Thursday, October 28, 2010

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.

Monday, August 30, 2010

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.

Thursday, August 26, 2010

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.

Wednesday, May 26, 2010

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.

Friday, May 7, 2010

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

Wednesday, April 28, 2010

Our blog has moved to a new address

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Thursday, March 18, 2010

The third FREPLA2020 Workshop held in Thakhek on the 10th and 11th of March

The third Workshop of the FREPLA2020 Project organised by the Ministry of Energy and Mines (MEM) and University of Turku, Finland Future Resource Centre (FFRC) was held in Thakhek in Nakai district on the 10th and 11th of March. The workshop was attended altogether by 30 participants from the different GOL ministries and departments. The two day workshop focused on the concrete planning issues and challenges of different economic sectors in Lao PDR. Several presentations were held on economic and energy related development scenarios on different levels and regions (national, Mekong Region and China) by using scenario development models, like LEAP, LaoLinda and IFs. Senior Technical Advisor of the UNDP Poverty Environment Initiative Ms. Grace Wong gave also an interesting presentation on mainstreaming poverty environment and MDGs in Lao PDR.

The FFRC team (Research Director Jari Kaivo-oja, Prof. Jyrki Luukkanen and Researcher Sari Jusi) organized tutored scenario development in small groups, where the participants discussed on drivers and uncertainties related to economic development of different sectors and built different scenario developments. Policy implications of scenarios were widely discussed by using the TEPSELV analysis among the participants. In TEPSEL analysis the participants discussed about the different changes (technological, economic, policy, social, environmental, legal and value) needed for different scenario developments.

The workshop turned out to be again a very successful arena for information exchange and creating of different economic and energy related development paths and scenarios composed by different GOL ministries and organisations. In the workshop the participants discussed and revealed challenges, potential risks and problems the country may face and need to take into account developing its’ economy and energy sector in the future.