Home Insider Insider Analysis Myanmar has Opportunity to Scale Up Access to Affordable, Renewable Energy

Myanmar has Opportunity to Scale Up Access to Affordable, Renewable Energy

With only 30 percent of the population having access to electricity, Myanmar has the lowest per capita electricity consumption in Southeast Asia according to the Greater Mekong Subregion Statistics 2013 report. The new NLDled government has prioritized energy reform and has declared a goal of 100 percent electrification by the year 2030; however, what would a workable energy renewable plan look like?

World Bank’s Reform Suggestions for Myanmar’s Energy Sector

The World Bank (WB) states that the power sector in Myanmar has the opportunity to scale-up access to affordable, reliable and sustainable electricity. In 2013, Myanmar’s electricity utilities connected about 200,000 residential customers to the power grid. At this rate, it would take nearly 40 years to achieve universal access and connect 7.2 million households presently without access to affordable and reliable electricity. To achieve universal access by 2030, as stated in the National Electrification Plan (NEP), the electrification rate should increase to 500,000 new connections per year by 2020, and stay at least at that level for another ten years. WB suggests to: (1) double the investment in the power sector, (2) to review tariffs below cost recovery in order to overcome barriers to investment in the energy sector and disincentives to improving efficiency and productivity in the economy, (3) to ensure that financial viability is improved and sustained over time, (4) to increase private sector participation as well as improve sector efficiency, (5) to speed up decision making and remove bottlenecks for sector development by addressing the current fragmented institutional and regulatory framework, (6) and to adequately assess the significant and long-lasting economic, environmental and social impacts by means of strategic planning and comprehensive assessment of all energy choices, in order to implement the NEP.

Myanmar Takes Steps Toward Energy Reform 

Myanmar has already taken steps to improve the institutional and policy environment in the energy sector. To improve coordination and policy making, the National Energy Management Committee (NEMC) chaired by the Minister of Energy (MOE) and co-chaired by Minister of Electric Power was established in 2013. The MOE formulated a National Energy Policy (NEP) and prepared an Energy Master Plan (EMP). The NEP adopted in January 2014 a broad framework and strategic directions for electrification and sector development. The MOE developed a new Electricity Law, which established the legal basis for Independent Power Producers (IPPs) and Purchasing Private Parity (PPPs) and stipulated the introduction of an independent Electricity Regulatory Commission (ERC).

Associated secondary legislation (rules and regulations) have not yet been adopted and the ERC has not been established yet. The devaluation of the Myanmar kyat in 2012 significantly increased the cost of electricity supply due to the higher cost of US-denominated natural gas for power generation. The government responded by increasing electricity tariffs in 2012 and in April 2014. Electricity tariff reforms have enabled power generators and suppliers to cover the cost of service.

Myanmar Faces Many Obstacles to Energy Reform

Despite abundant hydropower, natural gas, and renewable alternatives, Myanmar has not developed the energy sector because of concerns about environmental impact, resettlement, and ethnicity-related issues, and the large capital that is required for reform. Moreover, limited resources for upgrading and maintenance and high fuel costs keep gas and coal-fired plants significantly below potential capacity. Continued reliance on fuelwood, which accounts for 90 percent of traditional biomass used, also threatens forest and environmental sustainability. In the meantime, emergency gas plants have been installed and more are being procured to address summer load increase. High system losses from the outdated transmission and distribution infrastructure compound supply problems, highlighting the need for comprehension least cost generation planning for the whole country to address deficient electricity supply (ADB 2012).

Another constraint to consider is limited electricity access which hinders inclusive growth (a concept that advances equitable opportunities for economic participants during economic growth with benefits incurred by every section of society). The number of electrified towns and villages in Myanmar has increased slightly, but electrification remains low overall at around 30 percent as of 2014. Even for those with access to power, supply is intermittent; wealthier districts get an average of just 6 hours of power per day, and poorer districts only 1 hour (ADB 2013). Under the national target of universal access by 2030, the government approved the National Electrification Plan in September 2014, providing for an aggressive grid electrification rollout program and an ambitious off-grid program. As of 2013, Yangon, as the biggest city, accounts for 50 percent of total electricity consumption, with Mandalay a distant second with 17 percent. The country’s capital, Nay Pyi Taw, consumes about 6 percent of electricity. Rising electrification may not immediately drive industrial development, but it could spur the growth of micro and small and medium enterprises or home businesses, especially in rural areas. It could also improve quality of life: lighting increases study time for students, improves the study environment for school children, and can cut time allotted to household chores, freeing time for other work or leisure. More electricity will also boost access to information.

Last but not least, absence of systematic planning and programming, poor governance, and inadequate funding aggravate the ineffective management of the sector. When the institutional structure of a sector is fragmented and composed of many ministries, roles and responsibilities usually overlap. Duplication of function creates so-called jurisdictional grey areas, with consequences if these overlaps are not addressed. No one ministry oversees the various requirements of the entire sector, with no clear lines of responsibility, making assignment of responsibilities illogical at times. Given the number of ministries and departments, including state-owned enterprises involved in managing a sector, it will be difficult to gain the agreement needed to institute new policy directives, programs, and administrative reforms. The need for a separate and independent power regulator in charge of regulating issues such as tariff setting, competition, and so on, has also been consistently raised as an important short-term issue hindering progress. An inadequate and inefficient infrastructure system is one result of not institutionalizing the formulation of overall sector or subsector master plans. These lay out the policies and strategies, including targets and options that an institution will implement over a period given the objectives. The lack of a comprehensive plan that identifies and implements priority investment projects, especially in poor and remote areas, has held back the expansion of infrastructure investments. Capital investment and budget decisions in Myanmar are therefore centralized and not based on any approved sector plan, making for uncoordinated or underinvestment in electricity infrastructure in unserved areas.

Personnel in the power sector, after long isolation, have not benefitted from exposure to international developments, and no regular program has been instituted to upgrade their capabilities for planning, operating, and managing assets, and identifying sector needs. Personnel must also be able to plan and conduct economic and financial-related due diligence to guide decision makers on capital related investments. Every developing country’s resource envelope is limited. The large financing needs of Myanmar’s competing sectors severely constrain the overall budget. The programming and budgeting framework of sector ministries is not prepared based on a medium-term expenditure framework, wherein it identifies and prioritizes capital and recurrent requirements. And because programming of requirements is not synchronized with expected funding over the medium-term, the sustainability even of existing assets is threatened, with funding for upgrading, and operations and maintenance neither timely nor regular. Stateowned enterprises still provide most electricity, and although there is a role for private sector in providing electricity services, no formal public–private partnership framework exists to facilitate that participation in the power sector.

Government initiated corporatization of the Yangon Electricity Supply Board (YESB accounts for about half of the electricity market in Myanmar) and created the Mandalay Electricity Supply Corporation (MESC) through the restructuring of the Electricity Supply Enterprise (ESE serves all states and regions outside Yangon and Mandalay) to improve performance and overall efficiency in power distribution. Short-term concessions for low-voltage distribution grid in urban areas (e.g. Yangon and Mandalay) were also piloted to reduce distribution losses through private sector participation in billing and collections. As a result, distribution losses were reduced from around 23 percent (in FY2009) to 14 percent in Mandalay and 16 percent in Yangon (in FY2014). To continue the loss reduction program will require substantial investments in expansion and modernization of overloaded and outdated distribution networks. Private sector participation has significantly increased in power generation. In April 2015, MOEP completed the first competitive bidding for the 240 MW Myingyan IPP, which resulted in a significantly lower price and better plant performance compared to unsolicited bids received earlier. Myanmar also joins the UN Sustainable Energy for All (SEFA) initiative in 2014 and adopted the National Electrification Plan aiming to achieve universal access to electricity by 2030.