Powering Myanmar's Growth

Since Myanmar’s reform process began in 2011, its energy architecture has seen many positive developments. A robust energy development plan is crucial to the successful continuation of the country's economic and social development.

Date: 15 January 2014

In this discussion, we focused on:

  • what will it take to upgrade Myanmar's energy infrastructure to better meets the goals of the “energy triangle,” ie achieving economic growth and development to provide energy access and security in an environmentally sustainable fashion?
  • sources of generation, transmission and distribution networks: what are the challenges facing the country in their modernization?
  • are small-scale hybrid renewable systems and off-grid renewable systems a realistic solution to energy poverty in the country's rural areas?

Transcript

Karen Palmer: Good afternoon and welcome to today's discussion on Energy in Myanmar.

I'm your moderator, Karen Palmer.

I'm joined today by Chong Chi Nai, Director of Energy for ADB's Southeast Asia Department, and Jong-Inn Kim, Lead Energy Specialist in ADB's Southeast Asia department, who is leading on ADB's energy project work in Myanmar and helped author an assessment of the country's existing energy infrastructure.

Anthony Jude is unable to join us.

Chong Chi Nai: Welcome to the live chat.

Karen Palmer: Since reforms began in Myanmar in 2011, the country’s average electrification ratio has increased, growing from 16% in 2006 to 28% in 2012.

Yangon City has the highest ratio at 72%, followed by Nay Pyi Taw at 65% and Mandalay at 35%. Only about one in five rural households are connected to the electricity grid.

Technical and non-technical losses from Myanmar’s aging distribution system were as high as 18.2% in 2012, meaning almost a fifth of all power generated was lost before reaching customers.

In December 2013, ADB approved a $60 million loan to fund rehabilitation works to carry electricity more efficiently. This means some 480,000 households in four regions in Myanmar will have better access to a more reliable supply of electricity to support their daily activities.

In addition to providing support for transmission updates and reducing technical losses, ADB is working with the National Energy Management Committee to improve coordination between ministries responsible for the country’s energy.

ADB is also assisting the government in preparing Myanmar energy sector policy, revising the Electricity Law, setting the national transmission and distribution code, and establishing electric equipment standards. A 20-year, long-term energy master plan is also being formulated.

Let's jump in with some questions.

Barrie Harrop, Remotenergy: What is the role for Hybrid “Distributed Energy,” which refers to a variety of small, modular power generating technologies that are placed near the point of energy consumption?

Jong-Inn Kim: Since Myanmar has low electrification rate (28% in 2012), the role of distributed energy, such as off-grid renewable energy supply is equally important in remote rural areas together with electricity supply through grid extension and built power plants to improve electricity access in Myanmar

Karen Palmer: From TF Review: With so much energy infrastructure and other infrastructure to develop, how will this affect the demand for trade and export finance as Myanmar modernizes?

Chong Chi Nai: Myanmar has abundant energy resources, particularly gas and hydro. To develop necessary energy infrastructure to meet growing demand, Myanmar needs foreign investments.

Karen Palmer: From Lean Santos at Devex: Regarding the "energy triangle" that involves economic growth, development and energy provision, are the first two always the precedent of the latter? What usually (or always) comes first; economic growth to have enough energy supply for a growing demand or energy growth to fuel continuous economic growth? Can it be simultaneous?

Jong-Inn Kim: Very interesting question. We think economic growth will result in a growing energy demand and add a need for more energy supply to support economic growth. If a country has enough energy resources on its own to meet energy demand, both may be simultaneous.

Chong Chi Nai: There is a lot of suppressed energy demand in Myanmar that has been constraining economic growth.

Barrie Harrop: It seems to me that "distributed energy" is the way to go put power where the customers can use it – without massive grid costs.

Dave: What role will renewables play in the 20-year master plan? With so much capacity expansion needed is there a realistic opportunity for Myanmar to leapfrog over fossil fuels and become a green energy leader in the next decades?

Jong-Inn Kim: The 20-year master plan is still being developed including supply of renewable energy. In June this year, we will be in a better position to answer your question.

Chong Chi Nai: It is important to have a good generation mix of thermal, hydro and renewables power generation in order to have an optimal power system.

Achara Deboonme, The Nation/Bangkok: As you said foreign investments are necessary, what would be the most effective and efficient way to draw foreign investments?

Chong Chi Nai: A good legal and regulatory framework that creates an enabling environment to attract private sector investments, both domestic and foreign.

Jeff: What's the private sector's role in Myanmar's energy sector?

Jong-Inn Kim: In order to meet the rapidly growing demand in Myanmar, necessary energy infrastructure should be built. This cannot be done by the government alone. The private sector's role and investment is crucial in developing energy infrastructure.

Elaine Kurtenbach, AP: Can Myanmar avoid the heavily polluting pitfalls of past development models, such as China, by using appropriate technologies? What potential is there for "leapfrogging?"

Chong Chi Nai: Myanmar is endowed with abundant hydropower resources that can be harnessed in an environmentally and socially responsible manner to have a good generation mix.

Karen/DFI: How does energy efficient lighting figure into ADB's strategy to improve Myanmar's electrification? Are you in favor of more solar lighting solutions which lessen the burden on the existing grid and provide lighting to off-grid areas, or is ADB aiming primarily for on-grid lighting as grids are extended?

Jong-Inn Kim: ADB provided a loan to improve the distribution losses in four regions and will provide a loan for power transmission expansion. Also this year, we will provide a $2 million grant for off-grid renewable energy demonstration project in remote rural areas. Efficient lighting will be assessed after formulating an energy efficiency policy in Myanmar, which will be completed in July this year.

Christine: Are there any lessons that Myanmar can learn from other countries in developing its energy sector?

Chong Chi Nai: To ensure sustainability and efficiency, development of the energy sector should be carried out in an environmentally and sustainable manner with tariffs that reflect the cost of supply. Lifeline tariffs should be provided to ensure affordability.

Nithi Kaveevivitchai/The Bangkok Post: In the view of ADB, at the current stage of Myanmar, how should the government balance their concentration between off-grid and on-grid to ensure that the development is meant for the betterment of the general people in the country?

Jong-Inn Kim: Very good question. At this moment, since the electrification ratio is very low, ADB is more focusing on the expansion of supply facilities. But, expansion will take time. It cannot happen within a short time. As such we will provide off-grid renewable energy demonstration projects as well.

Achara Deboonme, The Nation/Bangkok: Beside regulatory changes (which sounds necessary given the involvement of various ministries), what other areas should be changed to attract investments? (For example, pricing structure, taxes and subsidies)

Chong Chi Nai: Providing subsidies is not a good path to follow as it would lead to inefficient use of resources and would also impose a big fiscal burden on the government budget.

Rajesh Ahuja / Nicolas Le Clerc from ANZ: when do you expect the real new power generation projects to come on stream and how do you expect such projects to be financed?

Chong Chi Nai: Power generation plants are being built to meet the suppressed demand and also to supply the growing demand. The bulk of the needed investments will come from the private sector.

Through the assistance of development partners, Myanmar is carrying out a long-term least-cost power generation expansion plan that takes into account the load forecast growth and the energy resources available. A new power generation plant would take time to design, build, and commission before it is put into operation.

Elaine Kurtenbach, AP: In the past, Myanmar's promises to export energy when the local demand was not being fulfilled have been a political issue. Has the country moved beyond that dilemma? If so, how has it resolved it?

Jong-Inn Kim: Currently, gas production is exported to meet existing contracts. However, the government recently announced that new gas production will be used for domestic needs first. Currently the dilemma facing the government is how to get gas for domestic power generation when it is already committed for export.

Julie, UNCDF: How affordable is energy for consumers in Myanmar today and to what extent is affordability a priority in the country's energy vision?

Jong-Inn Kim: Currently, willingness to pay for electricity is high in Myanmar due to its very low electrification rate and suppressed demand. Also, since Myanmar has abundant hydro resources, their supply price would be low in the long-term compared with neighboring countries.

Cécile Dahomé, Sevea: What do you mean by "As such we will provide off-grid renewable energy demonstration project as well." And second question, how to make sure that off-grid investments and projects are not made in the same places as future grid extension?

Jong-Inn Kim: We will be piloting off-grid renewable energy - which can include mini-hydro, small solar PV, solar thermal, bio-gas at the community level, for example - in remote areas. We will select project areas in consultation with local governments and civil society organizations.

Nithi Kaveevivitchai/The Bangkok Post: Mentioning the important role of FDI in energy sector for Myanmar, what would be the recommendation for the government to ensure that the rich natural resource will not be taken advantage of by any particular investor or country?

Chong Chi Nai: Harnessing indigenous energy resources should be executed in a transparent and competitive manner to ensure equitable return to the country as well as the investor.

Cécile Dahomé, Sevea: A few months ago the government has tried to raise the electricity tariffs (that are really low) but without success. How do you see the price evolving in the coming years?

Chong Chi Nai: A phased electricity tariff increase would be easier to implement. It would enable consumers to take appropriate measures such as installing energy efficient equipment to reduce consumption and their electricity bills.

Joe Schatz, The Christian Science Monitor: What's the outlook for the Myanmar electricity law? What are the main challenges in getting it drafted and passed into law at this point?

Jong-Inn Kim: The draft revised electricity law is now with the Parliament. A public consultation has been ongoing. It is expected that it will be promulgated in the first quarter of 2014.

SC: Given that the bulk of energy sector investments should come from the private sector and since subsidies is not a recommended path to follow, what would you suggest the government do to entice more private sector players to invest in the sector?

Jong-Inn Kim: The private sector involvement is inevitable to meet growing demand and necessary investments. Transparent procedures are needed to attract private investment through competitive bidding procedures instead of negotiated contracts. This improved transparency for private sector investments is crucial for public acceptance of private sector involvement, to help consumers understand pricing, and to reduce subsidies.

Interested in Myanmar: Does ADB have available Energy Plan for Myanmar? If yes, where could we find it?

Jong-Inn Kim: A long-term energy plan is now being prepared using ADB assistance and is expected to be completed by the end of this year.

Karen Palmer: How will the Greater Mekong Subregional power grid, which aims to link up Cambodia, Lao PDR, Myanmar, Thailand and Viet Nam, plus regions of southern People's Republic China, benefit Myanmar?

Jong-Inn Kim: In light of GMS regional power trade concern, Myanmar will be a potential electricity supply source for other countries in long run. But, near some border areas where it is difficult to extend the grid, Myanmar can import necessary electricity from neighboring countries.

Smart Energy: What is ADB's outlook on using smart grids in Myanmar?

Jong-Inn Kim: Myanmar is now building a central dispatch center for electricity to apply a smart grid concept.

Sakti BNI: We understand that the country endowed with abundant natural resources, but how about the issue of repayment capacity from the government to the investor?

Chong Chi Nai: Electricity tariffs reflecting the cost of supply will enable the authorities to collect revenues from the sale of electricity to pay investors as well as to expand the electricity grid to connect to more consumers.

Lean Santos, Devex: Along with the growing energy demand in the country and in the region, there's also the concern regarding climate change and environmental sustainability. How can the two issues be compromised given that renewable energy sources, at this moment at least, are expensive and are considered non-base load compared to economically-viable but environmentally-disruptive base load energy materials like coal and gas?

Jong-Inn Kim: A good point. Considering climate change and environmental sustainability, Myanmar should develop and optimize the long-term low carbon power generation mix for supplying least cost electricity utilizing their hydro, gas, and renewable energy resources.

Achara Deboonme/The Nation: To quickly increase the electrification ratio amid binding export contracts of gas, what generation sources Myanmar should focus on, say in the next 10 years?

Jong-Inn Kim: In the long term, Myanmar has adequate power generation. In the short term, it will be a challenge. If the demand will grow at the current rate of 15% per year, power shortage will be expected to remain.

Dave: You mentioned the importance of an appropriate generation mix to have an optimal power system. Could you tell us the current generation mix in the country?

Jong-Inn Kim: As of June 2013, hydro is 75%, gas is 21% and coal is 4% for total installed capacity of the country's power generation mix.

Energy Demand: Given the discussions on smart grid and pricing, is ADB looking at demand response to control consumption of energy?

Chong Chi Nai: Appropriate tariff levels reflecting the cost of supply would be an effective way to avoid inefficient use of electricity. At the same, lifeline tariffs would enable marginal consumers to have affordable access to electricity.

SC: Building more hydro plants could potentially displace people from their lands. Are you aware of any government plans or strategies to ensure that these people are properly relocated and adequately remunerated?

Jong-Inn Kim: The government is preparing the detailed procedures and requirements for environmental impact assessment (EIA) and social impact assessment (SIA), under the Environmental Conservation Regulations, including resettlement issues and proper compensation.

Christine: Most development organizations such as the ADB and World Bank are probably working on the energy sector in Myanmar. What are these organizations doing to ensure that there is no duplication of efforts?

Chong Chi Nai: Close coordination among development partners through the Electric Power Working Group chaired by the government ensures complementary efforts in assisting the government to develop the energy sector.

Jong-Inn Kim: Development partners hold regular quarterly meetings with concerned Ministries, through the Electric Power Working Group chaired by the Minister of Electric Power.

Karen Palmer: Here is a question from Anna: How important is stable energy supply for a burgeoning economy like Myanmar and for achieving development in general?

Jong-Inn Kim: There are persistent blackouts in Myanmar in the dry season due to the rapid demand growth of electricity and shortage of supply. Many industry owners say that the first priority for their business is stable supply of electricity.

Karen Palmer: We have run out of time. Thank you for your active participation.

Chong Chi Nai: Thank you for your interesting questions and insightful comments.

Jong-Inn Kim: Thank you for your questions and comments.

Karen Palmer: Till next live chat. Thank you and have a good day!

Chong Chi Nai
Chong Chi Nai is Director of ADB's Energy Division, Southeast Asia Department. His role is to identify the Division's priority areas of work in energy supply and usage with particular emphasis on energy efficiency and low-carbon and renewable energy.
Jong-Inn Kim
Jong-Inn Kim is Lead Energy Specialist in ADB's Southeast Asia Department where he is responsible for the energy sector operations in Myanmar. He led the team that prepared the country's energy sector initial assessment and was one of the main contributors to the publication New Energy Architecture: Myanmar.
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