Myanmar’s Energy Prospects, Emergency Tenders and Renewables

Katie Patterson of Myanmar Energy Monitor talks to The Myanmar Times about the impact of Myanmar’s electricity tariff hikes, next year’s blackout risks, the potential of renewables and the sector’s investment prospects
The Myanmar government has put in place the National Electrification Plan to achieve 100 percent electrification by 2030, but implementation is behind schedule, putting the country at risk of a potential energy crisis.

Electricity generation was 600 megawatts short of demand during this year’s hot season. As of now, there are 83 power plants in Myanmar, including 62 hydropower stations, 20 gas power plants, and one coal plant.
The current generation capacity is around 3.6 gigawatts.

In an interview, Ms Patterson, editor of FMR Research & Advisory’s Myanmar Energy Monitor, said that the electricity tariff hike has led to an uptake in solar power and that renewables should play a bigger role in the country’s energy mix.

The government estimates that power demand is growing by 15-17 percent every year. To catch up with this demand – and provide the additional 12.6 GW of electricity by 2030 – at least US$2 billion per year of investments are needed. This requires the right kind of energy developed in a responsible way, taking into account environmental and social impacts, land legacies and desire of ethnic groups for revenue sharing in areas where the natural resources are located.

Under the current administration, very few energy proposals have materialised into contracts so far.
The ministry in June issued five expensive emergency-power project tenders to prevent repeating blackouts in Yangon next year.

As reported, two consortia led by Hong Kong-listed VPower and China Energy Engineering Group (CEEC) have won the five projects.

How does the hike change the investment prospects of the energy sector?
The hikes should free up more funding to invest in new projects by reducing what the MOEE has to spend subsidising people’s electricity. Recently the Electric Power Generation Enterprise (EPGE) said that it expects to generate K6.9 trillion in revenues this fiscal year, up from K6 trillion in the last year, thanks in part to the tariff hike.
For a long time, the failure to raise tariffs has been blamed for the worsening state of power generation in the country.
Power Purchase Agreement (PPA) negotiations for a number of larger power projects have stalled because the government has said that the price is too high. Hopefully, now the government will feel it has the financial means to fund these projects, though we still haven’t seen any contracts inked in the past few months.

Also as a result of the tariff increase, off-grid solutions have now become more competitive, opening up space for more projects in this area. Off-grid solutions, which are often renewables, had been struggling to gain traction because the price of installation made them too expensive compared to the grid. Now, these solutions are more economically viable.

Since the tariff hike, we have also seen an increase in the number of solar rooftop panels purchased by companies and, especially manufacturers, seeking to bring their monthly bills back down.
This move also has symbolic importance for investors thinking of becoming more involved in Myanmar’s power sector.

It tells businesses that the MoEE wants to work with the private sector on electrification and that it’s willing to make necessary reforms, even when they may be unpopular in the short term. When the hike was first announced, many businesses reacted positively, even as it meant their electricity bill would go up.

What reform programmes, new legislation or changes in regulations are happening in the energy sector?
We haven’t had any major energy-specific reforms as of late, other than the petroleum bill, and the pace at which any significant pieces of legislation will be approved and implemented is likely to slow considerably next year, with the elections coming closer.

In terms of power and electrification, there have been talks of a new master plan being drafted, as the last one approved by Parliament in 2015 prioritises coal and has faced fierce public backlash. However, nothing has come out to suggest that this plan will be revealed any time soon.

Around this time last year, the MOEE also said it was in the process of drafting a law related to renewables, but there hasn’t been any major news on this since.
Now that there are five emergency power projects, what will be the supply-demand gap in Myanmar and how bad will the outage be next year?

We expect the supply-demand gap in Myanmar to continue to worsen. Unless something drastic happens, power outages will be worse next year and in 2021.

Because the majority of our power comes from hydro facilities, we experience generation gaps during the summer, when a lack of rainfall depletes dams at the same time demand spikes. Last summer the gap was estimated at around 600MW, and it will only grow as more households are added to the grid but no new plants come online.

The emergency power projects are an act of desperation from MOEE. These projects are expected to be highly expensive, but the reality is that there is an election next year, and consumers will be extremely unhappy if find themselves paying even more for electricity when the blackouts are worse.

If the government can successfully negotiate PPAs for all 1040MW of emergency power, it will certainly help bridge the gap, but sceptics are wondering if they will really come through. We will be watching the situation closely to see how they come to fruition and what the size of the contracts will be.

What role is renewable energy – including solar and hydropower – expected to play in the electrification plan?
The role of renewable energy in Myanmar’s electrification plan will hopefully grow. The country has abundant resources, especially when it comes to hydro and solar power.

Under the current Energy Master Plan, however, renewables besides hydro will make up a very small portion of generation capacity, around 10pc, while coal will jump from 3pc to 33pc of total capacity. In reality, it’s unlikely that this plan will be implemented, mainly due to widespread public opposition to coal.

Hydro already makes up the bulk of the country’s generation capacity – around 62pc – and there is significant potential for more hydro facilities to be developed. Construction is moving along slowly on several existing projects at the moment, and a few others are in the works, but the PPAs have yet to be inked.

In some cases, we’ve also seen companies approaching regional governments about small-scale projects under 30MW.
Myanmar holds a huge amount of power in its waterways, with some estimates of the potential for additional capacity going as high as 100GW. We can be confident that hydropower will continue to play a significant role in Myanmar’s energy mix.
As for solar and wind, companies have definitely expressed interest. Just last week Yoma Strategic Holding announced a strategic partnership with the Philippines’ AC Energy to add around 200MW in utility-scale capacity from renewables to the grid. InfraCapital Myanmar is also attempting to negotiate a PPA for a 263MW wind project.

However, a lack of experience with these types of power has made the government hesitant to move forward with any large-scale projects. The Minbu solar facility in Magway has moved forward, with phase 1 coming online in June this year, but the project has faced significant delays.

The other major solar project being developed by ACO Investment Group seems to have completely stalled. Also, no large-scale solar projects have received a PPA under the NLD government, with the price being the key area of dispute.
MoEE representatives have also suggested that the grid cannot handle the fluctuations that come with solar power, despite external assessors disagreeing.
As for wind, the outcome of InfraCaptial’s negotiations will play a major role in determining future potential. This process is likely to move slowly, though, as they’re creating all of the agreements from scratch and doing a fair bit of educating about the logistics of wind power.

Source: The Myanmar Times

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