The Renewable Energy Development Strategy in Lao PDR has defined the required capacity to achieve the 30% of renewable energy share in 2025. This is the most ambitious target in the Mekong region. In addition to that, the large hydro power plants are not included as a part of this target, as only electricity generated from small plants (up to 15 MW) is considered “renewable”. The transportation sector is also in the focus of this plan, with the aim to reach 10% of biofuels from the total consumption in this sector. The Lao PDR renewable energy targets are illustrated in Figure 4 (The target for installed capacity from renewable energy source in 2025).

 

The target for installed capacity from renewable energy source in 2025

 

Source: Renewable Energy Development Strategy in Lao PDR (2011)

 

Several support mechanisms have been provided by the government in order to achieve the national renewable energy targets as follow:

  • Establishing state’s fund for renewable energy development
  • Import duty waives for purchasing production machinery, equipment and raw materials
  • Divide the profit tax into three different categories: 20%, 10% and 5%. Profit tax exemption is possible for a certain period depending on activities and type of investment.
  • Subsidise on unit product price depending on energy type and times period

Due to its geographic position, Lao PDR is richly endowed with hydropower resources, as it is flowed by plenty of rivers. According to the Mekong River Commission Study in 1995, Lao PDR has 26,000 MW of potential hydropower reserve. However, until 2017 only 4,706 MW of installed capacity or 18.1% of total potential has been realised. The other renewable energy share comes from solar (0.48 MW), biogas (0.29 MW) and biomass (39.7 MW). Approximately 64% of power in Lao PDR are generated by Renewable Energy.

In 2017, around 2,775.4 GWh of electricity was generated from RE sources, where the majority of domestic electricity generation comes from hydropower (97.7%). The remaining share is from biomass with 2.1% and solar (PV) 0.2%.

Lao PDR's Renewable Energy Electricity Generation in 2017 (%)

  • Hydro (22,320.38 GWh)
  • Biomass (105 GWh)

Source: Electricite Du Lao, Electricity Statistics (2017)

Under the Electricity Laws (1997), the investment via public-private partnership model is encouraged. The Investment Laws (last update: 2009) provide several financial incentives to attract investment. These include but are not limited to: import duty free, profit tax exemption, and subsidies. Under the country law on Investment Promotion, domestic and foreign renewable energy project investors can obtain loans from commercial banks and other financial institutions in accordance with relevant laws and regulations.

Lao PDR is a member of Greater Mekong Sub-region (GMS) Economic Cooperation. This led to the cooperation with its neighbour countries in the energy sector development, especially in power trading. The Monsoon Wind Lao Project was established, as Thailand-Lao PDR cross-border cooperation. The instruments for monitoring wind resources have been implemented. Moreover, the solar home systems are also widely used and encouraged in Lao PDR, especially in remote areas, without access to the national grid.

Until now there is still no feed in tariff for the grid-connected renewable energy system to sell the electricity to the grid. The selling tariff is currently based on negotiations between producers and power utility on the case by case basis. The Department of Energy Policy and Planning (DEPP) is in a process of preparing the policy on electricity selling tariffs for different renewable energy resources.

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