Modelling the Long-term Risks Surrounding Laos' Electricity Trade

Aspiring to become the “Battery of Southeast Asia,” Lao People's Democratic Republic (Laos) has rapidly expanded its electricity generation capacity over the past two decades to export electricity to neighbouring countries. However, this expansion highlights multiple risks, including system over-capacity and unfair pricing (economic), increased competition due to regional capacity expansion (geopolitical), increased debt (financial), and higher carbon emissions and biodiversity loss (environmental). We modelled these risks in an energy systems model of the Laotian Power sector, developed in an open-source framework. We developed three broad scenarios that explored these risk dimensions, including (i) the risks of system over capacity due to uncertainty surrounding Laos’ electricity export demand, (ii) the ability of Laos to meet its Nationally Determined Contributions (NDCs) with its planned electricity exports and (iii) the opportunity for Laos to negotiate fair electricity export prices. We find that uncertainty surrounding Laos’ electricity export demand will significantly influence its domestic demand for electricity and associated supply and the level of CO2 emissions. However, we also find that revising and replacing the planned coal-powered power purchase agreements (PPAs) for exports with renewable power plants (solar and wind) will enable a GHG reduction trend aligned with Laos’ updated NDCs. Additionally, the amendment of electricity export price in PPAs to equal import price is expected to result in a nearly four-fold increase in Laos’ total discounted revenue by 2060. Based on these insights, a revision of Laos’ long-term energy plan is recommended to achieve sustainable economic growth while mitigating the risks above from the electricity trade.