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9 June 2017, Bangkok Thailand
RENEWABLE ENERGY MARKET DEVELOPMENT
IN LAO PDR-
OPPORTUNITUES FOR INVESTMENT
Deputy Director General Institute of Renewable Energy Promotion
(IREP) MEM
Presented by Dr. Seumkham THOUMMAVONGSA
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
• Area : 236,800 km2 • Capital: Vientiane • Population 2015
– Total 6.5 millions
– Density 27 person/km2
• 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%
1. Basic Facts about Lao PDR
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/m2 (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.
Primary Energy Consumption in Lao PDR
3. Overview of Energy Consumption
• Energy Consumption (2014): 2,510 KTOE
Residential, 47.40%
Agriculture, 1%
Industrial, 8%
Commercial, 12.30%
Transportation,
31.30%
ENERGY CONSUMPTION BY SECTORS
Fuelwood, 49.10%
Coal, 0.20% Charcoal,
5.40%
Electricity, 12.60%
Fuel Oil, 32.70%
ENERGY CONSUMPTION BY TYPES
0.0
1,000.0
2,000.0
3,000.0
4,000.0
5,000.0
6,000.0
19
90
19
92
19
94
19
96
19
98
20
00
20
02
20
04
20
06
20
08
20
10
20
12
20
14
20
16
20
18
20
20
20
22
20
24
20
26
20
28
20
30
ທາອຽງໃນຄວາມຕອງການຊມໃຊພະລງງານສ າເລດຮບ, kTOE
ອດສາຫະກ າ ຂນສງ ທລະກດ ທ ຢອາໄສ ກະສ ກ າ
Existing statistic Future predict
5,600 kTOE
2,510 kTOE
Industrial
Transport
Business
Residential
Agriculture
4. Trend of Total Energy Demand
• 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
5. Status on Energy Development
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
6. Power Generation Share
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
7. Other Renewable Energy Projects
6 12
73
0
10
20
30
40
50
60
70
80
2015 2020 2025
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
MW
8. Current Status of Wind Development Projects
Lao-Agrotech Co., Ltd
Naxaythong, district
Vientiane Capital
Plantation-Area Harvest-Area
Palm oil
300+800 ha 60 ha (2016)
FFB 173,640 kg
CPO 33,000 L
B100 20,000 L
Biodiesel Plant: 20,000 L/day
Extraction Plant: 20 tons/day
Vernicia Montana
12,350 3,000 ha
Fruit collection 75,000 kg
B100 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
Biodiesel-Makao Oil Lao Co., Ltd
Luangprabang, district
Luangprabang Province
100,000 105,000
120,000
63,500 63,500
38,000
-
20,000
40,000
60,000
80,000
100,000
120,000
140,000
2011 2012 2013 2014 2015 2016
Current Statute Bio-Diesel Production B100 (liter)
Bio ethanol: June
2014
The GOL signed
MOU with 2 local
private company
to conduct
feasibility study of
bio ethanol
production from
cassava (each
200,000 L/day)
9. Biofuel Development Projects
10. National Energy Development Plan
National Energy Development
Plan
1.Power Development Plan
2.Energy Efficiency Plan
3.Renewable Energy Development plan
4.Others alternative Energy Development Plan
5.Gas Development Plan
6.Oil Development Plan
Wind
73 MW
SHP
400 MW
For Electricity Biomass Biogas Waste
58 MW 51 MW 36 MW
Biofuels (ML)
Ethanol 97.64
Biodiesel 194.44
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 %)
Objective: Ensure energy security, sustain socio-economic development, and enhance environmental and social sustainability
Bio-Energy
• 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
Support
Mechanism
Heat Biomass Biogas
113 ktoe 178 ktoe
Solar
106 MW
11. R.E Policy and Strategy
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 socio-economic development; System to System Energy Trading or system.
12. Energy Sector Policy and Target
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
12. Energy Sector Policy and Target (Cont’)
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
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”
13. Concept of Project Financing (Cont’)
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
14. Electricity Infrastructure Projects Commercially Bankable
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
15. Parties involved in the PPP Process
2015-2020
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
2021-2025
• 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
16. National Implementation Plan
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:……
2,000
2,500
3,000
3,500
4,000
4,500
5,000
5,500
6,000
201
0
201
2
201
4
201
6
201
8
202
0
202
2
202
4
202
6
202
8
203
0
BAU
Target
560
kTOE
reduce
Target 5,040
kTOE
BAU 5,600
kTOE
17. EE&C Development & its National Policy
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
18. Plot Plan and Target By 2020
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
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.
20. Conclusion
