69661 The World Bank Asia Sustainable and Alternative Energy Program Lao PDR Power to the People: Twenty Years of National Electrification Copyright © 2012 The International Bank for Reconstruction and Development / The World Bank Group 1818 H Street, NW Washington, DC 20433, USA All rights reserved First printing: January 2012 Manufactured in the United States of America. Photo credits (cover): Yan Li and Jie Tang The World Bank Asia Sustainable and Alternative Energy Program Lao PDR Power to the People: Twenty Years of National Electrification Copyright © 2012 The International Bank for Reconstruction and Development / The World Bank Group 1818 H Street, NW Washington, DC 20433, USA All rights reserved First printing: January 2012 Manufactured in the United States of America. Photo credits: World Bank, EDL The findings, interpretations, and conclusions expressed in this report are entirely those of the authors and should not be attributed in any manner to the World Bank, or its affiliated organizations, or to members of its board of executive directors or the countries they represent. The World Bank does not guarantee the accuracy of the data included in this publication and accepts no responsibility whatsoever for any consequence of their use. The boundaries, colors, denominations, and other information shown on any map in this volume do not imply on the part of the World Bank Group any judgment on the legal status of any territory or the endorsement or acceptance of such boundaries. Contents Acknowledgements .....................................................................................................................v Abbreviations and Acronyms/Currency................................................................................... vi Executive Summary ................................................................................................................. vii 1. Country and Power Sector Overview .................................................................................. 1 Country Overview ................................................................................................................................................... 1 Power Sector—A Strategic Asset Effectively Developed and Expanded for the Nation’s Benefit ........................... 2 2. Sustained National Commitment—Enabling Rapid Transformation of the Power Sector with Strong Donor Engagement ....................................................... 6 National Electrification Program Results Stand Out ................................................................................................ 6 Government Role—Unwavering Commitment, Getting the Policies Right, and Staying the Course All the Way ........................................................................................................................ 7 3. Electricité du Laos—Highly Effective National Utility ........................................................ 9 Visionary and Effective Leadership, Steering Professional Implementation and a Results-Driven Culture ........... 10 Sound Program Planning and Project Prioritization—Transparently Driving Implementation ................................ 10 Cost-Cutting Technical Innovations and Practices Mainstreamed .......................................................................... 11 ’s Steadfast Enhancement of EDL Implementation and Organizational Capacity and Productivity......................... 12 4. Financing, Subsidy, and Tariff Policies ............................................................................. 15 Program Financing................................................................................................................................................. 15 Subsidies ............................................................................................................................................................... 15 Tariffs ..................................................................................................................................................................... 17 5. Making the Poor Count—Targeting the Gender Dimension of Rural Electrification ........................................................................................................ 20 Power to the Poor (P2P) Program .......................................................................................................................... 20 6. Off-Grid Electrification—Reaching Out Beyond the Economic Limits of Grid Rollout ....................................................................................... 27 Context: Grid Rollout—So Far So Good................................................................................................................. 27 Institutional Framework for the SHS Program ....................................................................................................... 27 Supply and Service Delivery Chain ........................................................................................................................ 27 Financing and Pricing—Hire-Purchase Scheme ..................................................................................................... 28 SHS Program Experience to Date ......................................................................................................................... 29 iii iv Contents Appendices A Long-Term Power Development Plan (2010–20) ............................................................................................. 31 B National Electrification Results in Lao PDR (1993–2009) ............................................................................... 32 C Percentage of Households/Villages Electrified, by Province (1995 vs. 2009) ................................................. 33 D Lengths of High-, Medium-, and Low-Voltage Lines ...................................................................................... 34 E Major Grid Extension Projects Sponsored by ADB and the World Bank ........................................................ 35 F Development Projects of Transmission and Distribution in Lao PDR ............................................................. 36 G World Bank Engagement ............................................................................................................................... 37 Boxes 5.1 Power to the Poor (P2P) Program: The Voices and Faces of Some of the Beneficiaries ................................ 23 6.1 Productive Uses of Solar Home Systems ...................................................................................................... 29 Figures E.1 Successful National Electrification Programs Worldwide ............................................................................... viii 1.1 EDL Generation, Import, Export, and Domestic Sales Curve........................................................................... 3 1.2 Lao PDR Power Flows 2008............................................................................................................................. 5 2.1 Households Electrified in Lao PDR 1993–2009 ................................................................................................ 6 2.2 Lao PDR Power Sector Institutional Framework (2006–Present) ..................................................................... 7 3.1 Households Electrified 1993–2009 .................................................................................................................. 9 3.2 115KV Transmission Lines (km-circuit) .............................................................................................................12 3.3 Distribution Lines (km-circuit)..........................................................................................................................13 3.4 EDL Distribution Losses 1995–2008 ...............................................................................................................13 3.5 Labor Productivity 1995–2008 .........................................................................................................................14 4.1 EdL Net Profit Margin 1995–2008 ...................................................................................................................16 4.2 ’s Compositions of EdL Revenue ......................................................................................................................17 4.3 Weighted Average Tariff in ASEAN Countries 2007 .........................................................................................17 4.4 Average Electricity Tariffs 1992–2009 ..............................................................................................................18 4.5 Average Electricity Tariffs vs. Estimated Cost of Service 1995–2009..............................................................18 4.6 Electricity Tariffs and Long-Run Marginal Cost, by Customer Segment ..........................................................19 5.1 Connection Rate, by Years Since Grid Reached Village................................................................................... 20 5.2 P2P Revolving Fund Flows ............................................................................................................................ 22 6.1 Progress of SHS Connection from Government SHS Program 1999–2009 ................................................... 28 6.2 Number of SHS Installed by Size 1999–2009................................................................................................. 29 Tables 1.1 Regional Snapshot 2008 ...................................................................................................................................1 1.2 Generation Capacity in Lao PDR ...................................................................................................................... 3 1.3 Power Projects Under Construction in Lao PDR .............................................................................................. 4 3.1 An Example of Economic Weighting of a Subproject ...................................................................................... 11 5.1 Evaluating Eligibility to Participate in P2P ....................................................................................................... 22 5.2 Grid-Connected Households (HH) in the 20 Pilot Villages .............................................................................. 24 5.3 Grid-Connected Female-Headed Households (HH) in the 20 Pilot Villages .................................................... 24 5.4 Non-Eligible Households (HH) ........................................................................................................................ 24 6.1 Solar Home System Options and Payments .................................................................................................. 28 Acknowledgements This report was prepared by a World Bank team led by branch offices in Pakse, Champsak province; for their Jie Tang, Senior Energy Specialist, and comprising Yan Li, arranging a field visit to see and better understand how Arun Sanghvi, and Jason Steele. The team acknowledges the national electrification program is organized, and to with deep gratitude the cooperation, support, and cour- see implementation at work on the “front lines�—grid tesies extended by officials from the Department of Elec- and off-grid—and witness firsthand the clear evidence of tricity (DOE), Ministry of Energy and Mines (MEM), and results and the developmental impact on the ground in Electricité du Laos (EDL) during the preparation of this a number of diverse communities across the southern report. We are grateful as well for the excellent arrange- region of Lao PDR. ments and facilitation organized by EDL and its regional v Abbreviations and Acronyms BAS Billing and Accounting System PDEM Provincial Department of Energy and Mines BO Branch Office PDP Power Development Plan DOE Department of Electricity PESCO Provincial Electricity Supply Company EDL Electricité du Laos PHRD Policy and Human Resources EGAT Electricity Generating Authority of Thailand Development Fund (Japan) ESCOs Electrification Service Companies PMU Project Management Unit GEF Global Environmental Facility PSDP Power Sector Development Plan GoL Government of Lao PDR RE Rural Electrification GS Generating Sets REF Rural Electrification Fund GWh Gigawatt hour REP Rural Electrification (APL) Program kV Kilovolt REP I Rural Electrification Phase I Project HHPC Houay Ho Power Company SHS Solar Home Systems ICB International Competitive Bidding SPC State Planning Committee IPP Independent Power Producer SPRE Southern Provinces Rural Electrification JICA Japan International Cooperation Agency Project Lao PDR Lao People’s Democratic Republic THPC Theun-Hinboun Power Company LNCE Lao National Committee for Energy UNDP United Nations Development Programme LV Low Voltage VEM Village Electricity Manager MEM Ministry of Energy and Mines VH Village Hydro MoF Ministry of Finance VOPS Village Off-Grid Promotion Office NDF Nordic Development Fund NGPES National Growth and Poverty Eradication Strategy Currency NORAD Norwegian Agency for Development Cooperation Kip NT2 Nam Theun 2 vi ExECutivE SummAry the Lao PDr National Electrification Program Success Story Outstanding results How Did this Extraordinary Progress Come About? Key Factors and Lessons The Lao People’s Democratic Republic presents a 1. Government’s visible hand—unwavering commitment, remarkable success story in rapid national electrification getting the policies right, and staying the course integrated within a broader strategy of national and rural Lao PDR’s impressive national electrification program development. In fifteen years (1995–2009), electricity results are the consequence of old virtues combined access more than quadrupled, from about 15 percent in with a flexibility to adapt new ones. The government of 1995 to 69 percent in 2009—and the program is on track Lao PDR (GoL) has pursued a pragmatic and purposeful to achieve the government’s target of 70 percent national approach, rather than an ideological one. By and large, the coverage by 2010 year-end. This expanded electricity government focused on doing the right things at more or access resulted in over 700,000 household connections less the right time. Further, a series of government policy by 2009 year-end, from about 120,000 households con- initiatives helped steer the rapid liberalization and mod- nected in 1995. ernization of the national economy, as a consequence of which the economy has grown at an average annual Two outstanding features of the Lao PDR electrification rate of 6.5 percent since 2001. The conducive overarch- program are highlighted in figure E.1. First, the program ing economy has provided a supportive backdrop, and in to date has maintained a faster pace of implementation turn has benefited from the government’s parallel efforts compared to most other countries considered to have to develop and expand the power sector as a strategic staged successful national electrification programs. This asset in enabling the country’s economic growth and the is evident from the steep path charted and the duration socioeconomic progress of all its citizens. shown (by length of line). Second, and even more remark- able, the country has managed to achieve this result at a The government set clear targets for electricity access— relatively low level of GDP (PPP) per capita, comparable 70 percent by 2010 and 90 percent by 2020—to be to Vietnam and China. achieved by means of an aggressive grid extension pro- gram complemented by off-grid electrification where FiGure e.1 SucceSSFul NatioNal electriFicatioN cost effective. The national electricity utility, Electricité ProGramS WorldWide du Laos (EDL), was held accountable to meet the annual targets for grid-based access expansion. By the same 100 Vietnam Thailand Costa Rica token, the government followed up with the policy and Percentage of households electrified 90 China financial commitment necessary to manage a pivotal 80 Tunisia balance between (i) ensuring affordability of electricity 70 Mexico Philippines connections to the vast majority of the population, and 60 ’s (ii) meeting the need to strengthen EDL financial health 50 and sustainability to deliver the grid extension program 40 Lao PDR Chile according to schedule. 30 20 Hydropower export revenues have played a defining role 10 in financing the startup and early-stage growth of the 0 Bangladesh national electrification program. Visionary and opportu- 0 1 2 3 4 5 6 7 8 9 10 nistic development of hydro projects were pursued dur- constant 2000 US$ millions GDP (PPP) per capita ing the late 1970s and early 1980s, driven by export sales to proximate Thailand markets and smartly coupled with Source: Data for countries other than Lao PDR is estimated from negotiated arrangements for power buy-back or exchange . figure 1–2, Douglas F Barnes, The Challenge of Rural Electrification, arrangements, where feasible, for electrification of bor- RFF Press, 2007; data for Lao PDR is from Ministry of Energy and Mines, and Electricité du Laos. der areas. The revenues from these projects enabled not Note: Time period covered: Lao PDR (1995 and 2009); Philippines only financing of those early hydro projects, but also that (1985 and 2002); other countries (1980 and 2002). of the national power grid expansion and connections vii viii Executive Summary program over the years. Subsequently, government a multiyear expansion plan that takes into account reforms, starting in the late 1980s, were instrumental in the financial and economic viability of the invest- engaging the participation of independent private power ments made and incorporates a village screening producers (export hydro IPPs) and led to the significant process to maximize social impact—clinics, schools, private investments underlying installed power capacity temples, irrigation and production activities get pri- today (and with several more in the pipeline). ority—within the constraints of available budgeted resources. Last and not least, the government established a posi- • Cost-cutting technical innovations mainstreamed—oper- tive and open environment for dialogue and cooperation ating efficiency improvements. EDL engineers have with the development partner community. This “sector- been open to learning from relevant practices across wide approach� and mindset led to the longstanding the region and beyond, and to adapting innovations and strong donor engagement and support—finance for that help lower the electrification program’s invest- the national electrification program investment as well ’s ment costs. As a result, EDL network design and as knowledge to help the government carry out sector equipment specifications for the grid rollout conform reforms, strengthen institutions, and improve sector per- to best engineering and commercial practices, the formance and efficiency—that continues today.1 Appen- result of a deliberate effort to balance cost consider- dix G provides more information about the World Bank’s ations and performance. EDL has also made steady engagement, dating back to 1966, in the Lao PDR energy progress in reducing distribution losses from 19 per- sector. cent in 2005 down to 12 percent by year-end 2009, which has had a direct impact on its bottom line. 2. electricité du laos—key to successful implementation The key to the successful implementation of the national 3. Financing, subsidy and tariff policy—striking a electrification program in Lao PDR—fast paced, effi- workable balance ciently executed, and effective in terms of results and The government recognized from the start that rural elec- impact—has been its institutional model of grid exten- trification implemented nationwide in a programmatic sion and rollout driven by the national electricity utility manner is a capital-intensive effort and cannot be accom- EDL. By virtue of its consistent and high-performance plished on a purely commercial basis. State subsidies track record, EDL has been a key enabler and front line would be required to ensure retail tariffs and the con- partner in Lao PDR’s national and rural development. nection fee for grid access would be affordable by poorer Several factors have contributed to EDL excellent imple- ’s segments of the population, especially as the grid’s reach mentation record. extended deeper into the rural areas of the country, where the vast majority of the population resides and • Effective leadership with strong commitment to rural elec- incomes typically decline. trification has instilled a corporate culture dedicated to accountability for results and an engineering tra- At the same time, implementation could not be achieved dition. As the grid rollout progressed well beyond ’s at the pace desired without maintaining EDL commer- Vientiane, accountability for meeting implementa- cial viability along the way—indeed, without steadily tion and connection targets was shifted squarely strengthening it over time, as EDL in the late 1980s and on to each EDL provincial branch concerned within early 1990s was in a weak financial position that chal- their respective provincial service areas. The branch lenged its ability to undertake the daunting task of elec- offices today are well supported and empowered trifying the country. Capital and operating subsidy were to plan, design, procure, and manage delivery of channeled to EDL primarily by way of two financing their connection targets; they are complemented mechanisms: (i) dividends from hydropower export rev- by highly professional and motivated staff who take enue earnings; and (ii) mobilizing the bulk of the financing pride in their mission and mandate. requirements (about 75%), over the program period from • Sound program planning and prioritization to enhance international development organizations and on-lending broad-based development impact. The rural electri- them to EDL on highly concessionary terms.2 fication planning process in Lao PDR is based on 2. The total investment cost of the EDL grid rollout program over 1. The major grid extension projects sponsored by multilateral institu- the period 1987–2009 is estimated at about US$600 million; of tions, over the period 1987–2009, together provided an estimated which two-thirds (about US$400 million) was financed by conces- US$450 million; of which about US$400 million was for grid invest- sionary loans or grants from multilateral and bilateral agencies, and ment, US$5 million for off-grid investment, and about US$25 million the remaining one-third of investment (about US$200 million) from for institutional capacity-building. See appendix E. domestic sources (GoL, EDL, and consumers). See appendix E. Executive Summary] ix In 2005, the GoL launched a Power Sector Financial Sus- electrification. The objective is to raise household con- tainability Action Plan covering the period 2005–2011. nection rates from 60–70 percent to 85–90 percent in After a two-year suspension of the previous tariff adjust- villages connected to the grid. The program has been ment initiated in 1998, a new tariff adjustment program successful in most villages where it has been offered: was initiated at the end of 2005 as part of the Financial connection rates have gone from under 80 percent to Sustainability Action Plan. It allowed for a gradual annual well above 90 percent, even reaching 98 percent in sev- ’s increase in EDL average retail tariff with the aim of (i) eral instances. ’s achieving cost recovery and phasing out EDL reliance on government subsidies with hydropower dividends; 5. off-Grid electrification—reaching out to those beyond ’s (ii) achieving a positive return on EDL assets; and (iii) the grid reducing cross-subsidies among consumer categories. Off-grid electrification, based on solar photovoltaic (PV), To ensure affordability to the poor, a life-line tariff was micro-hydro, and biomass and implemented by both the also provided to the residential consumers under the public and private sectors, has to date provided access new tariff regime, and tariff levels for the industries and to about 2.5 percent of households in remote rural areas irrigation categories were gradually reduced over the where the grid cannot reach in the short term. Notably, adjustment period to enhance the competitiveness of solar home systems (SHS) are available to these house- the industries and to support the agriculture production holds through an innovative hire-purchase scheme. in the country. In parallel, since 2005, EDL has vigorously Households have a choice of a range of solar PV panel invested in distribution loss reduction. This, in addition to sizes and pay an installation fee (the lowest of which is the fast expansion of the power distribution network to 136,000 kip (about US$16), then lease the system and remote rural villages, EDL achieved an 8% cut of distri- make monthly payments of 8,500 to 25,500 kip (about bution losses over the period of 2005–2009. As a result, US$1 to US$3) over five or ten years. They become the ’s EDL domestic business was turned from running losses owners of the system at the end of the lease period. , to making net profits since 2007 while the weighted Most significantly, in off-grid communities that have average retail tariff was maintained at US¢5.40/kWh (in benefited from the SHS program, it is clear that there 2009), among the lowest in the region (figure 4.3). The can be a transformational impact on off-grid community inexpensive cost of hydropower generation is also a fac- residents: small amounts of electricity provided by solar tor in keeping retail tariffs low and in improving EDL ’s PV systems are changing their lives, including enabling financial performance. significant levels of increased income generation. Striking and maintaining the right balance along the way has been a key enabler of the electrification pro- gram financing story, with the GoL and EDL having to Keeping a Good thing Going— come together to make it happen. Since 2007 EDL has , the Challenges Ahead achieved cost recovery and made profits from its domes- tic business; it is on course to achieve a commercially Lao PDR is on the threshold of graduating from Least viable standalone mode of operation by year-end 2011. Developed Country status. The power sector has been a key partner in the nation’s development so far. However, 4. Power to the Poor (P2P) Program—targeting the gender looking ahead, new demands and expectations of the dimension of rural electrification sector pose new and different challenges. Keeping the The “Power to the Poor� (P2P) Program implemented by success going will require not merely doing more of the EDL is a targeted, subsidized, affordable, and sustainable same. A far greater role than before for off-grid delivery financing mechanism for connection and indoor wiring. It systems in this decade is called for. is designed with a gender focus to provide an interest- free credit that allows the poorest rural households, who At this stage of national electrification in Lao PDR, more cannot afford to pay the entire costs of connection and of the unconnected population lives in “deep rural� vil- internal wiring up front (about US$60–80), to access lages and scattered communities in hard-to-reach places, the main electricity grid for basic service. This service including many in mountainous areas. A telling statistic is sufficient for an average household to run two light of the rapidly evolving cost structure of grid extension is bulbs and a small appliance such as a radio. The monthly the near doubling of the average cost per grid connection payments for both the credit and electricity consump- .7 over the course of the last seven years—about 7 million tion are designed to be about the same as the cost for kip (about US$900) today compared to 3.8 million to 4.7 lighting by candles, diesel lamps, or car batteries prior to million kip (about US$450–550) in 2005. x Executive Summary Achieving the government’s 90 percent national cover- Feature stories about the rural electrification age target by 2020 likely will require at least between a process in Lao PDr are are posted on youtube: three-to four-time increase in coverage by off-grid solu- tions over the course of this decade, from around 2.5 per- Lighting Homes, Empowering Lives: 20-years of cent share of national households today to 8–10 percent Electrification in Lao PDR by 2020. This roughly translates into an annual off-grid http://www.youtube.com/watch?v=5ssLx1r9lBE connection rate of about 10,000 connections per year, several orders of magnitude higher than rates achieved Lao PDR: Rural Electrification for All – A Gender Lens in recent years. http://www.youtube.com/watch?v=h-DY3T_1RPI Other key challenges the sector is looking to address include ensuring supply adequacy and improving ser- vice reliability; effectively satisfying the fast growing load demands from mining projects; developing hydropower (export IPP) further—and doing it better; and main- streaming energy efficiency, now that nearly 70 percent of the population has electricity access. 1 Country and Power Sector Overview Country Overview rural areas. The country is home to 49 recognized ethnic groups that comprise 160 sub-categories.3 The largest Lao People’s PDR is a landlocked country located in the group, the ethnic Lao, make up approximately 55 per- center of Southeast Asia, sharing borders with Cambo- cent of the population and is located predominately in dia, China, Myanmar, Thailand, and Vietnam. The land the lowland areas along the Mekong. Ethnic minorities area is approximately 236,800 km2, slightly less than the make up the balance and are mostly disbursed through- United Kingdom, and is mostly mountainous, with 68 out the highland areas. percent forest coverage. The Mekong River forms a large part of the Lao PDR border with Thailand. Lao PDR is among the poorest countries in the region, and along with its neighbors Cambodia and Myanmar, is With an estimated population of 6.2 million, the coun- among the countries on the UN’s list of Least Developed try is the least populated among its neighbors, with the lowest population density—26 people per km2 (table 3. Socioeconomic Atlas of the Lao PDR, 2008: An Analysis Based on the 2005 Population and Housing Census, Lao Department of 1.1). Seventy-three percent of the population lives in Statistics. table 1.1 reGioNal SNaPShot 2008 land areaa (km2) Populationa Pop. densitya GNi* per capita hdi rankingb (out of country (thousands) (million) (people/km2) (uS$) 182 countries) Lao PDR 236.8 6.21 26 740 133 Cambodia 181.0 14.7 81 600 137 Thailand 513.1 67.39 131 2,840 87 Myanmar 676.6 49.19 73 - 138 Vietnam 329.3 86.21 262 890 116 Sources: a. World Development Indicators Database, September 2009 unless otherwise indicated. , b.Human Development Index, UNDP 2007 http://hdr.undp.org/en/statistics. Note: * GNI stands for Gross National Income. 1 2 Power to the People: twenty years of National Electrification in Lao PDr Countries (LDCs).4 The country is ranked 133 of 182 The sustained economic growth has enabled significant countries on the Human Development Index.5 and steady decline in poverty rates (percentage of popu- lation living under US$1.25 a day); the number of poor The majority of the population derives its livelihood from households fell from 46 percent (1992–93) to 27 percent agriculture, which accounts for more than half of the (2007–08) and is projected at 24 percent by 2015. gov- country’s gross domestic product, estimated at US$5.6 ernment statistics indicate that over the same period, billion in 2008.6 The country’s major exports histori- the primary-school completion rate increased from 45 cally include electricity, garments, timber products, and percent in 1993 to 75 percent in 2007; life expectancy coffee. was extended from 56 to 65 years of age. The coun- try’s basic infrastructure has also improved substantially. While several development challenges lie ahead, the North–south arterial highway networks now greatly ease nation has come a long way following its founding as Lao cross-country transportation; more bridges and rails run PDR in 1975. Since then, the Lao PDR government has through the country’s borders with its neighbors; public systematically advanced the process of industrialization health networks are gradually becoming ubiquitous in vil- and modernization, with substantial external support for lages; and information and communications technology public expenditures from donor governments, the World (ICT) networks have reached all districts. Bank, and the Asian Development Bank. Major govern- ment reforms in the late 1980s to steer from a centrally planned to a market-based economy managed by the Power Sector—A Strategic state led to a gradual return to private enterprise and the Asset Effectively Developed and liberalization of foreign investment laws. In recent years, new sources of funds, from both the private sectors and Expanded for the Nation’s Benefit the economic regional powerhouses, such as China and The power sector, as one of the country’s strategic Korea, have started playing an increasingly important role growth sectors, has grown at a remarkable rate over the in the nation’s public sector development. last several decades and the pace is unabated. Its pivotal role in enabling the country’s economic growth and socio- The government has implemented ambitious socioeco- economic advancement over the decades is abundantly nomic development programs, as laid out in the National evident. Opportunistic and visionary development of Growth and Poverty Eradication Strategy (NGPES) and hydro projects pursued early on (1970s and early 1980s), Periodic National Socioeconomic Development Plan. The driven by export sales to proximate Thailand markets and National Socioeconomic Development Plan (2006–10) smartly coupled with negotiated arrangements for power has as its development objectives: (a) sustaining eco- buy-back or exchange arrangements, where feasible, for nomic growth; (b) accelerating efforts to reduce poverty; electrification of border areas, enabled not only financing (c) protecting the country’s environmental resources; of the early hydro projects; as well, the surplus revenues and (d) promoting industrialization and modernization. generated contributed to financing of the national power The government’s goal is for Lao PDR to graduate from grid expansion and connections program over the years, Least Developed Country status by 2020. As a result of with 69 percent national coverage achieved by 2009 and government-led development efforts, the economy has targets of 70 percent by 2010 and 90 percent by 2020. been growing at an average annual rate of 6.5 percent Government reforms starting in the late 1980s enabled since 2001, driven mostly by increased foreign direct participation of private enterprise in the power sector and investment in the hydropower and mining sectors. have been instrumental in advancing the public-private partnerships and private investment in the power genera- tion, underlying the rapid expansion of installed power 4. UN-OHRLLS Least Developed Countries http://www.unohrlls.org/ capacity to date. en/ldc/related/62/ 5. Human Development Index (HDI), UNDP 2007 http://hdr.undp. org/en/statistics. The HDI provides a composite measure of three Hydropower Development dimensions of human development: living a long and healthy life (measured by life expectancy), being educated (measured by adult In 1975 there was only 40 MW installed capacity in the literacy and gross enrollment in education), and having a decent country,7 mostly from one hydropower plant (Nam Ngum standard of living (measured by purchasing power parity (PPP) and income). Between 1995 and 2007 Lao People’s Democratic Repub- 1, 1 unit x 30MW) located near the capital city, Vientiane. lic’s HDI rose by 1.26% annually from 0.518 to 0.619 today. 6. World Development Indicators Database, September 2009. . 7 Source: 30 Years of EDL (1975–2005), Electricité du Laos 2008. Context and Background 3 table 1.2 GeNeratioN caPacity iN lao Pdr capacity Generation* Name location year (mW) (GWh) market ownership Selabam Champasak 1970 5.04 23.74 Domestic EDL Nam Dong Luangprabang 1970 1 5.59 Domestic EDL Nam Ngum 1 Vientiane 1971 155 1,145.78 Domestic EDL Xeset 1 Saravan 1991 45 115.48 40% Export (Thailand) EDL Nam Ko Oudomxay 1996 1.5 9.03 Domestic EDL Theun-Hinboun Bolikhamxay 1998 210 1,546.85 95% Export (Thailand) EDL 60% Nordic Group (Norway) 20% MDX (Thailand) 20% Houay Ho Attapeu 1999 150 392.55 99% Export (Thailand) EDL 20% Suez Energy (Belgium) 60% HHTC (Thailand) 20% Nam Ngay Phongsali 2002 1.2 1.84 Domestic EDL Nam Leuk Vientiane 2003 60 252.29 Domestic EDL Nam Mang 3 Vientiane 2005 40 223.82 Domestic EDL Nam Tha** - 2006 1.25 - Domestic EDL Mini/ micro-hydro** 37 locations - 11.5 - Domestic PDEM Diesel Generators** - 17.5 - Domestic PDEM Total 698.99 3,716.97 Source: Electricity Statistics Yearbook 2007 of Lao PDR, Department of Electricity, Ministry of Energy and Mines, unless otherwise indicated. *Generation in 2008. Source: EDL Annual Report 2008. **World Bank Project Appraisal Document (PAD), Rural Electrification Project Phase II December 2009. Note: PDEM stands for Provincial Department of Energy and Mines; IPP stands for Independent Power Producer. Today approximately 700 MW of installed capacity, 97 percent of it hydropower, is in operation. It is owned by a FiGure 1.1 edl GeNeratioN, imPort, exPort, aNd mixture of public and public-private players (table 1.2) and domeStic SaleS curve generated an estimated total of 3,700 GWh8 in 2008, of 2,000 Generation which 1,578 GWh9 (around 42 percent) was consumed Import 1,800 domestically, and the rest supplied export markets Domestic Sales 1,600 Export (figure 1.1). 1,500 Looking ahead, only a tiny fraction of the potentially 1,200 GWh exploitable 23,000 MW hydropower—15,000 MW 1,000 excluding mainstream Mekong—has been developed so 800 far. The revised Electricity Law by the National Assem- 600 bly in 2008 further strengthened the government com- 400 mitment to promoting private-sector led hydropower 200 development for cross-border trade, with expectations 0 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 Year 8. 3,700 GWh is total power generation in Lao PDR for 2008, which includes 1,777.57 GWh from EDL-owned plants and 1,939.85 GWh Source: EDL Statistics 2009. from IPPs. Note: Generation includes only EDL solely-owned plants and not EDL 9. EDL Annual Report 2008. joint venture IPPs. 4 Power to the People: twenty years of National Electrification in Lao PDr of increasing the nation’s installed capacity from approxi- Electricité du Laos (EDL) mately 700 MW to approximately 3,000 MW by 2013, Central to the impressive growth and performance of including Nam Theun 2. The hydropower projects under the power sector in Lao PDR—the rapid expansion of construction today are mostly IPPs for export to Thailand, national electricity access and pioneering work in devel- financed by foreign investments (table 1.3). With the oping hydropower for the export market—is the state- commissioning of Nam Theun 2 in 2010, net government owned power utility, EDL. It is not an overstatement that revenues from hydropower exports are expected to grow EDL is one of the country’s priorities and star perform- from US$17 million currently to approximately US$100 ers. Established in 1959 to supply the French military million by 2011 and US$350 million by 2020. table 1.3 PoWer ProjectS uNder coNStructioN iN lao Pdr capacity Generation* Name location year* (mW) (GWh) market ownership Nam Theun 2 Khammouane/ 2009 1,088 5,936 95% Export LHSE (Lao PDR) 25% Bolikhamxay (Thailand) EDF (France) 35% EGCO (Thailand) 15% ITD (Thailand) 15% Xeset 2 Saravane 2009 76 309 20% Export EdL (Thailand) Nam Nhone Bokeo 2009 3.5 - Domestic EdL Nam Lik 1–2 Vientiane 2010 100 435 Domestic EdL 10% China International Water and Electric Corp 90% Tatsalen Savannakhet 2010 3.2 - Domestic SIC Manufacturer (Thailand) 100% Xekaman 3 Sekong 2011 250 977 90% Export EdL 15% (Vietnam) Viet-Lao Power Investment and Development Joint Stock 85% Nam Ngum 5 Vientiane/ 2011 120 507 Domestic EdL 15% Xiangkouang Sinohydro 85% Nam Ngum 2 Vientiane 2013 615 2,300 100% Export EdL 25% (Thailand) Ch. Kanchang PLC 25% Bangkok Expressway PLC 12.50% Shlapak Development Company (USA) 4% PT Construction & Irrigation Co.Ltd (Lao PDR) 4% Team Consulting Engineering and Management Co., Ltd (Thailand) 1% Theun-Hinboun Bolikhamxay 2012 220+60 - 88% Export EdL 60% Expansion (Thailand) Nordic Group (Norway) 20% MDX (Thailand) 20% tOtAL 2,536 10,464 Source: EDL Annual Report 2008. *Expected completion year and expected generation. Country and Power Sector 5 bases in Vientiane, EDL today owns and operates the in the country’s power generation mix, and because a country’s main generation, transmission, and distribution unifying national backbone grid is not yet in place, when ’s assets. It was EDL visionary thinking and commercially- there is a transmission bottleneck and in dry seasons, minded instincts, coupled with its tenacious entrepre- EDL continues to import electricity from Thailand to meet neurial drive, that got the ball rolling in the 1970s, with domestic demand in each subgrid in dry seasons. the opportunistic development of the nation’s first major hydro resources. Over the past decades, EDL has aggres- sively and effectively led the country’s national grid roll- National Grid Development Program out program, resulting in national electrification rates underway that quadrupled from 16 percent in 1995 to 69 percent Several ongoing grid strengthening projects are under- in 2009. Electrification coverage in rural areas stands at way, with the objective of integrating these four around 35 percent. As noted, the government target is to electrify 70 percent of the population by 2010, 80 percent regional grids into a single integrated national grid over by 2015 and 90 percent by 2020, by deploying the least- the medium term. These developments will facilitate cost strategy of further grid rollout, complemented by an enhanced power-flow stability, adequacy, and security in expanded off-grid program. the national grid. This ongoing development is crucial, as well, in underpinning further expansion of the regional cross-border power market to meet growing demand in regional Power market the Greater Mekong Subregion (GMS)—Thailand, Viet- Consistent with the early drivers of power system devel- nam, China, Cambodia, and Myanmar. Specifically, the opment, today there are four regional subgrids in Lao following are well underway: construction of a modern a PDR (Northern Grid, Central Grid 1, Central Grid 2, and national power dispatch center; 500kV substations; and Southern Grid). These are not interconnected, but each critical transmission lines and cross-border links in south- is individually linked to the Thai power grid (figure 1.2) ern Lao PDR for export of hydropower to Cambodia and over high-voltage links. Because hydropower is dominant Vietnam. FiGure 1.2 lao Pdr PoWer FloWS 2008 Provincial 15.6 GWh EDL Generation Generation IPPs Generation 1777.0 GWh 39.4 GWh 1900.9 GWh Northern Grid Central 1 Grid Central 2 Grid Southern Grid 13.8 MW 268.2 MW 111.0 MW Peak Load 435.5 MW 391.8 GWh China Vietnam Thailand 17.8 22.6 GWh 431.0 GWh 1,885.3 GWh Source: Electricité du Laos 2009. Note: Import values from China and Vietnam correspond to EDL. Figures for imports by Provincial Authorities are not available. 2 Sustained National Commitment— Enabling rapid transformation of the Power Sector with Strong Donor Engagement National Electrification Program This achievement in the power sector in Lao PDR— results Stand Out especially the grid rollout program spearheaded by the national utility, EDL, is singularly exemplary compared to Lao PDR presents a remarkable success story in rapid other successful national electrification programs world- national electrification that is integrated within a broader wide in terms of the speed of progress (figure E.1). Even strategy of national and rural development. In fifteen more remarkable, the country has managed to achieve years, electricity access more than quadrupled from 15 69 percent overall coverage at a relatively low level of percent in 1995 to 69 percent in 2009; the number of GDP per capita, compared to Vietnam and China. households with electricity coverage grew more than five times from 120,100 in 1995 to over 700,000 in 2009 ’s The remainder of this chapter highlights the GoL role (figure 2.1). The country is on track to achieve the govern- and highly visible hand in enabling the extraordinary prog- ment’s target of 70 percent national coverage by 2010 ress to date in national electrification. and looking ahead to the next challenge—reaching 90 percent access by 2020. FiGure 2.1 houSeholdS electriFied iN lao Pdr 1993–2009 800,000 80 Household electrified Household electrification ratio 700,000 70 Percentage electrified Number of households 600,000 60 500,000 50 (percent) 400,000 40 300,000 30 200,000 20 100,000 10 0 0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Year Source: Department of Electricity, Ministry of Energy and Mines, and Electricité du Lao PDR. 6 Sustained National Commitment 7 Government role— social services and economic opportunities. The political unwavering Commitment, resolve did not stop with the rhetoric; the government set clear targets for electricity access. This was followed Getting the Policies right, and up by policy and financial commitment, against the back- Staying the Course All the Way drop of a conducive overarching national economy that has grown at an average annual rate of 6.5 percent since By and large, the government focused on doing the right 2001. The government also fostered friendly and produc- things and at more or less the right time. Further, a series tive relationships with not only its historic political part- of government policy initiatives helped steer the rapid ners, but with its regional neighbors, as well—especially modernization and expansion of the power sector and Thailand, with which Lao PDR has strong and shared its ability to step up and perform its role in achieving Lao cultural and economic ties, and which had its own suc- PDR’s broader developmental goals. cessful and very visible national electrification program just across the Mekong river. Critically, as well, the GoL clear national goals and targets, coupled with highly support- successfully established a highly positive and longstand- ive political environment. From the outset, following inde- ing partnership with international donors and financial pendence, the government’s vision at the highest levels institutions. has been of national electrification as a public good, essential for economic development and moderniza- enabling policy and an appropriate institutional framework for tion of the country for the benefit of all its citizens. Rural the power sector. The GoL has pursued a pragmatic and electrification has been an integral component of the purposeful approach rather than ideological approach in government’s growth and poverty-reduction programs. establishing an institutional framework, comprising spe- It has been and is rooted in an unwavering commit- cialized and effective implementing agencies/institutions ment to redressing regional development imbalances, best suited to deliver the desired results (figure 2.2). Spe- improving quality of life, and increasing access for all to cifically, the GoL has put in place enabling policies that FiGure 2.2 lao Pdr PoWer Sector iNStitutioNal FrameWork (2006–PreSeNt) Prime Minister’s Office (PMO) Ministry of Planning Ministry of Ministry of Energy Provincial and Investment Finance & Mines (MEM) authorities District Department of Promotion, Commercial authorities Departments Mgmt of Foreign/Domestic branches Investment Electricité Electrical Lao Holding Department of Department of Energy du Lao (EDL) Construction State Electricity (DoE) Promotion & Development Installation Enterprises (DEPD) (ECI) (LHSE) Non-energy Grid Hydro IPPs PESCOs Off-grid Private sector Implementing agency Private solar Village Off-Grid PV dealers Promotion Office (VOPs) Source: Authors. 8 Power to the People: twenty years of National Electrification in Lao PDr support three distinct delivery agents/mechanisms in the The government also effectively balanced, by means of a power sector. retail electricity tariff-setting and adjustment mechanism, the somewhat conflicting priorities of (i) ensuring that • Generation: promote entry of private sector IPPs. IPPs retail tariffs and connections to the grid were affordable effectively help finance the development of the to the poorer segments of the population, and (ii) main- nation’s sizeable low-cost hydropower resources for taining the commercial viability of EDL along the way export, thereby becoming a major revenue earner (further details are discussed in chapter 4). for the country. • Electricity grid system. EDL, the national utility, is Commercialization of EDL. Starting with the corporatiza- vested with responsibility for running and expanding , tion of EDL in 1997 the GoL has been committed to the the domestic electricity business, and also account- objective of EDL becoming an autonomous, profitable, able for meeting the grid rollout-based electricity and self-financing commercial institution. In this effort access targets. and throughout the process, the government collabo- • Off-grid program—private delivery complementing grid rated with EDL and donor organizations in implementing rollout. A special-purpose delivery mechanism and policies and tariff reforms and improving its governance implementation channel was established, with over- and operational efficiency—combined with significant sight by the Department of Energy (DOE), in the equity injections—that steered the transformation of Ministry of Energy and Minerals (MEM), to advance EDL to what is today: a commercial public utility. public-private partnerships for setting up and extend- ing energy services delivery chains to get solar home Sector-wide approach leading to longstanding and substantial systems to rural households, especially in areas not donor engagement. The government established a positive likely to be grid-connected soon. and open environment for dialogue and cooperation with the development partner community. This led to strong Provide stable financing platform for the program. The gov- donor engagement and support that continues today. ernment recognized from the start that rural electrifica- For over two decades, the energy sector has received tion implemented nationwide in a programmatic manner an ongoing stream of well- sequenced credits and grants is a capital-intensive effort that cannot be accomplished blending policy support with program financing. In this on a purely commercial basis—state subsidies would be process, the sector has been very open to, and has ben- required, and not simply on a one-off or intermittent basis. efitted from, knowledge and advice conveyed over the It has an ongoing capital subsidy to EDL delivered primar- course of regular and frequent interactions with donors. ily through two financing mechanisms: (1) dividends from Theses complemented international experience and les- hydropower export revenue earnings; and (2) mobilizing sons learned on the policy front with significant day-to- the bulk of the financing requirements over the program day implementation support experience gained in the period from international development organizations and Lao PDR program. on-lending them to EDL on highly concessionary terms. 3 Electricité du Laos— Highly Effective National utility Key to successful implementation of the national elec- ’s Several factors have contributed to EDL excellent trification program in Lao PDR—fast paced, efficiently implementation record, which has earned it a place in executed, and effective in terms of results and impact— the select club of countries worldwide acknowledged as has been its institutional model of grid extension and roll- best-practice national electrification programs. out driven by the national electricity utility EDL. Despite the geographic and demographic challenges posed by • Visionary and effective leadership, with strong com- mountainous terrain and low population density, EDL has mitment to rural electrification, has instilled a corpo- more than quadrupled national electricity access from 15 rate culture dedicated to accountability for results percent in 1995 to 69 percent in 2009 through its grid and a work ethic characterized by open-minded extension effort (figure 3.1). The country is on track to professionalism; achieve the government’s target of 70 percent overall • Sound program planning and prioritization to enhance coverage—grid and off-grid—by 2010. By virtue of its broad-based development impact with special consistent and high-performance track record, EDL has emphasis on the poor; been a key enabler and frontline partner in Lao PDR’s • Cost-cutting technical innovations mainstreamed to national and rural development. lower grid rollout program costs; and FiGure 3.1 houSeholdS electriFied 1993–2009 EDL and off-grid 700,000 80 EDL connections Household electrification ratio 600,000 70 Non-EDl connections Rate of electrification Number of households 60 500,000 50 (percent) 400,000 40 300,000 30 200,000 20 100,000 10 0 0 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Year Source: EDL Statistics 2009. 9 10 Power to the People: twenty years of National Electrification in Lao PDr • Steadfast enhancement of organizational capacity and to facilitate dialogue with visitors such as village lead- operational productivity, including decentralization, ers, provincial and other officials, and donors. The tools increased customer focus, steady gains in labor include, for example, topographic maps of the provincial productivity and technical operational efficiency, and service area, showing a diagram of the existing EDL net- last, but not least, strengthening technical capacity work and the planned network expansion by year. Trans- of staff and of management systems. parency and accountability are integral to branch office modus operandi. visionary and Effective Leadership, open-minded professionalism. Last, but not least, EDL lead- Steering Professional implementation ership has been successful in fostering a corporate cul- ture at ease in engaging productively with international and a results-Driven Culture donors—bilateral and multilateral—and thereby building a two-way, trusting, and productive partnership that has vision followed up by action: hydropower exports in early lasted from the very outset of the access program to the years set the stage for access program financing. Since 1975, present time. EDL leadership has been central to driving the impres- sive growth and performance of the power sector. It was the visionary drive and business acumen of the early senior leadership of EDL that recognized and success- Sound Program Planning fully pioneered hydropower development for the export and Project Prioritization— market—seeing that benefits in the medium term, in the transparently Driving implementation form of surplus revenues from exports, over time could help finance investment to grow the domestic power The rural electrification planning process in Lao PDR is sector. This powerful example10 set the stage for the based on a multiyear electrification expansion plan. It government’s subsequent push for a more ambitious takes into account the financial and economic viability hydropower exports-based market development pro- of every investment and incorporates a project selection gram in Lao PDR, anchored by IPPs. The dividends from methodology that prioritizes areas and villages to be elec- the government’s share of these projects comprised a trified to maximize social impact, within the constraints significant share of overall access program financing until of available resources. recently (see chapter 4). Simple but rigorous village screening and prioritization pro- rural electrification: motivated staff and results-driven cul- cess. Areas to be electrified (“subprojects�) typically con- ture. From the outset, the senior leadership of EDL also sist of several villages in a cluster. Those that are to be set a tone and values ethic that signaled an unwavering electrified through grid extension as part of the subproj- and strong commitment to rural electrification, and to ect are prioritized based on (i) proximity to existing major ’s meeting the GoL targets as a top priority for the national roads; (ii) larger number of households; and (iii) more utility. As the grid rollout progressed beyond Vientiane, economic and social activity, measured by the number of accountability for meeting the rollout implementation clinics, hospitals, saw mills, rice mills, schools, temples, and connection targets was shifted squarely on to each irrigation, and other small industries. Different weights EDL provincial branch within their respective service are assigned to different types of connections: higher areas. The branch offices today are well supported and weighting to connections likely to generate economic empowered to plan, design, procure, and manage deliv- use of electricity, such as saw mills, as well as those ery on their connection targets and their targets for cus- with social importance, such as schools and clinics. For tomer service improvements or technical loss reduction. example, one saw mill could be weighted as 20 connec- Branch offices have a highly professional and motivated tions, as its revenue is around 20 times that of a house- staff, who take pride in their mission and mandate. For hold (table 3.1). example, detailed spatial planning capacity resides in the branch offices and easy-to-use tools are available A total weighted connection score for each subproject is then calculated, and each subproject are ranked on the 10. Indeed, there was an earlier time when revenues from electricity basis of the cost of electrification, including its share of sales from Nam Ngum to neighboring Thailand represented Lao’s the medium-voltage (MV) network, divided by the total biggest export earner. Subsequently the tourism sector became the weighted score. Finally, the scope of the subproject is biggest export earner. More recently the mining sector and the fast- growing IPP-based big hydropower exports will change this picture adjusted to include priority villages selected by provincial again. governments to promote economic growth or achieve Electricité du Laos— Highly Effective National utility 11 table 3.1 aN examPle oF ecoNomic WeiGhtiNG oF a SubProject Weighted economic activities total No. Weight connections remarks Household 419 1 419 Household revenue considered as the base revenue Temple 0 15 0 10 points for estimated revenue, 5 points for religion importance School 4 25 100 20 points for estimated revenue, 5 points for social importance Irrigation 2 35 70 30 points for estimated revenue, 5 points for social importance Rice Mill 16 25 400 Weighted according to estimated revenue Clinic 0 7 0 4 points for estimated revenue, 3 points for social importance Saw Mill 0 20 0 20 points for estimated revenue total 989 Source: EDL, Authors. other social objectives, such as development of ethnic dismantled and moved to follow construction progress minorities. Specifically, under the consultative process as the network expands. The shorter transport distance used, EDL branch offices make proposals to the head- has also meant that fewer poles are broken en route. This quarters office, based on expected funds available and is a significant achievement: pole costs typically repre- taking into consideration the upstream consultations sent around one-third of the total investment costs of with provincial energy officials and other authorities as to rural electrification programs. their priorities and regional development plans. Following a cross-cutting review of all provincial and branch-level proposals, a revised implementation plan is prepared, SWEr reticulation and any adjustments conveyed to branch offices to pro- Single Wire Earth Return (SWER) network reticulation, ceed accordingly. pioneered and widely utilized in Australia and New Zea- land, and more recently in South Africa’s rural electrifica- tion program, has been deployed effectively by EDL in Cost-Cutting technical innovations several subproject areas. The technology is used to con- and Practices mainstreamed nect small and dispersed loads that are too far from each other to be economically or technically served by even EDL engineers have been very open to learning from a conventional single-phase spur line from the MV net- relevant practices across the region and beyond, and work. SWER reticulation typically involves a simpler steel adapting innovations that lower the investment costs of wire conductor, wider pole spacing, because a far lighter the national electrification program. As a result of this conductor is used, and hence, fewer poles per km circuit. deliberate effort to balance cost considerations and per- formance, EDL network design and rollout conform to ’s EDL has implemented six SWER projects in as many best engineering and commercial practices. This practice provinces. Together, they involve approximately 135 km has been mainstreamed, and is evident in many aspects of SWER reticulations to serve around 4,500 households of the network in place today, among them construction, and a remote army camp. Several more SWER projects network design, and equipment specifications. are planned for implementation in the near term. Further, EDL planners recognize that grid network extensions are beginning to reach the stage where an increasing portion Low-cost concrete poles of the remaining loads is smaller, more dispersed, and EDL adopted low-cost prestressed concrete pole tech- scattered in increasingly deeper rural areas. Looking to nology similar to that used in Thailand, significantly lower- the next decade, it is anticipated that the technical and ing both fabrication and transport costs. The far simpler economic case for deploying conventional single-phase technology and production process makes it feasible to and SWER reticulation is growing. produce the poles in “mobile factories� that are easily 12 Power to the People: twenty years of National Electrification in Lao PDr Shield wire technology on high voltage Vientiane, only 5 of the 16 provinces had public electricity transmission lines supply. EDL was able to serve fewer than 50,000 house- holds, around 6 percent of the total in the country. In the mountainous northern region of Lao PDR, in addi- tion to occupying a more difficult terrain, load clusters ’s Since 1994, EDL 115KV transmission system has tend to be dispersed and small, making it expensive to expanded at an average annual rate of 8.2 percent, to use normal reticulation design and standards to connect. comprise about 2,364 km in 2009. By the end of 2006, EDL has deployed shield wire technology on some high- EDL had 23 115/22KV substations with total capacity of voltage (HV) transmission lines, which enables low-cost 813MVA. Its distribution system network reticulation tap-offs from the shield wire that runs separately with the (MV) has grown at an average annual rate of 14.5 percent HV line without compromising network security or stabil- from 1,861 km in 1994 to 14,203 km in 2009, with LV ity. The spur lines that form the tap-off point are situated network reticulation growing annually at around 12.9 per- at several places along the length of the HV line, to con- cent from 2010 km in 1994 to about 12,500 km in 2009 nect small clusters of loads within reach; this obviates the (figures 3.2 and 3.3). need for costly substations at each location to serve small clusters of households and others close to the HV line. technical capacity—an engineering tradition. From the out- set, EDL has maintained a solid tradition of according sta- tus to the engineering profession and its professionals. It Steadfast Enhancement of EDL’s has benefitted from the historic and continuing ties and implementation and Organizational links originating in the association of Lao PDR with the Capacity and Productivity eastern bloc nations, and most notably, its neighbor Thai- land—with whom Lao PDR shares a common culture and Fast-paced construction program for network infrastructure friendly relations and whose electrification program is rollout. Underpinning the national electrification program highly visible across the Mekong River. Many senior EDL targets achieved each year is an equally impressive insti- engineers were trained in Russia and the former USSR. tutional capacity for staging and orchestrating a fast- and These early ties grew into a culture of solidly grounded sustainably-paced transmission and distribution network engineering professionals as the utility expanded. The construction program, anchored by extensive engineer- tradition has continued with an active program for send- ing design capabilities. Just two decades ago, the coun- ing promising young engineers overseas from provincial try’s transmission and distribution networks consisted EDL branches to strengthen their engineering skills and of 90 km of 115 kilovolt (KV) single-circuit and 90 km of improve their career development prospects as well. The 115 kV double-circuit transmission lines running through practice has also helped create a highly professional and the Vientiane Prefecture; 9 substations; 606 km of 22 committed work force and workplace. KV lines; and 553 km of low-voltage (LV) lines. Outside FiGure 3.2 115kv traNSmiSSioN liNeS (km-circuit) 2,500 2,000 1,500 km-circuit 1,000 500 0 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Year Source: EDL 30-Year Growth Report for 1994–2004 and EDL Annual Reports 2006–09. Electricité du Laos— Highly Effective National utility 13 FiGure 3.3 diStributioN liNeS (km-circuit) 16,000 Medium voltage 14,000 Low voltage 12,000 10,000 km-circuit 8,000 6,000 4,000 2,000 0 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Year Source: EDL 30-Year Growth Report for 1994–2004, and EDL Annual Reports 2006–2009. decentralization geared for improving operational efficiency greater Vientiane. Starting in 2003, several branch offices and customer service. EDL has grown over the years to were rebuilt and equipped with new computers, vehi- keep pace with the scale and geographical spread of the cles, and modern other equipment. Performance incen- grid rollout program, and indeed to drive it more effec- tives are in place to improve the utility’s key efficiency tively and efficiently. Starting as a Vientiane-based com- and productivity indicators. pany, the utility today has over 3,000 employees among its headquarters office in Vientiane and 22 branch offices Figure 3.4 depicts the steady and significant progress in the 7 provinces of Lao PDR: 9 branches in the northern made over time under the distribution system loss reduc- region, 13 in the southern region, and 6 subdivisions in tion program—technical and otherwise. This targeted FiGure 3.4 edl diStributioN loSSeS 1995–2008 30 27% 25 24% 23% 23% 19% 20% 19% Distribution loss (%) 20 19% 19% 19% 19% 17% 18% 18% 16% 16% 15% 15 13% 10 5 0 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Year Source: EDL Statistics 2009. 14 Power to the People: twenty years of National Electrification in Lao PDr program has been given high priority because it directly replacement of old meters, increasing meter reading affects EDL financial bottom line. Since 2005, intensive ’s frequency, mainstreaming state-of-the-art software and training on system analysis for loss reduction has been hardware for computerized billing and accounting. Not provided by international consultants to EDL system ’s least, a performance bonus is provided to field staff planning engineers at both corporate and branch levels. pegged to actual reduction in system losses achieved. Investments have been made systematically over time Figures 3.4 and 3.5 depict the progress along two labor in the entire range of measures, including substations productivity indicators. and transformer upgrading, optimizing feeder line length, FiGure 3.5 labor Productivity 1995–2008 527 210 453 197 181 391 148 327 302 319 129 118 254 271 109 219 98 85 172 164 187 75 149 163 60 58 57 63 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Source: EDL Statistics 2009. 4 Financing, Subsidy, and tariff Policies Electrification is a capital-intensive effort. Steady and Program Financing ’s rapid expansion of EDL medium-voltage and low-voltage distribution networks, outside of the more densely popu- overall financing mix. The total investment cost of the grid lated urban and peri-urban areas, has required an ever- rollout program over the period 1987–2009 is estimated increasing amount of financing over the two decades at about US$600 million (annex E). It has been financed . starting around 1987 This is not an easy feat for a poor predominantly (about 75 percent) by concessionary loans country. How the required financing was mobilized—in or grants from multilateral and bilateral agencies, with adequate amounts, and on a sustained basis—to maintain the remainder from domestic sources, including EDL, the rapid pace of implementation and increase in national the GoL and electricity customers. Domestic contribu- electricity coverage—is highlighted in this chapter. ’s tions were sourced primarily from EDL surplus reve- nues from hydropower exports and proceeds from new The success in addressing the financing challenge of ’s connection charges as elaborated below. As EDL finan- the national electrification program in Lao PDR is the cial position improved over time, the share of domestic result of steering a workable, ongoing, and lasting bal- contribution to financing gradually increased from under ance between two divergent fiscal and policy tensions. 25 percent of the total in the early days to around one- On the one hand, it was recognized that the program third of the total today. could not achieve the government’s target of 90 percent ’s access by 2020 without maintaining EDL commercial viability along the way. Indeed, the utility would have to Subsidies be strengthened over time: its weak financial position in the late 1980s and early 1990s challenged its ability capital subsidy—long-term concessionary financing with to undertake the daunting challenge of electrifying the grant components. As noted, the government recognized country. On the other hand, it was necessary to devise from the start that rural electrification implemented an effective and efficient subsidy and cross-subsidy pol- nationwide is a capital intensive activity, and cannot be icy, so retail tariffs and connection fees for grid access accomplished on a purely commercial basis. From the would be affordable by the poorer segments of the popu- outset, the GoL channeled concessionary funds11 from lation. This would be especially important as the grid’s international developmental organizations to EDL in the reach extended deeper into the rural areas where the form of subsidiary loans through the Ministry of Finance vast majority of the country’s population resides and (MOF). Together, these account for about 90 percent of incomes typically decline. Striking the right balance and ’s EDL loan portfolio. These long-term, highly concessional maintaining it along the way has been a key enabler of the national electrification program financing story in Lao PDR. It is an essential feature that the Lao PDR program 11. The World Bank has provided the government of Laos with 30-year shares with other successful national electrification pro- IDA loans at 0.75% per annum, with a 10-year grace period. The ADB grams worldwide. has offers loans with the same tenure at 1.00% per annum. 15 16 Power to the People: twenty years of National Electrification in Lao PDr funds, along with favorable on-lending terms,12 have Power Company (HHPC) (table 1.3). The dividend income allowed EDL to carry out its capital investment programs stream that EDL has received from these shareholdings with low-cost and long-term financing. In recent years, a since 1998 has been sufficient not only to offset the certain portion of the foreign funds has been conveyed ’s shortfall between EDL cost of supply and electricity to the GoL in the form of grants.13 In these instances, the sales revenue collected under allowable retail tariffs, but government’s practice has been to transfer 80 percent of also to provide the necessary liquidity for EDL to fulfill its the grant proceeds to EDL and on-lend the remaining 20 debt service obligations, while carrying out its grid exten- percent on concessional terms. sion and rollout at an uninterrupted pace, and maintaining positive net profit margins since 1998 (figure 4.1). operating subsidy for rural electrification—hydropower catalytic role of hydropower exports and dividends— export revenues and dividends. In addition to mobilizing setting in motion a virtuous dynamic for sustained expansion concessionary funds and grants from foreign sources, of domestic power sector. Hydropower export revenues the government also directly provides EDL with an oper- have played a defining role in financing the “startup� and ating subsidy in the form of retained dividends from early-stage growth of the domestic electricity business export-oriented private-sector hydropower projects. Spe- in Lao PDR’s power sector. They helped early on to cata- cifically, EDL is the designated nominee shareholder14 of lyze a virtuous cycle that enabled future expansion of the several GoL-IPP investment projects, currently holding 60 domestic business, leading to the scale of the business percent and 20 percent of shares, respectively, in Theun today. More specifically, for a large part of the 1990s, Hinboun Hydropower Corporation (THPC) and Houay Ho hydropower exports revenues and dividends constituted ’s over 70 percent of EDL revenue, as its domestic cus- 12. In the aftermath of the Asian financial crisis, the GoL restructured tomer base was small (figure 4.2). These revenues from ’s EDL entire subsidiary loan portfolio. As a result, seven loans, clas- sified as socially oriented, were repriced from 6.0–11.6% annual rate exports had enabled early investments in grid extensions to 2.0% in FY01–04 and to 6.0% in FY2005–07; another seven loans, into the domestic urban and peri-urban areas, which had, classified as non-socially oriented were re-priced with 50% of their ’s in turn, enabled a transformation in EDL revenue mix original rates in FY2001–04. Along with the price cut, maturity of all as the domestic business and revenue base grew with subsidiary loans was extended by 5 years. more customers connected through further grid exten- 13. The IDA funding on the Rural Electrification Project (REP) I and II starting 2006 is in the form of grants. In recent years, nontraditional ’s sions. Today, EDL domestic business has transformed lenders, such as China and India, have played an increasing role in into the backbone of the utility’s business, accounting providing export credits with a significant grant element for projects for more than 80 percent of its revenue (figure 4.2b). where goods and construction services are sourced through their Finally, rapid expansion of the domestic customer base respective countries. over time, coupled with the government’s tariff reform 14. In 2000, the GoL converted two subsidiary loans, with a com- bined balance of US$64.67 million, to government equity in EDL. process described in following, enabled the gradual These loans were used to finance EDL share in THPC and HHPC. ’s ’s strengthening of EDL commercial viability. FiGure 4.1 edl Net ProFit marGiN 1995–2008 40 With dividends 30 Without dividends 20 Net profit margin (%) 10 0 -10 -20 -30 -40 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Source: EDL audited income statements 1995–2008. Financing, Subsidies, and tariff Policy 17 FiGure 4.2 comPoSitioNS oF edl’S reveNue 1,400,000 100 90 1,200,000 80 Percentage of EDL Revneue 1,000,000 Revenue (Million Kip) 70 60 800,000 50 600,000 40 400,000 30 20 200,000 10 0 0 1995 1997 1999 2001 2003 2005 2007 1995 1997 1999 2001 2003 2005 2007 Export Dividends Domestic Source: EDL audited income statements (1995–2008). tariffs At the end of 2005, GoL launched a Power Sector Finan- cial Sustainability Action Plan for 2005–2011. In 2005, a charting a course towards full cost recovery. In the early new tariff adjustment program was initiated as part of years of the national electrification program, a combina- the Financial Sustainability Action Plan. It allowed for tion of factors—low domestic tariffs, high distribution an annual increase on the average tariff with the aim of losses, and high accounts receivable from domestic (i) achieving cost recovery and phasing out EDL reli- ’s sales, especially from government arrears—adversely ance on government subsidies with hydropower divi- affected EDL financial viability. Starting around 1998, ’s ’s dends; (ii) achieving a positive return on EDL assets; and the government set in motion a deliberate tariff reform (iii) reducing cross-subsidies among consumer catego- process with the objective of gradually strengthening ries. A life-line tariff was also provided to residential EDL commercial viability, while ensuring affordability for ’s consumers under the new tariff regime to ensure afford- selected low-consumption customer segments. The tar- ability for the poor. Tariff levels for industry and irrigation iff reform was suspended in 2004 for an assessment of categories were gradually reduced over the adjustment financial impacts on EDL and affordability to consumers. period to enhance the competitiveness of the industries FiGure 4.3 WeiGhted averaGe tariFF iN aSeaN couNtrieS 2007 17.5 17.68 13.07 US cents/kWh 9.47 7.67 8.5 6.20 6.52 6.77 5.38 5.40 Vietnam Laos* Brunei Myanmar Indonesia Malaysia Thailand ASEAN Singapore Philippines Cambodia average Source: The Heads of Asean Power Utilities/Authorities (HAPUA), Lavalin, June 2009. Note: *Current average tariff US¢ 6.50/kWh. 18 Power to the People: twenty years of National Electrification in Lao PDr and to support the agriculture production in the country. (WTP) continues to exceed the cost of supply.15 Conse- Concurrently, EDL has invested vigorously in distribu- quently, the government has been able to implement tar- tion loss reduction since 2005. While quickly expanding iff increases with little adverse social impact or notable the power distribution network to remote rural villages, reduction in demand. EDL also achieved an eight percent cut in its distribu- tion losses from 2005–2009. As a result, EDL domes- ’s tariff adjustments—the path travelled. From 1990 until tic business went from running losses to making net 1996, domestic tariffs remained nearly constant, and , profits since 2007 and the weighted average retail tariff well below long-term marginal costs. Even following the was maintained at US¢5.40/kWh, among the lowest in June 1996 increase of tariffs for large customers, the the region, (figure 4.3). The government and EDL have average tariff yield recovered less than 50 percent of the been aided in this endeavor by the low cost of a power , long-term marginal cost. In October 1997 responding supply based on domestic hydro. Further, despite the nation’s low income level, consumer willingness to pay 15. A survey, carried out in seven provinces among 1,043 electri- fied households and 2,161 non-electrified households in 2004, sug- gested consumer willingness to pay (WTP) for electricity exceeded supply costs. FiGure 4.4 averaGe electricity tariFFS 1992–2009 600 Average in Kip/kWh 7.0 Average in USD Cent/kWh 500 6.0 5.0 USD Cent/kWh 400 Kip/kWh 4.0 300 3.0 200 2.0 100 1.0 0 0 1995 1993 1994 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Year Source: EDL Statistics 2009 for tariffs from 1997–2009 and SPRE Project Appraisal Document for tariffs from 1995–96. FiGure 4.5 averaGe electricity tariFFS vS. eStimated coSt oF Service 1995–2009 600 500 400 Estimated cost of service Kip/kWh 300 (excluding cost of capacity) 200 Weighted average tariff 100 0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Year Source: EDL Statistics 2009 and SPRE Project Appraisal Document. EDL Tariff Study Update Project, International Development Association (IDA) June 2009. Financing, Subsidies, and tariff Policy 19 to the Asian financial crisis, the government raised the performance expectations: achieving a rate return on weighted average domestic tariff by more than 100 per- revalued assets of 4 percent at the end of the six-year cent, from 25.52 kip (US¢1.2) per kWh to about 55.12 kip implementation period 2005–11; and EDL gradually phas- (US¢2.6) per kWh.16 The government subsequently com- ing out its reliance on dividends by 2011. mitted to additional tariff increases, including a further 50 percent increase and quarterly indexation thereafter, cross-subsidies across business lines permit uniform national both of which took effect in 1999 (figure 4.4), bringing tariff policy. The financing and tariffs policies cited in the the average tariff to within 83 percent of the long-term preceding together have been instrumental in helping , marginal cost. In 2007 the tariff increase was suspended maintain the government’s policy of nationally uniform for an impact assessment. Thereafter, the government retail tariffs. Additionally, tariffs for selected low-con- endorsed (June 2005) and approved (November 2005) sumption customer segments are set to be “affordable, � a schedule of systematic tariff adjustments to reflect albeit with the judicious use of cross-subsidies. As in domestic inflation and exchange rate fluctuations from many other countries, residential and agricultural con- ’s 2005 to 2011. EDL current average tariff is about 560 sumers in Lao PDR have been cross-subsidized by other kip US¢ 6.50) per kWh, compared to the average cost of customer segments. This is one of the most critical fac- service (excluding cost of capacity) of 720 kip (US¢ 5.0) tors contributing to the willingness—by even the poor- per kWh (figure 4.5). Looking ahead, EDL is now on track est rural households—to shift from lighting provided by to achieve commercially viable modes of operation by candles, diesel lamps, or car batteries to grid-supplied the end of the tariff adjustment period, while maintain- electricity. However, the extent of cross-subsidization ing a reasonable level of cross-subsidies to allow a life- across customer segments is projected to decline. Under line tariff for the poor households. In this process, how the government-approved implementation of the gradual EDl performs as a profit-oriented company versus the tariff adjustment process, most customer segments will costs of social goods achieved will be easier to delineate. start generating revenue that exceeds the cost of supply The tariff adjustment is also driven by other underlying to its tariff class (figure 4.6). 16. When long-run marginal costs of supply were 116 kip (US¢ 5.4) per kWh and 66 kip (US¢ 3.1) per kWh for residential and agricultural consumers, respectively. FiGure 4.6 electricity tariFFS aNd loNG-ruN marGiNal coSt, by cuStomer SeGmeNt 1,400 2,500 1,200 2,000 1,000 1,500 800 Kp/kWh Kp/kWh 600 1,000 400 500 200 0 0 LT LT LT LT LT LT LT MT MT MT MT MT MT HT LT LT LT LT LT LT LT MT MT MT MT MT MT HT Res Int Com Ent Gov Agr Ind Res Int Com Gov Agr Ind Exp Res Int Com Ent Gov Agr Ind Res Int Com Gov Agr Ind Exp Unit rev Unit cost Source: EDL Tariff Study Update Project, International Development Association (IDA) June 2009. Abbreviations: Low-Tension (LT), Medium-Tension (MT), Residential (Res), International Organization (Int), Commercial (Com), Entertainment (Ent), Government (Gov), Agricultural, Irrigation (Agr), Industry (Ind). 5 making the Poor Count— targeting the Gender Dimension of rural Electrification Despite the rapid and remarkable achievement of the Lao electrification program in reaching a national connection FiGure 5.1 coNNectioN rate, by yearS SiNce Grid rate of about 69 percent of all households, around 20 to reached villaGe 40 percent of households in connected villages—mainly 90 All households poor—have remained without a connection for a long …then it takes 7 years 80 Another 10% for the next 105 to connect time. Most cannot afford the upfront connection charge; connect in the Number of households next two years… Poor households 70 some simply choose not to connect. 54% connect in first year 60 Especially revealing is an analysis over time of connec- 50 tion uptake rates (penetration) in village communities 40 following their connection to the grid. These historical 30 data indicate that about 60 percent of families are able 20 to mobilize sufficient cash to pay the upfront connection 10 charge within the first two years after connection to the grid and an additional 20 percent connect in the follow- 0 0 2 4 6 8 10 12 14 ing six years (figure 5.1). However, some 20 percent of Years since grid connection households remain unconnected, even 10 years after grid access, primarily because they cannot afford the average Source: IEG; Southern Provinces Rural Electrification Project (SPRE) upfront connection charge of kip 700,000 to kip 850,000 Performance Assessment Report 2008. (around US$87 to US$110). Results from a socioeconomic survey in June 2007 fur- ther revealed that poor households that remain uncon- by a well targeted subsidy mechanism. This provided nected tend to be disproportionately headed by women the rationale and case for the Power to the Poor (P2P) (often widows and divorcees). While female-headed program. households comprise 8 percent of all households, they account for 43 percent of poor households, mainly because they lack of the earning power of a male in their Power to the Poor (P2P) Program predominantly rural areas. The “Power to the Poor� (P2P) Program is a subsidized In light of the preceding, it was recognized that for the affordable connection and indoor wiring financing mecha- benefits of the national electrification program to reach nism implemented by EDL, with the support of MEM. all—including the very poor—and in order to realize the Designed with a gender focus, it offers the poorest rural government’s ambitious goal of 90 percent national cov- households, who cannot afford the entire upfront costs erage of all households by 2020, the connection cost of connection and internal wiring, access to the main barrier for the poor needed to be effectively addressed electricity grid for basic service. The objective is to raise 20 making the Poor Count 21 households below the poverty line and female-headed households—much in common household connection rates up to 85–90 percent in vil- sufficient to allow households to repay the connection lage communities connected to the grid. cost fully in three years. The program design utilizes participatory methods and gender-sensitive eligibility criteria and targets female- Pilot Phase headed poor households in particular. Eligible households , , Funded by EDC, GEF GAP and IDA, under the Rural receive the same no-cost “basic� 3/9 ampere meter (low Electrification Phase I Project, the P2P scheme was voltage), as provided by EDL to all households. This is pilot-tested across 20 selected villages in Champasak sufficient for an average household to run two light bulbs province, starting in the fall of 2008 and finishing by and a small electrical appliance, such as a radio. March 2009. EDL subcontracted with Electricity Con- struction and Installation (ECI), to provide the house wir- Eligible households pay at least 200,000 kip (about ing service. For eligible households, ECI provides a quote US$24) upfront on average. They can receive an interest- for the cost of wiring the household. EDL then provides a free credit of up to 700,000 kip (US$87) to cover the costs voucher to the household for a loan of up to 700,000 kip of installation and indoor wiring. The credit is paid back in (about US$87), and signs a contract with the household, equal installments of 20,000 kip (US$2.50) to EDL over agreeing that the household will pay back the loan and three years, as a part of the household’s monthly electric- cover the difference between the 700,000 kip loan and ity bill (that is, in addition to the electricity consumption the ECI quote, if any. charge for the month). In order to ensure efficient targeting of the truly poor and One of the key ideas of P2P is tp keep the monthly needy, several eligibility criteria were incorporated in P2P. expenditures of the targeted households for both the These included a gender-sensitive poverty criterion, to repayment of the interest-free credit and electricity con- determine eligible households (table 5.1), and input from sumption bills at the same level as their expenditures the village chief and village committee on who is poor for lighting before the connection to the grid. Once and not poor. In addition, gender-appropriate information connected, the typical beneficiary household’s repay- and dissemination materials highlighted the benefits of ment is about kip 20,000 (US$2.5), in addition to elec- electricity, and gender-inclusive consultation and partici- tricity consumption charges between kip 10,000 to kip pation was promoted, for example, by scheduling meet- 25,000 (about US$1–3), per month. By contrast, these ings at times women were likely to be available. households typically would be spending approximately kip 25,000 to 40,000 (about US$3 to USD$5) per month The P2P pilot was available only to those villages that had for vastly inferior traditional energy substitutes such as been electrified for more than two years, giving sufficient batteries, diesel lamps, or candles. The monthly savings time for those who were willing and able to pay the full in household energy expenditure are projected to be connection charge up-front to connect on their own. 22 Power to the People: twenty years of National Electrification in Lao PDr box 5.1 examPle: PhoSSaad villaGe uNder the P2P Pilot In 2002, EdL expanded its power grid to the Phossaad Village, located in Champasak Province in southern Laos, through the World Bank-supported Southern Provinces Rural Electrification Project (1998–2004). At the end of 2008, before the P2P pilot began, 63 of the 270 households in the village were not connected to the grid because they could not afford the cost of connection. In approximately one month between February and March of 2009, all 63 households were connected to the grid through the P2P pilot, with the connection rate in the village jumping from 77 to 100 percent. Phossaad village edl staff visiting a female-headed household in Phossaad Pilot phase results. Implementation of the pilot phase Program design was far greater, from 63 percent to 90 resulted in 537 newly electrified households, of which percent (table 5.3). 68 were female-headed, and in an increase in overall connection rate from 78 percent to 95 percent (table Of the remaining 145 non-eligible households in the 20 5.2). When considering only female-headed households, pilot villages, 46 (32 percent) were considered not poor the increase in connection rate attributable to the P2P enough. Many of these families had just built a new table 5.1 evaluatiNG eliGibility to ParticiPate iN P2P Step 1: Determine if the household has permanent housing that is safe to electrify: Is the house safe to be electrified? An eligible participant must live in a structure that is safe to electrify. Step 2: Determine if the household is poor: Household has a rice shortage at least 6 months per year Or Household does not have any livestock Or Household has access to less than 1 ha of land for rice cultivation Or Household cannot finance medical costs Or Household is female-headed An eligible participant must meet at least one criteria. A household is eligible for support if it has housing that is safe to electrify AND meets at least ONE of the poverty criteria. Source: P2P Training and Implementation Manual. making the Poor Count 23 box 5.2 PoWer to the Poor (P2P) ProGram: the voiceS aNd FaceS oF Some oF the beNeFiciarieS Ban Nongbung, a village in Champasak, Lao PDR’s most southern province. It was electrified in 2003, but not all village households were able to connect; they were simply too poor and could not afford the upfront connec- tion costs. With the assistance of the P2P program managed by EDL, several poor households and female-headed households, such as Ms. Phanh’s, were able to connect in 2009. ms. Phanh is a 57 year-old divorcee in normal health. She has been living on her own for 20 years, as her adult children have moved away. Her home is made of wood and thatch and consists of one very small room, where she sleeps, and an equally small covered porch area. She works for 6 to 7 hours per day finding fish, frogs, and bamboo shoots for her own subsistence and to sell, as her only income generating activity. She earns around 50,000 kip (about US$6.25) per month. Other than this work, she is unemployed, as local opportunities are for manual labor in the fields, for which men are favored. Her income is often insufficient to meet her needs, and she depends on her son for additional food and money. Since her home was connected in April 2009, Ms. Phanh has been using the electricity mostly for lighting and operat- ing some small appliances. She consumes a very small amount of electricity per month, approximately 14 kWh. For this she pays approximately 2,842 kip (about US$0.35) and in addition the 20,000 kip (about US$2.50) for repaying the P2P credit provided by EDL to cover the upfront connection costs. Now that Mrs. Phanh has electricity, she hopes to purchase an electric water pump for irrigating a small vegetable garden she would like to plant near her home to earn additional income. Deuaytia village, mounlapamok District—A man tending his four chil- dren while his wife works in the rice paddy. “Before, I used to share electricity with my neighbors, but now I have my own. I am very happy and it will support me to do work at night. At the same time, my children will be able do their homework in the evening. I also plan to buy a water pump so that I can bring water from the river which will reduce time and energy from having to carry bucket of water home. � Khaidiow village—A grandmother who looks after her six grandchil- dren while their parents are away working in the city shares her heart- this father is thankful that his children can felt feelings: “This is my long-awaited moment to have electricity in my do their homework in the evening. house. In all my 78 years of life without electricity, now I am speechless and delighted to see my house bright and I can see all my grandchildren’s faces clearly at night...hopefully, my grandchildren will be able to benefit from having electricity, not only in agriculture work, but also for their education as well as finding some part-time activity that they can do at night to earn income for the family. � For Grandmother chanh, this is a long-awaited opportunity. 24 Power to the People: twenty years of National Electrification in Lao PDr table 5.2 Grid-coNNected houSeholdS (hh) table 5.4 NoN-eliGible houSeholdS (hh) iN the 20 Pilot villaGeS reason for No. of % of No. of hh % of all hh Non-eligibility Non-eligible hh Non-eligible hh All HH 3,057 100 All non-eligible HH 145 100 HH connected before P2P 2,375 78 Not poor HH 46 32 HH connected through P2P 537 18 Too far away HH 57 39 Total HH connected after P2P 2,912 95 Too Poor HH 42 29 Source: Rapid Assessment of Power to the Poor Pilot Project. Total HH un-connect after P2P 145 5 Sunlabob May 2009. Source: Rapid Assessment of Power to the Poor Pilot Project. Sunlabob May 2009. table 5.3 Grid-coNNected Female-headed house, some even with concrete, and were considered houSeholdS (hh) iN the 20 Pilot villaGeS by the village chief or the survey team able to mobilize the money to cover the connection costs in the near future. The remaining 57 households (39 percent) were No. of Percentage located too far away from the electricity source. Finally, No. of all connected of connected 42 households (29 percent) were considered, or consid- female-headed female-headed female-headed ered themselves, too poor to even join the program, as Period hh hh hh they would not be able to pay the extra monthly cost Pre P2P 247 155 63 of 20,000 kip (about US$2.5) (table 5.4). Together these Post P2P 247 223 90 poorest of the poor families represent about 3–4 percent Source: Rapid Assessment of Power to the Poor Pilot Project. of all households in the 20 pilot villages. Sunlabob May 2009. FiGure 5.1 P2P revolviNG FuNd FloWS EDL, IDA, GEF, AusAID grant P2P repayment $80 EDL operational EDL P2P account US$2.5/month revolving fund US$1.5/month US$2.5/month Monthly bill Electricity P2P $80 Contractors tariff repayment Poor Households Coupons for households to pay contractors for connections Source: Authors. making the Poor Count 25 The broader development objective of the P2P pilot was monthly expenditures for lighting before the connec- to assess the effectiveness of the targeted connection- tion by the traditional means (e.g., candles, diesel charge subsidy and financing scheme as an efficient and lamps, and car batteries). The process is explained effective means for subsequent scale-up to help increase below. the connection rate in already electrified villages, in sup- – A coupon with a face value up to 700,000 kip is ’s port of the aim of achieving the GoL 2020 target of 90 provided upfront to eligible households for the percent household access. The pilot phase overwhelm- households to pay contractors for connection ingly achieved this objective: the household connection charges. rate at the end of the pilot program varied slightly across – Households can use the coupons to pay local the 20 villages, but the range of from 84 percent to 100 contractors that they can choose for the cost of percent signaled success. In 16 villages, the pilot pro- connection (up to 700,000 kip). If costs exceed gram raised household connection rates between 90 700,000 kip, the household pays the additional and 99 percent. In two others, it achieved a 100 percent amount. The households and the contractors household connection rate. Only in 2 of the 20 villages sign the coupon, indicating the specific amount was there a connection rate lower than 90 percent at the paid off with the coupon. This is done after the end of the pilot phase. Looking at another metric, among connection is completed. The actual amount of all households in the 20 villages, only 5 percent remained the interest-free credit must equal the amount without a formal grid connection at the end of the pilot shown on the signed coupon. phase.17 – The contractors get reimbursed by EDL with the P2P Revolving Fund by submitting the signed bottom line—P2P mainstreaming is underway countrywide. coupons. In 2009, buoyed by the promising results of the pilot, EDL – EDL enters the information into its computer- decided to scale up the P2P Program under the Rural ized billing system, which will generate monthly Electrification Phase II Project to all electrified villages bills with two items listed: the P2P credit repay- in the country. The P2P program will target an additional ment and the electricity consumption bill. 8,000 households in the next three years. To support the • Villages electrified for at least one year can become scale-up, EDL has employed teams to work with all of eligible. the provincial offices of DOE and MEM to implement • All female-headed households are eligible. . the P2P A P2P Revolving Fund was established within • All families with disabled members are eligible; EDL to provide interest-free credit to targeted disad- • The household must reside in a house that would be vantaged rural households. IDA and AusAID contributed safe for electrification. US$600,000, respectively, to the fund. Norad provided • ’s EDL monitoring system keeps track of the number funds for training provincial teams of EDL and MEM prior of female-headed households as well as households to implementation of the P2P scale-up program. Cou- that include any people with disabilities who have pons with a face value of up to 700,000 kip (US$87) have benefited from the P2P Program. been widely distributed to eligible households. The eligi- bility criteria have been modified to include more benefi- EDL has mainstreamed the P2P Program into its rural ciary households. The key features of the P2P scale-up electrification program. It has set up the fund and the program are summarized below: institutional arrangements for implementation at both its headquarters and at provincial branch offices. Its com- • A P2P Revolving Fund was established by EDL to puterized billing and accounting system was modified to provide financial support to the targeted beneficia- enable the inclusion of the P2P program and it was then ries. It was capitalized with IDA and AusAID grants. rolled out to all the provincial branch offices. The monitor- • The Fund provides an interest-free credit to eligible ing system for the P2P program, including gender indica- households. The monthly repayment to the credit is tors, has been mainstreamed into the monitoring system designed to keep the monthly expenditures of the for rural electrification and has been deployed in each of households for both the credit repayment and elec- the provincial branch offices for regular data collection tricity consumption bill at the same level as their and monitoring. Significant results have been achieved to date, far exceed- . 17 Detailed analysis of the pilot phase (table 5.4) also revealed that while the program was designed for and aimed at poor households, ing the target of 8,000 households. EDL reported that, to it did not reach the very poorest of the poor at the bottom, who can- date, 20,394 disadvantaged households were connected not afford to take the loan; nor those few families who live on the to the grid through the P2P program, and among these outskirts of the village, some even in the middle of the rice fields, beneficiaries were 1,101 female-headed households and well beyond the reach of a cost effective service connection. 26 Power to the People: twenty years of National Electrification in Lao PDr 606 households with disabled family member(s). This • There should be several entry points for addressing contributed to an increased access rate in Lao PDR of 69 gender issues in rural electrification projects. percent in 2009 to 73 percent in 2010. Since each of the • Addressing gender issues requires a slightly differ- beneficiary households are paying US$2.5/month, about ent focus and approach but is not “rocket science. � US$50,000 are flowing back to the P2P Revolving Fund • A commitment to “go the extra mile� is essential. monthly and this reflow is increasing, which will enable • Additional resources are needed but a small amount even more disadvantage households to benefit from the of money can go a long way. P2P program. • In the end, addressing gender issues is a smart way to make rural electrification effective and its impact Gender sensitive approach: key lessons and experiences. more inclusive. The key lessons and experiences that can help ensure that the P2P program is gender sensitive are summa- A video, Lao PDR: Rural Electrification for All—A Gender rized below: Lens, is posted on YouTube at: http://www.youtube.com/ watch?v=h-DY3T_1RPI&feature=player_embedded 6 Off-Grid Electrification— reaching Out Beyond the Economic Limits of Grid rollout Context: Grid rollout—So Far So Good over-optimistic. In February 2001, the GoL transferred responsibility for the pilot program to a dedicated entity in Of the 69 percent national coverage by year-end 2009, the Ministry of Infrastructure and Handicrafts (MIH), now off-grid electrification—based on solar, micro hydro, and known as the Ministry of Energy and Mines (MEM). The biomass, and implemented by both the public and private Off-Grid Promotion Support Office (OGS) in the Depart- sectors—provided access to about 2.5 percent of house- ment of Electricity of MEM was established to manage holds in remote rural areas where the grid cannot reach the program (figure 2.2). In March 2001, MEM’s Power in the short term. Covering the remaining distance to Sector Policy Statement established the policy and regu- achieve the government’s target of 90 percent access by latory mandate for Provincial Energy Service Companies 2020 will call for a far greater role for off-grid delivery sys- (PESCOs) as intermediary entities to plan, help organize tems in this decade than in the last, as the costs of grid- and install, and then provide ongoing support to off-grid based connections at the margins continue to rise rapidly. schemes in rural areas of Lao PDR. Recognizing that off-grid electrification would have to become an integral component over the long run, and a Supply and Service Delivery Chain sizeable complement to grid rollout, in 1999 the GoL— with support from the donor community and working The SHS pilot program was implemented by small pri- with the private sector—initiated an off-grid pilot program vate companies based in the respective provincial capi- to establish the capacity for sustainable implementation tals. Under the model adopted by OGS, these private of off-grid systems. The emphasis was on cost recovery companies—PESCOs—work in cooperation with the from operations and the use of low-cost technologies. Provincial Department for Energy and Mines (PDEM) The program focused primarily on the delivery of SHS to offices responsible for rural electrification. PESCOs have villages not expected to be connected to the grid in the a participatory planning process, designed by OGS, that next 10 years. identifies villages that meet the off-grid criteria, pro- cures equipment, and employs village energy managers (VEMs) who are responsible for installing and maintain- institutional Framework for the ing the systems and collecting bill payments. Payments SHS Program to the PESCOs and VEMs themselves are linked to their performance in planning, installation, and payment col- The SHS program was initiated under the Southen Prov- lection and reporting. inces Rural Electrification Project (1998–2004). It was originally housed in and implemented by EDL. EDL Scale-up beyond initial pilot phase. At the end of the pilot already had its hands full orchestrating the ambitious project in 2004, more than 5,700 SHS were installed grid rollout program, and the ex ante expectation that in more than 50 villages in 6 provinces, especially in the pilot program would be commercially viable proved recovering full operational cost and partial capital cost. 27 28 Power to the People: twenty years of National Electrification in Lao PDr table 6.1 Solar home SyStem oPtioNS aNd PaymeNtS monthly Payments for Solar kit (kip/month) installation fee 5-year repayment period 10-repayment period kip uS$ kip uS$ kip uS$ 20W 160,000 19.94 20,000 2.49 10,000 1.25 30W 190,000 23.68 30,000 3.74 15,000 1.87 40W 220,000 27.41 40,000 4.98 20,000 2.49 50W 250,000 31.15 50,000 6.23 25,000 3.12 Source: Department of Electricity. The dissemination model proved to be successful overall, (about US$16), then lease the system and make monthly warranting further donor support to scale up the program payments of between kip 10,000 to kip 25,000 (about to another 10,000 households and in all provinces— US$1 to US$3) over 5 or 10 years. The household can and to test alternative energy technologies other than chose the 5- or 10-year lease term depending on the SHS, such as village hydro and village hydro and gen- affordability of the monthly payment. They become the erating sets (VHGS). This program has been underway owners of the system at the end of the lease period. The since 2006. least expensive panel costs 10,000 kip (about US$1) per month for 10 years (table 6.1). Financing and Pricing— The solar power is routed through a charge controller to a Hire-Purchase Scheme deep-cycle battery for recharging, which can then power light bulbs, radio, and TV for up to four hours per day. This Solar home systems are available to remote households allows villagers, who generally cannot afford more than through hire-purchase agreements. Households have kip 15,000 (US$1–2) per month for electricity and a cost a choice of a range of solar PV panel sizes and pay an per connection of approximately kip 2.4 million (US$300), installation fee, the lowest of which is about kip 130,000 to receive solar home systems. FiGure 6.1 ProGreSS oF ShS coNNectioN From GoverNmeNt ShS ProGram 1999–2009 14,000 Number of connections 12,000 10,000 8,000 6,000 4,000 2,000 0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Year Source: Department of Electricity. Off-Grid Electrification—reaching Out Beyond the Economic Limits of Grid rollout 29 SHS Program Experience to Date FiGure 6.2 Number oF ShS iNStalled by Size By the end of 2009, PESCOs were active in every 1999–2009 province, covering more than 200 villages and having delivered more than 13,00018 solar home systems to rural households with the grant funding from IDA and AusAID (figures 6.1 and 6.2). An additional 10,000 solar home systems are to be delivered under the proposed Rural Electrification Phase II Project supported by IDA, , AusAID, GEF and Norad. The delivery model involving PESCOs and VEMs as implementing agents has proved 20W 30–40W 50W 55W+ to be moderately sustainable, as customer payments System type flow into a revolving fund that finances the costs of installation, management, maintenance, and payment Source: Department of Electricity. collection. Beyond operational expenses, the off-grid pro- gram arrangement generates reflows that can finance additional systems for distribution to new customers. village who is willing to be trained to become the VEM Customer repayment rates are reported to be in the and be responsible for daily maintenance, basic trouble- high 90th percentile on a continuous basis. A key fac- shooting, and collection of fees. tor in achieving high household penetration rates and high repayments rates is the participatory approach of Program impact. Most significantly, in off-grid communities the village identification process. The design of the pro- that have benefited from the SHS program, it is evident gram requires close collaboration with village commit- that the there can be a transformational impact on off- tees and relies on at least one representative of each grid community dwellers, even from the small amounts of electricity provided by solar PV systems (box 6.1). 18. Over 15,000 SHS have been installed under the off-grid program, however, approximately 13,000 are in operation. The gap is mostly charting the course ahead—reaching the population well the result of the withdrawal of SHS from households that gained beyond the economic limits to grid rollout. The vast majority access to the grid. As mentioned in annex B, over 19,000 off-grid households had been electrified by the end of 2009. Of this 19,000 of connections to date (67 percent of the 69 percent cov- the majority of households are beneficiaries of the government SHS erage) have been made by extending the grid in a cost- program, and to a lesser extent, other technologies such as village effective way, involving a least-cost rollout plan together hydro. Beyond the 19,000, the private sector, such as Sunlabob, con- with a simple but rigorous prioritization and the village tributes an additional 10% of electrified households, mostly solar home systems. screening process. The signs now are clearly that this box 6.1 Productive uSeS oF Solar home SyStemS Small amounts of electricity making a big differences in the lives of rural communities Nongsala village, Champasak Province. Pakse is a city in southern Lao PDR, situated at the confluence of the Xedone and Mekong Rivers, with a population of 70,000. It is the larg- est city in Champasak province and its capital. Several kilometers outside Pakse lies a small village, just a few kilometers from the main road, named Nongsala. Although Nongsala is rela- tively close to the main road, the ancillary roads leading to the village are extremely rugged and inaccessible by most motor vehicles. Coupled with the village being beyond the reach of the medium-voltage lines from the nearest substation, its inaccessibility has left it uncon- nected to the power grid, and it is not expected to be connected for years to come. Nongsala is one of 33 villages in Champasak province participating in the off-grid electrification pro- gram managed by the Ministry of Energy and Mines (MEM) and implemented by Provincial Energy Service Companies (PESCOs) and their village-level staff—the Village Energy Manag- ers (VEMs). In 2003, Mr. Chan Samone, who had some technical experience as an electrician and small entrepreneur, applied to be and was selected as the PESCO for Champasak and mr. chan Samone, PeSco, champasak and attepeu (continued) provinces 30 Power to the People: twenty years of National Electrification in Lao PDr box 6.1 coNtiNued , Attepeu provinces. In 2007 the program reached Nongsala village, where Mr. Samone now employs Mr. Seng and Mr. Khampon, who were formerly farmers, to install SHS, provide maintenance, and collect payments on a full-time basis. Nongsala village has approximately 81 households that depend mostly on rice farming and some handi- crafts for their subsistence and income. Only a few households live below the poverty line; the major- mrs. tim and children, Nongsala village, ity earn approximately 1 million kip (about US$125) champasak province. per month. Approximately 10 percent of their income mr. Seng and mr. khampon, before connection was spent on energy-related expenses, mostly kerosene and wax vems of Nongsala village candles for lighting, and most households retired for sleep at about 7 or 8 PM. Now, 74 households use solar home systems of 20–50 watts. Almost overnight, these house- holds switched from reliance on traditional unsafe fuels to clean, safe, and far superior SHS for lighting and to charge their cell phones. Nearly all households immediately purchased black and white televisions, and on average now stay up until 10–11 PM. Villagers are able to work more at night, increasing their productivity and their incomes, thanks to better lighting. Several villagers, such as Mrs. Tim, have reported a 50 percent increase in earned income from the additional time spent on making handicrafts in the evening since the SHS was installed. mrs. tim lives in a household of eight people, including herself, her husband, and six children. They, like most other rural villagers, used to depend on kero- sene and candles that supplied very poor household lighting. Now, Mrs. Tim and her family are enjoying better lighting, watching their black and white television, and working later into the night to make brooms that are exported to Thailand. Their SHS system allows her to earn an additional kip 120,000 (about US$15) mrs. tim’s 50w solar panel. per week. modus operandi is increasingly becoming prohibitively Pending results of the Rural Electrification Master Plan expensive. More of the unconnected population lives in implementation, achieving the government’s 90 percent “deep rural� villages and scattered communities that are national coverage target by 2020 likely will require at least in very hard and costly to reach places, including many a three-to four-fold increase in coverage by off-grid solu- in mountainous areas. A telling statistic on this rapidly tions over this decade, from around 2.5 percent today to evolving cost structure is the near doubling of distribu- 7–10 percent of households by 2020. This is the central tion cost per grid connection over the course of the last implementation challenge to be tackled in the next stage .2 seven years, from around 7 million kip (about US$900) of Lao PDR’s highly successful national electrification today compared to 3.6 million kip to 4,4 million kip (about program. US$450–US$550).19 19. World Bank due diligence in preparation of the Southern Provin- cial Electrification Program (SPRE) in 2003 and the Rural Electrifica- tion Program Phase II (REP II) in 2009. Both figures include the MV, LV, service drop, house meter, and in-house wiring costs. APPENDix A Long-term Power Development Plan (2010–20) 35/22kV Nam Ou 7 M (IPPe) ek on g Nam Ngay Nam Ou 6 (EDL) IPP(e) BounNeua Phongsaly Liming (Chaina) Nam Boun 2, (Exstension) Phongsaly (EDL) Nam Ou 5 Meng La (Chaina) (IPPe) 35/22kV 10kV Nam Ou 4 Luang NamthaTha 3, Nam Namo SwS (IPPe) Nam Long (EDL) Nam Phak, IPP(d) (EDL) Nam Pha, LuangNamtha 1 Nam Ma 3, IPP(d) Nam ko Namo SwS (EDL) IPP(d) Nam Ou 3 35kV Viengphukha (IPPe) To VietNam Ton Pheung (LNT 2) Oudomxai Nam Ma 2, IPP(d) Nam Nhon Oudomxai Luang Prabang Xammeua Nam Ma 1, IPP(d) Pakmong Pakmong IPP(d) Nam Thoung SwS Xamneua1 Nam Ou 2, IPP(d) Nam Sim Houayxay Nam Tha 1, IPP(d) To Huao Namh 22kV IPP(d) Nam Ou 1 Mekong Nam Xam 3 To Xieng Khong (IPPe) Nam Seuang 2, Bokeo Luang prabang, IPP(d) IPP(e) Nam Xam1 PEA Mekong Pakbeng IPP(e) Nam Seuang 1, Huaphanh IPP(e) g Mekon Sen souk IPP(d) Pakbeng, Luang Prabang1 IPP(e) Nam Beng IPP(d) Nam Dong Nam Khan 3, (EDL) (EDL) Nam Khan 2, 22kV (EDL) Luang Prabang 2 M.Kham (Xieng Ngeun) 22kV Hongsa Lignite IPP(e) Nam Ngum 4, IPP(d) Xieng Khuang 22kV To ThaWang Pha Nam Ken Phonsavan Mekong IPP(d) Sayabouly, Nam Ngiep 2, Nam Ngum 5 Sayabouly IPP(e) Nam Sana, IPP(d) Nam Ngiew IPP(d) Nam Chien, To VietNam IPP(d) IPP(d) (EDL) To Mae Moh Nam Ngum 3, Nam Mo 2, Nam Phai, IPP(e) Nam Pot Thavieng IPP(d) IPP(e) IPP(d) VangVieng Vientiane Nam San3, IPP(d) Phubia Mining Thongkhoun 2 Nam Song (EDL) Nam San3,(Down) Nam Lik1/2 (Extension) .Nam BakThong Khoun1 1 IPP(d) Nam Ngum 2, IPP(d) Nam Phouan IPP(d) Xayaboury Ban Don IPP(e) Nam Lik 1, IPP(d) Nam Ngeip 1, Nam Phao, IPP(d) Hinheup IPP(d) Nam Mang 1, IPP(e) Bolikhamxai g Nam Ngum 1, on IPP(d) Mek (EDL) Thalat Km20 Non Hai NamTheun1, IPP(e) Paklay Phonsoung Nam Mang 3 Nam LeukThabok Pakxan Mekong Nam Gnuang8, (EDL) (EDL) IPP(d) Thasala Iron melting Nabong1 Theun Hinboun, Naxaythong Tha Ngon Nam Ngum (Down) Bung kan IPP(e) Kengseuaten IPP(d) (Extension) (EDL) g Sanakham on Pak Thang N Viengkham Nabong ek Mining M Phontong Khoksa-at Khonsong Nam Hinboun, IPP(d) Nam Ham2, Donkoi Thanaleng IPP(d) 22kV Vientiane Capital Nong Khai Nam Theun 2, IPP(e) Nong Khai Ban Veun SwS Cement factory (at Mahaxai) Mahaxai Tha Li Xe Neua, PEA IPP(d) To Khon Kaen Nakhon Phanom Thakhek Khammouan To Udon3 Sakon Nakhon Sepon Mining M. Phin Ban Na (Seno) Tadsalen, IPP(d) Pakbo 35/22kV Mukdahan Nongdeun Kengkok Savannakhet Xepon3 (Down), IPP(d) Xelanong 1, IPP(d) 35/22kV Xebanghieng 1, M. Nong Xepon3 Up, To Roi Et 2 IPP(d) IPP(d) Mek ong Xekong 5, Xelanong 2, IPP(d) IPP(e) Saravan Taothan Xedon 2, M Kalum 300 IPP(d) (Lignite) IPP(d) Saravan Sekong 22kV Xeset1(EDL) Xekong 4, Xekaman 3, IPP(e) Sekong IPP(e) To Vietnam Selabam(EDL) Xeset3, Xekong 3Up, Extension Xeset 2 (EDL) IPP(e) (EDL) Xekaman 4B Xenamnoy1 Xekaman 2B, IPP(e) H lamphanh Gnai, Houay Champi (EDL) IPP(d) IPP(e) IPP(d) Xekaman 2A, Xekatam Xekong 3Down, Jiangxai Xeset4 IPP(e) Xekaman 4A, IPP(d) IPP(e) Attapeu Pak Xong (EDL) IPP(e) Bang yo Houay Ho, Xekaman 1, To Ubon 2 Nam Phak IPP(e) Houy katam Xepian- IPP(e) IPP(d) Xenamnoy, Ban Sok IPP(e) Xekaman-Sanxai, To Ubon3 Sirindhorn Ban.Lak 25 IPP(d) 22kV SLACO Saphaothong g on ek M Ban Na Hat Xan Champasak Nam Kong 1, IPP(e) Nam Kong 3, IPP(d) Nam Kong 2, IPP(d) To Plei Ku BanHat B.Tha kho T-off MK-Tha Kho, IPP(d) MK-DoneSahong, IPP(d) To Stung Treng As of 27 Juner, 2011 LONG-TERM Figure : 3.4-4 POWER DEVELOPMENT PLAN Planned Power System Diagram (PDP2010 - 20) in year 2020 ELECTRICITÉ DU LAOS Technical Department Power System Planning Office lt[a[xa[xF'.s,jXc8jpa'[+lq,[6o? Source: EdL, 2011. 31 APPENDix B National Electrification results in Lao PDr (1993–2009) year households households electrified Percentage edl connections Percentage Non-edl 1993 102,900 101,138 1,762 1994 111,200 111,226 -26 1995 754,265 120,100 16 117,922 16 2,178 1996 758,036 136,280 18 134,084 18 2,196 1997 761,808 196,998 26 165,308 22 31,690 1998 765,579 226,004 30 198,330 26 27,674 1999 768,142 254,610 33 226,317 29 28,293 2000 818,668 293,495 36 249,648 30 43,847 2001 866,277 303,690 35 273,825 32 29,865 2002 875,744 337,363 39 307,521 35 29,842 2003 892,872 368,259 41 363,141 41 5,118 2004 931,000 428,086 46 411,762 44 16,324 2005 935,019 459,077 49 458,985 49 92 2006 958,955 504,000 53 465,988 49 38,012 2007 982,485 536,727 55 518,841 53 17,886 2008 1,011,778 597,428 59 577,355 57 20,073 2009 1,011,800 700,547 69 681,113 67 19,434 Source: EDL Statistics 2009. Note: *To expedite the process of electrification and reduce distribution loss, EDL has tapped into power supplies from neighboring countries. Currently, four provinces in the north—Luang Namtha, Huaphanh, Bokeo and Xayabury—are electrified with power supply from China and provincial electric authorities, and eight border villages in the south are supplied by power Sources from Vietnam. 98,016 households that account for 14 percent of households electrified are supplied with power from foreign sources. 32 APPENDix C Percentage of Households/villages Electrified, by Province (1995 vs. 2009) PerceNtaGe oF houSeholdS electriFied PerceNtaGe oF villaGeS electriFied 1 0 Sekong 45 Sekong 33 3 3 Attapeu 40 Attapeu 42 5 4 Saravan 67 Saravan 61 13 14 Champasack 81 Champasack 75 16 5 Savannakkhet 76 Savannakkhet 60 15 16 Khammoune 83 Khammoune 72 2 2 Bolikhhamxay 83 Bolikhhamxay 74 61 62 Vientiane Capital 99 Vientiane Capital 100 25 14 Vientiane 86 Vientiane 90 7 4 Luang Prabang 60 Luang Prabang 61 2 1 Xieng Khuang 47 Xieng Khuang 47 3 1 Xayabury 73 Xayabury 61 1 0 Oudomxay 31 Oudomxay 56 4 2 Bokeo 62 Bokeo 66 1 0 Huaphanh 36 Huaphanh 24 2 4 Luang Namtha 51 Luang Namtha 54 2 1 Phongsaly 12 Phongsaly 7 1995 2009 Source: 1) Ministry of Industry and Handicrafts September 1995. 2) Department of Electricity. 33 APPENDix D Lengths of High-, medium-, and Low-voltage Lines Province high-voltage medium-voltage low-voltage Shield transmission distribution Shield wire th. Phase SWer th. Phase SWer wire 230kV 115kV 35kV 34.5kV 25kV 22kV 12.7kV 0.4kV 0.22kV 0.22kV Vientiane Capital 357 1,433 2,006 Phongsaly 73 46 Luang Namtha 1 199 156 Oudomxay 135 105 Bokeo 351 214 Luang Prabang 146 14 144 397 287 Houaphan 164 78 153 Sayboury 75 80 467 488 Xiengkhuang 181 94 94 173 Vientiane 220 68 20 1,126 1,023 114 22 Bolikhamxay 85 793 20 698 5 Khammouane 1,343 68,991 765 29 Savannakhet 52 1,796 1,446 Saravane 2520 734 25 600 Sekong 198 22 147 Champasak 235 1,372 1,948 Attapeau 113 169 117 total 247 1,463 2,685 256 164 10,757 69,057 10,372 114 56 Source: Tables 10 and 11, Electricity Statistics Yearbook 2007 of Lao PDR, Department of Electricity, Ministry of Energy and Mines; original data. From Provincial Department of Energy and Mines, Lao PDR. 34 APPENDix E major Grid Extension Projects Sponsored by ADB and the World Bank institution households total Grid off-Grid capacity others electrified uS$ uS$ uS$ building uS$ villages Projects Period agency million million million uS$ million million electrified Grid off-grid Vientiane Plain Rural 1987 (end) ADB 7.20 7.20 - 7.20 - n.a. n.a. - Electrification Project—I Vientiane Plain Rural 1990 (end) ADB 10.30 10.30 - - - n.a. n.a. - Electrification Project—II Nam Ngum-Luang Pra- 1989–98 ADB 20.30 20.30 - - - n.a. 5,200 - bang Power Transmission Power Transmission and 1997–2002 ADB 58.31 51.25 - - 7.06 350 30,700 - Distribution Northern Area Rural 2004–09 ADB 51.51 51.51 - - - 421 27,000 - Power Distribution (NARPD) ADB subtotal 147.62 140.56 - 7.20 7.06 771 62,900 - Southern Province Elec- 1988–94 WB 30.44 26.64 - 1.34 2.46 147 8,354 - trification (SPE) Provincial Grid Integra- 1993–2000 WB 47.52 32.89 - 1.63 13.00 439 33,478 - tion Project (PGI) Southern Province Rural 1998–2004 WB 41.41 31.72 2.31 7.39 - 721 51,805 6,097 Electrification (SPRE) Rural Electrification 2006–10 WB 36.27 26.40 2.37 2.00 7.50 540 42,000 10,000 Project I (ongoing) World Bank subtotal 155.64 117.65 4.68 12.35 22.97 1,847 135,637 16,097 ADB and World Bank 450.88 398.76 4.68 26.75 37.09 3,389 261,437 16,097 subtotal LAO PDR PDR 1975–2009 Lao 215.26 213.93 1.33 0.00 0.00 1,890 419,676 3,337 (GoL, EDL, and PDR Consumer) Domestic subtotal 215.26 213.93 1.33 0.00 0.00 1,890 419,676 3,337 total 666.14 612.69 6.01 26.75 37.09 5,279 681,113 19,434 Source: The World Bank, ADB and EDL. 35 APPENDix F Development Projects of transmission and Distribution in Lao PDr development Projects Status agencies Southern Province Electrification (SPE) Completed World Bank Provincial Grid Integration Project (PGI) Completed World Bank Southern Province Rural Electrification (SPRE) Completed World Bank Power Transmission and Distribution Project (PTD) Completed ADB Rural Electrification Project I (REP I) Ongoing World Bank Rural Electrification Project II (REP II) Preparation World Bank Northern Area Rural Power Distribution Project II (NARPD II) Ongoing ADB Northern Area Rural Power Distribution Project I (NARPD I) Completed ADB Vientiane Distribution System Improvements (VDSI) Completed ADB Off-Grid Renewable Energy Electrification Project Ongoing UNDP/GEF Southern Provinces Transmission Development I Ongoing China Export-Import Bank Southern Provinces Transmission Development II Ongoing India Export-Import Bank Transmission Development Project Ongoing Lane Xang Minerals, Ltd. Transmission Line and Substation System Master Plan Completed JICA Institutional Development for Off-Grid Electrification Completed ESMAP Power Sector Policy Reform Completed Public-Private Infrastructure Advisory Facility Xeset 2 Hydropower Project Ongoing China Export-Import Bank 115 KV transmission Line Ongoing Namo-Lao-China Border 115 KV Transmission Line Ongoing Thakhek-Cement Factory-Mahaxai GMS Northern Power Transmission Line Project Preparation Multilateral 230 kV Transmission Line Ongoing Hinheup-Naxaythong 115 KV Transmission Line Ongoing Hongsa-Luangprabang 115 KV transmission Line Ongoing Phosavanh-Xamneua 36 APPENDix G World Bank Engagement Bank support for the energy sector in Lao PDR can be • initiated an Action Plan for Financial Sustainability of traced back to 1966–1971, when the Nam Ngum Dam ’s the Power Sector (2005–13), aimed at EDL system project was completed (installed capacity of 30MW and loss reduction, tariff reform, and settlement of EDL ’s a total cost of US$28 million under an agreement with accounts receivable, and demand-side management the World Bank on the 1966 Nam Ngum Development and energy efficiency, Fund. This set the stage for the growth of EDL, which • provided capacity building toward commercial was created by decree on December 18, 1961. More operation of EDL, including corporate restructuring, recently, over the course of the last two decades, the financial management, billing and accounting, inven- following Bank projects have provided financing and tory and materials management, and integration of technical assistance aimed broadly at electricity access business at branches, and scale-up through EDL network extensions and customer • supported an enabling environment for private sec- connections, as well at support for off-grid program tor participation in off-grid renewable energy devel- development: opment for rural electrification. • Southern Province Electrification (1987–93); • Provincial Grid Integration (1993–98); mobilization of resources • Southern Province Rural Electrification (1998–2004); • Rural Electrification Phase I (2005–12); Given limited IDA allocations, the Bank played a pivotal • Rural Electrification Phase II (2010–14) role in mobilizing resources from other donors for rural electrification. Cofinancing mobilized to the RE Program includes investments • GEF—US$5.57 million, Of 570,000 new connections 1983–2009, Bank-financed • NORAD—US$14 million, rural electrification projects have financed over 20 per- • AusAID—$15.0 million for investment, cent (135,000 households). It is further estimated that • ESMAP—US$0.25 million, the MV network extensions financed under these Bank • PHRD—US$1.3 million, and projects directly facilitated an additional 20–30 percent • ASTAE—US$0.25 million for project preparation and of connections in the years immediately following Bank implementation TA. project closings, representing low-cost intensification undertaken by EDL using its own funds. Cooperation of iDA and iFC Capacity Building Under the RE Program, IDA developed business for IFC including (i) a US$15 million loan to cofinance the RE Bank projects have Phase II. • provided continued technical capacity building in formulating sector strategies, policies, and regu- lations, and in project implementation (planning, design, implementation, operations, procurement, safeguards), 37 The World Bank The World Bank Group Asia Sustainable and Alternative Energy Program 1818 H Street, NW Washington, DC 20433 USA www.worldbank.org/astae