Realizing rural electrification in Southeast Asia: Lessons from Laos

Abstract

The Lao People's Democratic Republic, a least developed land-locked country in Southeast Asia, was able to quadruple its electrification rate from 16% in 1995 to 63% in 2009. This has been achieved due to a series of projects undertaken by the government in conjunction with multilateral aid organizations. This study examines one such project undertaken recently by the Lao government and the World Bank called the Rural Electrification Project Phase I (REP I). Based on field research and research interviews conducted in Laos, the focus of this study is to understand this project's design and implementation, key success factors, and shortcomings. The authors derive lessons for both developing countries and those giving energy aid (such as multilateral financial institutions and development agencies) by laying out the dilemmas the project faced and emphasizing how key challenges were overcome. The study concludes by arguing that geographic and socio-economic data should be collected before electrification programs proceed, that programs must focus on the commercial viability of electricity suppliers, that fee-for-service models hold great promise, and that outsourcing can improve the efficiency and efficacy of electrification efforts.

Introduction

The Lao People's Democratic Republic, a least developed land-locked country in Southeast Asia, has tremendous potential for hydropower projects because of its access to the tributaries of the Mekong River, generous rainfall, hilly terrain, and a low population density that limits the need for human resettlement along rivers. It also shares a border with countries such as Cambodia, Thailand, and Vietnam wanting to import electricity to meet their domestic demand. Despite its abundance of hydroelectric resources, however, Laotian energy planners face problems supplying energy services to a large proportion of their population (Smits and Bush, 2009, Laos Ministry of Mines and Energy, 2009). The country's low population density and rugged terrain make it difficult and costly to connect everyone to an electricity grid. This gives rise to Laos' energy conundrum: while there is plentiful electricity for export, providing domestic access is difficult. This situation has avoided intense criticism because the government is committed towards expanding domestic electrification. As a result of its commitment, the government has worked together with the World Bank and other organizations over several decades extend the domestic grid. These seem to have paid off, and Fig. 1 shows that in 2009, Laos reached an electrification rate of 63%, quadrupling from the electrification rate of 16% in 1995. The latest of these efforts is the Rural Electrification Project Phase I (REP I), through which the government undertook rural electrification through both grid and off-grid measures. When looking at Fig. 1, we must emphasize that the REP I has worked in tandem with other national efforts that have in aggregate electrified more than 600,000 homes.

The objective of this study is to examine the Rural Electrification Project Phase I (REP I) with the aim of drawing conclusions on rural electrification for other countries in a similar position. The second section of the study describes our objectives and approach. The third section provides the background, objectives, and stakeholders of the REP I. The fourth section talks about the design and implementation of the REP I. The fifth section provides an analysis of the REP I's key factors that played a role in shaping the project, emphasizing the pros and cons separately for grid expansion and off-grid electrification. The last section concludes with implications for rural electrification in general.