|Project Rationale and Linkage to Country/Regional Strategy
Strengthening power supply capacity is critical for reducing poverty and enhancing the medium- and long-term development prospects of Myanmar. Persistent power brownouts during the dry season adversely impact economic and social activities. Electrification is urgently required; without it large areas of the country will be severely hampered in their efforts to advance economically. Basic and socioeconomic needs also depend on electrification, without which, health, education, and other essential services will inevitably suffer. About 68% of available electricity is used in Yangon (46%) and Mandalay (22%) regions (the country has 14 regions and states).
Low national electricity coverage. Although electricity consumption in Myanmar has doubled during the last 10 years, total electricity consumption in 2012 was 8,434 gigawatt-hours. With a population of about 60 million, Myanmar's per capita electricity consumption was only 140 kilowatt-hours (kWh) per year the lowest among the 10 Association of Southeast Asian Nations member countries. The low consumption is due to lack of industrial development, lack of investment, and poor electrification ratio. The country's average electrification ratio increased from about 16% in 2006 to 28% in 2012. Yangon City has the highest ratio (72%), followed by Nay Pyi Taw (65%), Kayah (42%), and Mandalay (35%). The remaining rural areas have electrification ratios averaging about 21%.
High distribution losses. As of December 2012, total system installed power generation capacity was 3,495 megawatts (MW), comprising 2,660 MW (76.1%) hydropower, 715 MW (20.5%) gas-fired, and 120 MW (3.4%) coal-fired. Due to scheduled maintenance and various limitations of operations at several power plants, the actual firm capacity as of December 2012 was 1,957 MW. Although the installed capacity exceeds the 2012 peak load of 1,796 MW, during the dry season hydropower plants cannot generate to full capacity due to lack of water. Hence, the country's power grid is experiencing of up to 400 MW 500 MW of load shedding during the dry season. The transmission lines and transformers have limited capacity. The network also has high transmission and distribution losses. Technical and nontechnical losses of the distribution system were as high as 23% in 2003 and decreasing to 18.2% in 2012. Therefore, improvement of the distribution network is urgently needed.
Sector governance and institutions. The regulatory framework for power includes the Electricity Act of 1948 (as amended in 1967), the Myanmar Electricity Law (1984), and the Electricity Rules (1985). MOEP is responsible for the power subsector. Within MOEP, Myanmar Electric Power Enterprise is responsible for the development and implementation of the transmission network, covering the voltages of 66 kilovolts (kV), 132 kV, and 230 kV. Two distribution enterprises operate the distribution systems in the country YESB and ESE. YESB is responsible for the supply of electricity to consumers in Yangon City and ESE for the rest of the country comprising 13 states and regions, including off-grid generation and distribution. Operation and maintenance capacity of the two distribution enterprises is adequate, but due to limited availability of parts and manual operation of distribution systems, performance of the distribution systems is poor.
Low electricity tariffs. From January 2012, the electricity tariffs was MK35/kWh for general purpose (households), street lighting, and government offices; and MK75/kWh for domestic power, and small and bulk power. On 27 October 2013, the government announced the increase in electricity tariff with effect from 1 November 2013: MK35/kWh for households (until 100 kWh) and MK50/kWh (for 101 kWh and above); MK100/kWh for industry, enterprise, and lumpsum (until 5,000 kWh) and MK150/kWh for industry, enterprise, and lumpsum (for 5,001 kWh and above); MK50/kWh for government offices; and MK100/kWh for industrial use of government departments. Off-grid consumer tariffs vary depending on the cost of generation by diesel or other means (e.g., solar, mini-hydropower) and may range from MK100/kWh to MK300/kWh.
Priority areas for future investments. Significant investments are needed to (i) improve and upgrade the distribution systems, especially in Yangon and Mandalay regions; (ii) address the current shortage of power generation through rehabilitation and new additions; (iii) reinforce the transmission grid and associated substations; and (iv) extend transmission and distribution networks to connect more consumers, particularly in rural areas. A consolidated development and investment plan for the power subsector is not available. The preparation of a long-term power master plan commenced in July 2013, with assistance from the Japan International Cooperation Agency (JICA); it is expected to be completed by June 2014.
ADB assistance. Up to 1987, ADB provided five loans totaling $31.6 million and three technical assistance (TA) projects totaling $1.27 million for the power subsector. Since 1987, no loans and TA were provided. Until reengagement in March 2012, ADB obtained limited information on the power subsector through the Greater Mekong Subregion Economic Cooperation Program. The Myanmar Energy Sector Initial Assessment (October 2012) recognizes that ADB should resume providing assistance to the power subsector to enhance reliability by rehabilitating and expanding transmission and distribution networks. The New Energy Architecture: Myanmar defines the enabling environment for achieving the long-term objectives of economic growth and development, energy access and security, and environmental sustainability. Since reengagement, ADB has provided a total of about $4.7 million of TA to enhance capacity, strengthen planning, enhance the legal and regulatory framework, and prepare power projects. To enhance MOEP capacity, ADB assistance includes (i) a power advisor to MOEP; (ii) international and national experts for preparing a transmission and distribution grid code, and electric standards and specifications; (iii) preparation of a financial management assessment of four enterprises within MOEP; and (iv) formulation of proper safeguard requirements and procedures. Also, to strengthen the legal framework, ADB provided assistance for drafting the revised electricity law and subsequent electricity regulation, and introducing the regulatory authority to enhance transparency and attract private sector participation. In addition, project preparatory TA conducted a feasibility study for transmission expansion. The project is included in the draft country operations business plan for Myanmar and is in line with ADB's interim country partnership strategy for Myanmar for 2012 2014, which emphasizes the need to support power infrastructure.
Development coordination. ADB, JICA, and the World Bank have closely coordinated their assistance for the power subsector with MOEP following reengagement. They have agreed that (i) ADB will undertake rehabilitation of distribution networks in Yangon, Mandalay, Sagaing, and Magway regions; (ii) the World Bank will carry out rehabilitation of a 108 MW gas-fired plant at Thaton; and (iii) JICA will undertake rehabilitation of gas-fired plants within Yangon, a hydropower plant, and distribution networks in other townships in Yangon.