Description

Background

ADB has made substantial contributions towards creating energy infrastructure in the Lao People's Democratic Republic. In line with government policies and programs and in conjunction with assistance from other development partners, ADB energy sector assistance since the late-1980s has focused on hydropower projects, high-voltage grid extension, rural electrification, and capacity building to manage power sector infrastructure and utility operations. Total ADB energy sector assistance from 1988 to 2009 was about $290 million for loan projects and $13.9 million for technical assistance projects. During the evaluation period (2000-2009), ADB approved support for two energy sector projects: the Nam Theun 2 Hydropower Project and the Northern Area Rural Power Distribution Project. ADB's total energy sector assistance approvals during the study period comprised $100.0 million in loans and $5.6 million in technical assistance support. Seventy percent of loans and more than 50% of technical assistance approvals were linked directly to the Nam Theun 2 project.

As an input to the country assistance program evaluation, this study assesses the performance of ADB assistance to the Lao PDR energy sector. More specifically, the study examines the development effectiveness of ADB-funded projects. It identifies lessons for further development of the energy sector and makes recommendations for future interventions.

Overall assessment

The overall rating of ADB's program is successful. This rating reflects several factors, most saliently that (i) the interventions have been consistent with government policies, programs, and priorities; and (ii) the assistance program has enabled positive outcomes at the national level (e.g., boosting foreign exchange earnings and recognizing the need to mainstream environmental and social mitigations) and the local level (e.g.,increasing  electricity access).

Key issues

• It is essential to mainstream screening of hydropower project developers and to build capacity to do so.
• A requisite institutional base needs to be built over the medium term to ensure that all new hydropower projects comply with a certain minimum level of environmental and social safeguards.
• Financial and operational performance of Electricite du Laos needs to improve.
• Greater Mekong Subregion-wide power system integration remains a medium-term goal.
• A holistic energy sector perspective is needed.

Lessons

• One-off and stand-alone interventions are ineffective for capacity building related to environmental and social mitigation.
• Some allowance must be made for unforeseen environmental and social impacts.
• Monitoring and evaluation of environmental and social aspects needs to be appropriately designed.
• ADB oversight is useful to ensure that hydropower projects comply with applicable environmental and social safeguards.
• A multifaceted approach must be adopted to ensure that power tariffs remain affordable in the coming years

Recommendations

• Focus ADB's capacity development interventions on the need to increase electricity access, improve the operational and financial efficiency of the power utility, and better manage the development of large hydropower
• Work with development partners towards designing a knowledge management framework and delivering knowledge management solutions given the need for capacity development on several aspects
• Continue to offer financial assistance, particularly for (i) hydropower projects with a view to better comply with environmental and social safeguards, and (ii) electricity access projects
• Conduct policy dialog to accelerate moves towards formulating a comprehensive energy policy and accelerating power systems integration across the Greater Mekong Subregion