Empowering Rural Electrification in Myanmar: Opportunities and Policies Tungapuri Hotel Nay Pyi Daw, Myanmar Dr. Chris Greacen March 9, 2013

Outline Early indications of ADB/IFC/World Bank strategies Empowering rural electrification strategy: –Off-grid small power producers –Grid extension Supporting regulations

Electrification 26%

ADB / World Bank / IFC Early indications of power sector development strategies:

ADB/IFC/World Bank Stated goals “Inclusive economic growth” “Reduce poverty and improve quality of life” “ADB’s vision is an Asia region free of poverty” “Regional integration” Power sector strategies Committed $600 million for energy sector “Private sector participation” –Creation of legal and regulatory frameworks to lower risks to private sector (including foreign investment) –Unbundling –Bidding Focus on: – centralized, large-scale generation (each plant > 100 MW) Coal Natural gas (CCGT) Large hydropower –500 kV transmission

POWER SECTOR (IV) Future Generation Expansion –92 Hydro potential sites (46,000 MW) –13 by MOEP1 (2,572 MW) –7 BOT by local private sector (560 MW) –44 FDI (BOT or JV) - 42,145 MW; 2 coal, 870 MW, –1 gas power generation, 470 MW –1 coal in Yangon, J power, 600 MW? (new) Power Demand projections: 2001, no systematic approach –A power demand master plan is needed: generation, transmission and distribution –Planning softwares and capacity building is needed

ADB/IFC/World Bank Stated goals “World without poverty” In Myanmar: “focus on energy infrastructure development“ “Connecting people and businesses to a reliable electricity grid is critical for Myanmar to realize its enormous social and economic potential” Power sector strategies Short-term: –Committed $420 million with focus on energy –Replacing gas turbines –Providing $80 million grants for community-driven development health, education, water supply, rural electricity Long-term focus still unclear, but World Bank articles on Myanmar give example of WB work extending the grid in Laos and Vietnam. Telephone call with IFC in February: “focusing so far on centralized electricity”

Electricity for whom?

Large Plants Customers Small Power Producer Mini- Grid Customers Empowering rural electrification strategy: extending the grid and encouraging rural mini-grids National Grid

Energy export $ Donor funds $ Electrification Fund Regulatory framework allows for fair treatment of both

Mae Kam Pong, Chiang Mai, Thailand Built by government & community 40 kW Used to be off-grid; Making arrangements to sell electricity to grid

Mawengi village, Njombe, Tanzania LUMAMA hydropower project 300 kW – remote mini-grid

4 MW hydro - Tanzania electricity to 4000 households in >15 villages & sells to the grid

Rice husk gasifier Myanmar – Kayuklot Township electricity to 500 households

Biogas from Pig Farms Reduces air and water pollution Produces fertilizer Produces electricity 8 x 70 kW generator

Sugarcane bagasse -- Tanzania capacity: 17.5 MW powers factory, irrigation, hospital, school, thousands of homes sells 4 MW to main grid but can also operate as isolated minigrid 16

faster if local entrepreneurs are also empowered to build mini-grids Electrification

faster if local entrepreneurs are also empowered to build mini-grids

Electrification faster if local entrepreneurs are also empowered to build mini-grids

Supporting laws and regulations Include SPPs in national energy law Provides mini-grids with legal right to exist Provides for establishment of: –Rural Energy Agency (REA) (if suitable agency does not already exist) –Small Power Producer (SPP) regulations

Rural Energy Agency (REA) Provides technical and financial support to SPP developers; Manages Rural Energy Fund: –Pays up to $500 subsidy per new connection – EITHER on-grid or isolated mini-grid if built to national standard; –Subsidizes SPP business plans and feasibility studies Website of Tanzania REA:

$ Small Power Producer (SPP) regulations Thai “Very Small Power Producer” documents : Tanzania “Small Power Producer” documents:

SPP program includes Streamlined licensing and approval For grid-connected SPP: –Streamlined grid interconnection procedures –Standardized Power Purchase Agreement (PPA) –Standardized tariffs For off-grid SPP: –Flexibility in tariff setting –Provisions to reduce risk when main grid expands to formerly isolated SPP mini-grid

VSPP results in Thailand

What to do when the “big grid” expands to reach the “little grid”? Allow formerly off-grid generators to sell back to the grid; and/or Allow mini-grid operators to purchase wholesale electricity from the grid for resale to retail customers.

Who owns the minigrids? Nepal: –rural communities –local private sector Cambodia: –local private sector Tanzania: –local private sector –church, –communities, –utility

Thai Government loans funds at 0% interest to commercial banks for investment in: Energy efficiency improvement projects Renewable energy development and utilization projects January 2003 – present 7000 M Baht 11 local financial institutions have participated. Max loan amount: 50 MB Max. interest rate: 4% Max. loan period: 7 years Revolving Fund Low cost financing

28 Thailand’s Board of Investment (BOI)’s tax incentives for renewable energy projects: Corporate income tax holidays up to 8 yrs. Additional 50% reductions of corporate income tax for 5 yrs Import duty reductions or exemptions on equipment and raw materials Tax Incentives Tax incentives

Summary Question of "electricity for whom" must be in forefront. Concern that the ADB (and World Bank/IFC?) likely to focus on centralized approach unless requested to do otherwise. Better strategy involves both grid extension and encouraging off grid small power producers. Include SPPs in new national energy law. Rural energy fund (REF) capitalized by donor funds leveraged by revenues from energy exports. REF available as per-connection subsidy both to off-grid and on-grid, also subsidizes feasibility studies and business plans. SPP rules provide for streamlined interconnection to grid, standardized PPAs and tariffs. Isolated mini-grids can connect if/when main grid arrives.

Resources Tanzania Rural Energy Agency (REA): Tanzania Small Power Producer (SPP) rules and documents: Thai VSPP regulations and documents: Electricity Authority of Cambodia (license, regulations, tariffs for mini-grids):

Chris Greacen Palang Thai