Transitioning the energy sector to achieve the 2030 Agenda for Sustainable Development and the objectives of the Paris Agreement presents a complex and difficult task for policymakers. It needs to ensure sustained economic growth as well as respond to increasing energy demand, reduce emissions and consider and capitalize on the interlinkages between Sustainable Development Goal 7 (SDG 7) and other SDGs. To address this challenge, ESCAP has developed the National Expert SDG Tool for Energy Planning (NEXSTEP).[1] This tool enables policymakers to make informed policy decisions to support the achievement of the SDG 7 targets as well as emission reduction targets (NDCs). The initiative has been undertaken in response to the Ministerial Declaration of the Second Asian and Pacific Energy Forum (April 2018, Bangkok) and Commission Resolution 74/9, which endorsed its outcome. NEXSTEP also garnered the support of the Committee on Energy in its Second Session, with recommendations to expand the number of countries being supported by this tool.
The key objective of this SDG 7 roadmap[2] is to assist the Government of Lao PDR to develop enabling policy measures to achieve the SDG 7 targets. This roadmap contains a matrix of technological options and enabling policy measures for the Government to consider. It presents several scenarios that have been developed using national data, and which consider existing energy policies and strategies, and reflect on other development plans. These scenarios are expected to enable the Government to make an informed decision to develop and implement a set of policies to achieve SDG 7 by 2030, together with the NDC.
[1] NEXSTEP tool has been specially designed to perform analyses of the energy sector in the context of SDG 7 and NDC with an aim that the output will provide a set of policy recommendations to achieve the SDG 7 and NDC targets.
[2] This roadmap examines the current status of the national energy sector and existing policies, compares them with the SDG 7 targets, and presents different scenarios highlighting technological options and enabling policy measures for the Government to consider.
[2] This roadmap examines the current status of the national energy sector and existing policies, compares them with the SDG 7 targets, and presents different scenarios highlighting technological options and enabling policy measures for the Government to consider.
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Section 1
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A. Highlights of the Roadmap
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Lao PDR’s access to electricity was 93.5 per cent in 2018. Based on the historical trend, it is estimated that Lao PDR will achieve universal access to electricity by 2025. Universal access to clean cooking technology and fuel, however, has been and likely to remain very low in the current policy scenario (was 8 per cent in 2018 increasing to 20 per cent by 2030). It remains a challenge for the country 5.6 million population will still relying on polluting cooking fuels and technology in 2030. Well-planned and concerted efforts will need to be made to achieve universal access to clean cooking by 2030. Energy intensity, the indicator used to measure energy efficiency, has been increasing since 2012 and reached 5.8 MJ/US$ in 2018. To achieve the SDG 7 target for energy efficiency, this needs to reduce to 4.0 MJ/US$ by 2030.
Lao PDR has abundant renewable energy resources – part from large hydropower resources it has also significant potential of solar PV and biomass resources. Nevertheless, Lao PDR lacks petroleum fuel resources and thus requires importing oil products to meet its increasing demand in the transport sector. The country’s power sector is heavily reliant on hydropower. Most of the power generated by Lo PDR is exported to neighbouring countries and a small part of the generation is consumed domestically. In addition to the opportunities that hydropower brings to the power sector, there are challenges as well to heavily rely solely on one technology e.g. the reduction of resources in the dry season requiring Lao PDR to import a part of its domestic electricity demand. As such Lao PDR has added a small amount of coal in the fleet, which has been planned for increase in near future. The NEXSTEP analysis has examined the potential of diversifying the energy sources, e.g. by increasing renewable energy technologies both in the demand and supply sides.
Lao PDR has abundant renewable energy resources – part from large hydropower resources it has also significant potential of solar PV and biomass resources. Nevertheless, Lao PDR lacks petroleum fuel resources and thus requires importing oil products to meet its increasing demand in the transport sector. The country’s power sector is heavily reliant on hydropower. Most of the power generated by Lo PDR is exported to neighbouring countries and a small part of the generation is consumed domestically. In addition to the opportunities that hydropower brings to the power sector, there are challenges as well to heavily rely solely on one technology e.g. the reduction of resources in the dry season requiring Lao PDR to import a part of its domestic electricity demand. As such Lao PDR has added a small amount of coal in the fleet, which has been planned for increase in near future. The NEXSTEP analysis has examined the potential of diversifying the energy sources, e.g. by increasing renewable energy technologies both in the demand and supply sides.
Section 2
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B. Achieving Lao PDR's SDG7 and NDC targets by 2030
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Universal access to electricity
Based on the 2018 rate of 93.5 per cent and using a linear forecasting method, the roadmap estimates that the access to electricity will be achieved by 2025. However, further study should be undertaken to examine the quality and reliability of access, particularly in rural areas, to ensure that households enjoy a minimum of Tier 3 level connection as per the World Bank’s Multi-Tier Framework of access to energy.
Universal access to clean cooking
Access to clean cooking, on the other hand, has been and is likely to remain poor in the absence of strong policy measures. In 2018, only 8 per cent of population had access to clean cooking fuels and technologies and is estimated to increase to 20 per cent by 2030 considering the historical trend as well as different programs and projects that are currently being implemented. This will leave 5.6 million people (more than 1 million households) still relaying on polluted cooking practices in 2030, leading to severe health hazards from indoor air pollution, particularly for women and young children. The NEXSTEP analysis suggests that a combination of electric cooking stoves, LPG cookstoves and improved cookstoves can be used to uplift the access rate to 100 per cent by 2030.
Figure ES 1: Lao PDR access to clean cooking under CPS and SDG scenarios
Renewable Energy
The share of renewable energy in the total final energy consumption (TFEC) was 16.8 per cent in 2019, excluding traditional use of biomass. This share becomes 41 per cent when biomass is included. Based on current policies, the share of renewable energy is projected to increase to 20 per cent by 2030. In the SDG scenario, the share of renewable energy is further increased to 26.5 percent of TFEC in 2030. This improvement is solely due to the increased renewable energy mix in power generation as well as the adoption of electric stoves whilst phasing out of traditional biomass usage, which also decreases the total final energy consumption.
Energy Efficiency
Lao PDR’s energy intensity in 2018 was 5.8 MJ/USD2017. Energy Intensity in Lao PDR has been increasing since 2011 with an average annual rate of 10.2 per cent between 2012 and 2018. This poses a challenge to achieve the SDG7 target for energy efficiency which requires the energy intensity to halve by 2030, compared to the average improvement between 1990-2010. This corresponds to an average annual rate of 7.5 per cent decrease between 2018 and 2030. Correspondingly, the energy intensity in 2030 should be 0.95 MJ/USD2017 to achieve the SDG7 target. Such a reduction has been found to be very difficult for Lao PDR and thus the target has been aligned with the global improvement rate of 3.0 per cent per year resulting in revised target of 4.0 MJ/US$.
Figure ES 2: Lao PDR energy efficiency improvement rate
Under the current policy settings, the energy intensity is projected to 5.32 MJ//USD2017. The energy efficiency target is not achieved in the SDG scenario, however, a higher level of energy efficiency measures, as discussed in the ambitious scenarios, will enable achievement of the target.
Nationally Determined Contribution (NDC)
Lao PDR does not make any explicit target for emission reduction from the energy sector in the second NDC, however, the measures mentioned for the energy sector suggest an emission reduction of 28.75 MtCO2-e, compared to BAU. In the second NDC, submitted in March 2021, the unconditional target aims to increase hydropower capacity to 13 GW by 2030. This target would be achieved with the domestic resources i.e. the unconditional target. For the conditional target, Lao PDR aims to add an additional 1 GW of solar and wind (combined) to the national power generation, and 300 MW of biomass. Additionally, targets have been mentioned in the demand side e.g. the adoption of 30 per cent of electric vehicles for 2-wheelers and passenger cars; increasing biofuel to 10 per cent of the fuel mix in the transport sector; and a 10 per cent energy efficiency improvement (to the final energy consumption, compared to BAU) across the economy. These targets have been included in the SDG scenario and the high energy efficiency scenario.
Section 3
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C. Important policy directions
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C. Important policy directions
The Road map sets out four key policy recommendations to help Lao PDR achieve the SDG 7 targets, as well as reduce reliance on imported energy sources:
The Road map sets out four key policy recommendations to help Lao PDR achieve the SDG 7 targets, as well as reduce reliance on imported energy sources:
- Strong policy measures are required to address the huge gap in clean cooking by 2030. Achieving access to clean cooking fuels and technologies seem to be one of the biggest challenges for Lao PDR, as it has one of the lowest access rates to date. Immediate well-planned policy measures are to be put in place to ensure achievement of this target by 2030. NEXSTEP analysis suggest a combination of electric cooking stoves, LPG cooking stoves and ICS should be used to achieve the universal access to clean cooking fuels and technologies. Choice of these technologies has been based on health benefits as well as cost effectiveness, as suggested by the annualized cost of technologies.
- Achievement of the energy efficiency target is considered to be the second biggest challenge for Lao PDR. Several measures are need with a whole-economy approach. Energy intensity in the country has been going upwards instead of declining as required in the SDG7 target. With the contraction of GDP growth due to the impact of COVID-19, this is likely to worsen in the future, as energy intensity is measured as the amount of energy per unit of GDP. The NEXSTEP has found that it is rather difficult for Lao PDR to achieve its needed energy efficiency target but it can be aligned with the global improvement rate, even that would be possible with extensive energy efficiency measures across all sectors, as discussed in the high energy efficiency scenario.
- Transport electrification strategies provide multi-fold benefits. Vigorous adoption of electric vehicles reduces the demand for oil products, hence reducing Lao PDR’s reliance on imported petroleum fuels. At the same time, it can contribute to climate mitigation and improving the local air quality.
- Lao PDR should focus on phasing out coal from the power sector. On the basis of economic, environmental and social benefits and the country’s vast renewable energy resources, including solar PV and biomass, phasing out coal would be the justified choice of Lao PDR’s energy transition. This would be also in alignment with the global move to phasing out coal as well as progressing towards net zero carbon by 2050. This scenario has ranked the highest when analysed using the Multi-Criteria Decision Analysis tool. Lao PDR’s coal industry is relatively new and thus it would be easier to transition to alternative energy sources and technologies, particularly to solar PV and biomass, in addition to further increasing the hydropower capacity. Analysis has revealed that such a transition is technically and economically possible without impacting the electricity export market. While there are challenges in doing so, international experiences and lessons learned from other countries suggest that an early start in planning, detailed consultations with stakeholders and international communities, and developing a well-thought long-term ‘just’ transition plan will minimize socio-economic risks.