Myanmar is at a major crossroad. After decades of heavy-handed military rule and international sanctions, the country has recently opened up to international aid, trade, and investments. Although it is endowed with rich mineral resources, oil and gas, as well as significant hydropower potential, Myanmar is ranked among the poorest countries (161 out of 180) by the International Monetary Fund and ranked 149th out of 187 countries by the United Nations in the Human Development Index. Only 26 percent of its 60 million people had access to electricity in 2011.[1]
With development and bilateral aid institutions as well as corporations, businesses, and tourists flocking to the country, Myanmar is faced with a great opportunity to rapidly change its economy and the lives of its people. But will Myanmar be able to develop its economy and bring electricity to its people (70 percent of whom are in rural areas) in a sustainable, equitable, and democratic manner? What development and electrification models are out there? As Myanmar contemplates these questions, its immediate neighbor to the east, Thailand, could offer insights and lessons from its history and the trajectory of the development of its power sector. Not only has Thailand been touted as a model, its energy security is also intimately tied to Myanmar’s resources and development – 30 percent of Thailand’s natural gas consumption is met by supplies from Myanmar, providing revenues that accounted for a quarter of Myanmar’s 2006 GDP.[2]
By most assessments, the development of Thailand’s power sector appears to be a great success story. In the 1960s, Cold War politics and the World Bank persuaded Thailand to choose a centralized electrification path by creating a monopoly of three state-owned utilities: Electricity Generating Authority Thailand (EGAT), which was in charge of generation and transmission grid; and Metropolitan Electricity Authority (MEA) and Provincial Electricity Authority (PEA), which distributed power to Bangkok and rural areas, respectively. The Thai power sector developed rapidly, with the electrification rate reaching 98 percent in three decades. Currently, the Thai power system has about 33,000 MW of installed capacity and continues to grow. On the surface, a centralized model for power system expansion would seem like the efficient way to lead the country toward prosperity.
Looking deeper, however, we notice that the “success” is not without its costs. Under a centralized monopoly, a number of community mini-grids powered by micro-hydro systems were forced shut upon the expansion of the national grid.[3] Although it excelled at rapid expansion, centralized planning without proper checks and balances led to cycles of over-projection of demand, over-investment, and economic inefficiencies, particularly after Thailand’s electrification rate reached 98 percent in 1995. A former prime minister stated in 2003 that over-investments in Thailand’s power sector were estimated at 400 billion Baht (ca. 10 billion Euros and about 6.5 percent of its GDP). Without implementing structural reforms to break the monopoly, the central planning, and the cost-plus regulatory regime (which enabled the costs for inefficient investments to be passed on to consumers), such inefficiency was not an isolated incident but rather a recurring event.
With a surplus energy supply, there was no real incentive to promote energy-efficiency programs. Thailand’s energy consumption was wasteful and unproductive, as indicated by the high energy intensity (ratio of energy consumption to GDP), compared to other comparable economies . Such inefficiency in consumption and investment also had an impact on Thailand’s economic competitiveness.[4]
Another consequence of the monopoly model with an emphasis on power system expansion has been the marginalization of greener, cheaper options to meet electricity demand: energy efficiency, renewable energy, and distributed energy systems. Energy efficiency has been shown – internationally as well as in Thailand – to be the cheapest, greenest way to meet growing demand. Many countries prioritize renewable energy because of its domestic availability and its job-creation benefits. Distributed energy, such as combined heat and power systems, is much more efficient than centralized generation and reduces the need for expensive transmission infrastructure. Despite clear benefits, Thailand’s share of renewable energy (excluding large hydro) is only 1.5 percent, and the share of distributed energy is only 3 percent, compared to the world average of around 11 percent. Although Thailand has clear policies to support these distributed clean energy options, the policies have yet to be integrated into the planning process and treated as equal options to conventional centralized generation.
When greener, cheaper, and more efficient options are not prioritized, Thailand’s power system must rely heavily on centralized generation that not only requires very capital-intensive investments but also creates significant social and ecological impacts. In addition, centralized generation wastes 40–70 percent of heat content (compared to 15 percent in a distributed combined heat and power application) into the atmosphere, rivers, or ocean and requires costly transmission infrastructure to transport power to where it is needed. Thailand has limited natural gas resources, but the overemphasis on large-scale power generation means precious gas is wasted instead of providing productive services for the economy, and this can cause impacts that surrounding communities would find hard to accept. Often, impacts and benefits are not distributed equally and evenly across the population. Pak Mun Dam, the World Bank-funded “run-of-river” project, displaced 1,700 families, decreased fish yields by 80 percent, and deprived 6,200 families of their livelihoods, all in exchange for barely enough electricity to power a mega-mall in Bangkok. Such inequality exemplifies the structural violence of the centralized power structure. It has also added fuel to the flame of political and social divisiveness (rural “peasants” vs. urban “elites”) within Thai society.
Heightened awareness of impacts from power projects has made the siting of new power plants in Thailand very challenging. To meet the growing electricity demand, central planners have increasingly been relying on energy imports. About 22 percent of total power consumption in 2010 was generated from imported gas (Myanmar), 7.7 percent from imported coal, and 4.5 percent from hydropower (Laos), meaning that combined imports comprised about 35 percent of total power consumption. This portion is expected to grow significantly as Thailand looks to its neighboring countries and beyond for untapped energy resources and sites for power plants that offer less opposition and less-stringent environmental regulations. From Thailand’s perspective, energy imports not only help alleviate the problems of diminishing domestic supplies while exporting environmental and social impacts, but they also create lucrative investment opportunities for Thai companies through project development, construction, financing, as well as operation and maintenance.
But a heavy reliance on energy imports also makes Thailand vulnerable. Not having sovereign control over the energy resources that provide Thailand’s energy security can be risky and costly to the Thai economy. A case in point is natural gas from Yadana and Yetagun, Myanmar. The gas comes through a single gas pipeline that feeds about 7,000 MW to power plants (more than 20% of total installed capacity) and accounts for about a third of the total gas supply consumed each year. This high level of dependence on this single source (pipeline) of fuel is a risk to Thailand’s energy security. It has forced Thailand to up its planned reserve margin requirement from 15 to 25 percent and added cost burdens for consumers. Yet, the latest Power Development Plan still calls for centralized power plants to be fuelled by imported liquid natural gas, imported coal, as well as imported hydropower, aggravating the problems of energy dependence, security risks, and wasteful consumption while broadening the extent of impacts beyond Thailand’s borders.
Clearly Thailand’s energy development trajectory is not sustainable from energy and ecological perspectives. More importantly, it is not economically beneficial in the long term. Thailand’s unproductive, inefficient consumption, which is fueled by increasing energy imports, is only made possible by borrowing from the past – plundering mineral and resource wealth – and from the future in the forms of massive debt and contractual obligations (such as 25-year power and gas purchase agreements), to be paid or fulfilled by current and future captive energy users. This debt-fueled-growth approach is not unique to the energy sector. Thailand’s economy as a whole is also on steroid growth. Its precarious debt load is at unprecedented levels: government debt is more than 40 percent of GDP, and average household debt is 20–23 percent of income and set to rise to 40 percent in the near future.
In sum, Thailand’s economic and energy sector growth may appear enviable on the surface, but deep down, it is a sick system. Instead of healthy, sustainable economic development, the expansionist centralized approach has led Thailand toward energy obesity due to unhealthy consumption habits that are financed by debt. Is Thailand’s power sector and economic development path the model for Myanmar to follow? No. There are other, better ways. Instead of emphasizing centralized grid expansion, mini-grids – with a focus on efficiency and decentralized generation – can play a significant role, too.
In addition, Myanmar has its own unique challenges. Unlike Thailand, which is surrounded by resource-rich neighbors, Myanmar is “the last frontier.” Its development will depend upon reliance on its own resources. Even then, much of its mineral and resource wealth has already been “spoken for.” Despite the dire need to use natural gas in power generation to serve domestic electricity demand, most of Myanmar’s natural gas has already been “claimed” by Thailand and other energy-hungry countries. Myanmar will need to choose wisely what kind of industries or economic activities it supports (given investment privileges) based on energy consumption, environmental costs, and value to economy (e.g., local job creation, local content, value creation).
The challenge will be how Myanmar can leverage external resources while maximizing benefits for the locals without losing sovereign power. One strategy would be to integrate economic and energy policy planning with the goal of minimizing waste and maximizing efficiency and economic value (e.g., job creation, money circulating in local economy) for each precious dollar of energy investment. Another strategy would be to prioritize utilization of distributed renewable resources over non-renewable resources. To ensure a democratic outcome, the government should also allow participation by citizens, entrepreneurs, and communities in the planning and development of the power sector.
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[1] ADB, “Myanmar Energy Sector Initital Assessment,” October 2012, http://www.adb.org/sites/default/files/myanmar-energy-sector-assessment.pdf (accessed March 22, 2013).
[2] Based on Yadana and Yetagun revenues reported (available at: http://www.nationmultimedia.com/aec/Ministry-reveals-gas-revenue-for-first-time-30186368.html) and GDP figures (available at: http://www.genocidewatch.org/sites/default/files/images/Myanmar_08_04_The_Human_Cost_of_Energy_Burma_Myanmar.pdf).
[3] Chris Greacen, “The Marginalization of ‘Small Is Beautiful’: Micro-hydroelectricity, Common Property, and the Politics of Rural Electricity Provision in Thailand,” PhD Thesis, Energy and Resources Group, Berkeley: University of California, August 2004.
[4] EPPO, “Energy Strategy: Energy for Thailand’s Competitiveness,” November 2003; available at: http://www.eppo.go.th/doc/strategy2546/strategy.html (accessed March 23, 2013).
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This article was first published in PERSPECTIVES ASIA#1.