August 19, 2016

Myanmar has set a Path to a Bright Energy Future by 2030

By Dejan Ostojic, Rome Chavapricha, Xiaoping Wang, Myoe Myint, Alan David Lee, and Heather Worley

Kyaw San has trouble studying at night. The student from Yangon Division’s Buu Tar Suu Village finds it especially difficult during the rainy season when his old solar-powered lamps cannot be charged, forcing him to study by candlelight.
Win Win Nwe, a grade 5 student, also often prepares for exams by candlelight. Her family can’t always afford to buy candles, adding another obstacle to an activity many take for granted. “If we can afford candles, we buy them. If we can’t, we don’t. We struggle and do our best,” said her father Kyi Htwe.
Today, two-thirds of Myanmar’s population is not connected to the national electricity grid and 84 percent of rural households lack access to electricity. No power means no light, no refrigerators, no recharging phones and batteries. Small businesses can’t stay open in the evenings, and clinics cannot refrigerate medicines. Access to reliable and affordable energy is essential for a country’s development, job creation, poverty reduction and shared prosperity goals.
The Government of Myanmar has developed a National Electrification Plan (NEP) to bring electricity to every community in Myanmar by 2030 –7.2 million new household and business connections. The plan aims to achieve 50 percent electricity access by 2020, 75 percent by 2025, and universal access by 2030 through the extension of the national grid as well as off-grid solar home systems and mini-grids in rural communities. By joining the United Nations Sustainable Energy for All (SEFA) initiative and adopting the NEP, Myanmar has a path to securing a bright energy future. But there is much work to do; over the next 15 years, building the grid will cost about $10 billion. Mobilizing this finance will be one of Myanmar’s biggest challenges and will need a financially viable power sector and sound policies.
Three priority policies could speed Myanmar’s achievement of universal access by 2030:
Improve transparency and competition in the electricity market in order to mobilize more private sector investment. Now that the National Electrification Executive Committee (NEEC) has been established, putting the right policies in place and building institutional capacity are important next steps. Universal access to electricity by 2030 will not be achieved with public resources alone; increasing private sector participation is essential. Research across many countries shows that attracting private investment involves stable, transparent, and enforced rules. An electrification initiative of the scope of Myanmar’s will be sustainable in the long term only if the costs are covered by a transparent combination of revenues and well targeted subsidies.
In many countries, one of the greatest threats to long-term sustainability – not just of the energy sector, but to inclusive economic growth generally – is the artificially low pricing of electricity and poorly targeted energy subsidies. Tariffs that are heavily subsidized can undermine the financial viability of the power sector and eventually fail to protect the poor if the subsidies are not fiscally affordable. Balancing the need for cost-reflective energy pricing and protections for poorer households is an important part of expanding and modernizing Myanmar’s energy sector.
Increase efficiency through corporatization and commercialization of Myanmar’s electricity utilities. An important recent achievement is the restructuring and corporatization that have been initiated in the power distribution sector. To improve performance and overall efficiency in power distribution, the Government of Myanmar is corporatizing the Yangon Electricity Supply Board and created the Mandalay Electricity Supply Corporation through the restructuring of the Electricity Supply Enterprise. As a result, distribution losses were reduced from around 23 percent to 14 percent in Mandalay and 16 percent in Yangon. This is an impressive achievement; to take this action a step further and continue the loss reduction program could involve substantial investments in the expansion and modernization of overloaded and outdated distribution networks. In Latin America, regulation was accompanied by the privatization of electric utilities. This contributed to helping expand capacity and system efficiency (with some countries in Latin America reducing system losses to less than 10 percent).
Create an independent electricity regulatory agency. A stable regulatory framework is essential for private sector participation, protection of consumers, and management of boundaries between grid and off-grid options for rural electrification. Many countries around the world, including Thailand and Vietnam, have established independent energy regulators to design tariffs and subsidy schemes that secure the financial viability of service providers and affordability for consumers. A new policy and regulatory framework would enable a transparent and efficient electricity market, particularly related to competitive bidding for new power generation. An efficient electricity market will entail transparent pricing policies consistent with the principles of full cost recovery and the establishment of an independent Electricity Regulatory Commission, as planned under Myanmar’s 2014 Electricity Law. In 1995, fewer than 10 developing countries had established electricity regulators but by 2008 about 60 had developed regulatory capacity.  Recent studies show that regulatory agencies are significantly associated with higher capacity and higher productivity.
At the World Bank Group we are proud to partner with Myanmar in implementing the NEP.  We support a long-term approach to improving the regulation of the electricity market and to developing a framework for increasing access to electricity and tracking results. We will look beyond individual projects in helping Myanmar to meet the goal of universal access to affordable, reliable and sustainable energy by 2030.
This blog is based on the World Bank Group’s policy note “Energizing Myanmar.” The authors are senior specialists in the Energy and Extractives Global Practice at the World Bank Group.


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