The country's backwardness could turn out to be a boon when it comes to
power generation
Myanmar, thanks to the polish of
political reforms, has taken on a golden sheen in the eyes of investors and
analysts. The realities on the ground are sobering however, not least for
electricity. Factory owners in Yangon have begun the year with daily power cuts
which may worsen as the dry season drags on.
Supply can only meet half of
anticipated demand according to the Ministry of Electric Power. The national
connection rate is 26 percent for a population estimated at about 60 million by
the Asian Development Bank (ADB). In the countryside, home to 40 million
people, only 16 percent are connected to the power grid.
The shortage of power is probably
the biggest single impediment to development. It is also an incredible
opportunity which should be the envy of countries which have marched ahead of
Myanmar. The lack of infrastructure leaves the door open to developing an
electricity system which leverages advances in community power production using
clean energy resources such as sunlight, farm wastes, biomass and geothermal.
The distributed power approach is
gaining ground fast in developed and developing countries. Upfront costs can be
high and subsidies are often provided, but then prices for carbon power are
also shaped by subsidies too. For example, from Germany to California rooftop
solar is booming. So much so that the Institute for Local Self-Reliance
estimates almost 10 percent of electricity in the US could be produced by
unsubsidized distributed solar generation, mostly on rooftops, come 2022.
Meanwhile, people in villages
across Bangladesh and India are finally switching on LED lights and more after
decades of waiting in vain for the electricity grid. While they waited,
technology and business changed. Locally-produced electricity from clean energy
resources, is now cheaper than candles, batteries or kerosene.
In India, Gram Power, Mera Gao
Power and Omnigrid Micropower are developing village microgrids. Initially a
few solar panels or biomass digesters are set up as a village power plant.
Because the systems are modular, more power sources can be added as demand
grows from basic needs to developing livelihoods, using machinery to increase
production and add value. Microgrids also power mobile phone base stations
which formerly relied on diesel generators.
Simpa Networks takes a different
approach, turning homes into power plants in India. Simpa sells solar home
systems on flexible installment plans. In Bangladesh, aid donors led by the
World Bank have provided financing of US$370 million for Grameen Shakti to
apply the approach at scale. Over a million solar home systems have been
installed. A thousand more are added each day.
The economics of these models
look favorable for Myanmar. Electricity from Gram Power in India, for example,
costs US$1.37 a month whereas previously households were spending US$3.66 on
kerosene. In Myanmar, the European Union Energy Initiative (EUEI) and Mercy
Corps, in separate field studies, found solar lanterns and solar home systems,
sold in markets for US$10 to US$300. The return on that investment can work out
to savings of 80 percent over 10 years, given mean monthly spending of about
US$10 on candles and batteries.
Upfront cost is beyond the reach
of many in Myanmar where one of every four people lives below the poverty line
and mean annual GDP per capita is US$859 according to the ADB. Therefore, one
limit on opportunity in Myanmar will be the availability of finance to provide
systems on credit at a price no more than what would otherwise be spent on
candles and batteries. While that is unlikely to be straightforward, experience
in Bangladesh and India shows household or village power systems can be
financed.
The opportunity may be as
promising if not more so among customers who are suffering unreliable supply
from the grid. Distributed power, particularly solar, could be a competitive
alternative to diesel generators widely used for power backup by households and
firms connected to the grid.
Experiences in Bangladesh and
India prove that distributed power can be fast, affordable and simple to deploy
in contrast to centralized power generation in developing countries. Granted,
the volume of power from household power systems or village power plants is a
trickle relative to what large power plants can deliver. But for people with
zero electricity just a little makes a huge difference. Electric lights are
better for reading and studying. Electricity connects people via the media and
telephones to information and opportunities.
Distributed power produced from
clean energy resources also provides several collateral benefits. One, the
damage and costs of environmental, social, health and security externalities
arising from centralized large hydro or carbon power systems can be reduced.
Two, generating and buying power locally may mean less money leaks out of the
local economy. Three, a reduction in vulnerability to the supply risks
associated with carbon energy plus the impacts of global decarbonisation
measures.
So what does the growing global
trend for distributed power mean for Myanmar? First, it demonstrates that a few
distributed power pilots plus dozens of local commercial initiatives in Myanmar
are onto something. Second, electricity could expand further and faster than it
has in other countries which developed earlier conferring considerable
economic, environmental and social advantages. Third, government policy and aid
donors have a model to follow and adapt. Finally, commercial or social
investors should be able to reduce their risks because they can learn from
experiences elsewhere.
Whether Myanmar grasps the
opportunity or continues with existing plans to continue to develop centralized
power only remains to be seen. However, there are reasons to think distributed
power could take off. One, distributed electricity matches the government's
goals for power self-sufficiency, renewability and diversity. Two, preliminary
assessments by the EUEI and United Nations Development Program during 2012
suggest aid donors are evaluating options for assisting distributed power in
Myanmar. Three, the ADB and Norway are providing technical assistance for an
electricity bill which would among other things provide a legal basis for
distributed power generation. Finally, investment and banking reforms will in
due course make doing business a little easier.
As in any underdeveloped country,
investment and development are going to face obstacles, though some of those
obstacles may fall were the government to actively promote the approach with a
targeted policy. Nevertheless, the opportunity to deploy tried-and-tested
models at scale may be enough for pioneer investors, particularly people
strongly motivated to deliver social impact, to make a move on the power
frontier. The prospects for power have never been brighter.
David Fullbrook
(David Fullbrook is a
sustainability analyst and regular contributor to Asia Sentinel.)
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