Regions and Countries

	Table of Contents
p. 11 of 20 BACK | NEXT I. Introduction II. Background and Rationale III. Economic and Social Trends IV. Program Review - Lessons Learned V. Strategic Directions of the GMS Program for 2001-2003 VI. Sector Properties and Proposed Program for 2001-2003 A. Transport B. Energy C. Telecommunications D. Tourism E. Environment F. Human Resource Development G. Trade H. Investment VII. ADB's Operational Program VIII. Coordination with Donor Agencies and Regional Institutions IX. Cofinancing and Catalyzing External Resources

GMS Assistance Plan : VI. Sector Properties and Proposed Program for 2001-2003

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B. Energy

70. The uneven distribution of energy resources in the GMS provides a compelling economic reason for expanded subregional cooperation in energy among the GMS countries. Countries that have large demand for energy, such as Thailand and Viet Nam, do not have sufficient energy resources while countries with low economic activity, such as Lao PDR and Myanmar, have large potential energy supplies, in terms of hydropower and gas resources. With the establishment of the GMS Program, energy development in the GMS moved increasingly towards integration, particularly in the power subsector. Integration through transmission grid interconnection will bring about improved efficiency and competitiveness of the GMS economies. Economic benefits will result from complementarity of energy resources, load diversity, exchanges of base for peak energy, increased supply reliability, reduced reserve capacity requirements, and reduced system losses.

71. Furthermore, an integrated power development approach brings about environmental benefits through reduced emissions from hydrocarbon fuels with the substitution of oil-fired plants by hydropower. The integrated approach will also allow for more optimal utilization of resources. Extensive river basin studies, for instance, enable better use of GMS water resources, such as development of dams for multi-purpose use, including hydropower. The integrated system approach will also better equip the GMS countries in addressing environmental and socioeconomic concerns arising from cumulative impacts of hydropower development.

72. Cooperation in the energy sector under the GMS Program thus focuses on the optimal utilization and development of the region’s energy potential and provision of cross-border power transmission links to allow efficient electricity trade. Support initiatives include the establishment of institutional mechanisms within the subregion to support the momentum toward increased cooperation in the field of electric power and natural gas. To achieve these ends, the Electric Power Forum (EPF), established in 1994, and its adjunct, the Experts Group on Power Interconnection and Trade (EGP), were created specifically to facilitate the integration of national networks and grids for power trading at the subregional level. They were also tasked to address the concomitant planning, regulatory, technical, and institutional issues. The EPF has held a total of six meetings since inception, while the EGP has held three.

73. On power generation, two hydropower projects have been financed by ADB to date: the Theun Hinboun Hydropower Project, which started commercial operations in April 1998; and the Nam Leuk Hydropower Project, which has been completed recently. The feasibility studies on the 500 kV Transmission Line between Nam Ngum and Udon Thani, and the studies on the Se Kong-Se San and Nam Theun River Basin have been completed. However, slower growth in energy demand resulting from the economic crisis, enabled a more flexible approach in the implementation schedule of power generation and accompanying transmission and distribution projects. The 500 kV Nam Ngum-Udon Thani transmission line, for one, was deferred due to a decline in power demand projections in Thailand. There was also a need for reassessment of hydropower development in the GMS, such as for the Se Kong-Se San and Nam Theun River basins, in the light of observed adverse impacts on fisheries, water supply, and other natural and community assets experienced in the past projects.

74. The current slack in power demand, however, provides an opportunity to work on other important areas of energy cooperation, such as removing unnecessary controls, facilitating competition, and mobilization of capital for sector growth, which are key to enhancing private sector participation in the sector as well. The objective of creating a regional electricity market remains, however, since hydropower and gas resources continue to be cost competitive, and power demand in the subregion is expected to revitalize shortly. The GMS countries took a big step towards full-scale regional electricity trade with the formal adoption of the Policy Statement on Regional Power Trade by the EPF. The EPF also endorsed the need for a Regional Indicative Master Plan on Power Interconnection¹³ , which is essential in mapping the strategy for regional cooperation in power, considering the funding constraints, institution of power pools, and production of low cost power from gas. The Master Plan study commenced recently with ADB support.

75. For the next three years, trends in economic activity will be closely monitored for their impact on load demand projections. With economic recovery and expected robust growth in energy demand, continued project preparation will be needed to avoid capacity shortages later. Meanwhile, the groundwork will be prepared for a more formal institutional arrangement for regional power trading and pooling. Related workshops will be conducted to discuss the differences (technical, policy, etc.) between and among the national power systems, which may obstruct interconnection over the medium and long term.

76. Subregional efforts at strengthening energy institutions through cooperation in data exchanges and training of energy professionals, are critical for the success of national rural electrification, and its strong anti-poverty dimensions. To address the adverse social/ environmental impacts of hydropower projects, the capacity for hydropower planning and project studies will be improved. More attention will be paid to cumulative impacts of hydropower development in basin studies. At the project level, studies will carefully scrutinize baseline data as reference for predicting project impact. Moreover, hydropower planning and implementation will involve more systematic participation of stakeholders, including NGOs, particularly in monitoring deficiencies in project design and implementation methods, and in formulating mitigation measures.

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