Chapter 2

Overview of Myanmar Energy Situation

Myanmar is experiencing a major political, economic, and social transition from what was once
under a military regime to today’s open democracy. In this process, electrification of the country
is expected to play a fundamental role in its development.

The energy policy landscape of Myanmar remains in flux. A new minister of Energy and Electricity
was appointed in 2017, bringing new perspectives to the ministry. Liquefied natural gas (LNG)
was chosen as a strategic option in the face of rising energy demands. Four projects were
approved and expected to start operation by 2021. Meanwhile, liquefied petroleum gas (LPG)
has been recently targeted as a means to reduce the electricity consumption in urban areas.

Coal remains a highly disputed resource. The union government has explicitly refused to
continue its development, while the Kayin state government is working to support a 1,280 MW
coal-fired project. In all these, one needs to also remember that rapid urbanisation will continue
to drive the electricity demand in major cities.

In rural areas, on the other hand, the government has made some headways in its support for
mini-grids. Recent policy directions have been focusing on the formulation of regulations for off-
grid projects.

2.1 Background: Myanmar Transition from Military to Democracy

Myanmar, formerly known as Burma, is the largest country in continental Southeast Asia. It is
even slightly larger than Thailand. It is a multi-ethnic country, with 135 different groups
recognised. Majority is composed of ethnic Burmese, while other large groups include Chin,
Kachin, Karenni, Karen, Mon, Rakhine, Rohingya, and Shan (Oxford Burma Alliance, n.d.).

The country was under various phases of British colonial control between 1824 and 1948, after
the defeat of the Burmese monarchy in three wars. A British-like administration was attempted
to be introduced during this period (Thant Myint-U., 2008). After it obtained its independence

4
in 1948, Myanmar entered its democratic era. It then experienced a period of military
dictatorship after General Ne Win staged a coup d’etat in 1962.

Myanmar initiated a gradual opening and transition towards democracy in 2008. A new
constitution was approved and elections were held. U Thein Sein, who became president in 2007
and led the transition towards democratic elections, was in charge of this process. After the
elections in 2012, the National League for Democracy (NLD) won most of the seats. The NLD was
the main party opposing the military rule and founded by Aung San Suu Kyi, the main figure of
the opposition, daughter of the country’s hero Aung San, and Peace Nobel laureate (Rieffel,
2016).

The NLD achieved a landslide victory during the 8 November 2015 election (Hulst, 2015;
Whiteman, 2016). However, Aung San Suu Kyi did not become president because the
constitution does not allow locals from assuming the presidency if they have foreign family
members (Cochrane, 2017). Instead, her close ally U Htlin Kyaw became president, while the new
position of state counsellor was created for her (Mclaughlin, 2016).

2.2 Energy Sector in Myanmar: Country-wide Implications

Energy is expected to play a central role in the democratisation and modernisation of Myanmar
(Loftus, 2016). However, the nation’s electrification rate as well as the consumption of electricity
remain very low.

In urban areas, the reliability of the supply remains an issue. A successful country-wide
electrification process also affects the legitimation of the reform agenda in Myanmar (Ross,
2015). Myanmar needs to also increase its generation capacity to meet the needs of the
population and the rapid rise in urban population and industry. Moreover, to be consistent with
the United Nations Sustainable Development Goals and the Paris Agreement, Myanmar must
meet such goals in a sustainable and inclusive manner by harnessing the potential of renewable
energy.

Myanmar is eminently rural (Table 2-1), with the exception of Yangon, the former capital city and
still the country’s major economic hub.

5
 Table 2-1. Population in Administrative Divisions in Myanmar

State / % of Urban Rural

Male Female Total Area (sq km)
Region Total Area (%) Area (%)

Kachin 878,384 811,057 1,689,441 3 89,041.80 36 64

Kaya 143,213 143,414 286,627 1 11,731.51 25 75

Kayin 775,268 798,811 1,574,079 3 30,382.77 22 78

Chin 229,604 249,197 478,801 1 36,018.90 21 79

Sagaing 2,516,949 2,808,398 5,325,347 10 93,702.48 17 83

Tanintharyi 700,619 707,782 1,408,401 3 43,344.91 24 76

Bago 2,322,338 2,545,035 4,867,373 9 39,404.43 22 78

Magway 1,813,974 2,103,081 3,917,055 8 44,820.58 15 85

Mandalay 2,928,367 3,237,356 6,165,723 12 30,888.09 35 65

Mon 987,392 1,067,001 2,054,393 4 12,296.64 28 72

Rakhine 1,526,402 1,662,405 3,188,807 6 36,778.05 17 83

Yangon 3,516,403 3,844,300 7,360,703 14 10,276.71 70 30

Shan 2,910,710 2,913,722 5,824,432 11 155,801.38 24 76

Ayeyawady 3,009,808 3,175,021 6,184,829 12 35,031.88 14 86

Nay Pyi Taw 565,155 595,087 1,160,242 2 7,075.10 32 68

Union 24,824,586 26,661,667 51,486,253 100 676,577.23 30 70

Source: Ministry of Immigration and Population (2015).

Myanmar has become one of the fastest growing countries in the region: up until 2014, its
economic growth had been constantly above 7% (Lwin, 2015) (Table 2-2). Its low labour cost has
made Myanmar an attractive location for manufacturing industries (Matsui, 2017b).
Nevertheless, natural gas has traditionally been, and still is, the largest export product of the
country and the main source of foreign currencies during its period of isolationism. Myanmar

6
exports about 90% of its natural gas production from four active gas fields, signing export
contracts with countries such as Thailand and China. Agriculture constitutes the main part of the
national economy – about 38% of the GDP – and employs 60% of the population (World Bank,
2016a). It also comprises 25% to 30% of the export earnings (FAO, 2018). It is commonly said
that anything can be planted in Myanmar because the soil is considered to be the most fertile in
Asia (Zorya, 2016). Nevertheless, isolation and stagnation have led the country to be the least
profitable in the region. In 2015, the government decreed a rice export ban for six weeks (Wai
and Aung, 2015). Tourism has been growing and the government has tried to stimulate it;
however, it still is largely limited by political factors.

Table 2-2. Economic and Trade Indicators

Indicator 2000 2005 2010 2011 2012 2013 2014 2015

Population 47.67 49.98

(million)* 51.73 52.13 52.54 52.98 53.44 53.90

GDP (current 8.90 11.97 49.54 59.98 59.73 60.13 65.57 62.60
US$ billion)*

GDP growth (%)* 13.75 13.57 13.08 11.99 10.26 10.55 9.63 5.59

GDP per capita

187 239 958 1,151 1,137 1,135 1,227 1,161
(current US$)*

Human 0.427 0.474 0.526 0.533 0.540 0.547 0.552 0.556

Development
Index (HDI)**

Inflation (average
consumer 15.63 48.499 97.379 96.314 100.855 107.164 113.72 123.33
prices)***

FDI approved - 6,065 19,999 4,644 1,419 4,107 8,010 9,481

(US$ million)****

FDI, net inflows

(current million 255 235 901 2,520 1,333 2,254 2,175 4,083
US$)*

7
 FDI (%GDP)* 2.86 1.96 1.82 4.20 2.23 3.75 3.32 6.52

Import value
index (2000 = 100 80.48 200.75 380.40 388.10 507.93 684.39 738.34
100)*

Export value
index (2000 = 100 233.09 534.58 570.19 547.90 693.31 680.84 685.49
100)*

Exports - - 8,829 10,228 10,379 11,957 14,653 16,459

(US$ million)*

Imports - - – – – – – –
(US$ million)* 8,184 10,453 12,499 13,987 16,341 18,403

Sources: *World Bank (WB), **United Nations Development Programme (UNDP),

***International Monetary Fund (IMF), ****Directorate of Investment and Company
Administration (DICA).

2.2.1 Energy Demand and Usage in Myanmar

Myanmar’s energy supply is highly dependent on traditional biomass. Figures 2-1 and 2-2 show
the total primary energy supply and final consumption in the 2000s. From about 70% at the
beginning of the century, the portion of biofuels and waste in the total energy supply has only
slightly dropped to 60%. Today, oil products have been experiencing an abrupt increase since
2011. Meanwhile, natural gas production and consumption have remained relatively stable. The
contribution from coal has not been significant.

The residential sector is the largest energy consumer, as seen in Figure 2-3, although
consumption by the transport sector has been growing in the last decade. Meanwhile, industry
has remained stable at about 10%–12% of the total consumption. Other sectors’ consumption
continues at much lower levels.

8
 Figure 2-1 Total Primary Energy Supply (ktoe)

25000

20000

15000

10000

5000

0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Coal Crude oil Oil products Natural gas

Nuclear Hydro Geothermal, solar, etc. Biofuels and waste
Electricity Heat

Source: International Energy Agency data.

Figure 2-2 Total Final Consumption (in ktoe)

20000
18000
16000
14000
12000
10000
8000
6000
4000
2000
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Coal Crude oil Oil products Natural gas

Nuclear Hydro Geothermal, solar, etc. Biofuels and waste
Electricity Heat

Source: International Energy Agency data.

9
 Figure 2-3 Total final consumption by sector (ktoe)

20000
18000
16000
14000
12000
10000
8000
6000
4000
2000
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Industry Transport Residential

Commercial and public services Agriculture / forestry Fishing
Non-especified Non-energy use

Source: International Energy Agency data.

Figure 2-4. Electricity Production (GWh)

18000

16000

14000

12000
Hydro
10000
Gas
8000
Oil
6000 Coal
4000

2000

0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Source: International Energy Agency data.

2.2.2 Rising Electricity Demand

Myanmar’s electricity production was near 16,000 GWh in 2015 – a two-fold increase since 2010.
The generation mix is dominated by hydropower and gas. Hydropower constitutes between 60%

10
and 70%, while natural gas accounts for the remaining 30%. Other sources comprise only a
minority in the mix.

Figure 2-4 shows the rise in electricity production, which is accompanied by the rapid increase
in electricity consumption per capita (see Figure 2-5). This notwithstanding, Myanmar remains
to have the lowest electricity consumption per capita amongst ASEAN countries (see Figure 2-6).

Figure 2-5. Electricity Consumption Per Capita (kWh/capita)

300
250
250
210
200 180
150 150
150 120
90 90 90 100
100 70 70 70 80 80 70
50

0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Source: International Energy Agency.

Figure 2-6. Electricity Consumption In Selected ASEAN Countries (kWh/capita, 2015)

5000 4660
4500
4000
3500
3000 2620
2500
2000 1530
1500
740 820
1000
250 330
500
0
Myanmar Cambodia Philippines Indonesia Viet Nam Thailand Malaysia

Source: International Energy Agency data.

11
2.3 Two-pronged Power Sector Challenge in Myanmar’s Rural Electrification, Generation
Expansion, and Tariff Reform

Myanmar is facing a two-pronged problem in the power sector. On one hand, a large portion of
the population has none or little access to electricity; on the other hand, the population
connected to the national grid experiences frequent blackouts.

2.3.1 Rural Electrification

Although there are varied figures available on Myanmar’s access to electricity, all sources agree
that at least half of the population lacks access to modern electricity. Furthermore, most
electrified rural communities rely either on diesel generators, which are economically and
environmentally costly; or on solar home systems, which do not provide sufficient power for
productive uses.

The government of Myanmar aims to achieve universal electricity access by 2030. The National
Electrification Plan, prepared with support from the World Bank, foresees that this will be
achieved mainly by expanding the national grid. However, a shift towards decentralised
alternatives such as mini-grids is gaining wider support. The Department of Rural Development
(DRD) is Myanmar’s leading governmental agency for rural electrification. The Electricity Law of
2014 favours decentralising the decision-making process for small off-grid projects. The Ministry
of Electricity and Energy’s (MOEE) approval is therefore not needed for projects of less than 30
MW and not connected to the national grid. The DRD has a wide network of representatives
across the country that facilitates its work with local communities. Nevertheless, an inefficient
coordination between the MOEE, which is in charge of the national grid, and DRD, which is under
the Ministry of Agriculture, Livestock, and Irrigation, can become a drawback in the realisation
of grid-ready projects.

2.3.2 Expansion of Generation Capacity

Increasing Myanmar’s generation capacity is a priority of the government. The National

Electricity Master Plan (NEMP), which the nation prepared with support from the Japan
International Cooperation Agency (JICA), analysed three possible scenarios for capacity
expansion:

12
 1) Domestic Energy Consumption Scenario: maximisation of domestic power generation.
Hydropower and gas-fired plants are fully developed.

2) Least Cost Scenario: minimisation of overall generation cost. Coal-fired plants’

contribution increases, while that of gas-fired generation decreases.

3) Power Resource Balance Scenario: feasibility of projects is also considered. Only

hydropower plants with shorter lead-time and nearest to demand centres are developed.
Gas-fired generation is developed but constrained by secured fuel supply. Coal-fired
generation compensates the reduction in gas and hydro-power sources.

The Power Resource Balance Scenario was finally selected for the plan. Nevertheless, the large-
scale development of coal-fired generation plants has become very controversial. Currently, the
central government does not support the commissioning of new coal-fired generation plants.

The contribution from renewables as an exogenous assumption was set at 10% of the energy
capacity in the NEMP. The role of variable renewables eventually lessened. In Chapters 3 and 4,
such potential as well as barriers to the penetration of solar energy in the generation mix are
explored.

Figure 2-7. Installed Capacity by Scenario and Source in the NEMP by 2030 (MW)

14000

12000

10000

8000

6000

4000

2000

0
Domestic Energy Consumption Least Cost Scenario Power Resources Balance
Scenario Scenario

Gas Coal Hydro (large) Hydro (small and medium) Renewable

NEMP = National Electricity Master Plan.

Source: Japan International Cooperation Agency (2015).

13
2.4 Update on the Myanmar Power Sector

2.4.1 Power Demand Will Continue Rising with New Mega-development Plans in Urban
Areas

Myanmar’s economy is expected to continue to grow in the coming years (Rab et al., 2016).
Urban areas are experiencing a refurbishing of the inner areas as well as expanding to adjacent
townships. Yangon, for example, has new development projects. With assistance from JICA, the
local government is drafting the Yangon 2040 Master Plan (Aye, 2017; JICA and YCDC, 2014),
which includes plans on a new airport, a second special economic zone, and access to a deep-
sea port (Mon and Aye, 2016). The Yangon New City project will extend Yangon to the other side
of the Yangon River. Its specially created authority, the New Yangon Development Company
Limited, has proposed a public–private partnership-based development of the 30,000 acre
(about 121 sq km) area, of which 20,000 acres will be developed during the first phase (Ko, 2018;
Shine and Ko, 2018). The Union government has also presented four large-scale development
projects in Yangon and Mandalay recently (Tha, 2018). All these initiatives represent an
opportunity to integrate rooftop solar systems in the urban development process.

2.4.2 Political Re-shuffle

The year 2017 saw a reshuffle of leadership at the MOEE and the country’s national government.
In July 2017, U Win Khaing was appointed as the new minister of Energy and Electricity, replacing
U Pe Zin Tun while remaining as head of the Ministry of Construction (Lynn, 2017a). After
Myanmar’s President U Htin Kyaw resigned, U Win Myint was appointed to the position in March
2018. Both are seen as loyal allies of Aung San Suu Kyi (Nang and Paddock, 2018).

The new energy minister identified his minister’s new priorities. In his first interview with
international media outfit Reuters (Lewis and Naing, 2017), the minister pointed out that: (i)
hydropower remains a priority, but in the future, no large dams are expected to be constructed
before 2025; and (ii) imports of LNG and small-scale hydropower projects will be prioritised, with
LNG to be used as part of the base load.

2.4.3 New Minister Advocates for Securing Supply in the Short Term: The Rise of LNG in
the Power Generation Mix and a Boost for LPG

The new minister strongly emphasised the need to increase the generation capacity in the fastest

14
possible manner. Such priority facilitated the speedy approval of the construction of four new
generation facilities, of which three are using imported LNG (Table 2-3). These are expected to
be operational, at least partly, by 2020. Some memoranda of understanding (MoUs) have been
signed with the MOEE while the signing of the power purchase agreements is still pending. The
final agreement on the price to be paid by the government will be critical in the sustainability of
the sector (Kean, 2018b).

Table 2-3. New Natural Gas and LNG Power Generation Projects Approved in 2018

Power plant Capacity Fuel Consortia Estimated Cost

(MW) (US$ million)
Ahlone 356 LNG to power, FSRU Toyo–Thai 321
Kanbauk 1,230 LNG to power, FSRU Total and
Siemens
Kyaukphyu 135 Combined-cycle gas Sinohydro 180
turbine (natural gas and Supreme
from Shwe)
Mee Laung 1,390 LNG to power, FSRU Zhefu and 2,507
Gyaing Supreme
FSRU = Floating Storage Regasification Unit; LNG = liquefied natural gas.
Source: Kean (2018).

Liquefied Petroleum Gas has been identified recently by the government of Myanmar as a way
to reduce the consumption of electricity in urban areas. The current number of households that
utilise LPG for cooking is very low; a shift in consumption to LPG is seen as an opportunity to
‘free up’ the nation’s power generation capacity (K. Kyaw, 2018). The target is to increase the
consumer base of LPG users from the current 100,000–150,000 households to 1 million–1.5
million households by 2020 (Htoon, 2018; K. Kyaw, 2018).

There are a number of challenges the government must overcome to be able to scale up the use
of LPG. Adequacy of safety standards is the most worrisome (Chern et al., 2018). Myanmar has
also little capacity to generate LPG and to meet most of the current consumption demand. The
country demands 6,500 tons of LPG per month, of which 5,000 tons are currently being imported

15
(Eleven, 2018). Constraints in the supply chain and inadequate investments in the sector are also
identified as drawbacks (Chern et al., 2018).

2.4.4 Coal

The merits and downsides of coal-fired generation of electricity remain a highly deliberated issue.
The Union government does not favour any further development of the coal-fired electricity and
coal mining plants (Phyo, 2017). Nevertheless, a 1,280 MW coal-fired project in the Kayin state
has triggered a debate between the central and regional governments.

In the state government’s proposal, the project would be built near Hpa-an, the capital of Kayin,
by Toyo–Thai for US$2.8 billion (Mon, 2018). The state government reasoned that the project is
necessary to increase electrification and attract more foreign investments (Myint, 2017a). Part
of the public, however, opposed the project, claiming that there was lack of transparency in the
process (Han, 2018; Naing, Lee, and Yimou Lee, 2017; S. P. Win, 2018).

The Union government has, thus, stopped the project by virtue of the Electricity Law, which limits
state governments’ authority to approve power generation projects to those that are up to 30
MW only and not connected to the national grid (Htwe, 2017b; S. M. Mon, 2018b).

2.4.5 Rural Electrification Policy

The Myanmar government has set the goal of universal electrification by 2030, consistent with
Goal No. 7 of the 2015 United Nations Sustainable Development Goals. To explore how to
transition from the current situation to the desired state, it is crucial to understand the current
level of electrification. Numbers vary from report to report, however Figure 2-8 shows the
varying electrification rates based on different definitions, which makes it difficult to determine
the actual rate. According to a report that looked at electrification in detail (Myanmar Ministry
of Planning and Finance and Bank, 2017), the breakdown shows electrification through the main
grid of 32.5%; by communal or private grids, 10.6%; by SHS, 17.4%; by rechargeable battery
systems, 17.2%; and by others (e.g., power generator, solar lantern), 6%.

Most figures on electrification through the main grid are in the 23% to 32% range (ACE, 2017;
MOPF and World Bank, 2017). It seems that the main grid’s electrification rate is in the low 30%
range, growing to 40% when mini-grid connections are included, and jumping to around 60% if
SHSs are included.

16
 Figure 2-8 Electrification Rates From Multiple Sources

IEA (2017) IEA (2016) Kyaw (2017)

MOPF and WB (2017) WB (2014) Wang and Win (2016)
Castalia WB Databank (accessed 2018) ACE (2017)
MOEE (2018)
70%

60%

50%

40%

30%

20%

10%

0%
2010 2011 2012 2013 2014 2015 2016 2017

Notes: International Energy Agency (2017a and 2016) and World Bank Databank (2018): for %
of population.
Myanmar Ministry of Planning and Finance and Bank (2017): % of population weighted,
connected to main grid only.
M. M. Kyaw (2017), World Bank (2014), Wang and Win (2016), and Ministry of Electricity and
Energy Myanmar (2018): % of households.
Castalia Strategic advisors (2014): % of connections, national average excluding Yangon.
ASEAN Centre for Energy (2017): % grid-connected.

Under the National Electrification Programme funded by the World Bank, an initiative called
‘60/20/20’ has been conducted since 2016 to encourage the installation of renewable energy-
based mini-grids. The scheme involves the government subsidising 60% of the capital costs while
villagers and developers/operators invest 20% each. This has proven to be a great incentive for
developers, as the number of projects had increased from eight in the first year to 74 accepted
project proposals by 2018 (Frontier Myanmar Research Ltd., 2018).

17
On the regulatory front, the World Bank and Deutsche Gesellschaft für Internationale
Zusammenarbeit are working on a regulatory framework. Rather than instituting a new law, they
are revising the present law known as the 2014 Electricity Law to institutionalise mini-grids. With
this revision, the treatment of mini-grids will be facilitated. The framework will cover, for instance,
the approval/licensing of mini-grid applications, permission for tariff setting with a reasonable
profit, and options to take when the main grid arrives earlier than planned. Mini-grids connected
to the centralised grid are expected to be under the jurisdiction of MOEE, while mini-grids that
are not connected and therefore operate autonomously will be under the jurisdiction of
state/regional governments (Pawletko, 2018; Greacen, 2018; Schmidt–Reindahl, 2018).

However, how the framework will be operationalised after the revision is still unclear. For
example, the 2014 Electricity Law states that an ‘electricity regulatory commission’ should
administer electricity activities, but such commission does not exist yet (Polastri Wint and
Partners, 2014).

18