Executive Summary
Myanmar¡¯s power sector has been severely affected by the ongoing political turmoil. The power sector has been spiralling downward since 2021 with prolonged electricity blackouts throughout the country. Electricity generation has been declining, resulting in a widening power supply¨Cdemand gap. The repercussions of damaged power infrastructure due to conflict have impacted the stability of the whole transmission system. Major cities, including Yangon, Mandalay, and Nay Pyi Taw, are facing power outages while industrial zones across the country are bracing for crippling power cuts and surging fuel prices.
Increasing the power supply¨Cdemand gap is the major challenge to securing reliable electricity services in the country. Myanmar already faced power shortages in 2019, of up to approximately 300 megawatts (MW). The power supply¨Cdemand gap has widened since 2021. Generation capacity available for dispatch has been reduced by more than 2.5 gigawatts (GW), due to various factors, including the suspended operation of two large liquified natural gas (LNG)-to-power plants in Yangon, low precipitation and low water levels in hydropower reservoirs, and a supply shortage of domestic natural gas. Furthermore, more than 2 GW of planned natural gas-based power plants involving foreign direct investment are on hold. New hydropower and solar photovoltaic (PV) development continues but with slow progress. Domestic gas fields are projected for production decline and depletion over the coming years, and major multinational companies that were developing new offshore gas fields have left the country.
To maximize the total daily power supply, electricity generation was ramped up from hydropower plants since mid-2021 to compensate for lower electricity generation from gas-fired power plants. More water resources were utilized from the hydroelectric reservoirs during the rainy season. Consequently, there was a sharp drop-off in the amount of water available for electricity production and irrigation in January 2022. Four hydropower units had to be temporarily disabled for maintenance operations in mid-2022, including Myanmar¡¯s second biggest dam, Shweli-1. This further reduced available capacity and resulted in an acute electricity shortage during the dry season from January to May 2023.
Constrained transmission and distribution network capacity also contributes to electricity shortages. The electric grid network has been attacked and damaged amid ongoing conflict. The authorities claimed that the power grid has been attacked 229 times between February 2021 and April 2023. About 77 percent of existing power plants are within 10 kilometers of conflict-related fatalities. While numbers of conflict-related events on electricity infrastructure have been declining since the peak in late 2021 and early 2022, the grid network capacity remains vulnerable. Furthermore, transmission network development, including interconnection with neighboring countries for power imports, has not made much progress since 2021.
The power sector continues to be hit by financial losses. Several factors affect sector financial sustainability, including currency depreciation, increasing grid maintenance costs, and a decline in revenues. Having depreciated since 2021, the Myanmar kyat has pushed hard currency-linked power purchase prices upward from independent power producers. With damage to the grid network, maintenance costs have increased. Furthermore, the military takeover triggered a country-wide boycott of electricity bill payments. The unpaid portion of electricity revenue increased over time, reaching up to 45 percent in November 2021. While significant deficits are anticipated from the power sector, increasing revenue from natural gas exports to China and Thailand can contribute substantially to the financial position of the energy sector as a whole, including electricity and fuel.There have been few advances in improving electrification, leaving over four million households without access to electricity. The prospects of achieving universal access to electricity by 2030 have dimmed. Between November 2020 and December 2021, the electrification rate at the household level increased from 57.9 percent to 61.6 percent, only 3.7 percent increase over a year, compared to average 6 percent per year between 2017-2020 at the household level. Petroleum fuel prices increased two to three times higher since 2021 due to supply shortages and currency depreciation. Such extremely high fuel prices put pressure on mini-grid operators and businesses, further reducing access. Distributed renewable energy is gaining more ground in meeting electricity demand, but supply chains and access to finance are impediments to further scale up.
The energy shortage is affecting all walks of life across the country. Power outages in Yangon have caused long queues at the compressed natural gas (CNG) filling stations. This has a direct impact on buses operated by the Yangon Bus Services and taxis, resulting in a shortage of public transport services for commuters. Healthcare workers cannot keep essential medication and test samples refrigerated. Most industry, factory, and commercial buildings use their own diesel generators for operations during power outages. These outages negatively impact the competitiveness of the low-margin garment industry that dominates the country¡¯s manufactured goods exports.
Myanmar¡¯s power sector will likely continue to experience significant challenges. To sustain the current level of power supply would require adding 300-500 MW every year until 2030. Scenario analysis on the power supply¨Cdemand gap illustrates that available generating capacity is projected to not meet the growing demand. The electricity supply¨Cdemand gap will be exacerbated with difficulties in mobilizing capital investment in power generation and upstream gas exploration. Keeping transmission and distribution networks up will also not be straightforward due to the constraints on financial and human resources. In the medium to long term, domestic gas depletion and difficulties in mobilizing investments in additional generation sources will likely drive the power sector to an even worse situation.
Many of the challenges in the power sector are structural, fundamental, and linked with political instability, conflict, and macroeconomic conditions. They cannot be easily fixed with short-term measures and require longer-term approaches and steady progress based on proper planning over the long-term. The analysis leads to the following conclusions on the outlook for the power sector:
- Gaps in power sector infrastructure are massive and cannot be addressed without improvements in the investment climate, which has deteriorated and is exacerbated by the ongoing political and economic crisis.
- Power imports, which also remain challenging under the current country situation, may help reduce the electricity demand-supply gap.
- Improving power sector financial viability and recovering customer confidence are critical for private sector capital mobilization to enhance the quality of electricity services.
- Distributed renewable energy solutions can help ease electricity shortages for the population but supply chain issues, access to finance constraints and limited awareness by customers are impediments to scale up.