Southeast Asia’s hydropower boom grinds to a halt as COVID-19 stalls projects

Southeast Asia’s hydropower boom grinds to a halt as COVID-19 stalls projects

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Hydropower construction in Laos has been halted due to fears of COVID-19 contagion. (Photo: Jack Board)

BANGKOK: Incomplete and prospective hydropower dam projects in Southeast Asia, particularly along the Mekong River and its tributaries, are at risk of major delays and shutdowns as the COVID-19 pandemic impacts major industries, energy markets and worker safety.

The government of Laos has already ordered a temporary halt to all hydropower construction in the country, after a mining company worker tested positive for the virus. Planning consultations about future works, including the major Luang Prabang dam, have also been postponed. 

Amid possibly the worst regional drought in four decades and the worsening impacts of climate change, observers say the virus-driven impacts have further put the viability of large scale projects in question.

“Everyone is affected. The global economy is affected. The hydro sector is affected. The pandemic will hamper global supply chains, delay construction and temporarily reduce demand,” the Mekong River Commission (MRC) Secretariat told CNA. 

“But the extent of the impact will depend on how far the pandemic will go. At this time, there are a lot of uncertainties. Nobody is sure when this is going to end,” it continued.

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This part of the Mekong River has been earmarked for the new Luang Prabang dam project. (Photo: Jack Board)

FALLING DEMAND FOR ELECTRICITY

Meantime Thailand, a major importer of electricity from neighbouring countries, is set to slash its overseas purchases, faced with a serious oversupply of domestic power due to a steep decline in demand. 

The country’s Ministry of Energy will be forced to adjust its power development plan with oversupplied reserves set to hit 40 per cent - or about 18,000 MW, a situation that is likely to see power prices soar for consumers. 

“To put this in perspective, 18,000 MW is over three times what Thailand is currently importing from neighbouring countries; and is greater than the combined installed capacity of 11 dams planned for the Lower Mekong mainstream,” said Pianporn Deetes, Thailand Campaign Coordinator for non-government organisation, International Rivers.

READ: Amid hydropower boom, Laos streams ahead on latest Mekong dam

“It is clear that buying electricity from large-scale dams is not necessary to ensure Thailand’s energy security,” she said, while urging for a moratorium on the signing of Power Purchase Agreements on new power projects in neighbouring countries. 

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Economic pressures and energy market dynamics are expected to majorly impact hydropower in the region. (Photo: Jack Board)

For Laos, which has positioned itself to be the battery of Southeast Asia, the risks and costs are already mounting. While existing projects, including the expansive but controversial Xayaburi Dam can continue to operate freely, its power production, which is managed for export by Thailand’s national energy utility EGAT, will be surplus to needs during this period.

“As COVID-19 is force majeure, people in the sector can renegotiate contract arrangements to make it flexible enough to cope with this situation,” the MRC Secretariat said.

READ: 'The colour is blue’ - Strange changes to Mekong River as hydropower dams and climate change make their mark

UNCERTAIN PROGNOSIS FOR HYDROPOWER INDUSTRY

Climate change is already biting in Laos and it is one of the reasons the government has admitted it needs to more carefully review its hydropower dependency. Recent reports that China had deliberately withheld water on its portions of the Mekong - which it refers to as Lancang - contributing to weak flow and dry river conditions downstream, have exacerbated concerns about the dams’ reliability.  

An MRC report shows a predicted mean temperature rise of about 0.8 degrees Celsius by 2030, a number set to rise incrementally throughout the remainder of the century, each increase raising the magnitude and stakes of the impact.

It also cites a 50 per cent drop in annual Mekong river flow through Laos’ capital city Vientiane over the next 40 years, under a “dried climate scenario”.

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Cambodia has already put a moratorium on mainstream Mekong projects for a decade. (Photo: Jack Board)

The permanent secretary of Laos’ Ministry of Energy and Mines told CNA late last year that solar projects were being considered as a complement or substitute to unreliable hydro production. 

“It’s very difficult now to operate or focus the output of the hydropower. We have to think more deeply, more broadly and think if we can develop it this way, or another way,” Dr Daovong Phonekeo said then.

Daine Loh, a power and renewables analyst for Fitch Solutions also said: “Unexpected droughts and weather patterns have weakened hydropower generation output reliability in recent years, so some markets might look to other more reliable baseload resources such as coal or gas generation to support their economic growth over the coming years.”

“The weaker fiscal position of these markets due to an economic slowdown also poses a significant downside risk to the completion of new large-scale hydroelectric power projects over the medium term, increasing the risk of delays and cancellations most prominently on primarily government-funded projects,” she added. 

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The Mekong has been suffering from low flows and appeared a blue-green colour late last year due to sedimentation loss. (Photo: Jack Board)

READ: Southeast Asia’s renewable energy transition likely to take hit from COVID-19, say experts

Cambodia is one country already turning its back on large-scale mainstream dams, with its government last month postponing new projects on the Mekong for a decade. It means two potential projects - the Stung Treng and Sambor - are unlikely to go ahead.

The country suffered major electricity shortages during last year’s dry season and while exploration of other renewable energy sources are in early exploratory phases, the allure of reliable, affordable production may put short-term importance on coal power plants.

“The current low gas prices, for instance, is tempting for many countries seeking cheaper electricity,” said the MRC secretariat. 

“But the recent volatility in the oil markets has once again highlighted the relative stability of cash flows that renewable energy projects, in particular hydropower, can deliver to investors over the long run.”

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Source: CNA/jb

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