Grid interconnectivity as climate adaptation in Mekong power trade under Climate Uncertainty: Case for Thailand – Lao PDR - Vietnam

Southeast Asia is one of the world's fastest-growing electricity markets, with increasing regional dependence on hydropower-based electricity trade through the ASEAN Power Grid. However, recent drought-induced power shortages in countries in the Mekong river basin have highlighted the vulnerability of regional power systems to climate-induced hydrological uncertainty. This study investigates the economic and energy-system impacts of hydropower degradation under deep decarbonization in Lao PDR, Thailand, and Vietnam, while evaluating the role of regional electricity trade as a potential adaptation mechanism. To capture interactions between macroeconomic adjustment and power-sector transformation, the analysis links a global computable general equilibrium (CGE) model, UNICON-G, with a bottom-up power system optimization model, UNICON-POWER, through an iterative soft-linking framework. 

Preliminary results show that hydropower degradation increases mitigation costs and raises electricity prices in importing countries, with impacts most pronounced in Vietnam, where both domestic hydropower generation and hydropower-based electricity imports play a significant role. Under climate stress—representing an approximately 20% reduction in hydropower availability by 2040—power sector mitigation costs increase, leading to higher electricity prices and reduced system flexibility. Higher electricity prices suppress electricity demand, constraining the role of electrification in supporting economy-wide decarbonization. As a result, Vietnam experiences additional GDP losses of about 1.5-2 percentage points compared with decarbonization alone, while Lao PDR faces losses (about 1 percentage point) from reduced hydropower exports. Expanded transmission partially offsets these impacts by facilitating access to lower-cost generation across regions, improving trade flexibility and reducing the overall cost of achieving decarbonization.