Access to Energy in Rural Areas of Myanmar: An Electrification Policy from a Bottom-up Approach
PARI-ERIA Joint Energy Research for July 2013 to June 2014
Global energy market is presently experiencing significant change, according to Dr. Fatih Birol, the Chief Economist at the International Energy Agency (IEA). It is now common knowledge that the United States, which was the largest energy importer until recently, underwent a sudden change to become an energy-exporting nation as a result of the Shale gas Revolution. On the contrary, energy consumption in the Middle East, the largest energy-exporting region, has increased dramatically mainly owing to population increase. Thus, in tandem with these changes as regards the main players, existing patterns of international energy trade are being transformed. On the other hand, there are also fields where existing trends are not triggering off any change, in spite of demands for reform. Climate change is the most significant example.
In relation to this situation, the policy of energy subsidies for exhaustible resources is a delicate field in which cutbacks are inevitable. The improvement of energy access in impoverished regions of Africa and Asia, an extremely difficult challenge, is also in a position of trade-off with this issue. For this reason, the Global Energy Policy and East Asia Research Unit decided to focus its efforts on energy poverty and energy access.
State of energy in Myanmar
We decided to focus on Myanmar, which is facing a paradox of having "abundant resources and poor access to energy," when considering energy poverty. This country is a fossil fuel producing country that exports natural gas to Thailand and China. In spite of this, Myanmar’s electrification rate has not reached 30%, and hence, it is in the lowest-ranked group in the world according to the Energy Development Index (EDI), an IEA index of energy poverty in various countries. Although the electrification rate is already high in urban areas such as Yangon and Naypyidaw, in reality, the electric power supply is unstable even in those on-grid areas. Facilities such as manufacturing plants and hotels, for instance, that require stable supply of electricity, are forced to own private power-generating facilities for backup; this burden of securing access to electric power is not small. Under such circumstances, the improvement of access to energy in rural areas has been largely neglected. The motivation behind this study is the awareness of the need to present economically rational policy options to improve energy access in rural areas, through means that include promoting the use of renewable energy as much as possible derived from the abundant regional resources, grounded on the foundation of abundant resources.
In presenting such policy options, future direction cannot be visualized without addressing the fundamental causes of the issue. This study, therefore, began with gaining an understanding of and analyzing the reality of the situation. Furthermore, in offering policy recommendations to the government, strategies for viable resolutions, which include the time axis must be presented with an understanding of the manner in which policy discussions and coordination occur and are implemented. However, various figures are being passed around, since public data and statistics have not yet been prepared and discussion among individual government departments is difficult to achieve. Efforts were therefore made by this study to do the following:
- Acquire raw data and information by conducting field work;
- Implement joint studies with Chulalongkorn University of Thailand to focus on the region of Thailand’s border with Myanmar and utilize analyses conducted as objectively as possible; and
- Integrate knowledge in cooperation with other studies.
Analyses were conducted with the intention of acquiring data and information in such a bottom-up oriented manner and by conducting active discussions about the process with experts from regulatory institutions, industries, and universities.
Specifically, the study included, first, the implementation of a qualitative analysis of barriers to investments that are made through consultation of interested parties with independent power producer (IPP) operators, which are essential to improving energy access in Myanmar. Although the domestic electric power generating potential in Myanmar is not small, sufficient investment is necessary for further development. Domestic resources are currently limited, and inducing foreign direct investment is a decisively important issue. Notably, the movement of capital from investors in such nations as China and Thailand, where there is an urgent need to meet their own electricity demand, is prompted by the incentive of electric power importation into those countries. We have thus far conducted a joint study, with the Energy Research Institute of Chulalongkorn University, focused on investors from Thailand. Hydroelectric power generation and thermal power generation were compared with regard to barriers to investment for IPP operators in Myanmar, based on interviews and three workshops.
Second, a quantitative study was conducted to examine the economic viability of off-grid electrification in Myanmar. This study largely comprised the following components:
- Forecast of demand up to 2030;
- Estimation of unit micro-grid costs; and
- Preparation of a scenario based on estimation of off-grid electrification costs.
Myanmar’s National Electric Power Master Plan currently being studied by the Japan International Cooperation Agency (JICA) presents a plan for electric power supply up to the year 2030. The study focused on off-grid regions in rural areas, and the target electrification rate of 70% for all of Myanmar for 2030 was based on per capita electric power supply forecasted by the Plan (low-demand case), as well as the electrification performance (volumes of electric power supply and electrification rates) of neighboring countries. Electric power demand in various regional areas (rural villages) was estimated consistent with achievement of the 70% target electrification rate.
Next, the minimum cost of electrification was calculated for the electric power demand in the individual rural villages, with a consideration for electrification by micro-grids, which utilize renewable energy as resources.
These costs were estimated to calculate the electrification cost for implementing off-grid electrification.
Issues that inhibit rural electrification
Both social and economic barriers analysis for the differences with regard to both the types of electric power generation in the border region can be summarized as follows : First, the social barrier stands out against hydroelectric power generation. This arises from the fact that the Salween river—the proposed location of the hydroelectric power plant intended to generate power for export to Thailand—is in a region plagued by ethnic disputes. The implementation of the project, including reaching any consensus regarding the distribution of the dam’s benefits between the government and the anti-government forces, would be difficult. For thermoelectric power generation, however, bankability, an economic barrier, is most prominent.
The possibility of coal-fired electric power generation is currently being explored, but international opinion against it is so harsh that it would not be possible to rely on assistance from the World Bank or the Asian Development Bank (ADB). Hence, procuring funds to develop coal-fired electric fire generation would be difficult. In other words, the hurdle for securing bankability among the limited number of potential lenders would be high for the project operators.
The quantitative studies and resulting demand forecasts suggest that some regions currently located away from Myanmar’s basic national grid may not experience electrification through grid connections even by 2030. Off-grid electrification that utilizes renewable energy is expected to move forward in such regions. Settlements that require off-grid electrification were grouped into six categories, based on their demand levels and renewable energy resource reserves. By calculating costs relating to micro-grids, comprising combinations of multiple renewable energies that are considered to be available at the lowest cost for each of these categories, hydroelectric power generation was confirmed to be highly promising. Based on these individual cost calculations, a facility enhancement scenario up to the year 2030 was created: the total cost of facility enhancements required for rural electrification was tentatively estimated at US$7 billion or more, of which facility costs comprised about 25%, and the remainder was operating costs). Furthermore, the cost of constructing and installing high-tension power transmission lines across the nation by 2030 has been estimated at approximately US$5.75 billion, according to a survey conducted by JICA (scenario 3, which has been adopted as the standard for this study), indicating the enormity of the funds needed to achieve off-grid electrification. However, it should be added that these calculations are tentative, because they are based on numerous unreliable assumptions, including population.
The purpose of this study is to present information that can be used in formulating Myanmar’s rural electrification plan. Furthermore, a single key aspect for the improvement of connectivity within the ASEAN region can be considered a cornerstone for the electric power improvement plan of the ASEAN, if it is to be considered as a means to supply electric power in national border areas and development of infrastructure for that purpose. The current stage is such that the advancements have been made with the analysis of information and the awareness of the issue, as well as the fundamental concept for attaining solutions have been clarified so that the principal tools required for the analysis could be identified and the analysis has begun. Future efforts will include gaining an understanding of actual conditions that determine electric power demand, including gathering data, conducting field studies and surveys, collecting information from other countries such as Thailand, and analyzing such information. More specifically, efforts will be made to improve accuracy based on the following:
- Scenarios based on demand forecasts for core off-grid regions and cost analysis for the installation of micro-grids;
- Analyses of potential capacities and suitability of renewable energy, based on field work conducted in off-grid regions, to supplement the above; and
- Analyses of electric power trading and investment along Myanmar’s border with China.
The integration of results from such studies is expected to contribute to the preparation of the foundation for Myanmar’s rural electrification plan.
The Global Energy Policy and East Asia Research Unit has made an effort to build a cooperative relationship with the government of Myanmar in order to offer an effective outreach from the study. As part of this effort, the Energy Policy Workshop has been conducted since September 2014. This workshop was originally initiated in response to an official request made by Myanmar’s Ministry of Energy, to Japan’s Ministry of Economy, Trade and Industry (METI) and to Professor Yoshikawa of the University of Tokyo. The Government of Myanmar expressed a "desire to have specialized education and personnel training provided for government officials involved with energy policies in Myanmar on specific topics" at the end of 2013. In the workshop, students are expected to not merely sit and listen to lectures but to actually summarize a policy recommendation for each group and submit it to the National Energy Management Commission (NEMC) by approximately spring 2015. A group of lecturers that constitute the core of the study team has provided support for the workshop effort. Further, during this process, an International Symposium was held at the stage when the workshop participants have prepared their draft policy proposals. The workshop participants , therefore, not only listened to lecturers who lead discussions on specific topics of energy but also had an opportunity to present their draft policy proposals and conduct discussions on them in of the presence of the lecturers. We intend to further deepen the cooperative relationship with Myanmar’s government, which will provide support for the development and implementation of the Rural Electrification Plan.