As anticipated by BMI, the saga surrounding the Xayaburi dam is far from over, with a lawsuit filed by Thai villagers threatening once again to derail the project. This development confirms once again the need for a sustainable approach towards the use of hydropower technology, highlighting the importance of a strong regulatory environment.
The Xayaburi dam has been the source of growing friction within the region in recent months, with countries such as Vietnam and Cambodia opposing construction of the dam due to worries about regional food security. This has caused a conundrum for Laos, as the country remains highly dependent on its power exports as a source of foreign currency. Most notably, protests against the 1,260-megawatt (MW) Xayaburi dam project on the Mekong River intensified in May 2012, after Thailand's second largest construction company, CH Karnchang, signed an engineering, procurement and construction (EPC) contract for the dam (See BMI's 'Karnchang's Troubles With Xayaburi Not Over' - May 03 2012).
Laos has long faced a tough balancing act with regard to the Xayaburi projects - risking incurring either the wrath of Vietnam, one of the most vocal opponents but also one of the country's top foreign investors, or of Thailand, also a top investor in the country as well as in the project, and Laos's largest buyer of power exports. The situation appears now to have further complicated as a group of Thai villagers have reportedly filed a lawsuit to block five Thai government entities, including Electricity Generating Authority of Thailand (EGAT), from buying the bulk of the electricity generated by the dam in the attempt to halt the US$3.6bn project.
|Facing Significant Opposition|
|Laos - Site Of Major Hydropower Plants|
Increasing delays and opposition could be critical to Laos's plans to bank on its hydropower potential to support economic growth. One of the most impoverished countries in the world, Laos aims to sell the electricity generated by 11 mainstream dams (including the Xayaburi dam) on the lower Mekong Delta to its power-hungry neighbours. Furthermore, the additional production could provide the country with greater access to electricity, enabling other business activities, such as mining, to take place.
|Laos Net Exports, TWh (LHS), And Laos Share Of Foreign Direct Investments (2001-2009), % (RHS)|
|… Potential For Exports|
|Thailand and Cambodia Total Net Imports, TWh|
However, the absence of rigorous regulation has proven crucial so far, with neighbouring countries and local actors contesting the lack of transparency during the feasibly study phase, as well as the lack of a public hearing process and opaque allocation of future generation. For instance, whilst Cambodia stands to benefit from the project, the economic benefits of such projects have largely been overshadowed by their environmental concerns and perceived injustice in the allocation of electricity.