Myanmar made limited progress in 2016 on its national goal of bringing electricity to all its households by 2030. The country’s electrification rate last year rose to 37% from 2015’s level of about 32%. Much of the off-grid population has intermittent access to electricity from diesel- or small hydro-based microgrids or pico solar systems, and millions of households still rely on a combination of solar and diesel with supplemental lead-acid batteries.
The country’s electricity appetite is growing rapidly. Myanmar’s peak 2015 power demand of 2,800 megawatts was 49% higher than in 2012.
Its clean energy development, like its overall power sector development, has been hampered by weak institutions and severe budgetary constraints. Progress was impeded by economic sanctions against the military junta that ran the country from 1962 to 2016. During those decades, the country formerly known as Burma raised hard currency by selling natural resources, including offshore oil and gas, to foreign buyers while making minimal investment in its domestic power matrix.
Sanctions largely ended in late 2016, when the U.S. concluded that their purpose was mooted by the 2015 electoral victory of Myanmar’s National League for Democracy. NLD leader Aung San Suu Kyi, a Nobel prize winner and daughter of a national hero who was held under house arrest for 15 years by the military government, ascended to the role of de-facto national leader.
Suu Kyi has committed to both full electrification and growing the share of low-carbon generation, but she is constrained by bureaucratic and fiscal limits. Under the Constitution that enabled the 2015 election, the Army maintains control of key government ministries, and retired officers have taken positions in various other ministries including those with energy policy roles. Most ministers and lawmakers view power from conventional sources as a more direct route to modernize Myanmar’s economy.
The government has no budgetary reserves and is unable to secure conventional commercial or project financing. In a recent example, several microgrid-installation projects were suspended in December 2016 when the Ministry of Livestock, Fisheries and Rural Development informed contractors that its spending authorization had been slashed by more than two-thirds because of a cash shortage.
The Asian Development Bank, which advised Myanmar’s government in the development of an energy master plan in 2015, is in the advanced stages of delivering USD 420 million of low-interest financing for a grid-extension project in the country’s largely rural Ayeyarwady, Bago, Mon, Rakhine and Kayin divisions. The project includes three new 230-kilovolt transmission lines, distribution systems and substations. They will be hardened as a result of a climate risk vulnerability assessment prompted by increasingly damaging rainy-season weather.
The 2015 energy master plan envisions raising Myanmar’s generating capacity almost threefold by 2030, to 15GW. Almost a third of the new capacity would be new and repowered hydro generation; the rest would be supplied by installing 3GW of combined-cycle natural gas turbines, raising coal-fired capacity by 2.88GW from its present level of 120MW and building 300MW of grid-connected solar, wind and geothermal projects from the present level of none.
Myanmar in 2016 enacted new tax legislation that broadens incentives available to solar. The Union Tax Law 2016 exempts panels, charge controllers and inverters “from commercial tax.” Previous law applied those exemptions only to imported solar hardware.
A long-delayed solar project in the central Magway region received new impetus in June 2017, when Thailand-based electrical component manufacturer QTC Energy agreed to buy a 15% share of the project developer, Green Earth Power Thailand. The developer has secured a 30-year power purchase agreement, a build-operate-transfer contract and a certificate from the Myanmar Investment Commission for the 220MW project. QTC says it will build the project in phases, beginning with a 40MW segment.
Investment is flowing toward existing but deteriorating hydro plants to address Myanmar’s yawning power need for baseload demand. In April 2017, development finance organization Japan International Cooperation Agency agreed to lend up to JPY 11 billion (USD 100.5 million) to the government for the rehabilitation of decommissioned units at two large hydro plants. The Baluchaung and Sedawgyi stations have a combined installed capacity of 4.6GW, but only 1.8GW was available for generation in 2015.
Leading combustion turbine vendors are pursuing business in Myanmar, encouraged by the success of a 2015 tender that led to a contract for a 225MW combined cycle natural gas project in the central Mandalay region. Singaporean developer Sembcorp in January signed a build-operate-transfer agreement with the Ministry of Electricity and Energy for the $300 million project, which is supposed to be commissioned in 2018.
The government in early 2017 revealed its intention to increase retail power rates, which had been heavily subsidized at USD 0.03/kWh for residential customers and USD 0.06/kWh for commercial and industrial users.
The artificially low tariffs make market-rate power uncompetitive in Myanmar, and the cost of the subsidies makes it impossible for the government to fund new generation, transmission and distribution projects.
Given the extent of Myanmar’s energy poverty and the public’s expectations that shortages will be addressed soon, it is likely that a large-scale transition to renewables will be postponed in the near term.