key objective is to fully focus on existing potentials for socio-economic development in order to graduate from Least Developed Country status and achieve the Sustainable Development Goals by 2030. One major outcome of the NSEDP is development and growth in accordance with the National Green Growth Strategy, which was released in 2019. Lao PDR has seen rapid economic growth over the past several years, but the economy is heavily reliant on the exploitation of natural resources, which Deputy Prime Minister and Minister of Finance, Mr Somdy Duangdy has recognized will one day be depleted. The government is working to improve the business climate so that the economic base can be diversified.

Source: Stimson Center,  January 29, 2021. https://www.stimson.org/2021/lao-peoples-democratic-republic/

Leave a Reply

Your email address will not be published.

This site uses Akismet to reduce spam. Learn how your comment data is processed.