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A Guide To The Laos Power & Energy Sector

Doe 1

Jane Doe

Professor John Doe
7 September 2021

Laos is a Southeast Asian country about the size of Thailand that lies between Vietnam, Myanmar (Burma), and Thailand. The Mekong River forms a large part of its eastern border with Thailand and Burma, running through the heart of Laos, providing water for agriculture, hydroelectric power generation, and fish farming.

Laos has a population of 7.2 million people, with more than 50 different ethnic groups speaking just as many languages. It is one of the world’s poorest countries in terms of per capita income. Still, this poverty has not prevented rapid growth in GDP in recent years due to expansion in hydropower production, exports, services, and tourism (worth US$375 million in 2010).

Energy demand is expected to rise more than 8% per year over the next two decades and is expected to reach about 70 terawatt-hours by 2040. This surge in demand will be driven primarily by additional power generation, though energy consumption will also continue to grow as a result of rising incomes. Per capita, energy consumption remains low by international standards at only around 200 kilowatt-hours (kWh) per person per year.

Laos has very few natural resources other than hydropower and fertile soil that give it potential for development. Still, these riches are underutilized due to inadequate infrastructures such as roads, trains, and highways needed to connect provinces and electricity grids throughout the nation.

Laos ranks 137 out of 189 countries on the Human Development Index, with more than half of all Laotians living in rural areas and many of them not being connected to the national power grid.

Doe 2

As of 2021, about 80% of the population is expected to have access to electricity. However, nearly half of Laos’ residents currently do not have a reliable and regular supply of electricity, despite the growing demand for power in recent years from domestic and industrial sectors.

Laos has one power plant on the Xe Kong River with an installed capacity of approximately 66 MW. Unfortunately, it runs only at 50% capacity due to low water levels during the dry season. There are numerous other hydroelectric plants built by foreign companies under BOT (build-operate-transfer) schemes since the early 1980s that were initially designed to generate around 100 MW total capacity, but many fell into disuse in the 1990s when economic circumstances forced projects owners to neglect maintenance.

Some new investors showed interest in such projects when Laos joined the World Trade Organization (WTO) in 2007, but delays in power purchase agreements have stalled the project.

Recently, some companies were granted development rights to a number of solar and wind projects ranging from 5 MW to 200 MW that could be developed before 2021. These developments will likely attract more investors into this sector while providing cost-efficient alternatives to hydropower plants at a time when many of the existing hydroelectric power plants are approaching their expected lifespan.

About 75%-80% of Laotian households currently use liquefied petroleum gas (LPG), wood fire, charcoal for cooking energy consumed by household appliances, or used for cooking food at home. This creates an urgency for new forms of power since these energy sources are both polluting and unreliable due to irregular supply.

Proposals for a national grid that would cover Laos have been made, but the government has yet to allocate sufficient resources needed to carry out this plan. There is also the possibility of establishing isolated power systems for provinces located in remote areas until the national grid is completed.

Doe 3

The Laotian government has expressed interest in participating in regional efforts such as the ASEAN (Association of Southeast Asian Nations) Grid Interconnection Plan (AGI), leading to greater market integration with neighboring countries via cross-border transmission lines connecting into Thailand’s Eastern Electricity Grid. This plan will likely reduce costs by creating more extensive markets and economies of scale within ASEAN countries compared to if each country remains alone.

If Lao PDR continues to develop its power sector, the role and importance of renewable energy sources will likely increase in the near future. Therefore, the government aims to promote sustainable power industry development by diversifying its generation capacity to reduce dependency on hydropower during dry seasons. Additionally, the Laos government seeks to increase the total installed capacity by efficiently utilizing existing hydropower plants and developing alternative sources such as geothermal energy.

Laos is indeed moving towards an intelligent power grid that will serve major urban centers and remote areas in the country. These developments are expected to attract more investors into this sector while providing cost-efficient alternatives to hydroelectric plants at a time when many of the existing hydropower plants are approaching their assumed lifespan.

The future road ahead for expanding Laos’s electricity consumption seems promising due partly to foreign and domestic investors’ efforts to invest in renewable energy sources such as geothermal, solar, wind, biomass, and biogas power developments.

Several development partners have undertaken numerous initiatives with technical assistance from international organizations such as ADB (Asian Development Bank), AEC (ASEAN Economic Community), ESCAP (Economic and Social Commission of Asia & Pacific), ADB, WB (World Bank), GIZ (German Corporation for International Cooperation) in order to achieve the target of increasing electricity production capacity to 6,000 MW by 2030.

Doe 4

As part of the government’s plan to bring electricity services to nearly every household, construction will soon start on a 230 kilovolts (kV) power line connecting Thailand with Laos in order to transmit up to 500 MW from the Nong Khai-Nam Ngum Hydropower project that began commercial operations in mid-2018.

Lao PDR aims to have a permanent power source for its new cement plants and mine exploration projects in 2021 and develop a smart grid system for both state companies and private investors. However, this effort could be challenging given the country’s mountainous terrain and limited human resources needed.

With all these efforts underway, it seems that Lao PDR is slowly moving forward towards a sustainable power sector for the country’s development. Once a more sustainable power sector is in place, it is more than likely that Laos will join the rest of the world in advancing towards a smarter power grid that is better for the environment.

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