According to local media reports, on September 15, 2023, the Ministry of Energy and Mineral Resources of Laos issued an order to temporarily suspend the research and development of planned wind, solar, hydropower and hydrogen energy projects until relevant energy development policies and master plans are formed by government departments. This is aimed at ensuring the stable development of the power industry.
Prior to this, a large number of investors are holding capital and technology, ready to play a big role here. But at the same time, Laos's policies and plans in the field of new energy are almost blank. In April
2023, the first wind power project in Laos, Mengsong Wind Power (600 MW), was officially started. A large number of domestic and foreign investors have signed memorandums of understanding or development agreements with the Lao government for wind power, photovoltaic, pumped storage and other projects. Laos, which is dominated
by hydropower, is trying to expand its power export category, and the demand for green power consumption and overseas investment in neighboring countries seems to coincide with it. Can Laos seize this opportunity? Ccement. Com/richtext/IMG/8txzuc0kgij1695360648261. The project is jointly developed by investors from Thailand, Japan and other countries, with the Asian Development Bank (hereinafter referred to as "ADB") taking the lead in providing syndicated financing. The participating institutions include multilateral financial institutions such as the Asian Development Bank and the Asian Infrastructure Investment Bank, as well as a number of policy banks and commercial banks. China Power Construction is responsible for the construction of the project, and the wind turbines provided by Vision Group have arrived in Laos from Jiangsu, China, in August. By 2025, the wind farm will be officially put into operation and export electricity to Vietnam. After more than a decade of preparation before
landing, the project company signed a memorandum of understanding with the Lao government as early as 2011 and started a feasibility study, signed a project development agreement with the Lao government in 2015, and reached a power purchase agreement (PPA) with Vietnam Electric Power Company by 2021.
The project will be developed in BOOT (Build-Own-Operate-Transfer) mode and transmit power to Vietnam in the form of point-to-point network. The project side and the financing side have not announced the PPA price, but according to the feed-in tariff policy announced by Vietnam in 2023, the maximum price of onshore wind power is 1587.
ADB believes that the Monson project will help to release the untapped wind power resource potential of Laos and promote the economic development of Laos. It also brings revenue such as franchise fees and taxes to the Lao government. For Vietnam, the project is conducive to alleviating the power shortage in central Vietnam and achieving its emission reduction targets.
Although Laos formulated a renewable energy development strategy in 2011, the goal is that renewable energy other than large-scale hydropower will reach 30% of the total national energy consumption by 2025. But for a long time, there was little wind power in Laos, except for a few demonstration projects. " According to the Southern Energy Observer (hereinafter referred to as "EO"), the cost of early wind power and photovoltaic power is relatively high. Governments usually adopt subsidies, fixed feed-in tariffs and other measures to support them, but Laos can not do so. Both
the Lao government and the Lao Electric Power Company (EDL) are facing serious debt problems and have no financial resources to provide support. At the same time, in order to maintain economic vitality, the Lao government has been controlling the terminal electricity price at a low level, and the price of wind power and photovoltaic can not be transmitted to the end users.
Nowadays, the cost of wind power and photovoltaic has dropped dramatically. By 2022, the global weighted average levelized cost per kilowatt-hour for new onshore wind power projects will be $0.033 per kilowatt-hour, 52% lower than cheapest fossil fuel option, according to the Cost of Renewable Energy Generation 2022 issued by the International Renewable Energy Agency; The cost of photovoltaic projects is 0.
This price level is close to or even lower than price of hydropower in Laos, and investors finally see the opportunity to develop new energy in Laos.
Vietnam, which has seen rapid economic development in recent years, is the second largest buyer of electricity in Laos after Thailand. In addition to Monson Wind Power, Bolapa 600 MW and Kange 700 MW wind power projects, which are also planned to be exported to Vietnam, are also under development and are expected to be connected to the grid for commercial operation by the end of 2025. The investors are China Harbour Engineering Co., Ltd., Huadian Overseas Investment Co., Ltd. and Laos Pengsha Tawei Group Co., Ltd.
The Vientiane Times reported that in August 2023, the Lao government approved Shawan Power Development Co., Ltd. to carry out a feasibility study on the development of a wind power project with an estimated installed capacity of about 1 gigawatt, which can be exported to Vietnam. Nathalin, the parent company of Shawan Power Development Co., Ltd., headquartered in Bangkok, has long been engaged in marine transportation and clean energy investment in Southeast Asia.
In addition, a Vietnamese company has also been authorized by the Lao government to carry out a feasibility study of a 252 MW wind farm project in Savannakhet Province, Laos. The power interconnection project between
China and Laos has led to power investment in northern Laos. At the end of 2022, China Southern Power Grid Co., Ltd. and Laos National Power Company signed the Framework Agreement on 500 KV Power Trade between China and Laos, and a large number of Chinese-funded enterprises focused on this cooperative layout. In October
2022, China-Guangzhou Nuclear Energy International and the Lao government signed a memorandum of understanding on cooperation between China and Laos in the clean energy base of power interconnection in northern Laos. According to the agreement, Edra Power Holding Co., Ltd., a subsidiary of CGN, will build a clean energy demonstration base for the integration of wind, solar, water and storage in northern Laos as an important supporting project for the interconnection of power between China and Laos. The electricity produced will be consumed in China, Laos, Thailand, Cambodia and other major ASEAN countries. In July
2023, China Power International and its partners signed a memorandum of cooperation on the Oudomxay New Energy Base Project with the Lao Government and the Oudomxay Provincial Government in the northernmost part of Laos. According to the official information disclosed, the new energy base project in Udomsai is a planned supporting power supply project for the old 500 kilovolt transmission line in the Southern Power Grid. The first phase of the project will build a 500-1000 MW photovoltaic power station, which is planned to be put into operation in 2025, after which the electricity will be exported to China.
Some practitioners engaged in energy investment in Laos revealed that in addition to the above-mentioned large-scale power central enterprises, some powerful Chinese-funded private enterprises are also seeking opportunities for wind power and photovoltaic development in northern Laos. According to the analysis of the above
practitioners, at present, the competition in China's new energy market is fierce, and the profit margin of investment in wind power and photovoltaic is shrinking. Therefore, enterprises hope to invest abroad, and in different market environments, projects are expected to achieve higher returns.
In addition, due to the large number of hydropower stations in Laos, the construction of floating photovoltaic on reservoirs has also become an investment direction. EDF signed a project development agreement with the Lao government in 2021 to build a 240 MW photovoltaic project on a hydropower station.
According to our understanding, Laos is almost blank in the price policy and technical specifications of new energy. At present, Laos has not formulated a price policy specifically for new energy. Whether it is exported or sold to EDL for domestic use, the electricity price should be calculated according to the situation of individual projects. According to
a research paper on energy policies of ASEAN countries published in 2022, Laos has not introduced a specific photovoltaic policy, compared with neighboring Cambodia, which has an auction system, Vietnam has a feed-in tariff policy, and the development of photovoltaic in Laos is still in its infancy.
The aforementioned practitioners said that the Lao authorities and EDL are also aware of the need for further management and regulation in the field of new energy, especially the self-use of distributed photovoltaic may affect EDL's electricity sales revenue, so clear rules are needed. According to the research report of
China Electric Power Planning and Design Institute, Laos has good light resources, and the solar irradiance in most areas is 5500-6500 MJ/m2, which is the area with strong global solar radiation. In fact, before the development of centralized photovoltaic, small-scale distributed photovoltaic has been applied in remote areas of Laos. In terms of
wind power, the data of wind resources in Laos is very scarce. According to a preliminary study conducted by the United States Agency for International Development in 2018, the development potential of utility-scale wind power in Laos is 116-557 gigawatts. The aforementioned research report of the General Institute of Electric Power Planning and Design points out that Laos is located inland and mountainous, with low wind speed in most areas, and only some areas near the Vietnamese border have potential for wind power development. The ADB, which
led the financing of Monson Wind Power, is very optimistic about the development of new energy in Laos. Electricity is the highest export commodity in Laos, and nearly 70% of the electricity generated is exported, of which hydropower accounts for the vast majority. The loan proposal for the Monson project, approved by the ADB board of directors, argues that wind power exports will make Laos exports more diversified.Compared with hydropower, wind power, photovoltaic and other renewable energy bring the same economic benefits, but wind power and photovoltaic have less impact on the social and ecological environment.
The Lao government is also aware of the important value of new energy. According to the Vientiane Times, the Lao government is already discussing policy measures for photovoltaic development in 2022. However, in addition to earning foreign exchange through exports, the Lao government also has a major concern, that is, to reduce the import of electricity from Laos during the dry season of hydropower through the development of photovoltaics.
According to previous reports, the regulation capacity of the power system in Laos is very limited, and the power system dominated by hydropower has obvious characteristics of high and low water. In the rainy season from May to October every year, hydropower is generated, and even excess water is abandoned. In the dry season from November to April of the next year, the power is insufficient and needs to be imported. Therefore, the increase of photovoltaic power generation helps to export more electricity in the dry season and make up for the power gap in the country.
However, according to the analysis of the aforementioned practitioners, new energy generation can alleviate this structural imbalance to a certain extent, but it can not solve all the problems, Laos still needs to import electricity from neighboring countries.
During the dry season, Laos usually buys electricity from Thailand. In 2022, Laos will also realize two-way electricity trade with China, sending surplus hydropower to China for consumption in flood season, and supplementing power supply from China to northern Laos in dry season.
Laos has been committed to becoming a "storage battery" in Southeast Asia, and new energy is expected to become another export growth point of Laos besides hydropower. Laos' neighbors China, Thailand, Vietnam and Cambodia, as well as Malaysia and Singapore, which are connected through Thailand's transmission grid, have made carbon neutral commitments in the international community, and these countries may become potential buyers of new energy generation. However, Laos is still one of the least developed countries in the world and needs foreign capital, technology and experience. This is an opportunity for Laos and for foreign investors.
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