A Busy Maytiane Week

Two seminars were arranged in Vientiane with the cooperation of Finland Futures Research Centre and Ministry of Energy and Mines (MEM) of Lao PDR, within the last week of May 2011. First one was the final FREPLA (Future Economy and Policies of Laos 2020) seminar, and it was followed by the kick-off workshop of INES, Interlinkages Between Energy and Livelihoods. I and the rest of the FFRC team present had the pleasure to take part in both, even though my personal contribution has been a great deal bigger for the INES project.

The FREPLA seminar was the fifth and the final to be held. Besides the FFRC staff, the participants attended were mainly government officials. Topics covered were diverse: from indicators of sustainable development to energy power plants and demand predictions. The future-orientated issues, forecasts and plans, seemed to interest the most and raise a fair amount of discussion.

INES workshop was the first one of the project. The participants represented various departments on provincial level. An interesting twist in the workshop was the fact that every presentation, question and comment was simultaneously translated into either Lao or English, depending on the language of the original speaker. Luckily, we were blessed with the exact right person for the job (many thanks to Dorn!), and the conversation flew smoothly.

A number of very important issues were taken up and discussed. Importance of reliable data availability was recognized. Consequently, organizing and funding continuous, systematic data collection was seen as a key priority in terms of future planning and preparing. Some practical means for the reduction of energy consumption were also suggested. The need for training for energy and population modeling was brought up several times which, in fact, happens to be the next step of the project.

In addition to the organisers and participants, the two seminars attracted the local press. Vientiane Times wrote two articles, one of each assembly, on top of which a picture of Jyrki Luukkanen handing out the laptops to the INES participants was published separately. Evidence of the latter, originally published on the 1st of June 2011, is attached below. We also made it to the news of Lao National Television! Unfortunately though, everyone in our team missed the big show on-air.

All in all, our team and all our local partners had a busy but rewarding week in Vientiane this May. In order to get a deeper insight on the topics, all the presentations can be viewed and downloaded at Publications - Powerpoint Presentations on our Mekong-website.

Setting up the office in Vientiane

As Finland Futures Research Centre opened the office in the capital of Laos, Vientiane, I had the honor to be the one setting up all the practical matters in the house. The house is used for office and living purposes and there will always be staff in the house. I arrived to the city 30th of March and was ready to pick up the keys for the office next day. It is my first time in Laos, and the first evening already I really liked the city. Streets were full of street vendors, steam rising from the pots, Lao language echoing in my ears, warm wind from the Mekong – they all infiltrated into my mind. Calm, but at the same time lively atmosphere fascinated me! Quite often the first impression is the one that counts and that happened to me as well – I still feel the same way! During the first two days I also remember thinking that I could not see any rats on the streets, and because of that I considered the city to be very exceptional Asian city in this sense. Very little I knew that time.

First days I was busy to shop the articles we needed for living in the house, such as basic things like sheets, towels and kitchen utilities. Shopping in a new city is always time consuming but fun! Quickly I got to know these helpful and friendly people of Laos. As an example, a very helpful worker in the mall unpacked and set up the whole tent-like mosquito net for us - just to see the size of it - and eventually it appeared to be too small for our office beds. It felt almost a crime not to buy it as he made such a hard work with presenting it for us. I learned quite soon also the most important sentence in here: “baw pen nyang”; “It is ok”, or “Never mind”. I was also amazed about the supply of the goods – I did not expect it to be so easy to get the things we had listed in Finland.

After staying a couple of days in the house, I found out that in addition to me and my colleague, there were others living in the house as well. Rats. I did not see them on the streets – maybe because they were all living in the house with me! One morning a rat was climbing up the stairs when I was coming downstairs. I think we both got equally frightened – and maybe the rat heard Finnish swore words for the first time in its life! Later I and my colleague met a rat also in the kitchen – poor rat was so confused that it ran first towards me and then my colleague – causing of course a lot of jumping and screaming in the kitchen. After these a couple of involuntary meetings, I decided to offer poisonous dinner for those little animals. It was a success –they seemed to enjoy the meal I prepared! I stayed tuned for the results. I knew the disadvantages of the poison, as when using it, I could not be in charge of the recycling process of the remains. So, as I was afraid of, it turned out that the rats were killed inside the walls, and I think it is easy for you to imagine the smell of a rotten rat body in almost +40C degrees heat. Luckily the worms are very active in here, so the smell of the house was gone in a few days. So, for now, I declare the Finland Futures Research Centre office in Vientiane as a rat-free area! And at the same time I am being a bit afraid that they will return…

World Bank Newsletter: Powering the People of Cambodia

The World Bank has produced a newsletter on its energy projects in Cambodia: with headlines such as Power to People. The newsletter from December 2010 can be downloaded here. It offers interesting reading on the achievements and targets of World Bank’s rural electrification programs in Cambodia. Interestingly the main stage seems to be set for grid extensions and grid connections whereas the off-grid elements and small-scale renewable energy are not receiving much attention.

World Bank supported Rural Electrification Fund seem to have performed well in its new connection program in terms of reaching the targets. At the same time the off-grid components appear to be lacking behind. But these aspects are not explored in the newsletter. Both the grant assistance for solar companies and for the small hydropower and biomass have been almost complete failures. Last year the solar program was revised and Cambodia started to follow Laos model on solar home systems i.e. a bulk purchase model with a several years payment scheme for the users. The ambitious plan is to have 12 000 installments by January 2012.

The slow progress on sustainable renewable energy solutions is unfortunate as Cambodia is truly at the crossroads. The current situation of low electrification and lack of more traditional centralized gird systems could offer a chance for “leapfrogging”. This would require ambitious and serious thinking of how to enable and empower small and very small power producers. A promising base for this direction has been laid by a report Powering 21st Century Cambodia with Decentralized Generation authored by Grynne Ryder.

Under our DREAM-project we continue to assess the reasons for failures and success of renewable energy projects in Cambodia and Laos.

Building Partnership for Implementing Renewable Energy Efficiency Projects in the Mekong Region-forum

In October 26-27 we attended a regional forum on ”Building Partnership for Implementing Renewable Energy Efficiency Projects in the Mekong Region”. The forum was organized in the framework of the EEP Mekong (Energy and Environment Programme) supported by the Ministry for Foreign Affairs of Finland and Nordic Development Fund. The event was hosted by the Ministry of Energy and Mines of Lao PDR.

In the opening session of the Forum the Finnish Under-Secretary of State, Ritva Koukku-Ronde, the Vice-Minister of Energy and Mines of Lao PDR, Somboun Rasasombath and the Deputy Director of Nordic Development Fund, Leena Klossner, each held a speech.

Among the attendants of the Forum were of course the teams of the seven EEP Mekong projects getting funding in the first round of the EEP Mekong- one of which being our INES- project which Jyrki Luukkanen presented in an EEP project session. In addition, the policies and strategies for renewable energy and energy efficiency of the four Mekong countries were presented in a country report session. Nordic technology providers were also represented at the Forum and a Public Private Partnership (PPP) session was also held to discuss the challenges and achievements of the PPP. In addition, there was also a panel discussion on bio-fuels.

The Forum was a great opportunity to network with other operators in the region and to learn about the other six first round EEP Mekong projects.

FREPLA project on Vientiane Times' Business pages

Future Resource Economy and Policies in Laos till the Year 2020 (FREPLA2020) Project Seminar held on 27th of August 2010 in Vientiane, Laos was referred to on 31st August on Vientiane Times' Business section

FREPLA2020 Project organized a high level seminar on resource economy policies and natural resources management. It gathered several Laotian Ministries and representatives from donor organizations to discuss macro-economic development and energy use scenarios of Laos, policies, challenges and needed development policy portfolios related to different sectors and natural resources management among other things.

The potential power of radical ICT system audit in the Mekong River countries: Towards better ICT infrastructures and resource management systems

In this blog we will discuss the requirements of information and communication technology (ICT) architecture and the governance mechanisms that can connect business and environmental management processes and analytics to data and applications.

Remarkable and innovative advances have occurred during the past 3 decades, especially in the electronics industry and informatics. Digital technology has provided a strong platform for digital products and e-business solutions, which are easily reproduced, easily distributed and subject to boundless modification, extension and recombination. The Internet has become integrated into the lives of many citizens and to every day’s life.

The World Wide Web and related information technologies are becoming primary tools of economic production, civic participation and political involvement, and define the economic, social and political landscape.

Today the new ICT architecture extends beyond the corporations and governments. We can say that all corporations and governments are so called extended organizations because of the Internet and associated digital infrastructures. Especially Internet has changed many things of modern management, also in environmental management.

Digital economy has many innovative “e”s, not only e-commerce. First, e is for electronic – the internet revolution that is changing the way we live, work and do business. E-commerce changes the balance of power between consumers and companies. The most obvious benefit is cheaper products and services as consumers learn to compare prices at the click of a mouse.

Secondly, e is for enterprise – the dynamism and creativity that drives the new economy.

Thirdly, e is for environment – the scope to use new technologies to reduce our impact on the natural world. In the best case knowledge economy helps us to increase dematerialization and immaterialization. E-commerce could help to cut energy and resource use, and improve environmental productivity and eco-efficiency.

Virtual traffic can replace real traffic. In many big cities of Asia traffic is a real environmental problem. From this perspective new ICT based communication and interaction tools are producing ecological and economic benefits. With the right policy framework, e-business could create more efficient logistics and distribution systems.

E-commerce has high potential for significant gains in resource productivity of Mekong River countries. Fourthly, e is for equity – the potential of the internet to strengthen communities and build social cohesion. All sorts of networks are being strengthened by the Internet.

What we can expect to happen in the future is the Wikinomics of resource management. As governments develop specifications for their new ICT architecture, they need to deal with several realities. Such realities are software packages, intellectual property rights, proprietary applications, systems, databases and virtual processes.

If governments want to get full value added from their ICT infrastructures they should perform an audit of the existing ICT systems and develop an understanding of the magnitude of the mitigating to better and more sustainable performance level. This kind of ICT auditing could create larger capacity to link large systems and multiple databases of the governments.
Probably this kind of audit could lead us to better resource management systems and better capacity building process.

If the Mekong River countries could improve their ICT infrastructures, many practical problems could be solved. Also better governance and institutional capacity performance could be reached.

In the World Bank report of “Natural Resource Management for Sustainable Development”, which was Lao PDR Development Report in 2009, this strategic aspect of government and institutional capacity is strongly underlined. Especially a framework for vertical collaboration across central and sub-national levels of government could be developed by better ICT infrastructures.

It is time to discuss about sustainable knowledge society challenges in the Mekong River countries.

Future challenges of energy pricing

One challenging issue in energy policy is pricing energy utilities. Price is a key variable of energy demand and supply in Mekong river countries. Selling energy utilities is dependent on marketing activities of energy. Marketing is a discipline of four coequal elements: the product, its promotion, its distribution and its pricings.

Marketing consists of 4 ps. Pricing is the company´s attempt to capture some of the value in the profits it earns. If effective product development, promotion and distribution sow the seeds of energy business, effective pricing is the harvest.

It is quite interesting and puzzling why many energy companies fail to price effectively even when they otherwise employ very effective marketing strategies. Price is of primary importance to energy companies. Energy companies must cover costs, to maintain cash flow and to achieve a target rate of return.

On the other hand, they must think how customers response to the prices of energy utilities. If prices are too high, demand for energy utilities will be weak. If prices are too low, demand for energy utilities is too strong and some customers are left without energy utilities. In real life markets are not in the equilibrium as conventional micro economic theories assume.

The customers´ goal is to obtain the most value for their money. For commodities, that often means buying the cheapest offering. For differentiated energy product, that may mean paying a little more for the perceived superiority of a particular brand.

A few pennies´ differences in price may be of great importance to a energy company selling millions of units, while being of little consequence to a customer who buys just one unit. Yet that will not stop potential customers from rejecting any price that is a few pennies more than they are willing to pay. It is important to understand that customers are not concerned with the seller´s need to cover production costs, to improve cash flow or to meet a target rate of return. Their concern is to get their money´s worth.

In the Mekong River countries one key future challenge will be intelligent pricing of energy utilities. Intelligent pricing strategy of energy utilities depends on production costs, price sensitivity and energy market competition. These three factors determine an energy product´s pricing environment. Energy companies can adopt product-driven focus or customer-driven focus in their pricing decisions.

Intelligent pricing begins starts with a better understanding of the economic underpinnings of cost and value of energy utilities. There should be more analytical research in this field because the success of energy sector investments depends critically on price intelligence of energy products and services.

Risk intelligence challenges in the Mekong River countries

Risk is the possibility of loss or reversal – or gain or advance. The risks that matter are the ones that pose a problem in our decision-making. We are surrounded with risks either with financial or non-financial. One of the biggest challenges in environmental decision-making is to develop better tools for risk intelligence.

In the Mekong River countries a very big challenge is to manage many risks associated with river basin management. Many production activities and markets depend on the Mekong River. Agriculture, hydropower supply and fishery are such activities. There are many business risks associated with natural resource management. Typically we can talk about production (or supply side risks) and marketing risks (demand-side risks).

In risk management it is important to identify different kinds of risks. For example, typical production risks are operating risks, supply chain risks, technology risks, workforce risks and asset risks.

Operation risks are happening when there are control or compliance failures or partner coordination failures. Supply chain risks are like supplier failure or political rapture. Supply chain risk is also key cost volatility. Technological risks include infrastructure breakdown and information security breaches. Workforce risks are capacity losses or disruption. Also key staff loss or defections are workforce risks. Very considerable risks are asset risks like counterparty credit loss, fraud or theft.

Typical marketing risks are security and political risks, end-market and customer risks, competitive risks, regulatory or legal risks or financial or economic risks. Security and political risks include market-disruption events and geopolitical volatility. End-market or customer risks are brand or reputation erosion and customer consolidation.

In markets competitive risks are always present. Disruptive technology and new entrants to the market are typical competitive risks. The government can create regulatory or legal risks like new legislation and litigation. Also official corruption can be categorized in this risk category. Financial market volatility and economic recession are typical financial or economic risks.

If better risk intelligence is wanted, just listing big risks is not enough. Only our imagination limits the conjectures, models, assumptions and guesses we advance to explain a risk.

The formulation of possible solutions is needed. It is necessary to invest in risk management systems and associated competences. Experienced staff to analyze and handle different risks is needed.

A lot of money and capital can be saved to better aims if the Mekong river countries manage their risks in a better way. Risk intelligence is about making choices bearing risks that our natural run of experience can really penetrate.

All this is easier said than done, but it is worth of trying.

Solar Home Systems in Laos

Solar energy is part of the Lao government’s and the World Bank’s off-grid electrification scheme. In total 15.000 households in 380 villages around Laos get their electricity from solar home systems (SHS). The panel users pay monthly fee that depends on the size of the solar panel and pay-back time. The usual monthly fee is 30.000 kip (about 3 USD) for 10 years. After the payment scheme is completed the user owns the panel.

DREAM research project team from Finland Futures Research Centre conducted interviews in six villages in two provinces which have been electrified by solar home systems. In order to get variation in the collected data, half of the visited villages were in very remote areas, whereas the other half situated close to the roads. There was also variation in terms of how long SHS had been used. In some villages the panels had been installed very recently, and in others they had been already more than seven years in operation. In the villages both users of SHS and those who did not use solar energy were interviewed to find out what positive and negative – expected and unexpected - impacts SHS had on users’ lives, and whether or not the program had any impact on those villagers who did not have a solar panel.

In the visited remote areas, the panels had been very recently installed. The villagers had poor access to services and markets, and mostly people lived in a subsistence economy. The users said they were happy with the quality of light, smokeless house and the possibility to work and study during the evening. The panels were working fine, but there were problems related to finance, maintenance and received information. The installation of SHS did not have significant positive impacts on income generation, because electricity was not used for income generation activities. Some SHS users had difficulties to pay the monthly fee because they lived in subsistence economy with little cash income. They often had to sell a chicken or a pig to pay the SHS monthly fee. As a result, even though the SHS made the life easier, it did not ameliorate livelihood. As the family wealth depends on the livestock, selling animals to pay the monthly fee is not sustainable in the long run. Unless they can develop other cash sources, paradoxically the electrification can lead to deterioration of their livelihood.

Another problem in remote villages was that many users had the impression that the battery change and other maintenance costs would be covered by the monthly fee, at least as long as they are in the paying scheme. This is not the case, and as the batteries can be very expensive, (700.000-800.000 kip, about 70-80 USD) many low income families will probably have problems in finding money for the new battery every two to five years.

In the so called easy access villages, i.e. villages which have some kind of road connection and are relatively close to markets and services, the situation was different. The households had more cash income and therefore usually less problems to pay the monthly fee. In some villages the light was used for making handicrafts in the evenings. The handicrafts were sold in the market nearby.

The challenge in the easy access villages related to the quality of the panels, not so much to the payment scheme as in the very remote areas. In one village the panels were no longer working properly after seven years’ use. The users could get only about an hour of light per day, despite of the new battery. They still had to pay the monthly fee and were worried that in three years time, when the payment scheme would end, the panels would be completely useless. The promoters of SHS had said that the panels would work for 50 years, but now it seemed that they wouldn’t last even for ten years when the payment would be completed. Villagers said that they had believed the promoters as they were officials and should know about these things. The villagers also told that they did not have a chance even to read the contract before signing it.

Besides the economic and quality difficulties that seem to relate to the SHS scheme, another challenge is that very often SHS are first installed to areas were the electricity grid will likely come within few years. For Provincial Energy Service Companies (PESCOs) that are making the panel installations, it is less profitable to install them in the very remote areas. It takes more time and money to install and collect the monthly fee from the very remote areas than in the areas with good road connections. Therefore, the main goal of the whole off-grid program, i.e. to provide electricity to areas which are not likely to get grid connection for the next 5-10 years, is not achieved.

According to the preliminary results of the DREAM project’s fieldwork, most solar panel users felt that the solar energy had made their life more comfortable. The energy was used mainly for lighting, but also for television and stereos. The challenges related to payments, quality of the panels and information flow. In the poorer areas, where people were living in subsistence economies with very little cash income, the users felt that the monthly fee was expensive and the payment scheme long. Especially battery replacement is expensive. In some cases the panels will not last even for the whole payment scheme, even though they have been said to last for as long as 50 years.

In order to improve the SHS program, it would be necessary to guarantee the quality of the solar panels and to make sure the information provided about the maintenance and the replacement of the batteries is accurate. Furthermore, the installation should start from the remote areas where the electricity grid is not likely to come, at least not for a long time. At the moment, the panels easily spread to areas where installation and fee collection is easy and economically feasible.

Impact of Micro Hydropower Based (MHP) electrification on rural livelihoods: Case study Nam Mong in Luang Prabang Province, Lao PDR. M.Sc Thesis

Fieldwork carried out for DREAM-project is now available through mekong.fi pages under publications 2009

Impact of Micro Hydropower Based (MHP) electrification on rural livelihoods: Case study Nam Mong in Luang Prabang Province, Lao PDR. M.Sc Thesis now available at mekong.fi -pages

https://jyx.jyu.fi/dspace/bitstream/handle/123456789/22636/URN_NBN_fi_jyu-200912144518.pdf?sequence=1