Myanmar and its Energy Sector in Fast Forward Transition
A country of 55 million population with plenty of untapped natural resources (oil, gas, minerals), and some 50 years ago it was still among the leaders in the education and industry development in Asia. After the military takeover in 1962, private businesses were nationalized, and a chain of military Governments and their experiments with socialism started. Time and development seemed to have stopped for next 5 decades in Burma. Now Myanmar’s GDP per capita is among the lowest in the world, and only half of the people are getting electricity from the national grid.
In 2011, after decades of isolation, Myanmar’s military Government changed their military uniforms to civilian cloths and, for everyone’s surprise, rapid reforms and opening up to the world started. In 2016 Myanmar got its first elected civilian Government in 50 years. Now people are enjoying long-awaited freedoms, and all seem to agree that there is no returning back to old ways.
In 1960’s the World Bank had predicted that the first country in Asia to reach Western countries development level would be Burma (and the country doomed to poverty forever was Japan…). Well, these predictions did not quite materialize. Now World Bank is again saying that during the next 10 years Myanmar will be one of the fastest growing economies in the world – and I can fully agree with that.
During the last couple of decades, the electricity tariffs were heavily subsidized by the Government – electricity was sold to consumers and industries with prices lower than production cost. So naturally there was no motivation to invest for new power generation, as this would have meant only more future losses for the Government. Also, due to the US and Western sanctions, it was not easy to get spare parts when something broke down.
Another headache is that approximately 70% of all electricity has been generated by hydro power and water volumes vary hugely between dry and rainy seasons. Due to the water shortage during the dry season, the whole country has been suffering from daily blackouts. Myanmar has also very large offshore gas fields, but earlier military Governments sold 90% of produced gas to China and Thailand, and it will take at least another 4-5 years before new ongoing explorations could produce more fuel gas for local power plants.
Present National Energy Plan has ambitious targets to electrify the whole country by 2030. As now only half of the population is getting electricity from the national power grid, according to the Asian Development Bank, this would require approximately 3 billion USD annual investments until 2030. Even WB, ADB and Japanese have been heavily supporting Myanmar’s infrastructure development, all were little skeptical that this target could be achievable. Anyway, the present year’s budget allocation to the Ministry of Energy and Electricity (MoEE) somehow suddenly increased to 5.2 billion USD!
The most important reform to shake up Myanmar’s power sector was made last July. During the last 10 years there has been a lot of talk of the necessity to increase radically the electricity tariffs to make further investments for electricity generation sensible. Anyway, the past Governments seemed to be very concerned how unpopular this reform would be among the citizens (=voters). On July 2019 the present Government finally was brave enough to announce new electricity tariffs. New tariffs are progressive – when smallest users are still paying subsidized rates, the large users, businesses and industries are having higher ‘realistic’ rates. Large users saw their monthly electricity bills doubled or even tripled, but for the Government’s relief, all seem to understand the necessity of this reform and there were no visible protests against it.
Opportunities in Power Generation & Distribution
The recent electricity tariff reform and this year’s huge budget allocation for power generation, transmission and distribution, combined with the Government’s drive to find private sector investors for electricity generation, are creating all new dynamics in Myanmar electricity sector. Suddenly, investments would be viable and private sector interest has woken up.
As a short term measure to increase electricity generating capacity before this November’s election, the Government will be relying on imported LNG with 4 new private power plant concessions in the pipeline. The Government is also building new power generation using old underutilized gas pipelines. Concessions conditions are often still unrealistic for foreign investors to join. It is not easy to start generating electricity 6 months after signing the contract, or to pay back your investment if initial concession is only 5 years long. Even so, local conglomerates have been ready for these investments opportunities, and this have opened up market suddenly for foreign flexile power technology providers. MoEE seem to have now more confidence to use flexible multi-fuel engines which can balance the grid, as more renewable power from wind and solar are expected in the future. Also, many new private industrial zones which are under planning and development will be looking for reliable power generating solutions.
Cutting the electricity transmission/distribution power losses is also a hot topic in Myanmar. Many old power distribution networks, which are still used nowadays, were built by British during the colonial years. So it is understandable that cables and transformers often can’t meet the present capacity requirement. In addition to technical losses, the commercial losses are also notable as not all consumed electricity is properly invoiced. Many cities in Myanmar are said to have power distribution losses between 20-30%, even higher numbers are not unheard. Modern solutions to monitor, manage and rehabilitate these networks will surely have plenty of opportunities in the future.
Opportunities in Renewables and Waste to Energy
All power generation investments which are connected to national grid are managed by the Union Government at Nay Pyi Taw. Myanmar’s 14 regional Governments have authority to decide of the new projects which have less than 30MW capacity and are located in off-grid areas. As Regional Governments have now been also given small additional budget allocations from the central Government, suddenly e.g. off-grid biomass power solutions utilizing locally grown energy wood, forest- or agriculture-waste, have become viable option. Anyway biomass solutions are new to Myanmar, so foreign expertise and investment support will be needed. Already some Thai investor groups are seriously looking for these opportunities.
The very first commercial scale solar plant in Myanmar was launched in June 2019. The first stage is now completed producing 40MW of electricity. The total area which is reserved for this project is about the size of 530 football fields and will have total capacity of 170MW. In addition, US based investors are planning to construct two 150MW solar parks, and potential Indian investors are also looking actively for opportunities. In addition, the very first solar mini-grid project providing power for 400 households was recently launched in Magway Region.
So overall the recent development is very promising as the Union Government is finally ‘warming up’ for utilizing solar power potential, even local bureaucracy is still very heavy to get these projects approved and proper power purchase agreements signed. Now MoEE is welcoming new solar investment proposals from both local and foreign investors, and there are several new projects waiting final approvals.
Myanmar has development potential of 4000 MW for wind energy, but still there are no large commercial scale projects running. Anyway, according to the ministry there are some 30 projects under study phases.
Even hydro power is providing some 60-70% of present electricity generating capacity, there is still plenty of future potential for new development. In addition to existing plants, another 60 sites have been identified with potential capacity of over 43000 MW. As earlier foreign investments were coming only from China, now also e.g. French and Austrian investors are active in this sector. There has been also plenty of talk to start dredging of existing hydropower dams to increase the water storage capacity, to increase power generation during the hot summer when power consumption is highest. Small hydro has been also preferred solution for rural off-grid electrification, and there will always be opportunities in this for technology providers.
Waste to energy solutions are also emerging in Myanmar. Yangon City has agreed to use soft-loan financing from Poland to utilize 1000 tons of daily municipal solid waste (MSW) for power generation. Another agreement will be soon signed to utilize another 1000 tons of daily MSW using Japanese technology – there would be still another 500 tons daily waste left, if someone else would be interested. Mandalay city as well as couple of smaller regional capitals, have their own plans to restructure their waste management and utilize waste to energy solution.