|Project Rationale and Linkage to Country/Regional Strategy
Energy poverty constrains opportunities for sustainable social development, especially in rural remote communities, where women-headed households (HHs) and indigenous and ethnic minorities are remarkably vulnerable. This limited access to rural electricity services needs boosting in areas with hard topographic conditions, by promoting sustainable off-grid options. These include solar home systems (SHS) and mini-grids powered by Renewable Energy Technologies (RETs) to replace contaminating kerosene lighting, diesel generation, and conventional grid-extension, alternatives with high financial cost and externalities. The proposed Project will address these issues and assist the Government of Lao PDR (GoL) in pursuing its ambitious target of electrifying 80% of villages and 90% of HHs by 2020.
The Asian Development Bank (ADB), through its Energy Policy, Energy for All Initiative and Sector Roadmap for Lao PDR, has promoted improving the country's energy security and access to clean energy. So far, ADB's key Assessment Strategy and Roadmap (ASR) for the Energy Sector in Laos PDR has promoted sector development by implementing new power generation capacity and extending and interconnecting provincial distribution grid-infrastructure. Nevertheless, the ASR scope needs to now include pro-poor clean distributed generation of electricity in its menu of options, especially SHS and mini-grids powered by RETs as one of the best technological and cost-effective alternatives to conventional grid extension in remote rural areas of Lao PDR. In figures, in developing countries grid extension cost can be estimated on average at $8,000 $10,000/ kilometer (km) and in difficult topographies at about $22,000/km. Besides, the Project will enhance ADB's regional experience and be the first of its kind in Lao PDR.
The midterm review 2007-2011 Country Strategy Program (CSP) for Lao PDR, recommends accelerating the electrification rate, mainly in the Northern Provinces. This will help to achieve the GoL's national electrification targets, mainly by targeting rural remote communities difficult to reach and with low capacity of payment for energy services. These HHs are not yet included in any ongoing electrification plans of the GoL and development partners. The Ministry of Energy (MEM) and its Department of Electricity (DOE) support this argument.
In the Northern Provinces the electrification rate is much lower compared to the national average of 60% (measured in 2010). Barely electrified remote areas will offer the best environment to demonstrate the suitability of RETs for bringing access to clean electricity services and social development. Sustained by this rationale and assisted by the Project Team, the MEM and DOE, proposed the selection of project implementation sites in the Provinces Oudomxay with 295,000 inhabitants, 45,000 HH and 14% electrification rate; Luang Nahmta with 155,000 inhabitants, 29,000 HH and 20% electrification rate; and Phongsaly with 168,000 inhabitants, 30,000 HH and 12% electrification rate. The Project will benefit at least 10,000 HHs.
The Project, which is included in the Country Operations Business Plan (COBP) for Lao PDR 2012-2014, will address a pro-poor-design targeting indigenous peoples; ethnic minorities and women headed HHs. It is categorized as Effective Gender Mainstreaming . The Project will strengthen the criteria for selecting sites and promote project ownership among beneficiaries. To avoid market distortions, it is foreseen that the project beneficiaries will repay part of the equipment costs through cash or in-kind contributions. The Project will promote sustainability models to ensure no equipment failure during expected service life.