Lao PDR. Country and Policy Report

Transcription

1 Draft Final Report PROMOTION OF RENEWABLE ENERGY, ENERGY EFFICIENCY AND GREENHOUSE GAS ABATEMENT (PREGA) Lao PDR Country and Policy Report May 2006

2 Contents List of Figures...4 List of Tables...5 List of Abbreviations...6 Executive Summary COUNTRY BACKGROUND Geography Population Economy Natural Resource National Poverty Eradication Program and Poverty Reduction Fund ENERGY SECTOR REVIEW Overview Energy Resources in Lao PDR Electricity generation / domestic use / export / and import Energy Energy Consumption Renewable Energy Resources in Lao PDR Energy Tariff System Lao PDR s Policy Framework on Energy Institutional Arrangement for Lao PDR's Energy Sector Organizations Chart of the Power Sector Agencies TECHNICAL POTENTIAL FOR REGA TECHNOLOGIES Renewable Energy Technologies Energy Efficiency Greenhouse Gas REVIEW OF SKILLS AND INSTITUTIONAL CAPACITIES RELEVANT TO REGA TECHNOLOGIES Technical Institutions Financial Institutions Non-Government Organizations Donor Agencies Private Sector Participation Government Institutions POLICY AND INSTITUTIONAL FEATURES IMPACTING REGA TECHNOLOGY DISSEMINATION

3 5.1 National Poverty Eradication Programme (NPEP) Rural Electrification Master Plan REVIEW OF SUSTAINABLE DEVELOPMENT PRIORITIES RE Sustainable Development Priorities in Lao PDR RE Sustainable Development as Supplied by ADB Lao PREGA Project Priorities for Mitigating Greenhouse Gas Emissions Policy Support for Sustainable Development IDENTIFICATION AND PRIORITIZATION OF REGA TECHNOLOGIES GHG Emissions Inventory Technology Needs and Priorities for Mitigating Greenhouse Gas Emissions in the Energy Field Optional Ways of the Energy Utilization for Dwelling Sector Technological Options and Reduction of Greenhouse Gas... Emissions in Transportation Field Technological Options and Reduction of Greenhouse Gas... Emissions in Agriculture Field Technological Options and Reduction of Greenhouse Gas... Emissions in Forestry Field Technological Options and Reduction of Greenhouse Gas... Emissions in the Toxic Waste Field CONCLUSIONS AND RECOMMENDATIONS Conclusions Recommendations...74 REFERENCES Attachment..78 3

4 List of Figures Figure 1.1: General Map of Lao PDR Figure 2.1: Exploitable Hydropower Potential of Lao PDR..16 Figure 2.2: Electricity Generation, Domestic Use, Export and Import up to Figure 2.3: Energy Consumption by Energy Type in Year Figure 2.4: Energy Consumption by Energy Sectors in Year Figure 2.5: Organizations Chart of the Power Sector Agencies.26 Figure 3.1: Distribution of Annual Solar Insolation, at the Earth s Surface.28 Figure 5.1: National Poverty Eradication Programme Process...42 Figure 5.2: Map of Lao PDR, 72 Districts Identified as Poor 44 Figure 5.3: Rural Electrification Master Plan Organization 48 List of Tables Table 1-1: GDP Growth and Inflation Indicator in Lao PDR (2004) 12 Table 1-2: GDP per Electric Consumption and Elasticity in Lao PDR..12 Table 1-3: Elements of the 2020 Development Vision.13 Table 2.1: Primary Energy Resources of Lao PDR.. 15 Table 2.2: Electricity Generation, Domestic Use, Export and Import.16 Table 2.3: Importing of Petroleum and City Gas in Year Table 2.4: Energy Consumption Comparison by Energy Type...18 Table 2.5: Energy Consumption by Sectors..18 Table 2.6: Historical EDL s Power Tariff (by Dec. 2001)..20 Table 2.7: New Power Tariff (Effective on May 2002)..20 Table 2.8: Trading Tariffs for Export and Import 21 Table 2.9: Other Import Tariffs.21 Table 2.10: Theun Hinboun IPP Tariffs for Export to EGAT 21 Table 2.11: Theun Hinboun IPP Tariff for Export to EGAT and EDL.22 Table 2.12: Houy Ho IPP Tariffs for Export to EGAT and EDL...22 Table 3.1: Average Daily Radiation on Horizontal Surface (kwh/m 2 /day, 10-year ave.) 27 Table 3.2: Average Daily Wind Speed (m/s)..29 Table 3.3: Production of Crops (Possible Biofuels) for Year Table 3.4: The Efficient Development of the Electric Light/Lamp..34 Table 3.5: General Summary of Assessment on the Utilization of the Energy for Lights..35 Table 3.6: Institutions and their Mandates in the Area of Environment Including CDM and Climate Change 36 Table 5.1: Elements of the 2020 Development Vision..45 Table 7.1: The National Inventory on the Greenhouse gases Emission 60 Table 7.2: General Summary Regarding the Assessment of the Cost. of Electric Energy Production.51 Table 7.3: Biomass Technology Chart 52 Table 7.4: The Cost Benefit Analysis Regarding Various Cooking Stoves...54 Table 7.5: The Efficient Development of the Electric Light/Lamp...54 Table 7.6: General Summary of the Assessment on the Utilization of Energy for Lights...65 Table 7.7: General Summary of the Assessment on the Recycling Energy Utilization as the Lights 66 Table7.8: General Summary of the Methane Gas Reduction (CH 4 ) in Agricultural Field 69 4

5 List of Abbreviations ADB ASEAN BCS BOOT BOT BTF CCEAP CDM CFL CH 4 CIDA: CO CO 2 CPC CTTE NAPA DANIDA DNA DOE ECS EDL EE EGAT EIAs EMP EMMUs ESCOs FAO FIMC GDP GEF GIS GHG GMS GOL HDR ICS IPCC IPP JICA LDC LNCE LNMC LPG LRMC MAF MAT MCTPC MHP MIH MLSW MOC MPH MRC Asian Development Bank Association of South East Asian Nations Battery Charging Station Build, Operate, Own and Transfer Build, operate and transfer Build, transfer and finance Climate Change Enabling Activity Project Clean Development Mechanism Compact Fluorescent Lamp Methane Canadian International Development Agency Carbon Monoxide Carbon Dioxide Committee for Planning and Cooperation Canada-Thailand Tri-bilateral on Environment National Adoption Program of Action Danish International Development Agency Designated National Agency Department of Electricity Electric Cooking Stove Electricité du Laos Energy Efficiency Electricity Generation Authority of Thailand Environmental Impact Assessments Environmental Management Plan Environmental Management and Monitoring Units Energy Service Companies Food and Agricultural Organization (of United Nations) Investment Management and Foreign Economic Co-operation Gross Domestic Product Global Environment Facility Geography Information System Greenhouse Gas Greater Mekong Sub-region Government of Lao PDR Global Human Development Report Improved Cook Stoves Intergovernmental Panel on Climate Change Independent Power Producer Japan International Cooperation Agency Least-Developed Country Lao National Committee for Energy Lao National Mekong Committee Liquefied Petroleum Gas Long Run Marginal Cost Ministry of Agriculture and Forestry Multiple Aeration Technique Ministry of Communication, Transport, Post and Construction Micro-Hydropower Ministry of Industry and Handicrafts Ministry of Labour and Social Welfare Ministry of Commerce Ministry of Public Health Mekong River Commission 5

6 MSW MUB N 2 O NASA NAFES NDF NEDO NGO NO x NPEP NREL NSC NTFP O&M PAPs PDIH PEA PPA PPAg PPP PREGA PRC PV R&D RE REGA RESDALAO RET RETC SHP SHS SIDA: SPRE STEA SNV SWH TCD UNCED UNDP UNEP UNFCCC Vientiane Cpt. WB Municipal Solid Wastes Multi-nutrient Urea Block Nitrous Oxide National Aeronautical and Space Agency National Agriculture and Forestry Extension Service National Long-Term Development Framework, of Lao PDR New Energy Development Organization (Japan) Non-governmental Organization Nitrogen Oxide National Poverty Eradication Programme US National Renewable Energy Laboratory National Statistical Centre non-timber forest products Operation and Maintenance Project Affected Persons Provincial Department(s) of Industry and Handicrafts Provincial Electricity Authority of Thailand Power Purchase Agreement Power Purchase Agreement Purchasing Power Parity Promotion of Renewable Energy, Energy Efficiency and Greenhouse Gas Abatement People s Republic of China Photovoltaic Research and Development Renewable Energy Renewable Energy, Energy Efficiency and Greenhouse Gas Abatement The Renewable Energy for Sustainable Development Association Renewable Energy Technology Renewable Energy Technology Centre Small Scale Hydropower Potential Solar Home System Swedish International Development Agency Southern Provinces Rural Electrification Project Science, Technology and Environment Agency The Netherlands Development Organization Solar Water Heater Tons of Crushing per Day United Nations Conference on Environment and Development United Nations Development Programme United Nations Environment Programme United Nations Framework Convention on Climate Change Vientiane Capital The World Bank Currency Unit Unless otherwise specified, the term dollar refers to US$ Currency = Kip (KN) $1 = KN10,300 KN1 = $

7 Units km ha GJ GWh ktoe kw kwh m 2 m 3 MW TgC/EJ toe kwh/m 2 kwp m/s Kilometers Hectares Giga Joule Gigawatthour Kiloton of Oil Equivalent Kilowatt Kilowatt hour Square meter Cubic Meter Megawatt Ton of Oil Equivalent kilowatt-hours per square meter kilowatt-peak Meter per second 7

8 Executive Summary 1. Lao People s Democratic Republic (Lao PDR) is a landlocked country in the heart of Southeast Asia at the centre of the Indochinese peninsula. Lao PDR has eastern border with the Socialist Republic of Vietnam, a western border with the Kingdom of Thailand, a southern border with the Kingdom of Cambodia, a northern border with the People s Republic of China and a northwestern border with the Union of Myanmar. The country is centrally located in the Greater Mekong Sub-region (GMS) with high rainfall and steep river valleys that are well suited to hydropower generation. 2. Lao PDR is one of the 13 least developed countries in the Asia Pacific Region; it is ranked 135 out of 175 countries in the Global Human Development Report (HDR) The narrowly based economy is one of the least developed in Asia with an approximate per capita Gross National Product (GNP) of around US$ 370 annum. Real GDP growth over the last few years has been in the range of % / year. Lao PDR is the recipient of about US$ 200 million annually in international grant support, which is largely targeted at social and environmental projects designed to alleviate poverty in the country. 3. The National Poverty Eradication Programme (NPEP) is central to the national development agenda. The NPEP encapsulates the essence of the Lao PDR s approach towards achieving the goal set in 1996 by the 6th Party Congress, namely, exiting the group of LDCs by The Lao PDR s long-term national development goal is to be achieved through sustained equitable economic growth and social development, while safeguarding the country s social, cultural, economic and political identity. The foundations for reaching this goal have been laid during the past 28 years of peace and development in the country by: Moving consistently towards a market-oriented economy. Building-up the needed infrastructure throughout the country; and Improving the well being of the people through greater food security, extension of social services and environment conservation, while enhancing the spiritual and cultural life of the Lao multi-ethnic population. 4. Lao PDR is endowed with significant indigenous energy resources, in particular for electricity generation. Hydropower is the most abundant and cost-effective resource for electricity generation. The energy resources range from traditional energy sources such as fuel-wood to coal and hydropower. The forest areas, which cover over 47 % of the total land, are a potential source for substantial traditional energy supplies. The total exploitable hydropower potential of Lao PDR is around 23,000 MW. Major Mekong tributaries are estimated at around 56%, followed by 35% of mainstream Mekong and 9% of the rest of the country. The Lao PDR s hydropower potential is very considerable and its development offers extensive benefits for the country. Hydropower is a major contributor both direct and indirect to economic output, government revenues and export earnings. However, only 623 Megawatts (MW) has so far been developed. 5. The Government of Lao PDR s goal is to increase the electrification ratio for the whole country from 41% to 90% by 2020, with intermediate targets of 45% in 2005 and 70% in This goal will be achieved through: On-grid household electrification involving main transmission / distribution grid extensions to meet the 90% target, after deduction of off-grid installations. Off-grid household electrification an embryonic but successful program of electrification of off-grid households employing state, donor and private resources is underway in Lao PDR and targets electrification of 150,000 households by However this program will need to be substantially scaled-up, if this target is to be achieved by Current projections of village and household electrification are as follows: 8

9 Year No. of Villages 3,464 3,574 5,584 6,433 7,024 8,906 Electrified % of Villages Electrified 31% 32% 50% 58% 63% 80% No. of Households 395, , , , ,894 1,140,396 Electrified % of Households Electrified 41% 45% 70% 76% 79% 90% 6. Lao PDR ratified the United Nations Framework Convention on Climate Change (UNFCCC) on 4th April Awareness about climate change, however, has been stirred in Lao PDR since it participated in the Rio Earth Summit in The first major climate change activity in the country was the Lao National Greenhouse Gas (GHG) Inventory Project (GEF Climate Change Enabling Activity project, CCEAP) and the capacity building project of GEF implemented through UNDP. The GOL has ratified the Kyoto Protocol on Clean Development Mechanism by February 6, 2003 and the Designated National Agency (DNA) has been established as the Science Technology and Environment Agency. 7. Renewable energy resources will most likely be developed under the direction of MIH and /or EDL, coordination with renewable energy sector organizations is recommended so that their data, experience and expertise can be accessed for the future projects. As well, staff of these organizations may be able to contribute practical experience on appropriate technologies, implementation approaches and pilot projects. The STEA and / or the Technology Research Institute (TRI) of STEA is an important institution for any renewable energy related work, and their staff should be consulted particularly in respect of the biomass energy assessment, but also in respect of mini / micro hydropower, wind power assessments and solar PV energy technologies. 8. It can be said that the financial factor is one of the most important issues that will contribute towards the success of the planning and implementation process in Lao PDR, but the Government has constraints in finance. Based on previous developments, it is indicated that most of the funding sources for energy / renewable energy sectors will come from the loans and grants of multilateral financial organizations and international and local participants into this sector, although these are still limited. 9. There is a lack of Renewable energy / efficiency energy Promotion Fund, lending conditions and procedures are complicated and often changed, Bank/financial organizations lack the necessary capacity to evaluate EE&RE projects, Banks also face high transaction costs due to the smallness of potential EE/RE projects, Credit institutions are hesitant to lend to EE/RE projects due to perceived high risks and long time to recover the investment cost. Renewable energy / efficiency energy financing is feasible but there are risks and barriers that need to be resolved. It requires detailed analyses to be carried out by both the ESCO and the financier. Performance contracts, insurance, owners commitments & other safety measures are key elements that enhance its attractiveness over other investment opportunities. 10. The limitation of manpower with the knowledge of know-how, experience and skills in strategic planning and those of implementing the plans. On the contrary, distributing that manpower from ministerial to provincial workplaces is not balanced. In addition, responsibilities among agencies, which are in charge of energy sector, are not clearly described and co-coordinated. The separate energy organizations also mean reduction of efficiency of planning, implementing and managing energy resources. At present, there is only the hydropower sub-sector becoming the main priority for the energy sector, however other energy type sub-sectors are not well determined and not under the single responsibility of any one organization. 9

10 11. Policy options and strategies for increasing the scale and application of energy / efficiency energy sources must take account of the diversity of national circumstances, as well as of technology options. It requires reliable support from the government in the form of incentives. The creation of an enabling policy environment, with appropriate institutional arrangements at the national level, would accelerate the development and wider scale application of new and renewable sources of energy. Available policies in Lao PDR include the following: (i) Linking new and renewable energy policies to sustainable development policies and to actions consistent with international agreements; (ii) (iii) Legal and regulatory policies and frameworks for attracting investment; Providing a clear policy message to mobilize all key actors and catalyze them into action. 12. As for the Lao PDR, the socio-economic development must be implemented with efficiency, continuation and stability so as to guarantee the balance between the economic growth and the social and cultural development as well as the eternally sustainable environmental protection. Consequently, the utilization of advanced technology is considered which needs to be developed and resolved to suit the real situation of each field of work. 13. In order to achieve the above-mentioned issues for supporting the additionally technical know-how, capacity and expertise of the technocrats; hence, the staff must be supported and promoted. To take for example, it is essential to make use of all-existing technocrats competency so as to systematically train them in the environmental field as well as carefully set plans of human resource development within this field of work. It is urgently necessary to guarantee providing the fund for the environmental protection. Thus, one of the most important things is to raise money for the contribution for the National Environmental Fund simultaneously in an attempt to not only search for the financial assistance from the friendly international agencies, but also to better promote the bilateral and multilateral cooperation. 10

11 1. COUNTRY BACKGROUND 1.1 Geography Figure 1.1: General Map of Lao PDR Lao People s Democratic Republic (Lao PDR) is a landlocked country in the heart of Southeast Asia at the centre of the Indochinese peninsula between latitude degrees north and degrees east. Lao PDR has eastern border of 1,957 kilometres (km) with the Socialist Republic of Vietnam, a western border of 1,730 km with the Kingdom of Thailand, a southern border of 492 km with the Kingdom of Cambodia, a northern border of 416 km with the People s Republic of China (PRC) and a northwestern border of 230 km with the Union of Myanmar. The country is centrally located in the Greater Mekong Sub-region (GMS) with high rainfall and steep river valleys that are well suited to hydropower generation. The climate is monsoonal, bringing rain from May to September and a dry season from November to February. The topography of the nation is mostly mountainous ranging from 200 to 2820 metres (m) with mountains covering about two-thirds of the land area. The country is crisscrossed by a number of rivers, including a1856 km stretch of the Mekong, which defines its border with Myanmar and a major part of border with Thailand. The country s situation provides a land link to all of the countries in the region. It connects its five neighbours to each other and has the potential to be a valuable transportation link. Two main geographical zones characterize Lao PDR: the central plains along the Mekong River and the mountainous regions to the north, east and south. The major cities are Vientiane Capital, Savannakhet, Pakse and Luang Prabang. The administrative system of the country includes about 11,000 villages in 142 districts in 16 provinces, 1 capital city (Vientiane Capital) and 1 special zone (Xaysomboun). 1.2 Population As of 2004, Lao PDR had a population of approximately 5.6 million people with a population growth rate of 2.7% per year. Buddhism is the dominant religion with more than 85% of the population as believers. The official language of the Lao PDR is Lao. The adult literacy rate is 62% and life expectancy at birth is 57 years for males and 61 years for females. The population comprises three main ethnic groups: the Lao Loum (Low land) with 68%, the Lao Theung (Low mountains) with 22%, and Lao Sung (High mountains) with 10%. The 11

12 population density is 23 persons per square kilometre (km 2 ) and roughly 85% of the population lives in rural areas. Education is compulsory through age 12. The education system is organized with five years of primary education starting at age six, three years of middle, and three years of high school; secondary education is offered with 5 years of undergraduate level (Bachelor Degree). University enrolments have been expanding rapidly over the past decade. 1.3 Economy Since the late eighties, economic policy has moved the country from a centralized, planned economy toward an open, liberalized, market-oriented economic system. Gross Domestic Product (GDP) has been growing annually at 4% to 7% since the 1997 Asian economic crisis and the economy is expected to continue on this trajectory for the next few years. With the opening of foreign exchange markets and lifting of formal exchange controls, the Lao currency (kip) now floats freely with its value based on supply and demand. As a result of the Asian economic crisis in 1997 and other local and regional economic influences, the Lao currency (kip) devalued from about US$ 1.00 = 726 kips in the mid-nineties to its present value of around US$ 1.00 = 10,820 kips. Although being a landlocked country inhibits the potential for international trade, Lao PDR has a comparative advantage due to its considerable hydropower energy resources and its common borders with Thailand, Viet Nam, PRC and Cambodia. Lao PDR, at its present stage of development, has few industries in which it enjoys a comparative advantage in the region. The most important of these is the generation of electricity based on Lao PDR s large, almost untapped, energy reserves, principally hydropower, and a central location in a region characterized by expanding electricity demands. Lao PDR is one of the 13 least developed countries in the Asia Pacific Region; it is ranked 135 out of 175 countries in the Global Human Development Report (HDR) The narrowly based economy is one of the least developed in Asia with an approximate per capita Gross National Product (GNP) of around US$ 370 per annum. Agriculture provides about 50 % of the GNP. Real GDP growth over the last few years has been in the range of % / year. External debt as a percentage of GDP has risen, but is thought to have peaked and a decline is predicted from The trade balance is stable and the current account deficit as a percentage of GDP is therefore also expected to decline. Lao PDR is the recipient of about US$ 200 million annually in international grant support, which is largely targeted at social and environmental projects designed to alleviate poverty in the country. Table 1.1: GDP Growth and Inflation Indicators in Lao PDR (2004) Indicators Real GDP Growth (%) Average Inflation N/A N/A (%) Source: Committee for Planning and Cooperation (CPC), Vientiane Capital, Lao PDR, Table 1.2: GDP per Electric Consumption and Elasticity in Lao PDR Year GDP (Million Kip) Consumption (GWh) % Change of Consumption % Change of GDP GDP Elasticity of Electricity N/A N/A N/A 12

13 External debt as a percentage of GDP has risen, but is thought to have peaked and a decline is predicted The National Long-Term Development Framework (NDF) 1 builds on progress since 1975 to realize the Government s goal of poverty eradication by The NDF incorporates the guidelines of the 6th and 7th Party Congresses (1996 and 2001, respectively). Table 1.2 provides a summary of the main elements of the NDF, including the long-term development indicators regarding living standards of the Lao multi-ethnic population. The main objectives and targets for the period and for are also presented. The National Poverty Eradication Programme (NPEP) is the NDF s operational format. Table 1.3: Elements of the 2020 Development Vision Indicators Total population (million) Population growth rate (%) GDP growth rate (%) Agriculture (%) Industry (%) Service (%) Life expectancy at birth (years) Adult literacy over 15 years (%) Total education enrolment rate Infant mortality under 5 (per 1,000 live births) Maternal mortality (per 100,000 live births) Access to clean water (% of population) Source: Committee for Planning and Cooperation (CPC), Vientiane Capital, Lao PDR, Natural Resources Around 70% of its terrain is mountainous, reaching a maximum elevation of 2,820 metres at Phou Bia (Bia Mountain) in the Xiengkhouang province. The landscape of northern Laos and the regions adjacent to Vietnam in particular, are dominated by hills. Although the country has no direct access to the sea, but it has an abundant of rivers, including a 1,856 kilometres stretch of the Mekong, defining its border with Myanmar and a major part of its border with Thailand. Within the Mekong basin, the rivers most important for meeting the government s development objectives are Nam Tha, Nam Beng, Nam Ou, Nam Souang, Nam Khane, Nam Houng, Nam Nam Ngum, Nam Ngiep, Nam San, Nam Theun, Nam Hinboun, Se Bang Fai, Se Bang Hieng, Se Bang Nouane, Sedone and Sekong. Lao PDR is abundant in natural resources like water, forests and minerals. The country has abundant surface and groundwater resources. It has a per capita availability of cubic metres and despite expected increase in future demands; there are no expected water problems in the foreseeable future. The mountainous terrain, combined with a large river network, provides a large hydroelectric power generation potential, which has barely been tapped. Forest resources are an important source of income, construction material, fuel wood, and other non-timber products in the Lao PDR. They also contribute significantly to the foreign exchange earning of the country. The total forest are of the Lao PDR is 11.17Mha (million hectares), covering 47% of the total land area. Over the last two decades forest areas have decreased due to shifting cultivation practices, poorly planned logging activities, and forest fires. 1 Source: National Poverty Eradication Programme, Vientiane Capital, Lao PDR, September,

14 The country has an abundance of mineral resources such as gold, copper, ferrum, limestone, gypsum, lead, and tin, which have so far been little exploited due lack of resources for development and limited infrastructure to access the resources. 1.5 National Poverty Eradication Program and Poverty Reduction Fund The National Poverty Eradication Programme (NPEP) is central to the national development agenda. The NPEP encapsulates the essence of the Lao PDR s approach towards achieving the goal set in 1996 by the 6th Party Congress: that is, exiting the group of Leastdeveloped countries (LDCs) by Lao PDR s long-term national development goal is to be achieved through sustained equitable economic growth and social development, while safeguarding the country s social, cultural, economic and political identity. The foundations for reaching this goal have been laid during the past 28 years of peace and development in the country by: (i) (ii) (iii) Moving consistently towards a market - oriented economy; Building-up the needed infrastructure throughout the country, and; Improving the well being of the people through greater food security, extension of social services and environment conservation, while enhancing the spiritual and cultural life of the multi-ethnic population. The 7th Party Congress (March 2001) defined the following guidelines for poverty eradication and sustainable economic growth: The socio-economic development of the country must be balanced between the three pillars of economic growth, socio-cultural development and environmental preservation. Socio-economic development must be based on sound macro-economic management and institutional strengthening and must be harmoniously distributed between sector and regional development, and between urban and rural development, so as to fully and efficiently utilize human and natural resources. Lao PDR must combine The national development potential and strengths with regional and global opportunities in order to enable participation in regional and international economic integration. Socio-economic development must be closely linked with national security and stability. Within these guidelines, the main objectives of the long-term development strategy include: a) Sustaining economic growth at an average rate of about 7 per cent (to triple the percapita income of the multi-ethnic Lao population by 2020); b) Halving poverty levels by 2005 and eradicating mass poverty by 2010, and; c) Eliminating opium plantation in remote area by 2005 and phasing-out shifting cultivation by ENERGY SECTOR REVIEW 2.1 Overview 14

15 The Lao power sector is still in its infancy with only 38% of the population 2 having access to electricity. The sector has the potential to play a pivotal role in achieving the social and economic development objectives of the Government of Lao PDR (GOL) by expanding the availability of low cost, reliable electricity within the country and earning foreign exchange from export sales to the region. GOL power sector policy facilitates these objectives by encouraging optimal use of the country s natural resources, promoting efficiency in power sector institutions and creating a conductive environment for responsible infrastructure investment, both public and private. 2.2 Energy Resources in Lao PDR Lao PDR is endowed with significant indigenous energy resources, in particular for electricity generation. Hydropower is the most abundant and cost-effective resource for electricity generation. The energy resources range from traditional energy sources such as fuel-wood to coal and hydropower. The forest areas, which cover over 47 % of the total land, are a potential source for substantial traditional energy supplies. The table below shows the primary energy resources of Lao PDR. Table 2.1: Primary Energy Resources of Lao PDR Resource Reserves Potential for Use in Power Generation Oil and Gas Coal (Lignite) Coal (Bituminous and Anthracite) Solar Three exploration concessions in central and southern Lao PDR. Mapping and geophysical investigations carried out, including one deep drill hole (2,560 m). Results not yet evaluated Major resource located at Hongsa in northwest Lao PDR. About 810 million tons proven reserve, of which over 530 million tons is deemed economically recoverable. Energy content 8-10 MJ/kg, relatively low sulfur content of % Reserves, mainly anthracite, dispersed in various fields throughout Lao PDR. Exploration ongoing. Total proven reserve to date about 100 million tons. Energy contents MJ/kg. Annual solar radiation received in Lao PDR about 1800 kwh/m 2, possibly less in mountain areas. Corresponds to conditions in southern Europe (Italy, Spain). Possibly in the longer term (10-15 years), if sufficient reserves found Sufficient reserves for about 2,000 MW installed capacity Current annual production of 130,000 tons, used for local factories or export. Possible longer-term option for around 500 MW installed capacity, depending on results of exploration. Photovoltaic modules already used for small-scale (e.g. 100 W) remote applications. Current costs of largescale photovoltaic power (around US$ 0.50 per kwh) make large plants infeasible. Wind Mean wind speeds at Luang Costs in areas of less than 4 m/s 2 Source: Hydropower Office, Department of Electricity, Ministry of Industry and Handicrafts, Vientiane Capital, Lao PDR,

16 Prabang and Vientiane around 1 m/s, in mountain areas likely to be somewhat higher. likely to be in upper end of range US$ per kwh, hence limited potential Geothermal No significant known reserves. Limited potential for power generation Biomass (waste) Hydropower Biomass resources dispersed throughout the country. Average annual precipitation about 2,000 mm. Total runoff around 240,000 million m 3. Theoretical hydropower potential of 26,000 MW (excluding mainstream Mekong). Current share of biomass (mainly wood fuel) in total energy consumption about 88%. Wood-fired cogeneration (heat and power) plants could be economic for self-supply in wood processing facilities Exploitable hydropower potential, including share of mainstream Mekong, around 23,000 MW. Figure 2.1: Exploitable Hydropower Potential of Lao PDR 56% Exploitable Hydropower Potential 9% Mainstream Mekong 35% Major Mekong Tributaries Rest of the Country Figure 2.1 represents the share of exploitable hydropower potential of the country. The total exploitable hydropower potential of Lao PDR is around 23,000 MW. Major Mekong tributaries, is estimated at around 56%, and followed by 35% of mainstream Mekong and 9% of the rest of the country. 2.3 Electricity generation / domestic use / export / and import The power demand increases by 8-10% annually. In 2002, energy generation was 3604 GWh annum of which 767 GWh was for domestic use and 2798 GWh was for export to Thailand. However, Lao PDR also imported power energy from neighboring countries to provide power supply to border communities. The power energy consumption was 173 kwh per capita. Table 2.2: Electricity Generation, Domestic Use, Export and Import (kwh/year) Year Generation Domestic Use Export Import ,156,619, ,272,507 1,613,448, ,283, ,806,272, ,546,838 2,228,816, ,197, ,438,381, ,346,000 2,792,838, ,167, ,653,660, ,330,142 2,871,413, ,802, ,604,109, ,738,823 2,798,343, ,797, ,178,201, ,738,983 2,284,638, ,343, ,347,625, ,762,784 2,424,685, ,588,003 Source: Department of Electricity, MIH, Vientiane Capital, Lao PDR. 16

17 Table 2.2 above, shows the electricity generation, domestic use, export and import of electricity, and Figure 2.2 represents its generation, domestic use, export and its import for the year Figure 2.2: Electricity Generation, Domestic Use, Export and Import up to 2004, (kwh/year) Electricity Generation, Domestic Use, Export and Import 4,000,000,000 3,500,000,000 3,000,000,000 2,500,000,000 2,000,000,000 1,500,000,000 1,000,000, ,000, Generation Domestic Use Export Import 2.4 Energy Consumption The petroleum energy is totally imported and its average consumption is 143 million litres per annum (period ). With regard the energy supply available for consumption, in fiscal years increased by 25% in average of total energy consumption and in the period was increase from million liters and about 9.5% increased annually. Table 2.3: Importing of Petroleum and LPG Gas in the Period No. Company Total Importing In the Period Names Total Amount (litre) Total Cost (US$) I Petroleum 357,760, ,276, Lao State Fuel Company 148,360, ,653, Shell Company 96,298, ,100, Caltex Lao Co. Ltd. 66,768, ,554, Vientiane Petroleum State Company 10,879, ,206, Houakhong Trading Co., Ltd. 13,786, ,032, Saysavang Lublicating Oil Factory 21,666, ,728, II LPG Gas 2,088, ,479 1 Lao State Fuel Company 381, , Prasansack Gas 608, , Bounnam Gas Factory 664, , Sun Gas Company 434, , Source: Department of Electricity, MIH, Vientiane, Lao PDR. The fossil fuel for energy generation is very low but the transport sector is the largest user of fossil fuel, while it is anticipated that commercial energy use is expected to increase as result 17

18 of population growth 3. The LPG gas imports are mostly in bulk of 8 or 16 tons. But merchants in provinces at the border with Thailand and Vietnam also import full cylinders and this increased from 1.07 ktoe in 1999 to 1.37 ktoe in 2002 for an average growth of around 8.5% a year. Table 2.4: Energy Consumption Comparison by Energy Type Year Energy Consumption (ktoe) Electricity Petroleum LPG Gas Coal Fuel Wood Charcoal Saw Dust N/A N/A N/A Covered 11.74% 16.63% 0.08% 2.93% 56.96% 11.67% Source: Department of Electricity, MIH, Vientiane, Lao PDR. Most of the population depends primarily on biomass (Fuel wood) for its domestic energy needs and on petroleum product imports for its commercial energy requirements. As much as 69% of the average energy use is covered by fuel wood, using wood fuel of about 0.75 cubic metres (cm 3 ) per capita per year, approximately 2.4 million tones per year. In the total energy consumption increased by 6%, primary energy supply totaled 1811 ktoe per year, over 69 % being covered by biomass (fuel wood and charcoal). Figure 2.3: Energy Consumption by Energy Type in Year 2002 Figure 2.3 illustrates the Energy Consumption by Energy Type percentage of energy consumption by type in year The major Charcoal Electricity energy consumption is 12% 12% fuel wood, which Petroleum estimated at around 56% 17% of the total. Fuel wood is followed by petroleum, LPG Gas 0% which is estimated at around 17%, while Fuel Wood Coal 56% electricity and charcoal 3% are at the same rate at 12%. The lowest of energy consumption are coal with 3% and city gas with 0.08%. Table 2.5: Year Total Energy Consumption by Sectors Industrial Sector Agricultural Sector Commercial Sector Residential Sector Transportation Sector (ktoe) (ktoe) (%) (ktoe) (%) (ktoe) (%) (ktoe) (%) (ktoe) (%) , , , Source: Ministry of Commerce, Vientiane Capital, Lao PDR 18

19 1998 1, , , , , Source: Department of Electricity, MIH, Vientiane, Lao PDR. The energy consumption can be divided into the energy categories of energy consumers which considered are industrial, agricultural, residential, transportation and commercial sectors. Table 2.4 shows the historical data of the share of domestic energy consumption by categories during , and Figure 2.4 represents their percentage share in year Figure 2.4: Energy Consumption by Energy Sectors in Year 2002 Energy Consumption by Setors in Year % 1% 51% 20% 2% Industrial Sector Agricultural Sector Residential Sector Transportation Sector Commercial Sector 2.5 Renewable Energy Resources in Lao PDR Available renewable energy resources in Lao PDR generally include solar power (for water heating and solar photo-voltaic for electricity generation), hydropower (including pico village, micro, mini, small, medium and large), wind power and biomass. Of these: Solar PV and mini/micro hydropower have the highest potential and applicability in Lao PDR. Village hydro systems have been promoted under the Off-Grid Promotion and Support Program (run by DOE) over the last 2-3 years. However uptake of village hydro systems to date has been poor and this technology is not expected to be a major contributor to rural electrification within the country. Pico hydro usage is common in some areas of the Northern provinces, but this technology is usually abandoned upon the arrival of more robust electrification systems. Biomass generation systems have not yet been developed (apart from a trial installation at the Renewable Energy Technology Centre). However, a significant list of potential resources (mainly utilizing wastes from pig farms and sawmills) has been developed as part of this assignment. Wind resources are generally poor, except (possibly) in some areas of the central provinces (along the border with Vietnam). Geothermal resources in Loa PDR are essentially un-explored and while some surface geothermal activity is found, these manifestations are small. We conclude, therefore those geothermal resources are unlikely to be a significant contributor to renewable energy generation in the country, at least in the mediumterm. 2.6 Energy Tariff System 19

20 The Government should approve being regulated in the Electricity Law of the country, the power tariff of domestic and export/import Domestic Power Tariff System The following tables are the historical and increasing EDL s power tariff per kwh by the end of the year The Government decided to apply the following new tariff system with monthly rate increase of 2.3% from May 2002 by the year 2005, on the basis of examination of a foreign consultant. The consultant also estimated Long Run Marginal Cost (LRMC) at customer end to be 741 kips/kwh. The Government is still to set a subsidy for irrigation, industrial and handicraft and governmental agencies sectors. Table 2.6: Historical EDL Power Tariff (by Dec. 2001) (Tariff Unit Kip/kWh) Category 1998 Jan 1999 Jun 2000 Dec 2000 Dec 2001 Residence 1~50 kwh 51~100 kwh 101~200 kwh 201~500 kwh More than 500 kwh Industry & handicraft Commercial & business Entertainment Irrigation Governmental Agencies Diplomacy & foreigners US$ US$ US$ US$ US$ Source: EDL, System Planning Office Table 2.7: New Power Tariff (Effective on May 2002) (Tariff Unit Kip/kWh) Category May 2002 Rates Forecasted Residence 1~50 kwh 51~150 kwh More than 151 kwh Increasing Monthly Rate 2.3% 2.3% 2.3% May May May 2005 Industry & handicraft % Commercial & business % ,061 Entertainment % 815 1,070 1,406 Irrigation % Governmental Agencies % Diplomacy & foreigners US$ US$ US$ US$ US$ Source: EDL, System Planning Office EDL s Export and Import Tariff The tariffs for energy export and import have been determined through regular negotiation with the related authorities of Thailand and Vietnam. The common export/import rates are applied to the trade with EGAT of Thailand for the Nam Ngum/Nam Leuk, Savannakhet and Thakhek systems. Table 2.8: Trading Tariffs for Export and Import Hour Export to EGAT Import from EGAT Peak Time ( ) 1.22 Baht/kWh 1.41 Baht/kWh

21 Off-Peak Time 1.14 Baht/kWh 1.33 Baht/kWh ( ) Source: EDL, System Planning Office Remark: - Tariffs of the off-peak time are applied for the whole day on Sunday - Payment is made in US Dollar (50% by a fixed rate of US$ 1= Baht 38, and 50% by an exchange rate on paying date) The tariffs were agreed in Power Purchase/Sale Agreement between Electricity Generation Authority of Thailand (EGAT) and EDL on December 13, 1999 and are effective from October 1, 1999 to September 30, 2003.are as the table above: As seen in the table above, the import tariff are set at approximately 16% to 17% higher than those rates for export to EGAT. As below, the import tariffs from Provincial Electricity Authority of Thailand (PEA) and Vietnam are set further higher rate as EGAT. Table 2.9: Other Import Tariffs Hour Energy Tariff Demand Charge Import from PEA of Thailand to Bokeo and Ken Thao Peak Time ( ) Off-Peak Time ( ) Baht/kWh Baht/kWh Baht/kWh Baht/kWh Import from Vietnam to Huaphanh and Bolikhamxai Source: EDL, System Planning Office) US$/kWh IPP Tariff for Export to EGAT and EDL Power rate for IPP projects are determined project by project through negotiation between EGAT and respective power supply consortium. Upon conclusion of negotiation, a Power Purchase Agreement (PPAg) is signed: (1) Theun Hinboun IPP: the PPA s of Theun Hinboun and EGAT stipulate their trading tariffs in the table below. Table 2.10: Theun Hinboun IPP Tariffs for Export to EGAT Manners Tariffs a Pre-commercial operation US$/kWh b After 1 st unit commissioned US$/kWh compounded annually by 3% increase c After fully commissioned to 10 th contract year The rate of the year being compounded annually by 1% increase d After 11 th contract year To be negotiated Source: EDL, System Planning Office And EDL s purchasing tariff from the Theun Hinboun IPP for domestic supply is set at a lower rate than that to EGAT with some discount. The tariffs since its commercial operation to date were as table below. Table 2.11: Theun Hinboun IPP Tariff for Export to EGAT and EDL Year Tariff to EGAT Tariff to EDL US cent/kwh 3.86 US cent/kwh US cent/kwh 3.97 US cent/kwh US cent/kwh 4.08 US cent/kwh 21

22 US cent/kwh 4.78 US cent/kwh US cent/kwh 4.83 US cent/kwh Source: EDL, System Planning Office Table 2.12: (2) Houy Ho IPP: trade is made under the similar conditioned agreement between EGAT and IPP. Houy Ho IPP Tariffs for Export to EGAT and EDL Year Tariff to EGAT Tariff to EDL US cent/kwh 4.96 US cent/kwh US cent/kwh 4.08 US cent/kwh US cent/kwh 2.25 US cent/kwh US cent/kwh N/A US cent/kwh N/A Source: EDL, System Planning Office 2.7 Lao PDR s Policy Framework on Energy Electricity Law The Electricity Law which became effective on 29 August 1997, sets out the regime for the administration, production, transmission and distribution of electricity, including export and import, through the use of a productive natural resources potential to contribute to the implementation of the national socio-economic development plan and to upgrade the living standards of the people (Article 1). Amongst other things it provides a suitable framework for the promotion and implementation of rural electrification. With respect to concessions for electricity activities, it is stipulated that investment is by the state solely or with foreign parties. Co-operative investments are allowed. Modalities may be: Build, operate, own and transfer (BOOT), Build, operate and transfer (BOT), Build, transfer and finance (BTF), Operation by the State Electricity Company, Some other form. However, in the section relating to concessions, the law stipulates that small-scale hydro generators under 2 MW, and thermal electricity generators under 500 kw, are exceptions to concession applications. As the majority of rural electrification projects will be under 2 MW (or under 500 kw in the case of diesel generators), concessions for such projects will not generally be required. The law stipulates that MIH, the provincial and district authorities and the village administrative authorities have coordinating and supervisory duties and rights. Electrification projects between capacities of 100 kw and 2 MW are handled by the respective PDIH (with approval from MIH), and projects under 100 kw are handled at the district authority level (with approval from PDIH / MIH). In village schemes (generally less than about 10 kw), the village chief has the right and duty to facilitate parties who are undertaking electricity enterprises. This represents current practice, in that small entrepreneurs (ESCOs) use solar PV, thermal diesel and micro hydro generators for very small commercial distribution networks, operated as private investments, presumably with district authorization through the village chief. These systems assign operational control and ownership to customers and to village scheme managers. 22

23 In rural areas generally, DOE undertakes surveys, while the provincial and district authorities may give approvals after referral to DOE/MIH. The provincial authorities, DOE/MIH, or private parties may undertake construction for transfer later or thereafter to the provincial authorities. No mention is made specifically of operational aspects or which types of parties can operate systems. The law stipulates that electricity pricing is specific to several types of electricity supply, one of which is rural and remote area supply. Prices are subject to socio-economic conditions. The Government agrees to and approves pricing levels for each type of electricity supply, allowing for periodic revisions of these levels. The law stipulates that an off-grid fund may be established by the State, financed from various sources, including the State, the people, and foreign or domestic assistance. The State may have a policy of reducing or exempting equipment, operation, and vehicles, from taxes and duties in order to facilitate off-grid development Power Sector Policy Power sector policy is outlined in the Government s Power Sector Policy Statement, September 2000 (revision 4). The main power sector priorities are to: (i) (ii) Maintain and expand an affordable, reliable and sustainable electricity supply in Lao PDR to promote economic and social development. Promote power generation for export to provide revenues to meet the Government s development objectives. (iii) Develop and enhance the legal and regulatory framework to effectively direct and facilitate power sector development. (iv) Reform institutions and institutional structures to clarify responsibilities, strengthen commercial functions and streamline administration Other Relevant Laws, Policies and Regulations A program of legislative reform has been in progress in Lao PDR for more than a decade, aimed at creating amongst other things a legal environment that encourages investment in the country. In addition to the Electricity Law (1997) already discussed, relevant legislation includes the: Law on Foreign Investment (1988) Contract Law (1990) Commercial Bank and Financial Institutions Act (1992) Customs Law (1994) Labor Law (1994) Business Law (1994) Law on the Promotion and Management of Foreign Investment (1994) Secured Transaction Law (1994) Water & Water Resources Law (1996) Environmental Protection Law (1999) and the Rules for Consideration and Approval of Foreign Investment Projects in Lao PDR (2002). 2.8 Institutional Arrangement for Lao PDR's Energy Sector Lao PDR potentially offers great opportunities for development of hydropower due to one of the top priorities of the GOL being to develop electricity project, especially the hydropower 23

24 generation for domestic consumption to meet the requirement of energy demand within the country and also to export electricity and thus earn foreign exchange to achieve GOL s socio-economic development objectives. The outline of perspective plan (Vision for 2020, Strategic 2010 and Action Plan ) applies as follows. Relevant line ministries and organizations manage the institutional arrangement for Energy Planning-the energy sub-sector in Lao PDR, namely: The petroleum and gas under Ministry of Commerce (MOC), Electric Power including New and Renewable Energy and Coal under Ministry of Industry and Handicrafts, Fuel-wood under Ministry of Agriculture and Forestry, At the energy sub-sector: The Ministry of Commerce is responsible for entire petroleum and gas sector planning for commercial aspects, The Department of Electricity, Ministry of Industry and Handicrafts is in charge of the power sector strategic planning which includes hydropower and The Department of Geology and Mining, Ministry of Industry and Handicraft is responsible for Coal. The Department of Forestry, Ministry of Agriculture and Forestry is responsible for overall supervision of the fuel-wood sector planning, in addition to its main forest sector planning. The Science, Technology and Environment Agency, Technology Research Institute is responsible for research on sustainable utilization of natural resource (including New and Renewable Energy). At National Level: The Committee for Planning and Co-operation is the high-level government organization responsible for coordinating with different economic sectors in formulating sect-oral plans and in compiling and consolidating the national development plan. The Lao National Committee for Energy acts as the Government Agency with powers to manage the development and marketing of the electricity across the whole country Ministry of Industry and Handicrafts (MIH) The overall responsibility for power sector development rests with the Department of Electricity within MIH. Policies and strategies for IPP development are formulated jointly with the Committee for Investment Management and Foreign Economic Co-operation (FIMC). Under Article 43 of the Electricity Law, MIH has the main duties of preparing strategic power sector plans; collecting and processing data on electricity generating potential; preparation of regulations regarding generation and transmission development; preparation of recommendations on tariff levels for submission to GOL; administration and inspection of electricity enterprises; and liaison with foreign parties in seeking funding for electricity sector development. Department of Electricity (DOE) acts as the focal unit for many of the Ministry s duties relating to generation and transmission planning and development, including strategic power sector planning; IPP project identification, planning, and evaluation; development of hydropower projects with an installed capacity between 2,000 and 5,000 kw; technical support to provincial authorities in developing hydropower projects with installed capacities less than 2,000 kw; review environmental studies and monitoring of environmental impacts related to hydropower development. 24

25 2.8.2 Committee for Planning and Cooperation (CPC) CPC administers and regulates foreign and domestic investment management and promotion in Lao PDR at Prime Ministerial level. The committee includes the Minister of Industry & Handicrafts and Minister of Finance. By providing a single link between the sponsor and GOL, CPC simplifies and guides the initial project approval processes for project sponsors seeking a concession (i.e. a license). MIH, STEA, Ministry of Finance, Ministry of Justice and other relevant agencies provide advice in their areas of competence to assist CPC in its decision-making Science, Technology and Environment Agency (STEA) STEA is the main co-coordinating agency for environmental planning and management across all sectors. Its responsibilities are set out in Article 36 of the Environmental Protection Law and include establishment of strategies for implementing environmental policy; issue or revoke licenses of organizations engaged in providing environmental services; receive and evaluate Environmental Impact Assessments (EIAs) and other environmental reports from sponsors of development projects; and regulation of agencies to curtail or modify activities that are having an adverse impact on the environment Lao National Committee for Energy (LNCE) LNCE acts as a GOL agency with powers to manage the development and marketing of electricity across the whole country to ensure effective implementation of strategic plans for energy and electric power development in Lao PDR. It negotiates on behalf of GOL and reports to it on matters concerning investment in power projects, regional grid interconnection; export sales of electricity and contracts with project sponsors. Its responsibilities are also reported as including the promotion of investment in the power sector and meeting market demand for power in neighboring countries Electricité du Laos (EDL) EDL is a state-owned corporation under the Minister for Industry and Handicrafts, which owns and operates the country s main generation, transmission and distribution assets in Lao PDR, and manages electricity imports into its grids and exports from its stations. EDL also has a project development role and has been the implementing agency for government hydropower power projects and in the case of IPP projects is the Government s shareholder. It has been past practice for EDL to take over from MIH the responsibility for a project once a shareholders agreement is executed and the project loans are closed Other Ministries and Agencies The Ministries of Finance, Agriculture & Forestry, Transport Communication & Construction, Commerce and other ministries and agencies, are also involved in the planning, review and development of power projects throughout the implementation process of hydropower IPP and Domestic projects. 2.9 Organization Chart of the Power Sector Agencies The organization of the power sector in Lao PDR is diagrammatically represented below. The function of the key agencies is briefly outlined below: 25

26 Council of Ministers Committee Planning Committee Committee of Investment Management & Foreign Economic Cooperation Science, Technology & Environment Agency Prime Minister's Office Provincial Authorities District Authorities Cabinet - Secretariat - Administration - Personnel - Documents - Finance Public Services Lao National Committee for Energy Off Grid Agencies (public) Min of Transport, Communications & Construction Ministry of Finance Ministry of Industry & Handicrafts Ministry of Agriculture & Forestry Commercial Units Departments: Power Sector Construction Companies Electricité du Laos Board of Directors General Manager Electricity Industry Geology & Mines Hydropower Office Rural Electrification Div Power System Plannng Div. Internal Auditor GM's Office Personnel Social & Environmental Div. Development Generation Distribution Services ECI / Off- Grid Project Administration Handicrafts Electricity Management Div. Administration Div. Admin. & Finance Business Ventures Inspection Figure 2.5: Organizations Chart of the Power Sector Agencies

27 3. TECHNICAL POTENTIAL FOR REGA TECHNOLOGIES 3.1 Renewable Energy Technologies This section covers detail of the requirement for renewable energy resources data and renewable energy technologies, as follows: Solar PV Resources, Wind Resources, Biomass / Biogas Resources, Existing Micro / Mini Electrification systems, New Mini / Micro Hydro Resources, Village Hydro Resources, Other Resources (Biogas digestion, geothermal, clean coal) The existing renewable technology projects (battery charging station, wind pumping, mini/pico hydroelectric, and biogas digester) are included in Attachment 3.1. It should be noted that current status and potentialities have to be periodically reviewed and updated because of technological developments and socio-economic transformations in the country Solar Power Potential NASA Solar Insolation Global Dataset: The National Aeronautical and Space Agency (NASA) / Langley Research Center solar insolation dataset 4 covers most countries, and is currently the only source of insolation data that covers Lao PDR. The NASA data has a resolution of 100 km (i.e. 1 o incremental of latitude and longitude) and for Lao PDR; the accuracy of the data is around +/- 15%, due to low number of data stations in the country 5. Table 3.1: Average Daily Radiation on Horizontal Surface (kwh/m 2 /day, 10-year average) Average Daily Radiation on Horizontal Surface (kwh/m 2 /day, 10-year average) Province Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Mean Vientiane (central) Phongsaly (north-west) Luangnamtha (north-east) Attapeu (south) Source: (uncertainly of values = 10% to 17%) The table above extracted from the NASA database, gives average values of daily radiation at selected locations. The NASA dataset indicates the solar radiation levels within the country average around 4.5 kwh/m 2 /day and show only moderate fluctuations during the year ranging from kwh/m 2 /day. Higher fluctuations are likely in the hilly areas of the country. While the 4 National Aeronautical and Space Agency, Atmospheric Sciences Data Centre, Surface Meteorology and Solar Energy Data Set, 5 Solar Insulation Long term-records are available from six climate stations in Lao PDR (including Luang Prabang, Vientiane/Wattay, Savannakhet and Pakse). Long term insolation records from climate stations in neighbouring countries provide additional useful data. 27

28 resolution of the NASA dataset is relatively coarse, the range of variation in solar insolation levels across the country is relatively small. In the absence of better data, the NASA datasets is currently being used by DOE and private sector organizations to assist in the selection of solar PV systems in Lao PDR, but is considered barely for adequate for this application. The data is generally not adequate for design/selection of solar heating applications and electricity generation. The following database resource map, extracted from the NASA data shows the distribution of annual solar insolation, at the earth s surface, across Lao PR: Figure 3.1: Distribution of Annual Solar Insolation, at the Earth s Surface, Across Lao PDR Solar Home Systems Lao PDR is situated in the tropical zone in Southeast Asia, the country has about 300 days of sunshine per year and the annual mean daily global solar radiation in the country is in the range of kwh/m 2 /day, which makes it a potentially good location for solar energy utilization. Solar insolation at the earth s surface is required for evaluation of the technical viability of solar photovoltaic (PV) and solar heating. Solar PV systems were first introduced in Lao PDR during the early 1980s, more than 5,000 solar homes have already been installed in Lao PDR under various programs and indications are that the popularity of solar PV systems is increasing. General experience has been that the systems work quite well in most areas. However, solar PV system performance reduces somewhat in 28

29 some areas of the country, where rainfall/cloud cover is higher, and larger capacity systems are required to achieve comparable performance. The GOL currently targets electrification of 100,000 households through off-grid systems (mainly solar PV) by 2020, and our view is that this target is likely to increase once the rural electrification master planning process is complete. Accordingly, a reasonable accurate solar insolation dataset covering the entire country will be required to allow selection/costing of solar PV systems that will provide adequate performance under varying solar insolation levels. Solar PV system costs can then be compared with other rural electrification approaches, and the least-cost approach selected Wind Energy Potential Wind velocity data will be required for the evaluation of small wind power generation installations. This will allow identification of rural villages that have adequate wind velocities, and where small-scale wind generation systems could be considered for village/household electrification as part of the master planning process. The Mekong River Commission (MRC) has completed long-term wind speed data for about 38 sites within the basin. Of these, 7 sites are within Lao PDR, as follows: Table 3.2: Average Daily Wind Speed (m/s) No. Site Period of Record Mean Wind Speed (m/s) 1 Seno 01 Jan Dec Pakse 01 Jan Dec Savannakhet 01 Jan Dec Vientiane 01 Jan Dec Thakhek 01 Jan Dec Sayabuly 01 Jan Dec Luang Prabang 01 Jan Dec Source: Mekong River Commission These wind speeds are below the wind speeds that are required for economic wind power generation. Referring to the Wind Energy Resource Atlas of South Asia prepared by the World Bank Asia Alternative Energy Programme (ASTAE, 2001), good to excellent wind resource areas for large-scale wind generation are found in central Laos. Also, good to excellent wind resources for village power generation and water pumping using small turbines are predicted for south-central Lao PDR. However, a detailed assessment of wind energy potential in Lao PDR has yet to be carried out (LNCE, 2002). Lao PDR is not included in this work, but there is an opportunity to have NREL extend this work to cover part or all of Lao PDR (at cost of perhaps US$ 100,000 to cover the southcentral provinces of Bolikhamxay, Khammouane, Savannakhet and Saravan, which are the only areas where economic wind power developments may be found). Opportunity for village wind power may be more widespread, because small wind turbines are able to operate satisfactorily at lower wind speed Biomass Potential The wood-fuels form by far the largest source of energy in Lao PDR. According to an estimate of the Food and Agricultural Organization (FAO), wood-fuel consumption in was more than 2.3 million tons and accounted for nearly 90% of the total energy consumption of the country. It is estimated that about 92% of households use wood-fuels for 29

30 cooking. Besides wood-fuels, an estimated million tons of agricultural wastes were also available for use as a fuel in (FAO, 1997). There is little experience of biomass system in Lao PDR, information on various biomass sources is sketchy, and studies providing any quantification or assessment are nonexistent. The obvious biomass source is rice husks, given the predominance of rice in Lao PDR s agriculture. RETC have established a 160 kw pilot gasification plant using rice husks under NEDO financed support with Chinese technology. There is a potential for gasification of agriculture wastes in a number of rural areas of Lao PDR, but it is not clear if there have been any studies that have sought to identify and quantity the available resources. It is understood that in rural areas, rice is generally processed in a large number of relatively small, dispersed mills (there are 49 rice mills in Lao PDR according to government statistics), and the available rice husk supply is thus widely distributed. This militates against the development of biomass plants, as economic viability is generally only attained when a significant and concentrated supply of rice husk (and other agriculture wastes) is available Biogas Potential Livestock plays an important role in an agriculture-dependent country like Lao PDR, but where there has been little experience of biogas systems. Animal and human excreta is generally available within rural areas, and there would appear to be potential for a larger biogas digester program for cooking, lighting and other purposes within the country (RETC has set up five demonstration units, and have completed a feasibility study of a support program for domestic biogas plants in rural households in Lao PDR). There are 1.1 million cattle, 1.2 million buffaloes and 1.5 million pigs in Laos, though widely dispersed. Data will need to be collected on the average number of animals per household. Large-scale biogas digesters using pig farm wastes could be established and be used to generate electricity. It is understood that there are no cultural inhibitions towards use of biomass digesters based on human and animal excreta. Biogas obtained by anaerobic fermentation of cow/pig dung and other organic matters can be used as an energy source for cooking, lighting and other purposes. Biogas technology was introduced in Lao PDR in 1983 through the assistance of Food and Agricultural Organization (FAO). Initially, three family-size biogas units were set up by the Ministry of Agriculture and Forestry with the cooperation of FAO. Since 1983, STEA has been involved 30

31 in the development of pilot biogas plants. At present 14 biogas plants with capacity ranging from 12 to 16 m 3 each have been installed in the country. Pig waste in large pig farms are a potential source of methane gas and most pig farms (35 in total) are concentrated around Vientiane Capital City. The data on large pig farms within Vientiane Capital City are shown in Attachment 3.2. Municipal Solid Wastes (MSW) from Vientiane Capital apparently 170 tons/day of organic waste is available, have not yet been studied as a combined fertilizer / energy / CDM project. A pilot plant is currently underway to produce organic fertilizer, which will provide useful insight into this market. Apparently recyclable materials are already separated out and sold to Thailand and paper waste is already used in a Lao paper mill. Vientiane MSW was apparently considered by the EU-Cogen 3 project but was not large enough for mass burn approach with boilers and steam turbines, so could be worth looking at in terms of digesters and using resulting biogas in gas engines or as a local cooking fuel to replace imported LPG Biofuels Potential Table 3.3: Production of Crops (Possible Biofuels) for Year 2003 Peanut Sesame Sugarcane Province Area (ha) Production (t) Area (ha) Production (t) Area (ha) Production (t) Phongsaly ,092 Luangnamtha ,263 66,926 Oudomxay ,884 Bokeo Luang Prabang 1,085 1,102 1,937 1, ,960 Houaphanh ,980 Xayabouly 2,115 2, Vientiane Cpt ,149 82,789 Xiengkhouang ,750 Vientiane 1,783 1, ,906 Bolikhamxay ,110 27,750 Khammouane ,775 Savannakhet ,245 Xaysomboun Saravan 3,985 4, ,050 Sekong ,248 Champasak 2,064 2,079 1,010 24,240 Attapeu ,630 Total 14,585 16,019 4,249 2,835 8, ,417 Source: Agriculture Statistics Centre, MAF, Vientiane Capital, 2003 Basic production data on peanut, sesame, sugarcane crops is available from agricultural statistics, which can be used to make projections for energy supply; the production figures for 2003 stand at 16,000 tons for peanut, 2,835 tons for sesame and 308,000 tons for sugarcane. However, a detailed study will be needed to understand the current use pattern, the opportunity cost for diverting crops or residues to energy use, collection issues, etc. Data on biofuels has been extracted from agriculture production statistics for peanut, sesame and sugarcane, and is provided as table above. Further, a significant palm oil industry is reported to be developing in Savannakhet Province, and a study needs to be made to examine its energy potential. Information is not readily available for coconut plantations and industry. 31

32 3.1.7 Existing Micro Hydro Electrification Systems Since 1999, a number of micro hydro projects have been initiated or completed, giving a total of some 38 existing micro hydro systems (with individual capacities in the range of kw and an aggregate capacity of 2,381 kw) capable of serving more than 12,000 households via simple, isolated distribution systems that have been developed within the country. The majority of the systems are located in the northern provinces of Phongsaly, Luangnamtha, Luang Prabang, Houaphanh, Xiengkhouang and Sayabuly. In 1999, the Hydro Power Office of MIH (with financial support by JICA) completed a study of existing micro hydro projects in Lao PDR, with the aim of assessing their current operational condition and need for rehabilitation. The study identified 3 mini hydro stations (capacities above 1 MW) plus 34 existing micro hydro stations (generally between kw), and was able to physically inspect / report on 26 of the micro hydro stations. While two of the stations were constructed in 1910, the majorities were developed between about 1970 and 2001 under funding provided by a variety of agencies, including GOL (MIH and Provincial Authorities), PR of China, Government of Vietnam, USA Ministry of Agriculture and Forestry, Nghe Tinh Irrigated Company of Vietnam, and others Micro / Mini Hydro Potential: The potential of micro / mini hydro systems (capacity up to 5 MW) has been prepared from information provided by MIH. The list contains 53 potential sites with total capacity of about 60 MW in northern provinces and 15 sites in southern and central provinces. The majority of the potential systems are located in the eight northern provinces of Phongsaly, Luangnamtha, Oudomxay, Bokeo, Luang Phrabang, Houaphanh, Xayabouly, and Xiengkhouang. 6 sites having feasibility studies completed; 12 sites having site identifications or reconnaissance work carried out, and the potential viability of these sites has not been ascertained. We understand that a number of the sites identified are unlikely to be viable due to the high cost of providing access. Some 15 sites in the southern and central provinces (mainly Bokeo, Savannakhet, Khammouane, and Xaysomboun Special Zone) have been identified, but have not been investigated to any significant extent. Preliminary technical, economic, environmental, and social assessments will be required if hydro resources in the southern and central provinces are to be considered in the RE Master planning process Village Hydro Systems A small number of village systems, typically serving individual villages through a small distribution grid and with installed capacities of 5 10 kw, have been constructed and installed in Lao PDR. A small diesel gen-set is usually provided as back-up generation, as stream flows are usually too low to fully power the village hydro unit during the dry season. Expansion of the number of village hydro systems is planned as part of the World Bank assisted SPRE II Project. 32

33 In the hilly areas, mostly in the northeastern provinces, where topographical and hydrological conditions are more suitable, significant numbers of Chinese-manufactured personal hydro generators ( pico hydro units, typically of Watts output) are in use in Lao PDR. Anecdotal evidence is that pico hydro usage by over 50% of households is common in many northeastern villages. Pico hydro installations require a head of only m and a small flow. The low cost of these systems (US$ ) is within the willingness to pay of many rural households, and this makes them popular, despite drawbacks such as their low reliability and poor electrical safety Hybrid Power System Potential Under a program called International Cooperative Demonstration Project Utilizing Photovoltaic Power Generation Systems. It is one of the world s first cases to generate power by combining two different natural resources. The project serves as an example for many areas in the world that are in need of such environmental and locally procurable generation systems. Lao PDR enjoys abundantly strong sunshine that can be turned into solar energy. However sunshine cannot be used at night when electricity is needed for lighting. Sunshine is also a form of energy that is easily affected by changes in the natural conditions. Our hybrid system can offset these shortcomings by using pumped water storage technology that can convert solar energy into a storage form. In daytime, power is generated by solar panels (100 kw); the electricity made from solar panels is used to run a highly efficient pump to draw water from Nga River into the upper reservoir. During nighttime, this water is used to run the power generator Other Resource Potentials Solar panel collects sunshine and turn into electricity, and Solar energy pumps river water into reservoir. (i) Geothermal Resources: Geothermal resources in Lao PDR are essentially unexplored and while some surface geothermal activity is found, these manifestations are small. We conclude, therefore that geothermal resources are unlikely to be a significant contributor to renewable energy generation in the country, at least in the medium-term. (ii) Coal Resources Potential: Lignite reserves, sufficient for about 2,000 MW of generating capacity, have been identified in the country. Anthracitic and bituminous 33

34 coal is also available, providing a possible long-term option for around 500 MW of generation. These reserves are generally more suitable for larger-scale generation than those needed to support rural electrification. (iii) Co-Generation Potential: Wood fired co-generation (heat and power) or gasifier plants could be economic for captive use in wood processing facilities. Just as for the case of rice mills, wood processing factories are also widely dispersed across the country. The National Statistical Centre (NSC) lists 112 saw mills without providing their capacities, whereas the Ministry of Agriculture and Forest (MAF) list 65 saw mills (licensed in ). It will be necessary to reconcile this variation, identify factories with large capacities and estimate the available wood waste. Some factories are converting the wood waste into charcoal briquettes for sale or export to Thailand. So a comparative cost-benefit analysis will be necessary to identify saw mills, evaluate waste steam supply constraints and conduct pre-feasibility studies. 3.2 Energy Efficiency In Lao PDR, although there is not yet a formal overall policy on energy efficiency (EE) and conservation, in many sectors of the country, the activities towards energy efficiency and conservation are being promoted. As the responsibility for the energy sector is divided and there is a lack of the relevant experience and expertise, the country is a little bit facing some difficulties in establishing the policy of the energy efficiency and conservation. However, the Ministry of Industry and Handicrafts (MIH) still intends to develop such a policy. It encourages the society acknowledging the importance of using energy efficiently. Moreover, the ministry also sends its officials to trainings, workshops and seminars on these issues abroad. In the past, the MIH has also carried out a number of activities regarding to energy efficiency and conservation. Table 3.4: The Efficient Development of the Electric Light/Lamp Currently Utilized Technology Recommended to Change to Utilize New Technology Sector The Increase of light Efficiency (%) Light bulb 36-watt fluorescent light tube Household watt fluorescent 36-watt fluorescent light Household 8 light 40-watt fluorescent Compact Fluorescent Tube Household 17 light Light bulb 36-watt fluorescent light Commercial watt fluorescent 36-watt fluorescent light Commercial 8 light 36-watt fluorescent light Compact Fluorescent Tube Commercial 17 Source: Assessment Report on Technology Needs and Priorities for Mitigating Greenhouse Gas Emissions These activities include public and private participation. For the public sector, with financing support of ASEAN Center for Energy, Lao PDR has been organizing a few workshops and seminars, which were attended by different stakeholders such as hotel managers, officers of electric utilities and architectural institutions. The table above shows the development of the efficient lighting, which has been utilized in cities, towns, countryside and commercial sectors. The energy reduction methods below which use energy with high efficiency (33-watt fluorescent light tube, compact fluorescent tube and electronic ballasted fluorescent light tube) or a number of advanced technologies using renewable energy (solar photovoltaic energy lamp and household solar photovoltaic energy system). 34

35 The annual energy-economizing assessment and benefit received (per year) is shown in table below: Table 3.5: Currently Utilized Technology Light bulb 40-Watt fluorescent light 36-Watt fluorescent light Light bulb 40-Watt fluorescent light 36-Watt fluorescent light Light bulb The General Summary of the Assessment on the Utilization of the Energy for Lights Recommended to Change to Utilize New Technology 36-Watt fluorescent light 36-Watt fluorescent light Sector Annual Energy Saving (kwh/year) Received Benefit (Kip/Year) (*) Household ,640 (in cities) -// ,284 Compact Fluorescent -// , Watt fluorescent light Household (in rural) , Watt fluorescent -// ,570 light Compact Fluorescent -// , Watt fluorescent light commercial N/A 36-Watt fluorescent -//- N/A light Compact Fluorescent -// , Watt fluorescent light 36-Watt fluorescent light Source: Assessment Report on Technology Needs and Priorities for Mitigating Greenhouse Gas Emissions (*) Received benefit tariff calculation is referred to new power tariff for Greenhouse Gases Lao PDR developed its first national GHG (greenhouse gas) inventory for the year 1990 using the IPCC guidelines. The inventory was developed for four of the six sectors mentioned in the guideline, namely energy, land use change and forestry, agriculture and waste. The GHG covered in the inventory include CO 2, CH 4, CO, N 2 O and NO x. Industrial processes were not covered because as only significant operative industrial activity in the category is a cement plant, and this plant was not operational in The inventory for solvents was not estimated, as there is no data on the use of solvents and other chemicals covered under this category. The revised Intergovernmental Panel on Climate Change (IPCC) guidelines (1996) methodology were used to develop the GHG inventory. Emissions were estimated from the volume of the activities. The volume data for each activity was collected from the National Statistics Centre and various report published by international agencies in cases where data was not available from the national sources. The present data collection system is geared to the needs of development planning and thus, does not cover certain areas that are necessary for estimation of GHG inventory. The Lao PDR is still in the process of building a system of collecting data on various economy and social indicators. This implies that a number of assumptions had to be made in preparing the inventory in absence of adequate data availability. The Department of Environment, Science Technology and Environment Agency is the focal point for three international environmental conventions, namely the Convention on Biological Diversity, the Framework Convention on Climate Change, and the Convention on Combating Desertification and the Kyoto protocol on Clean Development Mechanism and much effort centered on implementing these. 35

36 The Lao PDR ratified the United Nations Framework Convention on Climate Change (UNFCCC) on 4th April Awareness about climate change, however, has been stirred in Lao PDR since it participated in the Rio Earth Summit in The first major climate change activity in the country was the Lao National Greenhouse Gas (GHG) Inventory Project (GEF Climate Change Enabling Activity project, CCEAP) and the capacity building project of GEF implemented through UNDP. Its aim was to assist the government in fulfilling its obligations under Articles 4 and 12 of the UNFCCC. The activities undertaken included greenhouse gas inventory of sources and sinks, identifying greenhouse gas mitigation options, formulating GHG mitigation strategies, the national implementation plan and the first national communication. The Lao PDR also benefited from the project by initiating public awareness on climate change issues. At this stage, vulnerability and adaptation assessments were not included to the list of activities. Notwithstanding this large gap in information on vulnerability and adaptation to climate change, Lao PDR is seen to be highly vulnerable to changes in climate, particularly of rainfall amount, as can be seen in the yearto-year flooding and drought events that occur in the country. The key activities are: Develop a First National Communication on Climate Changes in the Context of UNFCCC, Assessed technology needs and its priorities for mitigating GHGs in the Country, Participated in meeting, seminars, workshop and training on Climate Changes. The planned activities are: To develop and implement the National Adoption Program of Action (NAPA), To assess national needs on capacity building, To carry out the mitigation measures for GHG emission through implementation of suitable projects, To continue in raising public awareness on climate change, Cooperation with international agencies on climate change activities and related issues, Curriculum design for climate change - The present awareness of climate change issue is limited to a few policy makers. A wider dissemination of this information calls for including climate change information in the educational curricula for the benefit of the younger generation, Vulnerability and adaptation assessment - Lao PDR is highly dependent on natural resources for its prosperity: agriculture, forest resources, and water resources. The likely transition in climate change will therefore, not only have physical impacts on these resources but also a larger impact on the socioeconomic situation of the country. The GOL has ratified the Kyoto Protocol on Clean Development Mechanism by February 6, 2003 and the Designated National Agency (DNA) has been established as the Science Technology and Environment Agency, the medium to large CDM potential in Lao PDR are the following sectors are (i) hydropower, (ii) waste management, (iii) afforestation and reforestation and bio-energy. The main constrains are (i) DNA structure and rules are unclear including the sustainability criteria and demonstration needed for approval (ii) private and consultancy sector is underdeveloped (iii) general lack of attractiveness to foreign investors, (iv) CDM potential difficult to mobilize (a) hydropower include additionally and methane emission from reservoir, (b) waste management which it only applicable for large city (c) afforestation and reforestation include the long gestation period, (d) bio-energy where a critical issue is feed-in tariff levels and their practical accessibility by project developers. 36

37 Table 3.6: Institutions and their Mandates in the Area of Environment Including CDM and Climate Change Institution Department / Division Area of Responsibility Science Technology and Environment Agency Ministry of Agriculture and Forestry Department of Environment, Environmental Research Institute Cabinet of STEA. Department of Forestry, Department of Agriculture, National Agriculture and Forestry Extension Service (NAFES), Department of Meteorology and Hydrology. Overall responsibility and coordinating role for environment, including climate change and biodiversity, Coordination of MEAs and ASEAN Cooperation Forestry, agriculture, shifting cultivation; Biodiversity, watershed management; Management of Protected Area, etc. Hydrological data, Climatological data. Ministry of Industry and Handicrafts Ministry of Communication, Transport, Post and Construction (MCTPC) Ministry of Public Health (MPH) Ministry of Labour and Social Welfare (MLSW) Committee for Planning and Cooperation (CPC) Lao National Mekong Committee (LNMC) National Environment Committee Department of Industry, Department of Geology and Mines, Department of Electricity. Department of Transport, Department of Housing and Urban Planning. Department of Hygiene, Department of Preventive and Curative Medicine and Rehabilitation. Committee for Disaster Management. Department of Planning, Department of Monitoring and Evaluation, National Statistics Centre. Industrial pollution, Air pollution, Mining and environment, Hydropower development. Vehicle emissions, household and municipal, Wastes, burning, methane emissions. Hospital waste, occupational health standards. Coordination of activities on disaster management National development, public investment programming, National socio-economic data. River management, flood mitigation, and basin development. Coordination of environmental management. Source: Department of Electricity, Ministry of Industry and Handicrafts, Vientiane, Capital, Lao PDR 4. REVIEW OF SKILLS AND INSTITUTIONAL CAPACITIES RELEVANT TO REGA TECHNOLOGIES 4.1 Technical Institutions The institutions with, a particular interest in / association with renewable energy / renewable energy resources / renewable energy technologies (RETs) in Lao PDR are: Ministry of Industry and Handicrafts (MIH), 37

38 Committee for Planning and Cooperation (CPC), Science, Technology and Environment Agency (STEA), Lao National Committee for Energy (LNCE), Electricité du Laos (EDL), The Ministry of Agriculture and Forestry (MAF), Ministry of Finance, Ministry of Communication, Transport, Post and Construction (MCTPC), Ministry of Commerce. These technical institutions have a role basically in providing necessary information, research and development (R&D), technical and financial support and training programs in addition to supplying the necessary hardware Training and Capacity Building Training and capacity building programmes will need to be prepared and delivered by the following levels: STEA is the main coordinating agency for science, technology development, and for environmental planning and management in all sectors. In the scientific and technology areas, STEA s role is to support the government socio-economic development plan through sustainable development / application of science / technology to improve the living standards of people in Lao PDR. DOE and EdL - DOE will be charged with RE off-grid planning and the ongoing maintenance and upgrading of the RE Database / GIS and RE Master Plan. EdL will be charged with grid expansion planning and the ongoing maintenance / upgrading of the RE Database / GIS. The RE Master Plan consultant will provide training to DOE and EdL in each of the relevant areas. It is proposed that the RE Planning Manual serve as the main source of training material. PDIH PDIH offices will be responsible for organizing the basic data surveys of the rural villages, entry of the data received into computers provided for the purpose and ing the data to DOE. The RE Planning consultant will provide training to the PDIH staff on survey process and implementation, the use of the survey forms, computer basics, data entry, quality control and . District and Provincial Authorities - These authorities will be responsible for undertaking the basic data surveys at village level. The PDIH staff should provide training to the district and provincial authority staff on communications procedures, the survey process and implementation and the use of the survey forms End Use Promotion It is a matter of curiosity that the government institutions concerned tend to be excluded in the end-use promotion of RETs. Currently, all existing RET end-use promotion activities are conducted by the private sector and NGOs such as financial and technical support. Unfortunately this lacks continuity and is dependent upon the availability of funds and a profitability margin for NGOs and the private sectors Research and Development (R&D) While renewable energy resources will most likely be developed under the direction of MIH and /or EDL, coordination with renewable energy sector organizations is recommended so that their data, experience and expertise can be accessed for the future projects. As well, staff of these organizations may be able to contribute practical experience on appropriate technologies, implementation approaches and pilot projects. 38

39 The STEA and / or the Technology Research Institute (TRI) of STEA is an important institution for any renewable energy related work, and their staff should be consulted particularly in respect of the biomass energy assessment, but also in respect of mini / micro hydropower, wind power assessments and solar PV energy technologies. Several institutions have been established for R&D purpose in Lao PDR; examples are the Renewable Energy Technology Centre (RETC) of STEA, under the direction of a Deputy Director of STEA, the TRI undertakes research and development on renewable energy technology, mechanical engineering and new material technology. RETC is a division of TRI, and support research and development into energy technologies in support of the Government s socio-economic development objectives. While the Renewable Energy for Sustainable Development Association (RESDALAO) is still being formed and currently has only limited capacity, consultation with members of this Association is recommended, as RESDALAO represents a wider group of renewable energy stakeholders than STEA / TRI / RETC. Such consultation will allow RESDALAO to become more closely involved with and contribute to MIH / EDL renewable energy projects. 4.2 Financial Institutions It can be said that the financial factor is one of the most important issues that will contribute towards the success of the planning and implementation process in Lao PDR, but the Government has constraints in finance. Based on previous developments, it is indicated that most of the funding sources for energy / renewable energy sectors will come from the loans and grants of multilateral financial organizations and international and local participants into this sector, although these are still limited. In the recent year, the Lao Banking system experienced further growth and an increase in competition with the foreign banks. To date, beside the Central Bank of Lao PDR, there are three state owned commercial bank such as Banque pour le Commerce Exterieur Lao, Agricultural Promotion Bank and Lao Development Bank, and one Lao privately owned bank namely Lao Commercial Bank. 4.3 Non-Government Organizations A number of Non-Government Organizations have been engaged in the promotion, development and dissemination of renewable energy / rural energy technologies in Lao PDR. Various NGO s encouragement and assistance options can be explored, including financing options with their on-going savings mobilization and credit schemes. In this regard, the Government of Laos, specifically the Renewable Energy Technology Centre of STEA, Department of Electricity of MIH has mobilized donor assistance from Canada- Thailand Tri-bilateral on Environment (CTTE), Swedish International Development Agency (SIDA), Canadian International Development Agency (CIDA), New Energy Development Organization of Japan (NEDO) and others to accomplish its RET projects. Specific examples include six existing biogas digesters, battery charging stations (BCS), solar home systems, solar home plus battery charging station hybrid system (Rotation System), Gasification Project, Wind Pumping Technology, Mini Hydro Electric Technology, Pico Hydro Electric Technology. 4.4 Donor Agencies The Government's strategy is to raise the national electrification rate to an ambitious target of 90 % by the year Electricité du Laos (EdL), the agency responsible for generation, transmission and distribution of electricity in the country is currently engaged in an ambitious program of rural electrification through extension of the national distribution grid to reach around 80 % of households. However, it will not be economically viable to extend grid electrification to 39

40 all areas of the country, and development of sustainable off-grid electrification systems such as pico hydro, village hydro / diesel, solar, wind, biomass, etc, will be required to serve about 10% of households, if the Government's rural electrification targets are to be achieved. Beside mobilization of domestic source by GOL, the rural energy / rural electrification programmes have received substantial assistance both from bilateral and multilateral donor agencies in the form of grant-aid and soft loans. The projects include: The previous World Bank - assisted Southern Provinces Rural Electrification (SPRE) Project, was completed in December The aim of the project was to extend grid connections to 50,000 households in rural areas of Central and Southern Lao by its completion date. This project also supported the Off-Grid Rural Electrification Promotion and Support Program that aimed to extend off-grid electrification systems to some 6,700 rural households. The recently commenced second ADB -assisted Power Transmission and Distribution Project (Northern Area Rural Power Distribution - LAO ) which will extend the grid to the major northern centres in the provinces of Oudomxai and Luangnamtha (both in 2006), and Phongsaly (2009), and connect an additional 33,800 rural households. The proposed World Bank -assisted SPRE II project (SPRE phase II) aims to extend grid connections to an additional 93,000 rural households in 1,300 villages and about 30,000 households through off-grid connection utilizing solar, village hydros, diesel gen-sets or other mini-grid options. In 2002, the GoL requested technical assistance for preparation of a master plan / study for a small (i.e. mini) hydropower development project targeting projects in the 8 northern provinces of Phongsaly, Luang Namtha, Oudomxay, Bokeo, Luang Phrabang, Huaphanh, Sayabuly and Xiengkhouang. A scope of work for the study was confirmed in 2003, and study implementation commenced in early February The study was due for completion in December The study considered hydro projects in the range 100 kw up to 5 MW only, and does not consider micro / village hydro projects supplying individual villages or small clusters of villages. As part of the SPRE II Project, the village off-grid electrification program aims to be expanded to all seventeen provinces within Lao PDR. the rates of connection will be substantially scaledup from those under the SPRE I Project, with a target of connecting 10,000 additional households over the three years of Phase 1 of the SPRE II Project, as well as maintaining those connections achieved under the SPRE I Project. This will be a major contribution to achieving the Government s national electrification target. In order to achieve this level of performance, MIH and the World Bank have identified the need to establish an implementing agency that has greater independence and flexibility in its operations than is possible for an office within MIH itself, This will be achieved by contracting out the responsibility for implementing the village off-grid electrification program to a Village Off-Grid Promotion and Support Office (VOPS). 4.5 Private Sector Participation Provincial Electricity Service Company (ESCO) The development of private sector operations is quite limited in Lao PDR and is confined mainly to small Provincial Electricity Service Company (ESCO) operations set up under the DOE Off-Grid Rural Electrification Promotion and Support Program in These ESCOs are generally individual entrepreneurs or small businesses (although some ESCOs are understood to be state entities) with an interest in rural electrification and who have been trained in the promotion, support and maintenance of solar PV systems, village hydro or village gen-set (diesel) technologies. The majority of their business is in subsidized solar PV systems. ESCO coverage under the DOE program is currently limited to six provinces 40

41 (Vientiane, Oudomxay, Luang Namtha, Champasak, Luang Phrabang, Xieng Khouang and Sayabuly) but there is potential to increase the scale of their operations for whole country from 2006 to With support from the World Bank and the Global Environment Fund (GEF), under the Southern Provinces Rural Electrification I (SPRE I) Project, the Ministry of Industry and Handicrafts (MHI) has developed and piloted a program for village-level off-grid electrification using solar home systems (SHS) and village hydro and generating sets (VHGS). The program is administered through the Off-Grid Promotion and Support Office (OPS), located within MIH. On behalf of MIH, OPS contracts private sector provincial-level Electricity Supply Companies (ESCOs). Working with Provincial Departments of Industry and Handicraft (PDlHs), ESCOs are responsible for planning new off-grid installations through a participatory planning process and for selecting and contracting. Village Electricity Managers (VEMs) in villages included in the program. Once a satisfactory installation plan has been prepared, ESCOs are responsible for the delivery of hardware to the village and for providing support to the VEM in installation and ongoing operations and maintenance. The VEMs are responsible for the collection of customer payments, which are remitted to ESCOs and from the ESCOs to a reflow account held by MIH. The ESCOs and VEMs are paid on the basis of performance, with full payments only being made if installations are made correctly and function properly and if targets for customer payments rates are met Private-Sector Renewable Energy Initiatives We understand that five private sector companies have been active in Lao PDR in the solar PV / renewable energy areas / power off-grid, briefly as follows: a) Lao Solar, which has now stopped operating. b) SVT, which was previously the local agent for BP Solar, but has now, turned its attention to electrical construction work. c) A Thai company with small representative office in Vientiane. d) Sunlabob, the only significant existing solar PV system provider in Lao PDR. e) SV Company Group, the only significant in consulting services for Village Off- Grid Promotion and Support Office Project. 4.6 Government Institutions The following institutions have been involved in the development, promotion and association with renewable energy / renewable energy resources / renewable energy technologies (RETs) in Lao PDR are: the Ministry of Industry and Handicrafts (MIH), the Committee for Planning and Cooperation (CPC), the Science, Technology and Environment Agency (STEA), the Lao National Committee for Energy (LNCE), Electricité du Laos (EDL), the Ministry of Agriculture and Forestry (MAF), the Ministry of Finance, the Ministry of Communication, Transport, Post and Construction (MCTPC), the Ministry of Commerce. 5. POLICY AND INSTITUTIONAL FEATURES IMPACTING REGA TECHNOLOGY DISSEMINATION 5.1 National Poverty Eradication Programme (NPEP) The National Poverty Eradication Programme (NPEP) is central to the national development agenda. The NPEP encapsulates the essence of the Lao PDR s approach towards achieving the goal set in 1996 by the 6th Party Congress, namely, exiting the group of less developed countries LDCs by The Lao PDR s long-term national development goal is to be achieved through sustained equitable economic growth and social development, while safeguarding the country s social, cultural, economic and political identity. The foundations for reaching this goal have been laid during the past 28 years of peace and development in the country by: 41

42 Moving consistently towards a market-oriented economy. Building-up the needed infrastructure throughout the country; and Improving the well being of the people through greater food security, extension of social services and environment conservation, while enhancing the spiritual and cultural life of the Lao multi-ethnic population. The figure below summarizes the main elements of the NPEP, and the inputs and process leading to its preparation. Figure 5.1: National Poverty Eradication Programme Process The NPEP expands on this strategic approach and it is now the Government s quintessential instrument to achieve the 2020 goal. The NPEP is a comprehensive framework for growth and development, and has a particular focus on the improvement of the poverty situation in the poorest districts. It has thus a dual objective: enhancing growth and development, and reducing poverty. The NPEP was presented at the 8th Roundtable Meeting, to be held in Vientiane, Lao PDR, in September The scope and content of the NPEP is in line with the Lao PDR s commitment to implement the Millennium Development Goals, adopted by all 189 member states of the UN General Assembly, as well as with the Brussels LDC Action Plan. At the 7th Roundtable meeting in November 2000, in Vientiane, the Government presented its strategic medium-term approach to poverty fighting, entitled Fighting Poverty through Human Resource Development, Rural Development and People s Participation. In March of 2001, the 7th Party Congress further refined the 2020 vision by specifying poverty reduction targets for 2005, 2010 and 2020 and highlighting industrialization and modernization priorities. 42

43 In June of 2001, the Prime Minister issued Instruction 010, identifying poverty criteria and clarifying the modalities for the preparation of an operational poverty eradication programme, based on the concept developed by the Government in the strategic approach presented at RTM 7. The Party Congress sets the guidelines and defines the way forward. Through the 5-year National Socio-economic Development Plans, the Government translates these into specific targets and objectives and identifies strategic programmes and priorities by sector to achieve them. The Roundtable documents operationalise these plans according to resource mobilization needs. Since the adoption of the New Economic Mechanism and the open-door policy in 1986, considerable progress has been achieved. Key social and economic indicators have steadily improved. Economic growth rates were strong throughout the nineties, despite the Asian financial crisis. Growth since the start of the new millennium has been steady in a stable macro-economic climate. The Lao PDR has become an active partner in ASEAN and other regional co-operation initiatives The National Goals and Priorities The 7th Party Congress (March 2001) defined the following guidelines for poverty eradication and sustainable economic growth: The socio-economic development of the country must be balanced between economic growth, socio-cultural development and environmental preservation. These are the three pillars of the Lao PDR s development policy. Socio-economic development must be harmoniously distributed between sector and regional development, and between urban and rural development, so as to fully and efficiently utilize human and natural resources. Socio-economic development must be based on sound macroeconomic management and institutional strengthening in order to enhance national solidarity and cohesiveness and to promote democracy within society. The national development potential and strengths must be combined with regional and global opportunities in order to enable the Lao PDR to participate in regional and international economic integration. Socio-economic development must be closely linked with national security and stability. Within these guidelines, the main objectives of the long-term development strategy are: To sustain economic growth with equity at an average rate of about 7 per cent, considered as the necessary rate for tripling per-capita income of the multi-ethnic Lao population by To halve poverty levels by 2005 and eradicate mass poverty by To eliminate opium production by 2005 and phase-out shifting cultivation by

44 Figure 5.2: Map of Lao PDR, 72 Districts Identified as Poor 44

45 5.1.2 Strengthening the Overall Environment for Sustainable Growth and Development The National Long-Term Development Framework (NDF) builds on progress since 1975 to realize the Government s goal of poverty eradication by The NDF incorporates the guidelines of the 6th and 7th Party Congresses (1996 and 2001, respectively). Table 5.1 provides a summary of the main elements of the NDF, including the long-term development indicators regarding living standards of the Lao multi-ethnic population. The main objectives and targets for the period and for are also presented. The NPEP is the NDF s operational format. Table 5.1: Elements of the 2020 Development Vision Indicators Total population (million) Population growth rate (%) GDP growth rate (%) Agriculture (%) Industry (%) Service (%) Life expectancy at birth (years) Adult literacy over 15 years (%) Total education enrolment rate Infant mortality under 5 (per 1,000 live births) Maternal mortality (per 100,000 live births) Access to clean water (% of population) Source: Committee for Planning and Cooperation (CPC), Vientiane Capital, Lao PDR, Industrialization and Modernization: Vital Role of the Supporting Sectors The NPEP includes a number of supporting sectors that will contribute both directly to job creation and hence poverty reduction, and indirectly to the strengthening the four core sectors (agriculture, education, health and transport). The 7th Party Congress (2001) defined industrialization and modernization of the Lao PDR as a gradual process, from relying heavily of the agricultural sector to a more diversified economy with higher productivity and more advanced technology. The Government s strategy for industrialization and modernization gives priority to the development of the energy sector, agro-forestry, manufacturing, tourism, and mining and construction materials. Concurrently with large and medium-sized hydropower projects, more attention will be given to small-size power plants for supplying electricity to rural areas. Every effort will be made to ensure that 70 per cent of the households have electricity by The Lao PDR s hydropower potential is very considerable and its development offers extensive benefits for the country. Hydropower is already a major contributor to economic output, government revenues, and export earnings. However, only 623 Megawatts (MW) of an estimated 23,000 MW of hydropower potential has so far been developed. The Lao PDR has one of the lowest levels of electrification in Asia; only 20 per cent of all villages and 34 per cent of households have access to electricity. The development of the country s hydro-electrical potential and rural electrification is thus integral to the national development framework. The key challenges in accelerating power development that the Government will address include the need for: A better and a more transparent integration of social and environmental concerns. Curtailing possible over-dependency of the economy on hydropower development. 45

46 Increasing domestic tariffs to cover financial production costs, at least in urban areas, with a transparent subsidy scheme for poor rural areas. More effective sub-regional co-operation in producing and distributing electricity. Prioritisation of proposed hydropower projects and development of suitable financing. Improvement of the regulatory framework and encouragement for increased private sector investment. Institutional strengthening, especially in financial planning, management, and negotiation capacity with developers. The Government plans to expand electrification in remote areas through two methods. One is to expand the grid to comparatively easily accessible areas. The other is to provide offgrid supplies to remote areas where it is difficult to expand the present grid due to environment or cost reasons. Only ten per cent of rural areas are provided with grid electricity. From a gender equity perspective, easier access to electricity will facilitate the lives of women and reduce their household chores while contributing to poverty eradication. Since women in rural areas spend a great time in gathering fuel wood, at the expense of other more productive activities, increased accessibility to electricity in rural areas will improve living standards and help reduce poverty. Energy consumption of the main economic sectors is increasing on average 10 per cent per year. Therefore, the expansion of energy production in tandem with that of the electricity network is a major supporting priority for economic growth, especially in rural and remote areas. To achieve expansion of energy production and the electricity network, the policy and investment priorities include the following: Expand the electricity network to full coverage, starting with provinces and districts with very limited access to electricity. Complete construction of small and medium-scale projects (up to about 60 MW) for domestic utilization using government investment funds. Proceed with the Nam Theun 2 Hydropower project with international investors. Construct a 500 kv high voltage electric transmission system. Continue mini-developments (micro-hydropower, solar and wind energy projects for off-grid power supply in remote areas. 5.2 Rural Electrification Master Plan Main Elements: The Rural Electrification Master Plan will consist of two main elements: A Rural Electrification Database and Geographic Information System (GIS) that will contain the basic data required, down to the village level, for effective rural electrification planning. The Rural Electrification Database / GIS was partly setup previously, but needs to be developed further and populated with data relating to all rural villages in the country, renewable energy resources, etc. A Rural Electrification Master Plan that describes the most economical method of providing electricity to each village in the country, along with the priority (timeline) for electrification. Both the Rural Electrification Database / GIS and the Rural Electrification Master Plan will need to be updated periodically (preferably annually) as the electrification of the country progresses and as the socio-economic situation and demand for electrification in rural areas of Lao PDR develops. 46

47 Approach: EdL is currently managing the planning and expansion of the Main Grid, and has the necessary data, computer programs and skilled personnel to carry out this task. As MIH / DOE assumes the role of preparing the Rural Electrification Master Plan, EdL will loose some of its current planning independence and will need to direct its Rural Electrification activities in accordance with the Rural Electrification Master Plan. The following broad approach to rural electrification planning is recommended: Organization MIH / DOE will be responsible for preparing the Rural Electrification Master Plan in consultation with EdL, the Provincial Department(s) of Industry and Handicrafts (PDIHs) and other stakeholders. This will be a feasibility-level plan that will identify electrification implementation priorities for all villages, provide an indicative implementation timeline based on the electrification priorities covering a 15 year period and will identify suitable implementation approaches for various areas (such as EdL grid extension, concession, ESCO, etc.). The current rural electrification planning approach will be adjusted to include consideration of the relative economic benefits of the various Rural Electrification models / technologies, so that the Rural Electrification Master Plan is developed on a least-cost basis. EdL will continue to manage the detailed planning / expansion of the Main Grid in accordance with the requirements of the Rural Electrification Master Plan, and will publish its detailed rural distribution grid expansion plans in the Power Development Plan on an annual basis, as it does at present. The Power Development Division (PDD) of DOE, MIH should be expanded to contain a list of villages that EdL will electrify within the next year, next 2 years, next 5 years, next 10 years, etc. Provincial, district and village authorities have responsibility under the Electricity Act for planning of smaller, off-grid systems. Planning for these systems, and coordination with other systems, will be included as part of the Rural Electrification master planning process, but in consultation with provincial and district authorities and the DOE. All villages that will not be electrified under either the EdL main grid expansion, or under provincial / district distribution systems, will then become the domain of offgrid electrification systems (i.e. individual household systems and village systems), and the programs for off-grid electrification will be directed towards these areas. The various electrification approaches (main grid, provincial / district grid and offgrid) will need to be coordinated by DOE to prevent overlap and duplication of electricity services, as the Master Plan develops in the future. Where extension of the main electricity grids over-runs existing isolated provincial / district schemes in the future, means of incorporating these systems into the main grid will be required. DOE will be responsible for the coordination of off-grid and Main Grid system planning / implementation, to avoid overlap of electricity services. Since Electricité du Laos (EdL) and DOE will both be modifying the Rural Electrification Database / GIS, clearly defined scopes will need to be agreed with respect to database management and sharing database updates. While System Planning Division (of EdL) is adequately staffed, additional staff will be required within DOE for RE database management and Rural Electrification Master Planning. Staffing levels for the DOE master planning function and computer hardware / software requirements for DOE / EdL are suggested in the main report. Engagement of an experienced consultant to assist DOE with 47

48 establishment of the Rural Electrification database and initial preparation of the Rural Electrification Master Plan is suggested. Subsequent maintenance of the Rural Electrification database and updating of the Rural Electrification Master Plan would be by DOE. The organizational arrangement proposed for preparation of the Rural Electrification Master Plan is indicated in the following diagram: Figure 5.3: Rural Electrification Master Plan Organization Planning The RE Master Plan will be developed on an economic least-cost basis, taking account of likely electrical demand and willingness-to-pay. Main Grid electrification will then be directed towards villages that have higher demand / willingness-to-pay for both household and productive consumption, to minimize the effect of RE on EdL s financial position. Renewable resource studies, aimed at establishing the likely viability of potential renewable resources will be undertaken, including: Assessment of the rehabilitation / repair of existing micro hydro distribution systems. Master plan study on small hydropower in northern Laos (currently being undertaken under JICA funding). Mini / micro hydro resource assessment in seven southern and central provinces. Biomass resource assessment. Current planning is that some 80% of all families in the country will be connected to the main electricity grids by Another 10 % of the rural population (about 100,000 households) will be supplied from off-grid, standalone electricity generators, mostly privately owned. In the medium-term, this number is likely to be larger (around 150,000 households), as it will take time for the grid to be extended into remote areas. However, in the longer-term, the number of off-grid connections is expected to reduce, as the grid is extended further into remote areas. 48