What Laos should do in the short, medium and longer term to develop its hydropower potential. It should focus on the opportunities (and how they could turn these into realities) and risks (and how they could mitigate them).

The Laos government needs to develop a coordinated and integrated impact assessment, and hydropower development strategy that addresses these issues. This should include research and studies on fisheries, the aquatic environment and water quality. Further, basin-wide planning, with due regard to environmental and social aspects and to sustainability needs to be implemented, and Laos needs to work with all stakeholders in the Meekong project.

To do this, Laos could developa.) 20 Years’ Power System Master Plan (PSMP) for sustainable hydropower development.b.) Water Resources Management Plan on the basis of technical, economic, social and the

environmental considerations.

The Water Plan would assess water resources in the country and address its present and future supply and demand scenarios. Water related issues including conflicts of water use would also be highlighted and made aware in the Plans, and integrated water projects would be identified for possible sustainable development and demonstration. Bhutan has developed these plans for their own hydropower sector.

The selection of projects for the 20 Years’ Master Plan could weigh/select dam projects based on the local Laos perceived values and interests, to ensure the sustainable development of the identified projects without any social & environment hindrance and hurdles, and to avoid delays in their implementation. Bhutan’s plan focused on the following risks: Technical, Economic, Social, and Environmental and evaluated the Hydrological risk, Economic merit, and Improved access and Intrusion into protected areas of each potential dam project. It also considered the Finance-ability of rural electrification; Dam cost risk, Employment benefits, Dewatering impacts, Fishery potential, Access road erosion, Site accessibility, Tourism, Fish migration, and Population displacement risk.

Also, the government in the short and medium term needs to solicit and encourage grant-based investments in villages to mitigate any ecologically detrimental effects. Companies could invest in the village areas, creating factories and outsources offices for the population to work in, thus giving them jobs, food, etc. International labor laws would have to be enforced and consent by the villagers would be needed, but this could alleviate any problems resulting in agricultural and fishery losses.

Other countries have received huge benefits from hydro-power including revenues from exportation and tax revenues. In four years, Bhutan by exporting hydropower to India has raised

its per capita income several fold. Revenue from enhanced exports will allow Laos to develop infrastructure such as schools and roads to be built, health clinics to be financed, refrigerated vaccines to be available in rural areas, micro and macro enterprises expanding to provide employment, women and children having time to be educated, produce to be refrigerated rather than spoil in fields, and opportunity in rural areas to study at night improving job skills and literacy.

However, there is another risk that could destroy any chance for the above opportunities. The primary market for electricity from Laos is Thailand, and while there is a framework agreement with the Laos government for the purchase of electricity, following the economic downturn that began in 2008, Thailand’s demand for electricity has faded and with it has the desire to purchase electricity. While it may still purchase electricity, it is certain that it will demand a lower price. Further, in the countryside, civil society organizations have promoted solar power, small-scale hydropower, biogas and other forms of clean energy. These initiatives will further reduce the need for Thailand to import power from neighboring countries. This is not good news for Laos in the hydropower sector.

Also, Laos is only able to develop low dams with limited reservoir capacity, and because of pressure from NGOs in Thailand, projects on the Mekong River near the Laos-Thailand border have been put on hold, meaning that most of the dams in Laos are smaller scale facilities further downstream. Such projects are less efficient in respect to electricity production.

To circumnavigate this obstacle, Laos has to create a climate conducive for foreign investment. Without foreign companies and capital, its unlikely Laos will be able to continue expanding its hydro-power. Thus far hydropower development has cost one and a half billion US dollars, and the dam’s operators have to typically spend 100 million dollars to monitor and improve water quality in the reservoir and the downstream river system.

In the long term, Laos needs to obtain money from bilateral and multilateral donors at very low cost (1-2% per annum interest). These loans should be long-term (40-50 years) and allow repayments to be waived, as the GON does for the Nepal Electricity Authority (NEA) (however, the GON on-lends this money to NEA at an interest rate of 10.25%, which is higher than market interest rates). Low cost of lending would facilitate reduced tariffs to future consumers, (i.e. Laos citizens using hydro-power, and consumers in neighboring countries such as Thailand) as reduced cost would encourage consumption. The affordability of the consumers (domestic citizens and foreign markets) to pay for the electricity charges has to be cautiously considered while deciding the power tariff. If the energy price is kept high, there will be less incentive for use of electricity. Domestic electricity use in previously non-equipped areas would encourage ‘income generating activities”, thus contributing to economic growth domestically. Low tariffs would also support exportation of electric services, therefore increasing revenue through exportation. It is of the utmost importance that the hydropower planning process creates a “surplus” energy situation in order to ensure that the earnings from export of power continue to increase.

Laos should solicit donor-assistance in developing roads to local communities, as the process of connecting villages allows producers to gain enhanced access to markets for their agricultural

and other products. Hydropower developers will then be able to develop the necessary secondary roads to connect their plants with their load centers. It may also be possible to build these roads on a private or private-public partnership basis, paid for by a user-fee or subsidy. Laos can request donors to assist in this endeavor, significantly revitalizing the countryside and offering increased opportunities for greater participation in rural governance.

Laos should also develop several long term initiatives to achieve these opportunities. They should follow Bhutan’s example and develop:

1.) Integrated Energy Management Plan for sustainable supply/demand management.a. This would develop a management strategy for sustainable development of

hydropower based on various demand forecasts and scenarios in the future.

2.) Development of Legal and Policy frameworks for re-structuring and reforming the power sector.

a. A legal framework for restructuring the power supply industry would provide necessary regulations and frameworks, and would provide mechanisms for licensing and regulating the operations of power companies and participation of the private sector.

These plans and polices in the hydropower sector would contribute to achieving economic self-reliance and overall socio-economic development of the country.