The ADB is promoting the development of a ‘Mekong Power Grid’ that, if implemented, would facilitate the construction of numerous hydropower schemes in the Mekong Region. This Bankwatch article discusses problems with the plans for the grid, and civil society’s call for a ‘Comprehensive Energy Options Assessment’. Introduction
In the relentless pursuit of its vision of economic integration under the Greater Mekong Subregion (GMS) Initiative, the ADB is promoting ‘Regional Power Interconnection and Power Trade’ as a flagship project, more commonly referred to as the ‘Mekong Power Grid’ (MPG). Norwegian hydropower consultants ‘Norconsult’ prepared the plan through technical assistance packages commissioned by the ADB. The MPG plan proposes to exploit areas of the Mekong Region where hydropower potential is abundant, namely China’s Yunnan Province, Burma (Myanmar), and Laos – where community opposition is stifled – to provide energy to the power-hungry economies of Thailand and Vietnam. A regional transmission grid would connect the dams and a proposed ‘power pooling’ arrangement would facilitate cross-border trade in electricity. Private sector investment will be encouraged to help meet the MPG’s price tag of more than US$43 billion.
Whilst progress on the MPG slowed during the Asian financial crisis, momentum is once again building. At the Second GMS Summit in Kunming in July 2005, the six GMS region governments signed a Memorandum of Understanding to implement the ‘Regional Power Trade Operating Agreement’, prepared under a recent ADB-financed TA (Mercados and Soluziona, 2004).
The Dubious Benefits of the Mekong Power Grid
In an analysis commissioned by the Thai energy sector NGO Palang Thai, Dr. Bretton Garrett, a Canadian electrical engineer of considerable experience, outlined several major concerns regarding the overall concept of the MPG. Primarily, Dr. Garrett questioned the wisdom of committing to an expensive, long-term electricity trade arrangement without certainty of economic benefits (Garrett, 2005). For an investment of more than US$43 billion the total expected benefits would amount to only US$914 million, which represents a saving of just over 2% compared to the non-project scenario. Furthermore, because the costs of the hydropower schemes proposed under the MPG are at present unknown, the economic viability of the entire MPG plan is based largely on speculation and assumption.
One of the key concerns of the MPG is the distribution of costs and benefits. Dr. Garrett points out that whilst consumers would shoulder the initial cost and risk of investment in the construction of a regional transmission infrastructure, in the absence of a competitive marketplace for buying and selling power through the MPG it will be the generation companies that reap any economic benefits from savings in generation costs. Ominously absent from the MPG plan is the priority establishment of a truly independent regulator that would ensure accountability of the generator and transmission grid operators to the consumer. This measure would be crucial in guaranteeing equitable distribution of any economic benefits derived from a regional power trade arrangement, were they to arise.
Harmonizing electricity generation and transmission operations across the Mekong region presents a formidable technical and political challenge for the GMS countries. Failure to cooperate closely on both levels risks large-scale blackouts and ensuing political crisis. Even in regions with strong technical skills and close political ties, tempers can quickly flare when sharing energy resources beyond national boundaries. In a recent incident involving the Nordic power grid (upon which the MPG is modeled), Swedish operator Kraftnät, providing only two minutes warning, reduced by 30% its power exports to Finland to secure supply for domestic needs, consequently causing an all time high in Finland’s electricity prices (Helsingin Sanomat, 28.2.2006). The incident caused political tension between the countries, and in the end the Swedish Minister for Sustainable Development was forced to apologize to her Finnish counterpart.
Energy inefficiency and better solutions
There are better options for meeting the region’s energy needs. Thailand and Vietnam currently use energy very inefficiently. In 2003, Thailand used almost three times more energy per dollar of gross domestic product than Japan, and about 40% more than the US, according to the US Department of Energy. Vietnam’s energy efficiency ratio is even worse. In 2003, Vietnam used five times more energy per dollar of GDP than Japan, and almost three times more than the US. Clearly, Vietnam and Thailand have significant potential for demand side management.
Besides, not all of the power-generating capacity claimed to be required in the future may actually be needed. The science of ‘energy forecasting’ attempts to estimate a country’s future energy needs, and therefore how much additional capacity will be required. If this estimate is too high then excess generation capacity is commissioned unnecessarily. Over-estimation of demand has consistently occurred in Thailand where the state electricity utility, the Electricity Generating Authority of Thailand (EGAT), is responsible for preparing the forecasting figures. A report by the National Economic and Social Advisory Council, a government advisory body, concluded that EGAT’s 2004 Power Development Plan (PDP) had overestimated power demand growth for the coming 13 years by just over 6000 MW (Permpongsacharoen, 2004).
The Council proposed an ‘alternative PDP’ which illustrates how new supply could be met with lower cost, lower impact and lower risk resources, avoiding the need for imported hydropower. These options include demand side management (shifting load to off-peak and increasing energy efficiency of the end-user), renewable energy (biomass, solar, and wind energy, small hydropower under 10 MW), cogeneration (combined production of heat and electricity) and optimizing the efficiency of existing plants (repowering). Yet despite evidence that alternatives exist, successive ADB-financed studies have failed to investigate the potential for energy efficiency and renewable energy in the region
Call by Civil Society for a Comprehensive Energy Options Assessment
Justification for the MPG plan is founded on dubious grounds. A transparent, participatory process is urgently required to examine objectively the Mekong region’s energy needs and identify viable, sustainable and equitable solutions. In January 2006, 29 NGOs from the Mekong region called on the ADB to support a ‘Comprehensive Energy Options Assessment’ in line with the recommendations of the World Commission on Dams.
What would this proposed Comprehensive Energy Options Assessment entail? At the beginning of the process a multi-stakeholder consultative group would be formed, composed of regional governments, donors and civil society, that would oversee and implement the regional energy needs and options assessment. The first task then would be to take a critical look at energy demand projections for Thailand and Vietnam, and develop realistic forecasts. Based on these figures all potential options for meeting the region’s energy needs would be considered, including the role of demand side management, decentralized energy generation, and renewable energy technologies. These potential options would then be weighed-up, taking into account social, environmental and economic factors, and ranked on the basis of a multi-criteria analysis. The result of this analysis would be made available in local languages in the region, and stakeholder forums convened to decide which options should proceed to the full investigation stage. Public hearings would be organized to provide input into the multi-stakeholder forums.
The process would lead to a regional energy sector strategy that aspires to the World Commission on Dam’s core values of equity, efficiency, participatory decision-making, sustainability and accountability, thus decreasing the potential for future conflicts over energy development. An upcoming TA entitled ‘Developing the Greater Mekong Subregion Energy Sector Strategy’, approved by the ADB Board of Directors in January 2006, presents the ideal opportunity to implement such a process.
Were the MPG to go ahead, the distribution of costs and benefits between stakeholders would be vastly unequal. Whilst local communities affected by hydropower schemes stand to lose access to the natural resources upon which they depend, urban elites and private sector companies will benefit the most. By accepting the call for a Comprehensive Energy Options Assessment, the ADB could prove itself committed to developing sustainable and equitable energy solutions for the Greater Mekong Subregion, rather than blindly pursuing solutions that are outdated, and environmentally and socially destructive
Garrett, B.W., (2005). ‘Comments on Study for a Regional Power Trade Operating Agreement in the Greater Mekong Subregion, TA 6100-REG, Final Report‘, Discussion document commission by Palang Thai, Bangkok
Helsingin Sanomat International Edition, Business and Finance section. 28.2.2006
Mercados and Soluziona, (2004). ‘Study for a Regional Power Trade Operating Agreement in the Greater Mekong Subregion’, Published by Asian Development Bank, Manila.
Permpongsacharoen, W. (2004). ‘An Alternative to Thailand’s Power Development Plan‘ Published by The National Economic and Social Advisory Council