Hydroelectric Power in Laos: Economic Security in Energy-Hungry South-East Asia

Via Future Directions International, a report on Laos’ hydroelectric potential:

Hydroelectricity is at the core of Laos’ strategy to become the “Battery of Asia”. The export of electricity to neighbouring high-growth states, such as Thailand, is predicted to stimulate economic development. The average Laotian is likely to benefit from new employment opportunities, greater access to electricity and the development of infrastructure related to hydroelectric dam construction. The timing of this investment is fortuitous, as the rapid development of the South-East Asian economies surrounding Laos correlates to their energy needs, at a time when “clean” and sustainable energy sources are being championed globally.

That same growth, however, threatens the potential value of hydroelectric exports in the long term. Rising interest in energy self-sufficiency, particularly in Thailand and Cambodia, could decrease Laos’ regional competitiveness. If that occurs, Laos could potentially find itself with an oversupply of electricity. Considering its relative dependence on energy export revenue, this could wreak havoc on the national economy if energy prices drop.


Laos is the fifth-largest hydroelectric energy exporter in the world. Its energy exports generated nearly US$1 billion in the first nine months of 2017 and accounted for 19 per cent of its exports that year. Foreign investors are also interested in its hydropower potential, with 25 per cent of all foreign investment directed towards the hydropower industry. Consequently, hydroelectricity production is likely to increase; currently, 46 hydropower plants are operational and an additional 54 are under construction and scheduled to be operational by 2020.

Only about ten per cent of Laos’ hydroelectricity is sold internally. In the near future, exports are expected to increase with growing regional energy needs. Thailand is the largest importer of Laotian hydroelectricity, with about seven per cent of Thailand’s energy imported from Laos in 2015. By 2036, its energy imports are expected to make up about 20 per cent of its total electricity demand. Similarly, the Vietnamese Government predicts that its energy imports will increase by around 58.5 per cent by 2035 and Laotian energy already accounts for the majority of Vietnam’s imported electricity.

Laos is in a position to meet regional demand for its hydropower. In the long term, however, potential issues could arise from the financial consequences of its infrastructure spending and the energy plans of neighbouring states. The Laotian Government follows a system of “build, operate and transfer” in the process of administering its dams. Underthis system, private companies are responsible for the construction and operation of the dams; after 20-40 years of operation, full ownership is transferred to the government. This system eases the approval and oversight process, reduces red tape and more readily facilitates foreign investment.

By the time the government takes ownership, and hydro revenue theoretically flows exclusively to state coffers, two downsides become apparent. Firstly, dam infrastructure requires extensive maintenance, which becomes particularly costly after several years of operation. The Laotian Government will therefore inherit maintenance and upgrade costs previously carried by private operators. These costs will increase over time, because the infamously heavy and unpredictable rainfall in Laos leads to disastrous consequences when infrastructure maintenance standards are not rigorously enforced. The second problem is that by the time the government inherits the hydropower facilities, it is likely that alternative energy sources and hybrid renewable-energy projects will offer more cost-effective and perhaps more efficient sources of electricity.

Regional initiatives to decrease dependence on external energy providers also spell trouble for the Laotian hydropower industry. In the long term, energy self-sufficiency ambitions in Thailand, Vietnam and Cambodia mean that beyond the next 20 years, the market for hydroelectric exports may begin to decline in the face of increased domestic production.

Thailand has expressed its desire to generate nuclear power domestically for five per cent of peak-time use by 2036. Vietnam is planning to increase internal renewable energy generation by over ten per cent by 2030. Cambodia is maximising the energy potential of the Mekong and its tributaries by building several of its own hydropower facilities. It increased hydroelectricity generation by a factor of 50 in just five years between 2011 and 2016.

Studies have found that every country in the Greater Mekong region theoretically has access to energy sources that are 100 per cent renewable, through hydro, wind, solar and hybrid systems. These projections all indicate that, despite currently booming energy requirements for the growing populations surrounding Laos, hydroelectricity may not be as profitable an export in 20 years.

Overdependence on natural resource exploitation for national revenue is not unique to Laos; regionally, for example, Timor-Leste is coming to terms with the consequences of being almost entirely reliant on oil and gas revenue and being subject, therefore, to fluctuating international prices. Similarly, attempting to meet the current regional need for electricity as quickly as possible could undermine Laos’ future energy security.

As investment in hydroelectricity projects is likely to decline, the Laotian economy would be better served by increasing the development of the services industry. That would help to increase economic diversity and reduce its reliance on a single natural resource.

This entry was posted on Thursday, October 25th, 2018 at 5:42 am and is filed under Uncategorized.  You can follow any responses to this entry through the RSS 2.0 feed.  You can leave a response, or trackback from your own site. 

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About This Blog And Its Author
As the scarcity of water and energy continues to grow, the linkage between these two critical resources will become more defined and even more acute in the months ahead.  This blog is committed to analyzing and referencing articles, reports, and interviews that can help unlock the nascent, complex and expanding linkages between water and energy -- The Watergy Nexus -- and will endeavor to provide a central clearinghouse for insightful articles and comments for all to consider.

Educated at Yale University (Bachelor of Arts - History) and Harvard (Master in Public Policy - International Development), Monty Simus has held a lifelong interest in environmental and conservation issues, primarily as they relate to freshwater scarcity, renewable energy, and national park policy.  Working from a water-scarce base in Las Vegas with his wife and son, he is the founder of Water Politics, an organization dedicated to the identification and analysis of geopolitical water issues arising from the world’s growing and vast water deficits, and is also a co-founder of SmartMarkets, an eco-preneurial venture that applies web 2.0 technology and online social networking innovations to motivate energy & water conservation.  He previously worked for an independent power producer in Central Asia; co-authored an article appearing in the Summer 2010 issue of the Tulane Environmental Law Journal, titled: “The Water Ethic: The Inexorable Birth Of A Certain Alienable Right”; and authored an article appearing in the inaugural issue of Johns Hopkins University's Global Water Magazine in July 2010 titled: “H2Own: The Water Ethic and an Equitable Market for the Exchange of Individual Water Efficiency Credits.”