Asia > South-Eastern Asia > Laos > Laos Energy Profile

Laos: Laos Energy Profile

2015/02/21

 

Laos (Sathalanalat Paxathipatai Paxaxon Lao), officially the Lao People's Democratic Republic, is a landlocked country in Southeast Asia, bordered by Burma and China to the northwest, Vietnam to the east, Cambodia to the south, and Thailand to the west. Its people was estimated to be around 6.5 million in 2012. Laos traces its history to the kingdom of Lan Xang, which existed from the 14th to the 18th century at the same time as it split into three separate kingdoms. In 1893, it became a French protectorate, with the three kingdoms, Luang Phrabang, Vientiane and Champasak, uniting to form what is presently known as Laos.

It briefly gained independence in 1945 next Japanese occupation, but returned to French policy until it was granted autonomy in 1949. Laos became independent in 1953, with a constitutional monarchy under Sisavang Vong. In a little while next independence, a long civil war ended the monarchy, at the same time as the Communist Pathet Lao movement came to power in 1975. Laos is a single-party socialist republic. The capital city is Vientiane. Other large cities include Luang Prabang, Savannakhet, and Pakse.

The official language is Lao. Laos is a multiethnic country with the politically and culturally dominant Lao people making up approximately sixty % of the people, mostly in the lowlands. Various Mon-Khmer groups, the Hmong, and other indigenous hill tribes, accounting for forty % of the people, live in the foothills and mountains. Laos' "strategy for development is based on generating electricity from its rivers and selling the power to its neighbours", namely Thailand, China, and Vietnam. Its economy is accelerating rapidly with the demands for its metals. It is a member of the Asia-Pacific Trade Agreement (APTA), Association of Southeast Asian Nations, East Asia Summit and La Francophonie. Laos applied for membership of the World Trade Organization (WTO) in 1997, and on February 2, 2013 it was granted full membership.

Energy sources

Total installed electricity capacity (2008): 0.72 GWe
Hydro-electric: 99%
Diesel/solar photovoltaic: ~1%

Of an estimated potential of 23,000 MW, current total installed capacity for hydropower is almost 671 MW. The major hydropower plants are Nam Ngum (155 MW), Theun Hinboun (210 MW), Houy Ho (152 MW), Xeset (45 MW), and Nam Leuk (60 MW).

The other hydropower plants have much lower production capacity. The Theun Hinboun and Houay Ho projects were built, and are operated, by private joint-venture companies in partnership with Electricité du Laos (EdL), the national utility, principally to export power to Thailand. Most of the country’s people lives in rural communities beyond the reach of these large-scale energy projects. Additional than 20 micro-hydropower plants are currently in operation, mostly in the northern regions, and several thousand small photovoltaic solar installations are as well in use. Together, these provide around 1 MW of energy.

Most of produced electricity is for export to neighbouring nations ad only 10% is used domestically.

Total primary energy supply (2007): 1,033 ktoe
Total primary energy production (2008): 0.047 Quadrillion Btu

The Lao PDR has significant indigenous resources for power generation. The major energy resources are wood fuel, coal, and hydropower. Forest areas covering additional than 41% of the total land area are a substantial source of traditional energy supplies, but hydropower constitutes the majority abundant and cost-effective energy resource.

Accurate, up-to-date analysis of biomass use is scarce but the dominance of wood fuel in the energy balance is visible. According to the Food and Agriculture Organization, wood fuel is the major source of energy in Laos and accounted for 89% of the country’s total energy consumption in 1994. Almost 93% of all households use wood fuel as their primary source for cooking.

The country produced 0.6888 million short tons of coal and consumed 0.442 million short tons in 2010.

Reliance

The Lao PDR imports the entirety of its oil and gas request. The majority of the imported fuel is used in mechanised transport. Most of the fuel is imported from Thailand whilst a portion comes from Viet Nam, which in turn obtains most of its oil supply from a refinery in Singapore. Imports amounted to 560 million litres in 2010, a significant increase at 5% a year. With higher economic increase prospects, oil imports are expected to grow. The country imports liquified petroleum gas (LPG) for domestic and industrial utilisation. LPG imports are relatively high amounting to 871,800 kg in 2006.

Due to the domination of hydropower in the country’s power generation mix, EdL regularly imports electricity from Thailand to meet domestic request at the same time as there is a shortage of supply, particularly in dry seasons. In addition, an electricity supply deficit in one sub-grid of EdL may need to be filled by surplus in an extra, wheeling through the Thai grid. Although the government considers hydropower export to be an significant source of foreign exchange earnings, it is noted that in 2007 and 2008 total electricity imports exceeded hydropower exports. This essentially reflects reduced hydropower generation during 2006-2008 because of lower rainfall than normal, inclunding limited generation and transmission capacity.

Extend network

Household connections have increased from 16% in 1995 to 63% in 2009, and 72% in 2011. The rural electrification rate remains at 38%.

Lao PDR has no integrated national grid. The EdL transmission system comprises four separate power grids in four operational areas comprising 115 kilovolt (kV) and lower-voltage lines and substations. Each of the four operational areas is as well connected to the transmission systems of Thailand and/or Viet Nam and/or Yunnan province in the People’s Republic of China (PRC) for power import at the 22 kV, 35 kV, or 115 kV levels.10 There are medium-voltage connections to neighboring nations that are not connected to the 115 kV grids but provide power to isolated request centers in the Lao PDR. All these grids are connected with the Thai transmission network, and export hydropower to Thailand (and in the near next, to Vietnam and Cambodia) over high voltage links as well. This situation will persist, certainly over the tenure of the Rural Electrification (APL) Program, until the Lao PDR has a fully integrated transmission grid.

The government has declared rural electrification as one of its development and poverty reduction priorities. Using renewable technology has an enormous potential in the rural areas, particularly those that cannot be serviced by grid-based electricity. The government encourages all projects for assessing, field-testing and implementing alternate energy schemes. Some micro hydropower stations have been successfully implemented (such as the Houyakasen plant generating 75 kW) and other forms of renewable energy are being explored.

Capacity concerns

The lack of a fully integrated transmission grid limits the expansion of national electricity generation and maximiation of the use of domestic hydro-electric generation.

EdL succeeded in quickly reducing transmission and distribution (T&D) losses from 27% in 1994 to about 18% by 2000 and 12% in 2009 with a focus on reduction of technical losses. The introduction of energy meters on outgoing feeders of 22 kV lines from substations has as well enabled EdL to keep nontechnical losses in check. To reduce T&D losses further, additional sophisticated technical options for technical loss reduction will be required, and electricity tariffs should remain affordable to rural households to encourage legal use of electricity. However, considering the planned expansion of the utility grid, it will be increasingly challenging for EdL to continue reducing T&D losses in the coming years to reach the targeted T&D losses level of less than 10%.

The Lao PDR is facing the challenge of developing its renewable and alternative sources to help power the country’s economic increase and promote energy security in a manner that will not endanger food security. The country has a great opportunity to capitalise on its advantageous climate and plentiful land and labour to initiate a national strategy for renewable energy. However, the emerging energy supply scarcity, continuing energy market instability, and a lack of investment in technology development, must be overcome.

Renewable energy

Hydropower
The water resources of the Mekong River and its tributaries are estimated to hold a hydropower potential in excess of 20 times the current power production. Of the 23,000 MW of exploitable potential hydropower in Lao PDR, about 15,000 MW are internal to the country, and the remaining 8,000 MW represent the country’s share in the mainstream Mekong, jointly with one or additional riparian nations. Large hydropower capacity (better than 25 MW) represents additional than a 97 % share in the power generation mix in Lao PDR.

To date, about 1,838 MW of hydropower generation capacity has been installed (inclunding the 1,080 MW Nam Theun 2 project), with an extra 1,372 MW under construction, 3,041 MW in the advanced planning stage with commissioning targeted before 2015, and additional than 3,300 with completed feasibility studies. For the seven plants under construction, 1,145 MW will be for export to Thailand and Vietnam and 227 MW for domestic supply. There are as well 17 hydropower projects in the pipeline with feasibility studies completed which will add an extra 4,573 MW of installed capacity by 2020 according to the new development plan. Of those, three are export-oriented projects at the advanced planning stage, targeting commercial operation before 2015: (i) Nam Ngum 3 (440 MW), (ii) Nam Ngiep 1 (278 MW) and (iii) Nam Theun 1 (523 MW). Once approved and completed, these three projects will account for a total of 2,241 MW of the installed capacity. In addition, some 40 other hydropower projects, with Memorandum of Considerate (MOU) signed with various developers, are at different stages of preliminary consultation and feasibility study.

Solar energy
Solar irradiance on Lao PDR is between 3.6-5.5 kWh/m2, with sunshine 1800-2000 hrs/year. With such solar energy potential, if photovoltaic technology was used (in general efficiency of 10%), it would generate 146 kWh/m2/year, or 1.5x108 kWh/km2/year ( 13 MTOE/km2/year). Photovoltaic solar technology is being used for water pumps, water purification, and communications; however the initial investment cost is high and hence current uptake is low. Current installed capacity of solar power systems is 285 kW. Installation of small solar home systems have been carried by public inclunding private sectors, with funding from the World Bank, international organizations or own investment of local private companies. At present, around 20,000 households have been supplied electricity through solar home systems. Larger PV systems (capacity up to 40-100 kWp) have as well been piloted within cooperation project between MEM and NEDO (Japan), as a component of a hybrid power system with micro hydropower in remote rural area.

Biomass
In Laos, fuelwood (mainly for cooking needs) and electricity are the only energy sources produced locally. Forests are the major source of wood fuel, supplying an estimate of 85% of all fuel-wood. Wood is the major source of energy for the majority of the rural populace, and accounted for 89% of the country’s total energy consumption in 1994. The country is increasingly facing wood energy problems which are recognised by the government.

The DOF (Department of Forestry) has a Social Forestry Support Unit which allocates land for village wood lots. Individual farmers are as well given land to grow fuel-wood. Furthermore, rural industries are encouraged to grow their own fuel-wood, and receive land entitlements for this purpose. Research on fast-growing species is undertaken at the DOF's Silviculture Centre. Furthermore, DOF is building up a pilot extension network in seven districts (out of 110) in seven provinces (out of 16).

As Lao PDR is an agricultural based country, there are a lot of wastes generated each year from agro-forestry production, such as rice straws/husk, sawdust, corn cobs, livestock manures, which can be used as feedstock for energy generation. Besides, communal and organic industrial wastes are part the significant biomass energy resources. Annual Energy Potential of Agroforestry wastes is estimated around 500 MTOE.

Biogas
Biogas produced from livestock manure can be a substitute for traditional sources for cooking and lighting. Although biogas has a long history in the Lao PDR, almost all of the digesters, with the exception of 30 units installed in early 2005, are no longer operational. This is mainly due to incorrect sizing and a lack of considerate of how to maintain the units. It was estimated that utilizing of livestock wastes for biogas production could generate around 2.8x108 m3 of biogas per year, or equivalent to 5x108 kWh electricity (about 216 MTOE).

Biofuels
Research on energy crops for biofuel production is in its infancy in the Lao PDR; and there are no data to assess the feasibility and sustainability of biofuel production. In addition, the possible environmental impacts will be hard to ascertain. Nevertheless, there is high potential of energy crops in Lao PDR, such as oily crops (jatropha, Vernicia Montana nut, oil palm, soybean, etc), starch culture (cassava, corn,) sugar (sugarcane) and other trees, which can be used as feedstock for biofuels production. Pilot projects on jatropha plantation for biodiesel production have been conducted in recent years. Kolao farm has invested on Jatropha plantation on 2500 ha and pressing factory with capacity 40 ton per day, and biodiesel processing factory - capacity 2000 L/day in Kenthao district, Xayabouly province. Besides, a teak wood company in Luang Prabang has piloted plantation of Vernicia Montana nut on area of 7000 ha.

Wind power
There is lack of data on wind energy potential, particularly at a height above 50 m. According to international data sources, there may be some wind potential in central provinces of Lao PDR, particularly up on high mountains along Lao-Vietnam border (Savannakhet and Khammouane provinces) where at a height 50 m and above, wind speeds reach 5.8 m/s 4. The theoretical potential for wind energy in Lao PDR is estimated to be additional than 182,000 MW. At present Ministry of Energy and Mines is installing wind data logger in four sites in these province and plans to install in other provinces. A wind power proposition has recently been accepted by an international Scandinavian funder.

Geothermal energy
The country’s natural hot springs are known for their significant role in tourism; however, to date, no significant geothermal areas have been identified for possible power generation. Known sources are too small to be exploited for this purpose.

Energy efficiency

Request Side Management (DSM) and energy efficiency have just received attention from the government. The Demand –Side Management/Energy Efficiency Project is a component under the Rural Electrification APL Phase One project (REP I), which was established to increase access to electricity of rural households in the central and southern provinces of Lao PDR. REP I Project is funded by the World Bank/GEF. The DSM/EE Project is implemented in 2 phases – Phase I (2007-2010) and Phase II (2010-2012). The in general objectives of Phase I are to determine reasonable energy consumption levels for the major energy-consuming Ministries/agencies and to address the issue of inefficient practices in public sector electricity consumption, which have direct fiscal and financial impacts on EdL because of the poor payment record of government departments. Saving domestic electricity as well enables Lao PDR to generate additional revenues from electricity exports. EE programs focusing on request side management were piloted in four government buildings, reaching an 8% electricity consumption reduction. Public awareness on DSM and EE is still in its infancy. Continued support is needed for implementation of the action plan, and to remove barriers, inclunding:

  • (i) the lack of basic data on electricity consumption and end use patterns by rate class;
  • (ii) the lack of public or private sector capacity for program planning and implementation;
  • (iii) the lack of technical expertise or awareness part end-use customers with regard to EE technologies and practices; (iv) the lack of available financing mechanisms to support investment , and;
  • (v) little or no appreciation of the benefits of EE.


Energy consumption in the country is mainly in the form of traditional fuels, i.e. the use of biomass such as fuel wood (56%) and charcoal (12%) for cooking and heating in rural areas. This represents around 69% of the total energy consumption. Energy consumption by sectors shows that residential and transport count for 51% and 26%, respectively, followed by Industrial sector.

Domestic electricity consumption in 2008 was 1,578 GWh, with 828 MW of peak request. Additional than 75% of domestic request is in the Central Region. Domestic consumption is expected to grow at around 10% per annum, without counting the emergence of large power-consuming industrial loads, such as alumina refining and aluminium smelting, as the development schedule for these industries has become uncertain following the world financial crisis.

Ownership

Electricité du Laos (EdL, www.edl-laos.com) was corporatized in 1997 but remains all-owned by the government. It owns and operates the major generation, transmission and distribution assets in the Lao PDR, and manages electricity imports to its grids and electricity exports from its generating stations. EdL answers to its board which includes government appointees.

EdL has a project development role as the implementing agency for the government's major generation, transmission and distribution projects. EdL’s system planning office performs system expansion planning and analyses potential generation and transmission projects. EdL is as well involved in the Lao IPP program in several capacities:

  • EdL is an off-taker from IPP projects and is the Off-take Authority, managing the use of IPP-generated electricity in the grid. Although EdL off-take from IPP projects has been small to date, it will become an increasingly significant source of generation for the company someday, and larger commitments from new projects are planned.
  • The General Manager of EdL is a member of the Coordinating Committee for the Development of Electric Power (CDEP), charged with negotiating tariffs with foreign power purchasers for export IPP projects.
  • Historically, EdL has been designated by the government to hold its shares in IPP investments, and it is the current holder of shares in the Theun Hinboun Power Company and Houay Ho Power Company. These shares are administered by a appropriate unit under the General Manager’s office. Responsibility for the government's shares in existing and next projects is under discussion. Governmental shares in the Nam Theun 2 Power Company are held by LHSE, a appropriate purpose holding company.

Competition

Electric supply to the domestic market in Laos is entirely the responsibility of the national-owned, vertically-integrated EdL. It was established in 1959 to supply Vientiane, but presently has operations in the whole country, and has the status of a national-owned autonomous enterprise. While cost/profit centres within EdL have been established, financial relations between EdL and the government are still intertwined. The average tariff level in 17% below cost-recovery and substantial distortions exist across consumer categories.

Small-scale power production plants using micro-hydro and diesel engines are widespread, and their use has developed solely as a result of private initiatives.

Energy framework

Lao PDR is exceptionally well endowed with water resources and enjoys a strategically advantageous location within the Better Mekong Sub-region. Surrounded by energy-hungry neighbors – inclunding Thailand, Vietnam, Cambodia and China – the long-term management of its 23,000 MW of exploitable potential hydropower is critical to conference the country’s development goals. The strategy of the Government of Lao PDR is to develop its hydropower resources to earn export revenues inclunding to meet domestic needs. However, the Government’s plans are ambitious in light of various constraints and in particular that the sector may be being developed faster than the Government’s ability to scale up its capacity to manage it entirely. The dual challenge it faces is not only “how to do the right projects” but “how to do the projects right.”

Lao PDR National Strategy on Renewable Energy
In October 2011, the Government launched the National Strategy on Renewable Energy, designed to ensure adequate supply of energy, energy efficiency and conservation in the country and promote cultivation of fuel crops for bio-fuels production. According to the strategy, the Government aims to increase the share of RES to 30% of the total energy consumption in 2025. To reduce the importation of fossil fuels, the Government outlines a tentative vision to reach 10% of the total transport energy consumption from biofuels. This target will be regularly revisited and revised, feeding in results of appropriate studies, lessons learned from on-going implementation, and international technological developments in the field of RE.

Power Sector Policy and Targets for 2020
Government policy gives priority to power sector development as a means of achieving the country’s development aspirations. A number of laws and regulations of the Lao PDR due or not instantly influence energy usage efficiency, fuel savings, and the promotion and development of renewable energy, inclunding biofuels. The in general policy aim, according to the electricity and agriculture laws, is to increase the household electrification ratio from approximately 45% in 2005, to 70% in 2010, and 90% in 2020; and to reduce the use of imported fuels for electricity generation and other uses through increased use of indigenous energy resources; principally hydropower, inclunding solar, coal, and biomass energy. The laws as well provide for the development of capital and promotion funds to enable new forms of agricultural production. The four priorities of the government’s power sector policy are to;
i. maintain and expand the provision of an affordable, reliable, and sustainable electricity supply in the Lao PDR to promote economic and social development;
ii. 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 entirely direct and facilitate power sector development; and
iv. reform institutions and institutional structures to clarify responsibilities, strengthen commercial functions, and streamline government.

The Water and Water Resources Law (1996) requires water users to comply with water and water resources management regulations. It has features that help ensure sustainable hydropower development, inclunding the requirement of environmental and social impact assessments and of approval for small-scale hydropower reservoirs. Similarly, the Environmental Protection Law (1999) is a good instrument for sustainable hydropower development.

The Electricity Law was initial promulgated in 1997. A key aspect of the Electricity Law is that, with a view to augmenting generating capacity that is developed by EdL or other government entities, it encourages investment in power generation capacity through the public-private partnership mode.

The National Policy on the Environmental and Social Sustainability of the Hydropower Sector (NPESSHS) was issued by the government in 2005. It aims to adapt and tailor the principles developed under the Nam Theun 2 hydropower project to the hydropower sector as a whole.

The Lao DSM/EE project (www.laodsm.net/) was initially implemented in Phase 1 of the Rural Electrification Program, and will continue to be implemented throughout the second phase until 2012. The program aims to promote the efficient use of energy in the Lao PDR through energy auditing, appliance labelling and the creation of standards, the promotion of ESCO operations for energy efficiency projects, and the creation and expansion of an energy consumption database, in order to better analyse where request-side management measures would be best implemented.
The Energy Efficiency and Conservation (EE&C) goals submitted to the 5th East Asia Summit Energy Ministers Conference, held on 20 September 2011 in Brunei Darussalam, national that the country uses Final Energy Request as the EE Indicator, and aims at 10% reduction from business as usual by 2030. However, there are no tangible action plans to achieve the target.

Investments in renewable energy projects in Lao PDR are entitled to investment incentives under the Investment Law of Lao PDR, update in 2009. The financial incentives include the following:
· Import business free on production machinery, equipment and raw materials;
· Import business 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.
Additionally, the investors can obtain as well non-fiscal incentives, such as:
· Up to 75 years leasing term (for enterprise construction land);
· Permission to expatriate earnings to home or third nations;
· Right to employ foreign workforce (not additional that 10% of the enterprise’s total labors).

To harmonize the support to renewable energies in Lao PDR, the Government will establish a Renewable Energy (REN) Fund as sub-account to the existing Rural Electrification (RE) Fund.

Better Mekong Sub-region (GMS) Economic Cooperation with six member nations was launched with the assistance of the Asian Development Bank in 1992. Its economic cooperation in energy sector includes: regional power interconnection & power trade arrangements; sub-regional strategy for the utilization of natural gas; and sub-regional strategy for cooperation in renewable energy. The Inter-Governmental Agreement on Regional Power Trade in the GMS was signed in 2002, and the Regional Power Trade Coordination Committee (RPTCC) was created in 2002 to coordinate, promote and implement regional power trading development.

Given the government ambition to make the Lao PDR the power battery of the GMS, and the impeccable logic of power system integration within the GMS, the government would like to ensure that investment in high-voltage (230 kV and 500 kV) transmission systems is in line with an agreed GMS-wide power system master plan (which does not from presently on exist).

Lao PDR ratified the UN Framework Convention on Climate Change (UNFCCC) on 4 January 1995 and the Kyoto Protocol on 6 February 2003.

Energy debates

The Rural Electrification Project Phase I (REP I) was completed in mid-2010 and successful in achieving high electrification rates in rural areas as 36,700 households were electrified by mid-2009 out of the revised goal of 39,400. However, choosing between grid expansion and off-grid electrification by balancing people’s need with costs remains as a key issue for rural electrification efforts.
The government has recognised the need for a broad review of options for rural electrification to examine other implementation models for off-grid and grid expansion. With International Development Association (IDA) assistance, rural electrification studies were conducted in the context of the government’s Power Sector Policy Implementation Strategies, as part of preparation studies for the proposed Southern Provinces Rural Electrification 2 (SPRE2) project, which supported the development of a Rural Electrification Master Plan and the establishment of a Rural Electrification Fund.

The government has thus developed the Rural Electrification Master Plan (2010) with a target of electrifying 90-95% households by 2020. It states that with the connection ratio increasing from 80% to 95% of the households, it would be possible to assume an electrification target of ~90% households with electricity from the grid and 5% with electricity from off-grid sources, mainly solar and micro-hydro by 2010. This is a additional ambitious target than the government’s original goal. Owing to the increasing cost of expansion, it is expected that as much as 20% or additional of the people will remain beyond the reach of the grid for a foreseeable next. In order to overcome the limitations in grid expansion, the government has developed a complementary policy for off-grid rural electrification through the introduction of solar home systems and recently added small-hydro systems. Two key issues are that as a lot of as 40% of households prefer not to connect and procure power from the electricity grid and the need for clarity on the roles of the government as regulator and the EdL as operator as the government has had a powerful influence over EdL’s operation practices.

The renewable energy development strategy aims to kick-start the development of the biofuels market in the country through the provision of incentives to farmers, domestic and foreign investors to engage in the production of biofuels for domestic utilization and at the same time monitor its development and ensure proper mitigation of negative impacts. The tentative vision for the promotion and development of biofuels are: substitute 10% of the transportation fuel request by 2025; and increase deployment of biofuels technologies in rural areas. The government intends to issue a Biofule Decree, establish and strengthen the capacity of a body/agency responsible for the promotion and development of biofuels, formulate a Biofuel Action Plan as blueprint for development, amongst others.

To promote the development of small hydropower resources, the Government will implement measures to address the existing technical, financial, procedural and institutional barriers to small hydropower development in the country.

The government will issue the investment guidelines and development roadmaps to attract internal and foreign investments in renewable energies. The Government will as well establish a one-stop service centre for disseminating data and facilitate investments on renewable energies.

Lao PDR satisfied the participation requirements for CDM. The government ratified the Kyoto Protocol in 2004, appointed Water Resources and Environmental Government (WREA) to be the Designated National Authority, developed sustainable development criteria, and established the approval processes for CDM projects. With recent evolution in CDM, the Government ensures that small-scale projects such as solar homes systems, pico hydropower, biogas, improved cook stoves, solar water heaters, etc will be developed under the CDM Program of Activities or programmatic CDM. In addition to CDM, the Government as well encourages project proponents to access other carbon markets such as the EU Emissions Trading Scheme where CDM CERs can be converted into EU allowance units, and to voluntary markets in Europe and North America that purchase verified emissions reductions for clean energy projects.

Energy studies

The Lao PDR is instantly a member of the Association of South East Asian Nations (ASEAN). Within ASEAN, the Centre for Energy is dedicated to promoting regional integration in the electricity transmission networks of member states, in order to facilitate economic increase and development, through the adequate and reliable provision of power. The Lao PDR is currently an exporter of power to both Vietnam and Thailand, primarily through large hydropower projects.

Role of government

The Ministry of Energy and Mines (MEM) under the Prime Ministry’s Office is the central agency in charge of the energy sector and of renewable energy, and has the leading role in preparing the country's renewable energy strategy. The MEM along with the Ministry of Planning and Investment and the Water Resources and Environment Government (WREA) are responsible for electricity supply and power sector development.

The MEM includes two departments, which focus nearly exclusively on the electricity subsector: the Department of Energy Promotion and Development (DEPD, www.poweringprogress.org) interfaces with prospective hydropower developers and/or investors, and negotiates the necessary project agreements and other legal and binding documents for hydropower development; the Department of Electricity (DOE, www.laoenergy.gov.la/)) develops national energy policy and plans (inclunding tariff policy), monitors the energy sector’s compliance with applicable policies and regulations, and develops strategic plans (for generation, transmission, distribution, rural electrification, renewable energy and energy exports).

In addition, the Department of Geology and Mines (www.dgm.gov.la/) is responsible for upstream oil and gas exploration activity and for awarding and negotiating concessions for coal and lignite mine development.

The Ministry of Agriculture and Forestry (www.maf.gov.la/) is in charge of fuelwood and other traditional forms of energy. It promotes biofuel development in collaboration with MEM, and determines and develops policies related to the majority effective use of lands for plantation of industrial and fuel crops, in collaboration with the Ministry of Natural Resource and Environment and Provincial Governments.

The Ministry of Science and Technology has the role of conducting research and pilot tests on science and technologies developed from different nations, for renewable energy applications.

The Water Resources and Environmental Agency (WREA, www.wrea.gov.la) in the Prime Minister’s Office is responsible for the government's Climate Change Strategy. Issues include the consumption of fossil fuels, particularly lignite for power generation and diesel oil by the industry, transport and agricultural sectors; methane emissions from paddy fields; the use of fuel wood and charcoal in rural areas; and reforestation and grasslands conservation. The WREA is the major coordinating agency for environmental planning and management across all sectors and formulates environmental policy, and is responsible for certifying the environmental and social impact assessments for hydropower projects, inclunding working in broader assessments.

Government agencies

A number of public institutes and associations, such as the Lao Institute for Renewable Energy, are affiliated with the Lao Union of Science and Engineering Association, the National Science Council, the Prime Minister’s Office, the Technology Research Institute, and the Renewable Energy for Sustainable Development Association. These institutions and associations are involved in research on renewable energy, notably feedstock crops, jatropha for biodiesel production and cassava for bioethanol production.

The Lao Institute for Renewable Energy (LIRE, www.lao-ire.org/) was founded in October 2006 as a platform for renewable energy research, and is currently engaged in programmes on bio-energy, solar, pico-hydropower and waste water treatment – DEWATS.

Energy procedure

Rapid expansion of rural electrification is one of the major priorities for the government which has a goal of electrifying 90% of the country’s households by 2020 (70% by 2010 and 80% by 2015). As electrification moves to additional remote areas, on-grid electrification becomes additional costly, and this has led the government to promote off-grid options, with an emphasis on renewable energy technologies.

The government has constructed renewable energy road maps, in which timelines and milestones were defined for the proposed policy, legal, financial, market and organisational interventions for each renewable energy type to meet the national target and specific renewable energy targets for 2025.

The governments has a Rural Electrification Master Plan (REMP) 2010-2020, which aims to upscale the solar energy programme covering additional 19,000 households within 331 villages in 11 provinces.

Energy Development Plan
To achieve the policy targets, five hydropower projects with a total capacity of 2,121 MW are under construction. Memorandums of considerate have been signed for 47 hydropower projects. Power development agreements have been signed for 18 projects, with a capacity of about 15,000 MW and one thermal power plant with a capacity of 1,878 MW. The government of the Lao PDR has signed an MOU with the government of Thailand for the provision of 7,000 MW of power to Thailand by 2020.
The government has as well signed an MOU with the government of Vietnam for the supply of 5,000 MW by 2020. There are plans for construction of high-, medium-, and low-voltage transmission lines from the north to the south of the Lao PDR.

TA for Capacity Development in Hydropower and Mining Sector (2010-2014)
The objective of the project is to increase capacity and improve the performance of governmental institutions for the hydropower and mining sectors. There are four components. The initial component is a joint hydropower and mining program to provide skills and training to government staff to remove bottlenecks to the development of both sectors. The second component is the development of the hydropower sector in the Lao PDR. Activities will cover planning, granting concessions, construction, operation, revenue management. The third component is improving mining sector development, inclunding: development of governance; strengthening government management capacity; promoting mineral resource development. The fourth component is the development of project government and management.

Energy regulator

There is no regulatory agency; however, at the central government level, the Department of Electricity (DOE) of the MEM is the key agency responsible for the sector policy, planning, and governance, inclunding the establishment of regulations and standards and monitoring of the energy sector’s compliance with applicable policies and regulations. EdL assists the DOE with load forecasting, system expansion planning and hydropower generation. The DOE is as well responsible for the creation and enforcement of environmental and social safeguards, to achieve the ambitious objectives of rural electrification, and for the management and implementation of the national hydropower development policy (NPSH), inclunding public outreach and data disclosure.

At the provincial level, the 18 Provincial Departments of Energy and Mines (PDEMs) under the MEM are responsible for carrying out MEM functions, as assigned by the Minister.

Degree of independence

The DOE is a department of the MEM, which is itself a government ministry. Hence, regulatory functions are conducted in concordance with the government, with no autonomy of authority on the part of the DOE. Financing for the Department is allocated via the national budget.

Regulatory framework

The government's strong commitment to private sector-led investment in hydropower development is evidenced by the approval of the revised Electricity Law by the National Assembly in 2008, and the country’s active participation in the GMS Forum to promote international investment in hydropower for cross-border power trade.

At present, there is no comprehensive renewable energy policy and strategy in Lao PDR. Projects implementations were carried out by various sectors which lead to gaps in the management and promotion of the development of renewable energies. Although there are some private sector investments in fuel crops plantation, but facing significant obstacles due to lacking appropriate management mechanism.

Regulatory roles

The DOE is responsible for issuing standards related to electrical equipment and the quality of electrical service, inclunding regulations on investment in the power sector, in particular those pertaining to its further development. In addition, the DOE is responsible for making recommendations to the government on tariff pricing and structure, whilst the setting of tariffs for electricity is conducted centrally by the government.

Energy regulation role

Other than the MEM, the Ministry of Planning and Investment is involved in the energy sector not instantly, through the provision of regulations for foreign investment in Lao enterprises, which covers investment in power sector development from foreign companies.

Regulatory barriers

Key challenges and constraints on the development of renewable energies in Lao PDRare as follows:

  • No specific policies or strategies on renewable energy promotion;
  • Lack of coordination between stakeholders in renewable energy projects;
  • Renewable energy policy has not from presently on been clearly stated in the National Socioeconomic Development Plans or in strategies on increase and poverty reduction, inclunding five year plans of the government;
  • Lack of specific regulations and laws on renewable energies;
  • It was not clear from presently on, who responsible for approval of renewable energy projects;
  • Users have insufficient knowledge and considerate on renewable energies;
  • Lack of public funding support for the renewable energy sector, particularly for research and development;
  • Absence of energy pricing regulation is a risk for investors;
  • Rural households prefer grid electricity rather than off-grid one;
  • Insufficient data on renewable energy potential for provincial level;
  • Electricity access rate in remote areas is still low due to high cost of grid extension.