Photo: Nam Long hydropower plant is located in Lao PDR's northernmost region of Luang Namtha. The 5.6 megawatt run-of-river dam provides electricity to about 150,000 rural people in two provinces. In Lao PDR, the Regulation on small Hydropower states that any hydropower project under 15 megawatts is considered a small dam.
For the past ten years, Bounleuth Luangpaseuth has been developing small hydropower projects under 15 megawatts in Lao PDR. As CEO, and vice-chair of the IFC-led Hydropower Developers’ Working Group in Lao PDR, Luangpaseuth understands the importance of sound policy and guidelines from the perspective of a local and small business owner.
“Developing small hydropower could bring rural households affordable electricity in Lao PDR,” said Luangpaseuth. “It’s the small projects that promote local business development.”
One of the projects Luangpaseuth is operating is a 5.6 megawatt project located in a remote area that is delivering electricity to about 150,000 people in Luang Namtha and Bokeo provinces. In Lao PDR there are roughly 300 small hydropower projects in the preparatory or negotiation phase and 11 operating.
For the smooth and successful execution of hydropower projects, companies need clear policy and regulation on the development process from start to finish. In the early phases of Lao PDR’s Hydropower Developers’ Working Group, small hydropower developers including Luangpaseuth agreed that clearer procedures on small hydropower development would help boost the sector. Luangpaseuth along with a team of small developers from the Hydropower Developers’ Working Group formed a committee to share their experiences that would support the drafting of a new regulation.
“Our working group was the perfect platform to offer our advice on drafting the regulation,” said Luangpaseuth. “We knew that if we could provide the government with our private-sector experience, there was a chance that a stronger, more business-friendly regulation would emerge.”
Experienced in the hydropower project concession agreement process, Luangpaseuth understood the challenges for small hydro developers first-hand. He believed that the process needed improvement by streamlining and clarifying the type of procedure that would be relevant for smaller and more localized projects.
“Our first recommendation was that the private sector should be on board if this regulation is going to work,” said Luangpaseuth. “When the government gave us the green light to provide feedback, we carefully combed through the regulation. Although there are some outstanding issues, the regulation today reflects many of our comments, which is a great success.”
With support from IFC, Luangpaseuth and the working group provided industry and technical advice to the Lao Ministry of Energy and Mines for a year and a half. Based on their experiences the developers reviewed drafts and discussed how to strengthen it based on experience and current needs for small hydropower development. Several areas were identified for improvement starting with a need to clarify the size of a small dam. The regulation now states that, in accordance with the Electricity Law, all dams 15 megawatts and below qualify as small.
The working group pushed for longer licensing periods. First proposed at 10 years with a possibility of renewal, the regulation now has harmonized the licensing period with the approach of the 25-year concession agreement. Small projects with lower defined impacts on the environment, people and nature qualify for the licensing scheme. Small project situated for example in national parks or with higher risks involved are still required to undergo a more rigorous concession agreement process.
Additionally, they helped comment on the bidding process and procedures on how to handle two parties vying for the same dam site. Provisions on project cancellations were commented on and thereafter strengthened; and details on power purchase agreements were amended.
The Regulation on Small Hydropower Development was the first time the private sector had the opportunity to get involved in in-depth consultations and offer their advice to the Lao government on policy development in a consolidated manner, a model that IFC and the working group will continue to promote in the future.
“As hydropower developers, we know if a policy from our sector is going to work, or not,” said Luangpaseuth. “Our business experience, in combination with IFC’s advisory support helped the government achieve its aims and finalize a solid regulation.”
In December 2013, IFC launched the first Hydropower Developers' Working Group in Lao PDR with support from the Australian government. Since then, over 100 members have joined the working group in Lao PDR and has been an active platform for hydropower companies to work through issues that create hurdles in the sector, comment on policy and engage stakeholders through seminar series. In August 2016 the working group was launched in Myanmar. HDWG Myanmar operates independently from Lao PDR to ensure local issues and topics are addressed appropriately.