Laos has an area of 236 800 km² and a population of about 4.8 million.

Water resources

The Ministry of Agriculture and Forestry. and its Department of Irrigation and Micro Hydropower, is responsible for water resources. A new Water and Water Resources Law was enacted in 1996.

Laos has two large dams in operation, and five dams in total, providing a total storage capacity of 7.2 km³.

A 76.5 m-high CFRD is under construction on the Houay river for the 150 MW Houay-Ho hydro project. It will have a gross storage capacity of 596 x 10⁶ m³. Project completion is scheduled for 1999.

A CFRD is also under construction for the Nam Leuk hydro project, also scheduled for completion in 1999. The reservoir capacity will be 185 x 10⁶ m³.

Several other large dams are planned in the future., all for hydro projects:

Nam Ngum 3, a CFRD with a height of approximately 220 m;

Nam NguM 2, an arch dam, 169 m height and,

Xepian-Xenamnoy, a rocfill dam 78 m high.

Energy and power sectors

The Ministry of Industry and Handicraft (MIH) is responsible for energy. Electricite du Laos (EdL), is the state-owned national power utility responsible for power generation, transmission and distribution.

The Department of Electricity (DOE) has been established recently within the MIH as an institutional step in the process of electricity sector restructuring. The Hydropower Office within the DOE has been created as the planning, management and administration for the IPP programme, allowing Edl to concentrate more on its prime responsibility of domestic electricity generation, transmission and distribution.

A Committee for Investment and Foreign Economic Co-operation has been established within the Prime Ministry's office to administer and co-ordinate all foreign investment in Laos.

As part of an overall market-oriented restructuring of the Lao economy, changes have recently been made to create an investment climate more favourable to an IPP mode of development, in line with the objective of the Government of Laos(GOL). The GOL has reformed the commercial sector to encourage and regulate foreign capital and, in parallel, it has restructured and commercialized the power sector to enhance regulatory capacity and operating efficiency.

A programme of legislative reform is being undertaken to establish a proper legal and regulatory framework to manage the emerging market economy, to promote regional co-operation and to protect third Parties and environment from potentially adverse effects of private investment. Various new laws have been introduced since 1988, the most recent being a new Water and Water Resources Law (1996) and Electricity Law (1997).

The Electricity Law has introduced a licensing system which IPPs seeking a sole mandate to develop a power project must apply for a license. Regulations under the recent laws are now being drafted and will define many of the concession conditions for licenses and provide the necessary mechanisms for implementing the licensing system.

A number of measures have been taken to commercialize EdL. Tariffs for domestic consumption were increased by 70 per cent in October 1997. EdL became a public company under a charter approved by MIH on 29 December 1997, and signed a Performance Contract with the Ministry of Finance and MIH on January 1998. The utility has also been reorganized into profit centres, and has engaged a Financial Management Adviser to help introduce formal cost accounting and internal transfer pricing for each profit centre. Finally, EdL has established a Loss Reduction Unit, which is identifying major sources of technical and commercial losses and is making appropriate investments to reduce them.

The electricity market currently involves power purchase agreements. Currently about half of the country's hydro plant capacity is privately owned. Deregulation of the energy/power sector is envisaged in 2010, and will involve the separation of generation, transmission and distribution.

The main source of energy is fuelwood (90 per cent), the balance being supplied by electricity (5 per cent oil-based and 5 per cent hydro).

The sources of electricity in 1996 were: hydro(97 per cent)and imported oil (3 per cent).

The total electricity consumption in 1996 was 380 GWh, representing per capita consumption of 80 kW/year, one of the lowest rates in South-East Asia. At present, only 16 per cent of households, mainly in Vientiane, have access to electricity.

Most of the electricity generated in Laos is exported to Thailand. During 1996, 792.4 GWh was exported, and 87.5 GWh was imported.

Both energy consumption and electricity demand are expected to increase by about 9 per cent/year during the next decade.

Hydropower development

Laos has a very large hydropower potential, with a gross potential of 26 500 MW (232 564 GWh/year), of which the technically feasible potential is estimated to be about 18 000 MW (about two-thirds in the country's interior and the remainder on the Mekong river adjoining Thailand and Cambodia. Only about 2.3 per cent of the technically feasible potential has been developed so far.

The total installed capacity in Laos is now 427 MM of which 423 MW is hydro capacity.

The average annual generation of the hydro plant now in operation is 2814 GWh/year. Hydro will continue to supply about 97.5 per cent of power produced.

The 210 MW Theun - Hinboun project has recently been completed, nearly doubling the country's installed capacity.

The Nam Song Diversion Project has also recently increased the average annual output from the 150 MW Nam Ngum scheme from 860 GWh/year to about 1000 GWh/year.

A further 210 MW of hydro capacity is under construction, at an average cost of US$ 1500/kW, and 3717 MW more is planned for completion by 2007. Studies are also under way or pending for another 2669 MW of hydro capacity.

Nam Leuk, a Government project under construction, will add 60 MW (245 GWh/year) to the Vientiane grid. The plant's two units will operate under a gross head of 191.6 m; completion is scheduled for 1999.

Houay-Ho, the first major privately funded hydro project in Laos, is on schedule. It will have a capacity of 150 MW (617GWh/year) from two units, and is expected to start generating power in 1999. It is being built on a BOT basis.

The existing hydro plants could be uprated by an estimated MW.

BOT hydro projects to be developed soon are as follows:

Nam Ngum 3 (460 MW) and Nam Ngum 2 (615 MW), both scheduled for completion in 2003. Memoranda of Understanding (MoU) on power purchase agreements (PPAs) have been signed.

Nam Theun 2 (681 MW) is to be developed privately as a BOOT scheme.

Xepian and Xenamnoy (438 MW), to be completed in 2006; a PPA is under negotiation.

Xekaman I (468 MW), 2006: a PPA is under negotiation.

Nam Theun I (400 MW), 2007; a feasibility study has been submitted.

Feasibility studies are to be conducted soon for the following non-BOT projects: Xeset 2 (30 MW), to be completed in 2003; Tat Ko (30 MW), 2004; Xekong 4(470 MW), 2004, and, Nam Ngum 4 (45 MW), 2005. A feasibility study has already been carried out for Nam Mang 3 (50 MW), to be completed in 2006.

Feasibility studies have been submitted for the following BOT projects: Nam Theun 3 (236 MW); Nam Khan 2 (145 MW); Xetalam I(44 MW): Xetatam 2 (46 MW), Nam Ou (513 MW); and Nam Lik 1/2 (80 MW). Feasibility studies are under way for Nam Ngiep 2 (495 MW) and Nam Tha I (263 MW).

Studies are also pending for: Nam Cha l (115 MW); Nam Cha 3 (70 MW); Nam Ngiep 2 (495 MW); Nam Ngiep 3 (70 MW); and Nam Seuang (192 MW).

Small hydro

Laos has nine small, mini or micro hydro plants in operation, with a total capacity of 10 MW. An 80 kW plant is under construction, and two more are planned, with a total capacity of 2.7 MW. A number of small hydro projects are also under construction jointly by Thailand and Laos.

Further development is planned to serve the needs of remote areas, mostly financed by donor countries.

Future outlook

The hydro potential of Laos is far in excess of domestic requirements, and the GOL intends to facilitate development of hydro projects for power export, to make a very significant contribution to the country's economy. The Government is hoping to develop other energy markets, apart from Thailand, in particular in Vietnam and Cambodia.

A major programme of studies for large and medium-scale hydro projects is under way. Government policy on future power development divides project into two types:

Domestic Generation Projects will be principally for meeting increasing domestic demand; they can be brought on-line early earn export revenue. They will mostly be from 5 to 60 MW in capacity and will continue to be built by the GOL.

Export Generation Projects will be implemented in joint venture arrangements with IPPs, specifically to meet export commitments, but they may also supply local demand near the project. Initially, IPPs will build projects needed to satisfy obligations under MoUs with Thailand and Vietnam. An inventory of additional projects is being developed to provide back-up and to meet additional export demand anticipated in the medium to long-term.

Thc GOL will favour power projects which will have: limited detrimental social and environmental impacts; provide associated infrastural and social development; GOL equity in IPP projects to enhance returns to the country; and, timely implementation.

Transmission planning is at all Important juncture, with several important issues under consideration, including: establishment of a Lao National Grid Company: implementation of a 500 kV line for taking power from the Nam Ngum basis: finalization of interconnection

Arrangements for other IPP projects; planning of a 500 kV line in southern Lao to export power to Vietnam; and, planning for an HVDC line to connect the Jinghong project in Yunnan province, China, through Laos to Thailand.

The process of institution, commercial and regulatory reform will continue It will clarify issues relating to the rights of developers and lenders seeking to invest in Laos, and will include further commercialization of EdL.

Rural electrification remains a high priority. A number of isolated mini and micro hydro projects are at various stages of planning and implementation, and other forms of renewable off-grid supplies are being investigated. Such projects will usually be funded by bilateral arrangements with donor countries and supported by other international organizations. A trial installation of photo-voltaic power supply is planned and, if feasible, could open the way for other such investments.