Burma, thanks to the polish of political reforms, has taken on a golden sheen in the eyes of investors and analysts. The realities on the ground are sobering, however, not least for electricity. Factory owners in Rangoon have begun the year with daily power cuts which may worsen as the dry season drags on.
Supply can only meet half of anticipated demand, according to the Ministry of Electric Power. The national connection rate is 26 percent for a population estimated at about 60 million by the Asian Development Bank (ADB). In the countryside, home to 40 million people, only 16 percent are connected to the power grid.
The shortage of power is probably the biggest single impediment to development. It is also an incredible opportunity which should be the envy of countries which have marched ahead of Burma. The lack of infrastructure leaves the door open to developing an electricity system which leverages advances in community power production using clean energy resources such as sunlight, farm wastes, biomass and geothermal.
The distributed power approach is gaining ground fast in developed and developing countries. Upfront costs can be high and subsidies are often provided, but then prices for carbon power are also shaped by subsidies, too. For example, from Germany to California rooftop solar is booming. So much so that the Institute for Local Self-Reliance estimates almost 10 percent of electricity in the US could be produced by unsubsidized distributed solar generation, mostly on rooftops, by 2022.
Meanwhile, people in villages across Bangladesh and India are finally switching on LED lights and more after decades of waiting in vain for the electricity grid. While they waited, technology and business changed. Locally produced electricity from clean energy resources is now cheaper than candles, batteries or kerosene.
In India, Gram Power, Mera Gao Power and Omnigrid Micropower are developing village microgrids. Initially a few solar panels or biomass digesters are set up as a village power plant. Because the systems are modular, more power sources can be added as demand grows from basic needs to developing livelihoods, using machinery to increase production and add value. Microgrids also power mobile phone base stations which formerly relied on diesel generators.
Simpa Networks takes a different approach, turning homes into power plants in India. Simpa sells solar home systems on flexible installment plans. In Bangladesh, aid donors led by the World Bank have provided financing of US $370 million for Grameen Shakti to apply the approach at scale. Over a million solar home systems have been installed. A thousand more are added each day.
The economics of these models look favorable for Burma. Electricity from Gram Power in India, for example, costs $1.37 a month, whereas previously households were spending $3.66 on kerosene. In Burma, the European Union Energy Initiative (EUEI) and Mercy Corps, in separate field studies, found solar lanterns and solar home systems, sold in markets for $10 to $300. The return on that investment can work out to savings of 80 percent over 10 years, given mean monthly spending of about $10 on candles and batteries.
Upfront cost is beyond the reach of many in Burma, where one of every four people lives below the poverty line and mean annual GDP per capita is $859, according to the ADB. Therefore, one limit on opportunity in Burma will be the availability of finance to provide systems on credit at a price no more than what would otherwise be spent on candles and batteries. While that is unlikely to be straightforward, experience in Bangladesh and India shows household or village power systems can be financed.
The opportunity may be as promising if not more so among customers who are suffering unreliable supply from the grid. Distributed power, particularly solar, could be a competitive alternative to diesel generators widely used for power backup by households and firms connected to the grid.
Experiences in Bangladesh and India prove that distributed power can be fast, affordable and simple to deploy in contrast to centralized power generation in developing countries. Granted, the volume of power from household power systems or village power plants is a trickle relative to what large power plants can deliver. But for people with zero electricity just a little makes a huge difference. Electric lights are better for reading and studying. Electricity connects people via the media and telephones to information and opportunities.
Distributed power produced from clean energy resources also provides several collateral benefits. One, the damage and costs of environmental, social, health and security externalities arising from centralized large hydro or carbon power systems can be reduced. Two, generating and buying power locally may mean less money leaks out of the local economy. Three, a reduction in vulnerability to the supply risks associated with carbon energy plus the impacts of global decarbonisation measures.
So what does the growing global trend for distributed power mean for Burma? First, it demonstrates that a few distributed power pilots plus dozens of local commercial initiatives in Burma are onto something. Second, electricity could expand further and faster than it has in other countries which developed earlier, conferring considerable economic, environmental and social advantages. Third, government policy and aid donors have a model to follow and adapt. Finally, commercial or social investors should be able to reduce their risks because they can learn from experiences elsewhere.
Whether Burma grasps the opportunity or continues with existing plans to continue to develop centralized power only remains to be seen. However, there are reasons to think distributed power could take off. One, distributed electricity matches the government’s goals for power self-sufficiency, renewability and diversity. Two, preliminary assessments by the EUEI and United Nations Development Program during 2012 suggest aid donors are evaluating options for assisting distributed power in Burma. Three, the ADB and Norway are providing technical assistance for an electricity bill which would among other things provide a legal basis for distributed power generation. Finally, investment and banking reforms will in due course make doing business a little easier.
As in any underdeveloped country, investment and development are going to face obstacles, though some of those obstacles may fall were the government to actively promote the approach with a targeted policy. Nevertheless, the opportunity to deploy tried-and-tested models at scale may be enough for pioneer investors, particularly people strongly motivated to deliver social impact, to make a move on the power frontier. The prospects for power have never been brighter.
David Fullbrook is a sustainability analyst and regular contributor to Asia Sentinel.