Myanmar’s Energy Sector is set to Power Away. The aim is to light up the whole country by 2030 at the latest.
Myanmar’s government has prioritised energising the country’s power sector. The aim is to provide electricity to the whole country by 2030 at the latest.
While hydroelectric schemes will provide most of the country’s power needs, new gas-powered plants and LNG depots will boost the power supply in the medium term. As international finance and expertise is being sought, there will be plenty of business opportunities for foreign firms.
Myanmar’s government has launched a concerted effort to meet the country’s growing power needs. Daw Aung San Suu Kyi has realised that the peace process alone cannot ensure stability and national reconciliation, according to government insiders.
“Peace and electrification,” she announced two months ago. When she visited villagers near Mandalay, she told them the whole country would have electricity by 2030. While it is an ambitious prophecy, it is one that the government is firmly committed to achieving, senior government officials told Business Review.
Investment in infrastructure development is “ground zero for democracy in Myanmar,” a senior economic advisor to the government, Mr Sean Turnell told the Business Review recently. It is central to the government’s current plans for economic development, he added.
The recent appointment of U Win Khaing as minister for energy is a significant step, according to government insiders. While Aung San Suu Kyi did not know him personally before his original appointment as construction minister, she has been impressed enormously by his professionalism and his management skills. He has been instructed to deliver on the government’s recent promise to provide electrification to the whole country.
The prominence the government has put on power generation has also been symbolically signalled on the front pages of the government media over the last few months – with U Win Khaing leading government delegations to inspect the country’s hydropower plants.
The country’s official business organization – the Union of Myanmar Federation of Chambers of Commerce and Industry -- has appointed an energy working committee to help formulate policy, at the government’s behest: the two Vice Presidents, especially Myint Swe are heavily involved.
No obstacle will be allowed to stand in the way of providing electrification to the whole country by 2020, the new energy minister told businessmen involved in the power industry, shortly after his appointment. The finance minister U Kyaw Win told the energy minister in a private meeting in early August that the government would provide all the necessary finance to boost energy generation immediately, according to a senior government official who was present on condition of anonymity. A list of projects and their cost was all that was needed to release the funds, the energy minister was told.
The overall aim is to convince international businesses and investors that the Myanmar energy sector is “investable”, said Mr Turnell. The government, he added, understands they need international investment and expertise to deliver on their promises. The government has already reached out to Norway, China and Thailand for assistance, according to government insiders.
The government has ruled out coal-generated power plants, in favour of other options, especially renewable energy, according to sources in the ministry of energy. In the short-run, quickly increasing the power on the grid will be left to Liquid Natural Gas ( LNG), and there are major but tentative plans to build a LNG storage and supply base near Yangon – fuelled initially from Thailand and Singapore, with local gas coming online as soon as possible. The longer-term plan is to provide the country’s energy needs with hydroelectric power, though this is likely to take up to ten years before the scheme is productive. Solar energy is also going to be added to the mix.
Myanmar is in desperate need of a stable supply of electricity, particularly in the rural areas, where some 70% of the population lives. This lack of a consistent power supply is preventing the country’s economic take-off and limiting industrial growth. “Myanmar’s ability to raise per capita incomes and living standards, and to create a more inclusive and equitable society, all depends on a well-functioning power sector,” said Keith Rabin a New York-based business consultant and energy specialist with long experience in Myanmar.
In 1986 Thailand’s power grid covered only 11% of the population, but after the government’s concerted electrification programme, especially in the rural areas, this jumped to around 65%. As a result of the supply of cheap electricity, Thailand was able to become a regional manufacturing hub.
In Myanmar, only 30% of the country’s population is currently connected to the national power grid. Myanmar’s recent census found that 69% of the country’s households use firewood for cooking and 46% use kerosene, candles or batteries for lighting. This poses both health risks and eats up
much of their daily income. According to recent reports, this reliance on non-grid power costs rural residents 10 to 20 times that supplied by government from the subsidized grid.
Myanmar’s current power generation capacity is only about onetenth of their neighbours, Thailand. Myanmar currently produces a 5,215 Megawatts of power annually on the national grid: of which hydropower accounts for 61%. But it also loses more than 20 percent of what it generates during transmission and distribution. The country’s electricity consumption is 44% for residential use, 32% for industrial purposes and 20% for commercial use.
But Myanmar’s power needs are increasingly acute – especially in the country’s urban centres. There is a continued rapid growth in demand for electricity, estimated at around 12% annually. The situation in Yangon is particularly urgent, where the total energy usage in the city centre has risen some 20% since 2015 -- an estimated 1,250 Megawatt.
The situation is so dire that foreign firms in the joint Japan-Myanmar run Thiliwa Special Economic Zone, on the outskirts of Yangon, have had to restrict their immediate expansion plans. Ajinomoto -- the Japanese mega food and chemical company, which produces amongst other things, seasoning, cooking oils, sweeteners and pharmaceuticals -opened its factory in Thilawa last month, but has had to delay its production plans because of the lack of electricity. Instead, the company imports manufactured seasoning powder in bulk from its factory in Thailand, packs it in Thilawa, and then distributes it.
Other companies that had also hoped to start production – including Yanmar Myanmar, a joint venture between the Japan-based Yanmar and Mitsui, importing and selling agricultural and farming machinery – who set up in Thilawa earlier this year have shelved their production plans until there is a reliable source of power.
“Electricity is one of the main difficulties facing factories in Thiliwa,” said Takashi Yanai, former president of the Myanmar- Japan Thilawa Development Ltd (MJTD). “We need to resolve the issue of the power supply in the SEZ before the manufacturing sector can develop robustly. But we hope the situation will improve as the government is providing support.”
A recent report, “Myanmar Energy” – written by Alexander Dodge of the Norwegian University of Science and Technology and commissioned by the Norwegian Embassy in Yangon -suggests a LNG solution: “short term, medium-sized LNG solutions are less capital intensive and more suitable to the given fiscal and regulatory framework,” advised the report. 250 Megawatt LNGfueled power barges could also be located further up the Yangon River and be connected to the existing transmission grid, added the report.
The minister, U Win Khaing, told businessmen in Naypyidaw shortly after his appointment, that he favoured LNG as a short-term solution. The government has since announced that three new natural gas-fired power plants were expected to go live before next summer, when the country is expected to face acute power shortages, especially in Yangon.
“We plan to run three new gasfired power plants that can generate 450 Megawatt of power by next summer. This will meet the country’s demands, particular those from Yangon, in 2018,” U Khin Maung Lay, deputy managing director of the Ministry of Electricity and Energy’s ( MOEE) Electric Power Generation Enterprise, told a press conference in Yangon in September.
The power plants are Thadon in Mon State, Thaketa in the Yangon Region and Myingyan in Mandalay. The State-owned Thaton power plant, currently being built by China Energy Engineering Group Co, is about 80% complete and expected to generate 120 Megawatt of power.
The Thaketa power plant, is a joint venture between China’s Union Resources and Engineering and the MOEE, and is more than three quarters complete. “When the plant is operational, it is expected to generate 106 Megawatt of power,” said U Aung Kyaw Oo, a member of the Yangon Electricity Supply Corporation. “It will support most of Yangon’s electricity demand,” he added.
Construction of the third and largest plant -- the 225 Megawatt Myingyan plant -- is around 90% complete. It is expected to provide a long-term power solution for the Mandalay Region. It is being constructed by Singapore’s Sembcorp Industries, under a build-operate-transfer agreement with the MOEE.
Two years ago the World Bank approved a USD 400 million loan to support the country’s National Electrification Plan: the first phase of which seeks to extend electricity access to over a million households by 2021; 60% of which will be connected to the national grid. In order to reach full electrification by 2030, the World Bank estimates that over 517,000 connections need to be made every year.
The Government of Myanmar, with the help of the World Bank, is also currently rolling out off-grid electricity services as part its National Electrification Plan, installing solar PV systems in eight of Myanmar’s states and regions, benefiting more than 2,000 villages and 140,000 households.
The aim is to provide over 2 million people with off-grid electrification by 2021.
But the government has a long way to go to achieve its goal of complete electrification of the country by 2020 as the minister hopes, or even 2030 as Aug San Suu Kyi has promised and the World Bank projects. The LNG projects are a good start – and testify to the government’s commitment. But it is hydroelectricity that is likely to be the longer-term solution. Building hydroelectric plants is a long process – involving necessary tenders, feasibility studies, environmental and community impact studies.
As the controversial Chinesebacked Myitsone Dam project, is expected to be formally cancelled soon, probably during the Chinese president, Xi Jinping’s state visit to Myanmar in November, many of these potential hydro schemes will have to start from scratch. What is desperately needed is international expertise and investment. The industry minister, U Khin Maung Cho, told a business forum in Bangkok in August that power shortages will soon be a thin of the past as the government intended to turn to Norway for assistance in providing hydroelectric power.
The government has started to address the country’s power needs in earnest. So there is likely to be enormous opportunities for foreign energy companies to be involved, both in the short-term LNG solutions and the longer-term hydroelectric schemes.