A call for basin-wide energy plans

Preparatory work for the next big dam on the Mekong -- Pak Beng -- in northern Laos has begun. This news supports the widespread narrative that the current rapid pace of dam construction on the Mekong River will continue until the entire river is turned into a series of reservoirs. Certainly the construction of even a few large dams will severely impact food security in the world's most productive freshwater fishery and sharply reduce the delivery of nutrient-rich sediment needed to sustain agriculture, especially in Cambodia and Vietnam's Mekong Delta.

However, our ongoing research and communication with regional policymakers provides compelling evidence that not all of the planned dams will be built due to rising political and financial risks in the region. As a consequence, we have concluded in our most recent report that it is not too late for the adoption of a new approach that would optimise the inescapable "nexus" of tradeoffs among energy generation, food security, and water use and better protect the core ecology of the river system for the benefit of future generations.

Our report, "A Call for Strategic, Basin-wide Energy Planning in Laos" discusses how risks to future dams are on the rise in the Mekong basin. For instance, the 2016 drought raised the question of whether the river can provide enough water in the future to make dams commercially viable, particularly with climate change predictions anticipating greater intensity of both droughts and flooding.

Likewise, China has still made no legally-binding commitment to regularly release water from its upstream mega-dams in the dry season so that downstream dams like Xayaburi and Don Sahong can produce firm, reliable power. Further, economic slowdown in China and Thailand puts a damper on future energy demand and also the ability for those countries to finance hydropower projects in Laos and Cambodia.

We believe that these and other risks make it increasingly likely that Laos and Cambodia will fall far short of current plans for more than 100 dams on the Mekong mainstream and tributaries. This reality will have particular implications for Laos, which seeks to become the "Battery of Southeast Asia" by setting the export of hydropower to regional markets as its top economic development priority.

Failure to complete all of the planned projects will lead to lower than expected revenue levels and will not deliver the hard currency needed to stave off future macroeconomic challenges. The reluctant recognition that Laos's hydropower dreams are in jeopardy may cause a reconsideration of its development policy options.

Already the Lao government has begun to make overtures to the US and other donors for assistance in managing the optimisation of its hydropower resources. This is not surprising since Lao decision makers depend almost entirely on outside developers to build out its planned portfolio of dams under commercial build-own-operate-transfer (BOOT) concessions. This development approach means that all of these dams are being constructed in a one-off, project-by-project manner with no prior input from the intergovernmental Mekong River Commission (MRC) or neighbouring countries, and few opportunities exist for cumulative impact assessments or coordination. As a result, there is little practical opportunity for synergistic planning that could optimise the benefits of water usage on a basin-wide scale.

By 2020 roughly 30% of the Mekong basin's power potential in Laos will be tapped by existing dams and those currently under construction. Beyond 2020 the prospect for completing the remaining 70 plus planned dams is unclear due to rising uncertainties and risks. As Lao officials begin to realise they will not necessarily meet their development goals, there will still be time for the Lao government to transition to a basin-wide, strategic energy plan that meets projected revenue goals while minimising impacts on key environmental flows through a combination of fewer dams and integration of other sources of clean energy generation such as wind and solar.

A key pillar of support for a strategic energy plan is investment in a national power grid that can provide reliable export of electricity to regional markets and meet domestic electrification needs. Laos currently has no connected national grid, which limits its ability to negotiate for favourable prices in regional energy trade because developers have historically built transmission lines directly across the border to neighbouring markets. In its southern provinces, Laos still imports power from Thailand at a much higher price than it sells power to Thailand in the north.

An effective national grid powered by fewer dams and a combination of other clean energy sources would provide flexibility to respond to dynamic swings in regional demand and assist Laos in managing a creeping excess in hydropower supply. The Asian Development Bank (ADB) has already scoped the design and funding package of a "backbone" grid, with an estimated cost of $400 million. This is only about one-fifth the cost of the pending Pak Beng dam.

The Lao government currently lacks the capacity and resources to implement a strategic, basin-wide energy plan. While much of the traditional official development assistance is shifting away from Laos to Myanmar and other parts of the region, a recent warming in the US-Laos relationship has opened the door to discussion of basin-wide power optimisation and improving stakeholder engagement. By our assessment, US assistance to date is of high quality but low on funding and frequency which limits outcomes.

To usher in an effective basin-wide energy strategy, the US should dedicate more resources, promote investment in the national power grid, and utilise its leadership in the region to marshal support from other Western donors and emerging regional economies like Vietnam to support necessary capacity building and infrastructure for regional energy trade.

To attract the right kind of energy planning support and make the shift to a strategic, basin scale focus, the government of Laos should better articulate its actual planning needs. Investment in a national power grid would be a step in the right direction.


Brian Eyler is Director, Southeast Asia Programme at Stimson Centre. Courtney Weatherby is a Research Associate, and Richard Cronin is a Distinguished Fellow at the centre.

About the author

Writer: Brian Eyler, Courtney Weatherby & Richard Cronin