Myanmar’s electrification rate is among the lowest in South-east Asia, despite the country holding abundant hydropower resources that should easily enable it to reach energy self-sufficiency. With electricity consumption rising sharply in recent years, and forecast to triple by 2030, the government of Myanmar is moving to deploy dozens of new power plant projects in an effort to reduce shortages and boost rural electrification, supported by a new energy strategy emphasising gas-fired plants and small-scale hydropower projects. Several key changes are needed before the country can meet its ambitious universal electrification target, however, including reforms to its tariff structure, as well as ongoing upgrades to the national grid.
In its December 2016 “Myanmar Energy Sector Assessment, Strategy, and Roadmap” report, the Asian Development Bank (ADB) reported that total electricity consumption in Myanmar stood at 11,252 GWh in 2015, with Yangon accounting for 44% of the total. According to the bank, electricity consumption has risen by an average of 9.8% annually between 2000 and 2012.
In a July 2017 report, the Ministry of Electricity and Energy (MoEE) also highlighted strong recent growth in electricity consumption, showing that the country’s peak load rose from 1600 MW in 2011 to hit 1850 MW in 2012, 2055 MW in 2013, 2527 MW in 2015 and 3192 MW in mid-2017. The MoEE forecasts peak demand will soar in the years to 2030, ranging from 3178 MW to 3587 MW in 2018, 3862 MW to 4531 MW in 2020, 5930 MW to 8121 MW in 2025, and between 9100 MW and 14,542 MW in 2030.
This poses a challenge for growth and industrialisation given current capacity constraints. According to the European Chamber of Commerce (ECC), Myanmar’s electricity supply is sourced from 319 power plants. These are comprised of 302 hydro-power plants, 16 gas-fired power plants, and one coal power plant, with daily generation capacity estimated at 43,500 KWh.
According to the ECC’s “Energy Guide”, as of mid-2018 Myanmar’s total installed capacity stood at 4976 MW, of which 3033 MW, or 61%, is derived from hydropower, 1823 MW, or 37%, from gas and 120 MW, or 2%, from coal. However, available capacity in the country is just 50% of installed capacity, and many gas-fired power plants are not fully operational due to poor maintenance. Exacerbating the problem, hydropower output often declines during Myanmar’s dry season, while a further 520 MW of installed hydro capacity is reserved for export to China.
As a result, Myanmar has one of the lowest electrification rates in South-east Asia, with the World Bank reporting in 2014 that just 33% of the country’s 53m-strong population had access to grid electricity, and some 40,000 villages were reportedly not connected to the national grid. The ADB reports that the 70% of citizens who live in rural areas are largely without grid access, with some paying between 10 and 20 times the amount of government-subsidised electricity tariffs to fuel their homes.
The National Electricity Master Plan (NEMP) and National Electrification Plan (NEP), backed by the Japan International Cooperation Agency and the World Bank, respectively, are the primary policy documents guiding electricity development in the country. Approved in November 2015, the NEP calls for universal electrification to be achieved by 2030-31, emphasising small-scale and off-grid solutions, including 500,000 subsidised solar home projects, as well as an additional 35,000 mini-grid solar developments.
The NEMP seeks to boost coal’s contribution to the country’s energy mix to 30% by 2030, as well as develop new hydropower projects to meet demand. The plan is currently being updated, according to the MoEE’s July 2017 report, with the goal of aligning it with the NEP, as well as developing cost-effective energy solutions. The Myanmar Energy Master Plan, meanwhile, published in 2015, emphasises renewable development, highlighting hydropower and solar projects. It forecasts that Myanmar’s energy sector will require between $30bn and $40bn of investment in the 15 to 20 years from 2015, making private sector participation in new power projects an important consideration for the government.
In December 2016 the ADB reported that an additional 1500 MW of projects were under development and planned for completion by 2020, with gas-fired plants, to play a major role in these efforts. In November 2017 Daw Nilar Kyaw, the minister of electricity, industry and transport for Yangon Region, announced that an additional 439 MW of capacity would be added for the city in 2018, most of which will be sourced from gas-fired plants. Major planned gas-fired projects include Yangon’s 106-MW Thaketa power plant, as well as the 225-MW Myingyan power plant, located in Mandalay Region. The NEMP’s influence is also clear in upcoming projects, with a new coal-fired plant in south-eastern Myanmar set to join the country’s sole existing coal-fired plant, the 120-MW Tigyit plant located in southern Shan State.
In October 2017 Thailand’s TTCL, a joint venture (JV) between Italian-Thai Development and Japan’s Toyo Engineering, announced it would build a $2.8bn, 1280-MW coal-fired power plant in Kayin State. Forecast for completion in 2023, the project is expected to use Japanese technology and consume 4m tonnes of imported coal each year: although Myanmar holds significant coal reserves, they are not high quality enough for use in electricity generation. TTCL authorities reported that the firm expects a return on investment of approximately 10-13%.
Private Sector Participation
According to the ADB, 75% of Myanmar’s installed capacity is owned by the MoEE, with the remaining capacity owned by private independent power producers (IPPs). The country has recorded robust private sector participation in new power plant development since opening the sector to IPPs in 2012, with the World Bank stating that power plants account for the majority of public-private partnership (PPP) projects that have reached financial close since 1999 (see overview).
One of the largest projects to be developed as a PPP is the Myingyan plant, with the $315m plant reaching financial close in 2017. Sembcorp Industries is constructing the facility under a 22-year build-operate-transfer PPP arrangement. The firm was registered in October 2015 after a JV between Singapore’s Sembcorp Utilities and Singapore-registered MMID Utilities and successfully claimed the contract for the project in April 2015.
Myingyan is the largest gas-fired plant in the country, with its first phase coming on-line in January 2018. The Thaketa plant, meanwhile, is being developed as a JV between China and Myanmar. China’s SEPCOIII Electric Power Construction Corporation is building the plant, which is scheduled to come on-line in the first quarter of 2018, according to the latest available estimates at the time of press.
With electricity demand set to triple over the next 12 years, private sector investment in power plants is expected to accelerate, although tariff reforms and grid upgrades will be necessary to fully capitalise on potential interest from international investors.
The ADB reports that Myanmar’s retail electricity tariff is set at between MMK35 ($0.03) and MMK50 ($0.04) per KWh for households, and between MMK75 ($0.06) and MMK150 ($0.11) per kWh for industry, depending on consumption levels. Although tariffs were increased by an average of 40% in April 2014, electricity prices in Myanmar are still among the lowest in South-east Asia, and continue to remain far lower than the actual cost of supply.
In September 2017 local media sources reported that losses from tariff subsidisation hit $400m during FY 2016/17, even as the private sector’s share of total power generation increased from 35% to 50%.
“Before we engage in a meaningful debate about the right energy mix for Myanmar’s power generation sector, the government needs to raise electricity tariffs. Ultimately, that is what will make power generation a profitable activity and an attractive sector for investment from private utilities companies,” U Aung Ye Soe, managing director of Myanmar engineering company Machinery and Solutions, told OBG.
The IMF echoed these sentiments in its Article IV Consultation for Myanmar, writing in November 2017, “electricity tariffs need to be rationalised to reduce the subsidies to the state-owned electricity company, while mitigating the impact on the poor.”
With the NEP calling for 24,000 MW of generation capacity, grid upgrades will also be required in order to fully capitalise on new power plant opportunities. Myanmar’s transmission system is a network of 230-, 132- and 66-KV transmission lines and substations connecting hydropower plants to load centres across the south of the country. Although the ADB reports that distribution lines are generally in good condition, it also found that technical and non-technical losses stood at 20% in 2013. The government is now moving to gradually phase out its 6.6-KV distribution systems instead opting for 11- and 33-KV systems.
As of December 2016 a 454-km, 500-KV transmission line linking Mandalay to Yangon was already being implemented, a project which also received assistance from a number of international governments including Serbia, South Korea and Japan.
In June 2017 the Yangon Electricity Supply Corporation announced it had launched a new pilot project in the Hlaing, Dala, Tarmwe and Hlaing Tharyar townships. The project entails installation of new transmission cables, with plans to extend the programme to an additional 100 villages outside of municipal areas, as well as 33 Yangon townships, under NEP mandates to provide grid connections to any villages located in close proximity to the national grid.