Myanmar’s high growth in electricity demand — rising by around 13 percent annually — is a challenge for the government. Demand is estimated to reach 4,500 MW by 2020 and 13,410 MW in 2030. Currently there is no plan to meet this high demand.
High-level policy shifts and unclear policies within the cabinet and ministries have stalled even previously signed MoUs on power generation. The average interest rates on project loans are also increasing due to unstable policies and on-going armed clashes in proposed project areas. In addition, the proposed hydropower projects may take at least five years to begin supplying electricity.
Other short-term solutions to Myanmar’s energy crisis have been proposed. Other ideas include importing energy from neighboring states and even chartering a power generator ship; however, high cost coupled with a lack of asset gain convinced the government to halt these initiatives. Plus, ongoing conflicts in northern and eastern Shan State make it impossible to construct a cross-border power grid to import energy from cheaper sources, such as China and Laos.
Using natural gas is also an option but it would require upgrading gas turbines and reducing the government’s exports earnings, which makes up a large slice of national income.
Recent foreign investments in solar power provide a last hope for alternative energy solutions, but will not come closer within a year.
Meanwhile, the Japan International Cooperation Agency (JICA), Myanmar’s largest supplier of official development assistance (ODA), proposed an alternative recommendation: to develop coal power plants using the catchy term “clean coal.” Coincidentally or not, Japanese power giants have already invested to develop the coal plants in Myanmar; their projects have been stalled since the new administration shifted policy gears in 2016.
Recent quotations from Myanmar’s government ministers and National League for Democracy (NLD) party leaders on the use of coal power have sparked an outcry from environmental non-governmental organizations and civil society organizations.
The final public report has not been released yet, but Myanmar’s 2015 Energy Master Plan, which favors the replacement of hydropower with solar and coal, has been widely discussed within the policy community for some time.
Coal power is the preferred choice for the administration, as it is economically feasible to provide for the country’s urgent need of electricity. Foreign investment, development assistance, low interest loans, and most importantly a commitment to the lights on in the short term with flexible project locations makes so called “clean coal” power plants a favorable choice for the government. A coal power plant would take an average of three years from planning to plug in.
Within the region, the average cost of electricity breaks down as follows: solar at roughly $1 per 1kWh, wind at $0.8/kWh, coal at $0.6, imported energy at $0.5, and hydropower at $0.4. When combining the costs to build and operate plants and transfer power to the grid with offers of FDI and ODA, coal is the favorable choice, as no capital contribution is required from the government.
However, the market trajectory tells another story. From 2009 to 2016, the cost of solar and wind energy dropped more than 80 percent and 60 percent respectively, decreasing 11 percent annually on average. Advances in both technology and economies of scale make renewable energy competitive to conventional sources on the global market.
Meanwhile, higher production costs and environmental preservation costs made the cost of power from coal to increase by an average 5 percent annually. If this trend is maintained, the price of renewable energy will beat coal by 2020.
If it pursues the current plant, Myanmar may be stuck with increasingly expensive coal power and eventually left with power plants that are not economically feasible after years of operation. Under those circumstances, even ODA with low or no interest rates may not effectively benefit for Myanmar in the long term.
Meanwhile, Myanmar still lacks any comprehensive study on the quantity and quality of coal required to operate its planned coal power plants. According to initial assessments from other plants in the region, a specific coal quality is required. If Myanmar has to import specific types of coal to operate its plant, it may affect the national trade balance and increase energy dependency in the long run.
Myanmar and Greater Mekong Power Grid
A recent publication from the Stimson Center, “Mekong Power Shift: Emerging Trends in the GMS Power Sector,” describes Myanmar as the future battery of the region with the recommendations to import energy as a short-term solution and invest in becoming a long-term power exporter.
Myanmar has the potential to generate 104,000 MW from hydro and wind power alone and over 40 TWh /year from solar. Long-term investment in these fields may enable Myanmar to surpass Laos, which is currently largest power exporter in the Greater Mekong Subregion.
The timing is right for such an investment. The ASEAN power grid, endorsed in 2014, is now on track, and China is also planning to link up with this power grid. Completion of this project may create a boom in the regional power market.
With new dams on Yunnan’s major rivers, China can generate over 100 GW annually from hydropower alone. If all goes as planned, the surplus will be exported through the power grid across Thailand and Laos, and cost of energy imports will drop significantly.
If Myanmar plans for the long-term game in the region, renewable energy is the real game changer. Investing in the power grid is a strategic choice not only to make imports possible for short-term need but as an early bid to make Myanmar a player in the regional power market.
But pursuing that goal will require peace and political stability in ethnic states. Otherwise Myanmar as the battery of the region is just a castle in the air.
Amara Thiha is the Asia Foundation’s 2017 William P. Fuller Fellow in Conflict Resolution and a visiting fellow at the Stimson Center. The views and opinions expressed here do not necessarily reflect the policies or positions of the Asia Foundation and Stimson Center.