Mekong Eye - News, analysis and opinion focusing on the environment and sustainability of the Mekong region
Kannikar Petchkaew
4 February 2022 at 15:15  (Updated on 5 May 2022 at 13:13)
After years of hydropower supercharging Laos’ successful ambition to become the key power exporter in the region, Laos’ energy export market has taken a surprising turn … towards coal.
According to most international analysis from Carbon Tracker to Bloomberg, carbon is dying. Yet in Laos, energy carbon production went from zero to half of all energy produced by the country in five years.
This analysis of government, health and industry data from across the region explores the economic, environmental and geo-political forces at work driving investments in a dying power source and the potential consequences of a shift away from renewables.
Like much information about Laos, full disclosure is unheard of and huge questions remain about the specific actors profiting from coal and whether it threatens Laos’ gradual emergence from deep poverty. This explainer covers:
According to media reports last year, a new $2 billion  agreement will allow a Chinese company to manage the majority of Laos’ power grid for the next 25 years, an extension of decades of foreign investment driving massive and poorly understood energy projects.
Overwhelmed by a sovereign debt of $12.6 billion, or around 65 percent of gross domestic product, Laos is not in a strong position to regain control over its energy operations.
The Chinese, who have the finances, technological aptitude and manpower to run it, will continue to influence what kind of energy gets financed in the country.
Coal power concessions have so far granted for businesses from China, Vietnam, Singapore and Laos. Global hostility towards new coal plants makes identifying new coal projects even more difficult than usual and requires scouring media reports for mentions. But one thing is clear: numbers are climbing.
The Global Energy Monitor has identified at least six coal projects that have been announced  in addition to the currently operational Hongsa plant, which will add 6700 MW of coal to Lao’s energy mix. Here are some examples of details of some of these plants from available news sources:
So as of now, waiting in line are at least five coal power plants with a total capacity of 4,100 megawatts— twice what the country has today.
The Minister stated at the National Assembly that as of 2020, Laos already had 82 sources of energy with a combined installed capacity of more than 10,000 MW. One-fifth of those plants are coal-fired.
According to Our World in Data, in 2020 coal power comprises close to half of Lao’s electricity generation. Very few public explanations are available to justify the pivot to coal.
“The main reason we want to produce more electricity from coal-fired power is to minimize the amount of reimported power and address the electricity shortage in the dry season,” the Minister was quoted in the Vientiane Times, explaining, in effect, that it was a strategy to keep the lights on during dry periods when hydropower dams slow production. Experts argue that there are better back-up alternatives.
Laos’ initial coal financing was driven by Thailand, the country that purchases most of Laos’ hydropower, even as Thailand’s own coal production flattened.
Hongsa Power Company (HPC) was established in 2009 by Thailand’s Banpu Power Public Company Limited (BPP) and RH International (Singapore) Corporation Pte. Ltd. and is a subsidiary of Thailand’s RATCH Group Public Company Limited and LaosHolding State Enterprise (LHSE), according to its corporate website.
Its goal was to develop a 1,878 MW lignite mine-mouth power plant. What resulted was Laos’s highest-capacity power generator, providing energy for Laos and Thailand.
Before the Hongsa Coal Power plant started operation in 2015, Laos’ energy production was coal-free. After Hongsa started spinning its turbines, coal power generation accounted for one-eighth of Laos’ electricity production. Within the next four years, coal grew to make up close to half.
Hydropower has historically dominated energy production in Laos, growing 10% each year for the last two decades and helping pull the country out of extreme poverty, making the coal investment more puzzling.
When GE signed a memorandum of understanding with Laos to support the long term development of its energy sector, Laos’ dream was to punch well above its weight in ASEAN as an energy producer and exporter.
As of 2021, all operational hydropower projects in Laos have a total capacity of 9000 MW. If all of the country’s hydropower turbines turned all year round, they could power all of Slovenia.
The export of Laos’ electricity generation has grown 10% annually for the past 15 years. During those years, the country has exported over three-quarters of its electricity.
Laos aims to add another half of what they have today with 44 hydropower projects planned or under construction.
Thanks to hydropower, the country’s population access to electricity has been slowly but continuously growing for almost three decades. In 2019 Laos stated that not a single person lives without electricity. However, some areas, mainly along the border, are still reportedly not connected to the national grid.
In 2020, revenue from electricity generation was one eighth of the country’s GDP.
In early November  2021, Thailand’s National Energy Policy Board, chaired by its Prime Minister approved the plan to increase hydropower electricity purchasing from Laos from 9,000 MW to 10,500 MW.
So why did Laos turn from hydropower to coal amidst apparent global demand for clean energy and higher demand from energy exporting?
Witoon Permpongsachareon is the Director of Mekong Energy and Ecology Network. The NGO has worked on environmental issues in the Mekong region for more than 20 years. He sees the demand for hydropower growing for Laos electricity exports.
“In November 2021, the Thai government agreed to purchase electricity from another three hydropower projects Nam Ngum 3, Pak Baeng, and Pak Lai. So to me there’s no reason for more coal.”
Courtney Weatherby, a research analyst and Deputy Director for Energy, Water, and Sustainability, Southeast Asia at the Stimson Center sees this demand for power as a potential threat.
“The drought that we have seen in recent years is becoming more severe and more frequent and we have seen so many droughts over the last two decades which have had an impact on not only agriculture, rice production, or water availability. But there’s also an impact on hydropower especially during the dry season,” explains Weatherby.
“The water level and the reservoir will drop when hydropower dams operate to produce electricity. In drought years sometimes there really is not enough water available and the reservoir cannot produce the electricity as planned.”
Since 2000, there has been a clear seasonal pattern of water release and restriction detected at Chiang Saen. The recorded flow was on average higher than naturally expected in the dry months of December to May whereas the recorded flow was lower than expected during the wetter months of June to November.
The current decade is experiencing wider swings between flow surplus and deficit. In the previous decade, the flow at Chiang Saen swelled to one and a half times that of naturally expected flow at its highest point and shrunk by a third at its lowest point.
In the current decade, Chiang Saen’s flow at its highest point was double that of naturally expected flow while Chiang Saen at its lowest point shrunk by more than half.
Further downstream in Vientiane, 10 out of 12 months on average have been experiencing flow deficits every year since 2000.
In the long term, Laos may simply be trying to stabilize its energy market, but investment in carbon comes with its own perhaps even higher risks.
Unlike in Thailand, where environmental and health regulations have stymied coal investment, Laos’ carbon footprint is skyrocketing. Hongsa Coal Power Plant has an electricity production capacity close to 2000 MW — a quarter of what Laos’s hydropower dams can currently produce.
Each year Hongsa burns almost 15 million tons of lignite, sending CO2 into the air equivalent to almost five million passenger cars driven non-stop for a year.
Most of the electricity produced by Hongsa has been exported to Thailand. The immediate environmental and health impacts are born by the people of Laos.
Radio Free Asia reported in June 2021 — six years after Hongsa started spinning its turbines — that two villages with close to 200 families were affected by construction of the third phase of the plant. The plant and authorities agreed to pay 1,200 kip (US $0.12) per square meter of farmland and 2,000 kip (US $0.20) per square meter for constructed facilities.
According to residents, the compensation was half of what their property was worth.
In 2016, ten thousand Laotians died from household and ambient air pollution according to ASEAN Center for Energy. 146 per 100,000 citizens dying of carbon-related causes was highest among ASEAN countries and over four times higher than immediate neighbors Thailand and Vietnam.
Somporn Pengkam is the Director of the Community Health Impact Assessment Platform in Southeast Asia. She has been studying the health impacts of the Hongsa Coal plant on the Thai border area, a mere ten kilometers from the plant.
“After [Hongsa] started operation, villagers found rice in a paddy field turning brown as if it was burned. Tangerine trees are falling. That happened to all plants,” said Somporn.
“Buddhist monks said they noticed this change in their vegetable farm. But we have yet to confirm that it is related to the coal plant. But all of them have seen the plants standing there for years and no one could deny that the coal plant is horrifyingly dangerous.”
For the villagers struggling to feed their families, the health impact is a secondary concern  after the impact on their farming.
“Once there’s any pollution, people will not stand facing it till they die. They will evacuate for the survival of their farm. The community will be gone first.”
Carbon dioxide emissions grew five times faster within the first four years of Hongsa’s operation than it did in the last 50 years.
In 2018, each Laos citizen released almost three tons of carbon dioxide into the atmosphere. That’s the same as a car running non-stop for close to 8,000 miles. But in Laos, the energy produced by carbon rarely reaches citizens.
Somporn expects it to get worse.
“For trans boundary impacts, it’s not only the Hongsa plant we are talking about. There are more of several coal plants in southern Laos. Coal reserves are there and so are the risks.”
Laos has made electricity the major force for its development but the big bet on coal may reverse its fortunes.
China made a public pledge last year to end its investment in foreign coal plants and many other regional foreign investors, such as Singapore and Thailand, have been pressured to curtain carbon investments as well. The Laos government seems slow to recognize this new reality.
“Our energy and mining plans have been a major and crucial force for our development,” said Sonsai Siphandone Laos Minister of Planning and Investment, as he addressed the annual meeting with the Ministry of Energy and Mines in mid-November 2021.
“It successfully turned us from a basic economy country to an export-based country and brought us better lives and brought us out of poverty.”
For Weatherby, the drive for success with coal comes as major forces may face many challenges.
“When you look at the price trends for coal in the region, it is increasingly uncompetitive with alternative energy sources,” she said.
“For instance, the per kilowatt-hour cost. Solar tends to fall far beneath coal. We know that coal prices are rising in the long term. Because of a lack of investment in mining. Because of the severe concern over carbon emission. Because it is not an attractive alternative anymore.”
Witoon is also hopeful that the global trend will not easily allow Laosto burn more coal.
“From a business perspective, coal is not competitive anymore. The world turns against it. So you could be turned against too. You would be charged with high taxes. You would be boycotted. Those financial institutions will also be seriously careful if they should take this high risk for a high return?
If they really need to support coal plants which have been heavily criticized they would trade with high interest. Your cost is not competitive anymore. No smart people will do business with many obstacles and disadvantages lying ahead.”
Weatherby, though, realizes that planned projects are not guaranteed to receive promised financing. .
“Many of the coal plants in southern Laos that have been proposed — which is where the coal reserves are — were intended originally for potential sale to Cambodia. The projects that Laos is anticipating to sell to Cambodia will be funded by China. So I think there’s uncertainty now around those projects.”
The stakes for Laos almost could not be higher. Thanks in large part to energy exports, it is expected to rise from a least developed country to a developing country in 2026 as it emerges from a history of abject poverty.
The United Nations makes this assessment based on per capita gross national income, human assets and vulnerability to economic shocks. A potential crash for coal is already reflected in this last pillar.
“Laos is small. Rich in natural resources but landlocked. The country needs funding for it’s development. For crucial infrastructure. You need money in doing so. How could this country find that money? What should they trade to have enough money for the development?” wondered Somporn.
As the UN committee recommends, Laos receives five years for the transition. Other Mekong countries are taking advantage of the shift to renewables to attract large investment in solar.
Laos has several proposed solar projects, but they will require external investment for Laos to successfully adopt this cleaner technology.
Witoon has a suggestion for Laos policy makers.
“What Laos should do is announce a no coal policy and ask those developed countries to help in financing the development instead,” he suggested. “I think the world will overwhelmingly welcome this and help Laos out.”
Data and Methodology
In most cases, due to the scarcity of official Laos data disclosures, data has been sourced by international bodies tracking energy issues. The data from Global Coal Plant Tracker  is produced by the Global Energy Monitor. Additional data was sourced from the Global Change Data Lab and Ember to show the dramatic growth of coal electricity and the  sharp drop of hydropower electricity. The World Bank’s World Development Indicators dataset was one of the few available sources on public health impacts of carbon emissions in Laos.  Data from Stimson Center was used to demonstrate the irregular flow of The Mekong found in recent decades has made hydropower less reliable. The author worked with additional data from the official website of Laos Ministry of Energy and Mines, Hongsa Power Company Limited (HPC), and news outlets reporting on the Laos energy sector. Original data findings in this story were verified by researchers and environmental activists working on Laos energy and sustainable development.
This story is supported by the Mekong Data Journalism Fellowship jointly organized by Internews’ Earth Journalism Network and the East West Center.
Kannikar Petchkaew has covered wide ranges of issues from politics, economy, human rights, civil war to the environment. Her byline has appeared on numerous media outlets, including Asia Calling, Free Speech Radio Network, the Straits Times, Mongabay and the Mekong Eye. She enjoys her multi-tasking life, juggling her journalism career with lecturing young students in Thailand. 
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