RENEWABLE ENERGY MARKET DEVELOPMENT IN LAO PDR- OPPORTUNITUES FOR INVESTMENT Presented by Dr. Seumkham THOUMMAVONGSA Deputy Director General Institute of Renewable Energy Promotion (IREP) MEM 9 June 2017, Bangkok Thailand
CONTENTS Basic Facts about Lao PDR Power potential in Lao PDR Overview of Energy Consumption Trend of Total Energy Demand Status on Energy Development RE and EE&C Development & its National Policy Challenge Conclusion
1. Basic Facts about Lao PDR Area : 236,800 km 2 Capital: Vientiane Population 2015 Total 6.5 millions Density 27 person/km 2 Total Share of GDP 2015 GDP per Capita 1,947 US$ Growth rate of GDP: 7.56% Share of GDP 2015 Agricultural: 21.80% Industry: 32.70% Services: 35.95% Taxes on products and Import duties, net: 9.55%
2. Power potential in Lao PDR Hydropower Potential of about 26,500 MW excluding the Mainstream Mekong. Small Hydro Power 15 MW: 2,000 MW Solar: irradiation 3.6-5.5 kwh/m 2 (1800-2000hrs/y) Biomass > 938 MW Biogas >313 MW Wind 182,000 MW, very good 3000-3500 MW 600 MW (phase 1: 250MW; phase 2: 350 MW) under negotiation for development in Sekong Province.
3. Overview of Energy Consumption Energy Consumption (2014): 2,510 KTOE ENERGY CONSUMPTION BY TYPES Fuel Oil, 32.70% Fuelwood, 49.10% ENERGY CONSUMPTION BY SECTORS Transporta tion, 31.30% Residential, 47.40% Electricity, 12.60% Charcoal, 5.40% Coal, 0.20% Commercia l, 12.30% Industrial, 8% Agriculture, 1% Primary Energy Consumption in Lao PDR
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 4. Trend of Total Energy Demand ທ າອ ຽງໃນຄວາມຕ ອງການຊ ມໃຊ ພະລ ງງານສາເລ ດຮ ບ, ktoe 6,000.0 ອ ດສາຫະກາ ຂ ນສ ງ ທ ລະກ ດ ທຢ ອາໄສ Existing statistic ກະສ ກາ Future predict 5,600 ktoe 5,000.0 Agriculture 4,000.0 3,000.0 2,510 ktoe Residential 2,000.0 Business 1,000.0 Transport 0.0 Industrial
5. Status on Energy Development Lao PDR is 92% electrified Current Installed Capacity: 6,441 MW Projects Under-Construction: 6,618 MW Projects Under Study: 10,000 MW Power Projects have been mostly developed by diverse participation with a public private partnership (PPP) scheme Certain policy to frame the PPP scheme
6. Power Generation Share Total Install Capacity 6,441 MW, 45 Plants Thermal Power 1878 MW Hydro Power 4,519.5 MW Solar Power 3.5 MW Biomass 40 MW Almost 71% of power in Lao PDR are generating from Renewable Energy : 4,563 MW
7. Other Renewable Energy Projects WIND: 2000-3000 MW 600 MW (1st phase: 250MW) under negotiation for development in Sekong Province. 8 additional projects under field investigation SOLAR: Only Solar Home System (SHS) (50-100W) (25,000 HH) 700 kw grid connected (demonstration project by Japanese grant), 3 MW in commercial operation (2017) 100 MW solar farm under study in Vientiane Province. More 400 MW under Feasibility Study
8. Current Status of Wind Development Projects Completed Pre-feasibility study of the wind potential in Laos at Nong and Xonbuly districts of Savannakhet Province with 64 MW GoL Signed MOU, PDA with Impact Energy Asia Limited: 600 MW in Xekong Province GoL Signed MOU with Phongsapthavi (Domestic Company) in Bolikhamsay and Khammouane Provinces. GoL Signed MOU with AIDC in 4 Provinces: Savannaket, Saravan, Xekong and Attapeu 6 Provinces (LPB, VTE CAP, VTE, Xayabury, Xaysombune and Chamapsak) is under wind data collection 50 MW is under Feasibility Study 80 70 60 50 40 30 20 10 0 MW 73 6 12 2015 2020 2025
9. Biofuel Development Projects Plantation-Area Palm oil Harvest-Area 300+800 ha 60 ha (2016) FFB CPO B100 173,640 kg 33,000 L 20,000 L Biodiesel Plant: 20,000 L/day Extraction Plant: 20 tons/day Vernicia Montana 12,350 3,000 ha Fruit collection B100 75,000 kg 18,000 L Biodiesel Plant: 1,000 L/day Extraction Plant: 2 tons/day In 2017 new Plant 2 units; Each unit 15 t/day B100 18,000 L 140,000 120,000 100,000 80,000 60,000 40,000 20,000-100,000 105,000 Biodiesel-Makao Oil Lao Co., Ltd Luangprabang, district Luangprabang Province Bio ethanol: June 2014 Lao-Agrotech Co., Ltd The GOL signed Naxaythong, district MOU with 2 local Vientiane Capital private company to conduct feasibility study of bio ethanol production from cassava (each 200,000 L/day) Current Statute Bio-Diesel Production B100 (liter) 120,000 63,500 63,500 38,000 2011 2012 2013 2014 2015 2016
10. National Energy Development Plan 1.Power Development Plan 2.Energy Efficiency Plan 6.Oil Development Plan National Energy Development Plan 3.Renewable Energy Development plan 5.Gas Development Plan 4.Others alternative Energy Development Plan
11. R.E Policy and Strategy Objective: Ensure energy security, sustain socio-economic development, and enhance environmental and social sustainability Financial Incentive for Investors Renewable Energy Strategy Development (2011-2025) Develop and Modify Legal documents (laws, regulations and guidelines) Target: increase RE use to 30 % of national demand by 2025 (bio-fuel production to account 10 %) Bio-Energy Wind 73 MW Solar 106 MW SHP 400 MW For Electricity Biomass Biogas Waste 58 MW 51 MW 36 MW Heat Biomass Biogas 113 ktoe 178 ktoe Biofuels (ML) Ethanol 97.64 Biodiesel 194.44 Support Mechanism Establish Renewable Energy Fund Financial Mechanism: - Import duty free on production machinery, equipment and raw materials - Import duty free on chemical materials necessary for biofuels production within 7 years - Profit tax is divided in to 3 categories: 20%, 15% and 10%. Profit tax exemption is possible for a certain period depending on activities, investment areas and size investment Subsidies on unit product price depending on energy type and times period
12. Energy Sector Policy and Target Increase electrification ratio to 95% by 2020; 98% by 2025 Increase a share of renewable energy to 30% in the total energy mix by 2025 and 10% for reduction of Fuel import by Biofuel Program Promote energy efficiency and conservation by Reduce 10% of energy consumption in 2030 (Compare to BAU) Increase power export to boost national socioeconomic development; System to System Energy Trading or system.
12. Energy Sector Policy and Target (Cont ) Make modern energy more affordable and accessible for every Lao citizen even in the remote areas; Reserve coal for domestic use and power generation; Increase power export to 15,000 MW by 2020, 9,000 MW to Thailand and 5,000 MW to Vietnam, 300 MW to Cambodia and 300 MW Myanmar
13. Concept of Project Financing New project developed on Build-Own-Operate- Transfer New Project Concept on Build Own Operate (BOO) Ring-fenced project through special purpose company (limited liability company) Project cost comprising: 30% as equity contributed by shareholders 70% as debt financing sourced from commercial banks
13. Concept of Project Financing (Cont ) Lenders rely upon future cash flow of the project for interest and debt repayment Main collaterals for lending banks are the concession agreement, power purchase agreement, assets and rights of the project company as set forth in project s agreement No financial guarantee from host country Guarantee from project investors limited to equity i.e. project financing or limited recourse financing
14. Electricity Infrastructure Projects Commercially Bankable Electricity tariffs are framed by a long-run marginal cost concept Concession period is fixed for 30 years Private investors need an acceptable return on investment (ROI) to be secured Private investors need an acceptable return on investment (ROI) to be secured Commercial lenders require a minimum debt service coverage ratio (DSCR) guaranteed Host government to adjust its fiscal policy in respect of government imposts to be imposed on project by project in order to help secure financial criteria of private parties
15. Parties involved in the PPP Process Governmental agencies as a regulatory body State-owned enterprise as a minority shareholder (optional) and power buyer Private investors as majority shareholders Commercial banks as financiers International financial institutions (optional) as (equity) soft loan providers Networks such as non-governmental organizations and civil society as stakeholders
16. National Implementation Plan 2015-2020 2021-2025 Improve and formulation of Regal Framework such as amendment of Electricity Law, IPP process, Ministerial Regulation on RE and EE and C, Database development, MEPS, Capacity building, and supporting tools and guidelines Develop and demonstrate pilot Project with small and large scale projects for domestic supply and export opportunity Promote the renewable energy technology industry, Formulate a clear framework for a midterm program (increased competition) Support the full development of renewable energy Increased competition and reduced dependency 2026-2030 Promote new, economically viable, renewable energy technologies Encourage full competition based on equality. And So on
2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 17. EE&C Development & its National Policy The National EE&C Policy towards 2030, aiming to achieve the following goal: - Reduction of national energy demand by 10% (year 2030) - Reduce energy consumption level by around 1% per year on average (BAU) - GHG reduction (2.6 Mil.tco2 in 2030) 4 areas of focus: Industry Residential Building & office Transportation What s up next: 6,000 5,500 5,000 4,500 4,000 3,500 3,000 2,500 2,000 BAU 5,600 ktoe BAU Target Target 5,040 ktoe 560 ktoe reduce
18. Plot Plan and Target By 2020 Government Mandate need to be blended and utilized biofuel mix with fossil fuel; Commercialization of None Hydro Renewable Energy without subsidization from GOL Pilot Plan for Low Carbon Technology on Transportation sector, especially promotion EV car, Public or EV motorbike in Large City Initiative Expert of None Renewable Energy to GMS state with combining with hydropower Development biogas to replace the LPG import Energy self-sufficiency to solve environment and Social issue by Using multiple Financing Mechanism Improving rural livelihood trough RE for Rural electrification
19. Challenges Awareness barriers among policy makers, consumers, suppliers etc Lack of knowledge concerning opportunities, reliability and lifetime of technologies; Lack of knowledge concerning impacts on environment from renewable energy production; Lack of information on resources available and sustainability, in particular with regard to biomass Financial challenges: The high investment cost and scare resources support Renewable energy is hardly variable economically unattractive to provide investor Lack of financial institutional support and absence of appropriate financing
19. Challenges (Cont ) Socio-cultural challenge Lack of renewable energy specialist among the decision makers meaning that policy makers are not be fully aware of characteristics and benefits of renewable energy Limited public awareness of renewable energy advantage in daily life Technical challenge Some of renewable energy has low energy generation compare to other energy Lack of local standards for renewable energy equipment and systems as renewable energy technologies are relatively new to the market Environmental and social impacts Limited Domestic Market and Market Constrain for Export Domestic Power Demand is limited None Hydro Renewable Energy Trading among ASEAN Countries
20. Conclusion Lao PDR has set as top priority in the National Energy Policy to develop the vast hydropower potential available in order to stimulate the regional power trade and so optimizing the energy-mix within the ASEAN Community. However, this National Top Agenda requires optimal development of the country s hydropower and Second None Hydro resources in a sustainable way by sharing the multifaceted benefits delivered. Sound Strategy shall be formulated and effectively implemented.
Thank you for your kind attention Email: seumkham@gmail.com 26