Transcript: Episode #124: Power to the People
Following is the full transcript for the interview with Guillaume de Langre, which was released on September 23, 2022. This transcript was made possible by Artificial Intelligence (AI) and has not been checked by any human reader. Because of this, many of the words may not be accurate in this text. This is particularly true of speakers who have a stronger accent, as AI will make more mistakes interpreting and transcribing their words. For that reason, this transcript should not be cited in any article or document without checking the timestamp to confirm the exact words that the guest has really said.
00:00
But which is the right direction? The right direction for us is the one that will lead to an improvement in the quality of life of our people. Among the fundamental infrastructure requirements identified by a new administration in 2016, were roads and alleged electrification, not only because these are among the basic requirements of potential investors, but because these are also essential to our investment in human resources. Better Roads, mean better access to health and education facilities, and lighting provides new opportunities for our people to achieve their potential.
00:55
Over the last two years, nearly 3000 miles of roads have been constructed or upgraded, with priority given to least developed regions such as
01:12
some of the steps we have taken which may not seem significant to observers make a great difference to the lives of our people. Before I conclude, I would like to invite all our friends to join us in our journey. Our journey is not a simple journey, it's adventure. You're listening
01:40
to a special version of the Insight Myanmar podcast, which covers the fallout from the military coup and a Democratic resistance. During this crisis, we're not only ramping up the production of our podcast episodes, but also our blog and other social media platforms as well. So we would like to invite you to check these out along with signing up for our regular newsletter. All of our other projects have been paused indefinitely so we can focus entirely on this emergency but for now, let's get into
02:18
sunflower follows the sunlight the dog follows its own superstition is the end of day.
02:57
At the way that you're gonna have a good day. Yeah. Maybe that is.
Brad 03:19
Bad. Today, we're going to be joined by an expert who is going to be taking us through the history of the current predicament facing Myanmar's energy sector. So GM, thank you for joining us. Would you like to introduce yourself?
Guillaume 03:38
Thanks. Thank you so much for having me on. So my name is Guillaume DeLong. I used to be a researcher and a adviser to the Myanmar Ministry of electricity and energy. I was in Naypyidaw for about two years, working on a variety of issues, mostly related to the power sector. And yeah, that's it. That's about it. I'm really happy to be here today.
Brad 04:05
Excellent, thank you. So let's sort of jump into the background of the situation because many of our guests have not been to Myanmar, but I'm sure they can imagine the blackouts that those of us who live there faced, but I know that this is a problem that goes back many, many, many decades. So what what what was the situation, let's say, you know, approximately post-independence of the energy sector and what trajectory was it on.
Guillaume 04:37
So the history of access to electricity access to energy in Myanmar, is very much influenced by the geography of the country and by the political priorities of a biller dominated government. So you'll see that in the post independence times, you had people in Yangon. and Mandalay. Some of them key cities between those two major cities that would have electricity, through generators through sometimes some dams. But that was about it. And the rest of the country was very much dark, with a few exceptions. And the story of the power sector until the 2000s, is really one of very, very, very slow development in a kind of concentric circles way, right. So we start with these key cities, and then you start connecting a few villages outside of though in the suburbs of those key cities, and then slowly, slowly expanding in that way throughout the dry zone, through by go and, and then around Yangon. And then some also some expansion in the more touristy areas in the 90s. So around inland lake, but gone those areas. The bottom line is that by the time that Aung San su chi is in power, access to electricity in the country is still extremely low. And the main reason for that is that the tatmadaw, as long as it was in power, showed that it wasn't really interested in developing access to electricity, too much of the country. I mean, we see basically, a stagnating number of electricity connections through throughout the 1960s 70s 80s and 90s, the number of new customers is growing very, very slowly. And only in specific areas, right, really only in the lowlands by the late 2000s tons away and then in and then 10 saying, start thinking, Okay, we need to make up for this. And so you start seeing a centralization of electrification, and starting to build more generation capacity starting building new dams, bringing in more investment, including from China, but not only. Nevertheless, by the time that Myanmar starts really expanding access to electricity across the country. The country is far behind all of its neighbors, right by the time that Myanmar starts electrifying, even Cambodia, Laos, but also of course, Thailand, India are far ahead of where Myanmar is. And so there's a lot of catching up to do. And what we see in the time, between the late 2000s, and the coup is a very dramatic, very rapid expansion of electricity production capacity, and the number of connections, right, we go from a few 1000 new connections every year to 400,000, on average, during the NLD time. So during the NLD times, you had about 400,000 new customers every year. That's a massive expansion. That sort of follows also the expansion of like rural roads, for example, right? We had this major infrastructure push that started during the teen years, and then continued during the NLD years.
Brad 08:20
So I just want to jump on that. Is there a political? And all, shall I say, is there a democratic element to this? Because it seems like the the expansion of the infrastructure only came as soon as there was for whatever value it had, and electoral process as a way of holding politicians to account for their actions and inactions. Was there just suddenly more awareness of the public demand for these things? Or was there something else driving it?
Guillaume 08:53
I think that to the extent that this electrification and energy drive that starts more or less in 2006 2007, and gains steam in in 2011, and really reaches a very high rate of change in in 2016. That change started before democratic nation, I think it reflected a change within the top middle home in leadership, change of perspective, in the mind of Tom sway about what was the role of the Termidor in terms of developing the country? I don't know what exactly prompted that change? I think what we see in the late 2000s is a change of approach within the Talmud or a change of vision that the Tramadol should perhaps play some role in developing the country that it was not just about guaranteeing, you know, safety from internal enemies and safety from protection from external enemies. Protecting the saw 70 of the country at all costs, but a starting very small budding idea that may be the authority that was governing this country had a role to play in actually developing its infrastructure, which may seem obvious, from an external point of view. But when you look at how the tatmadaw behave for decades, when it came to infrastructure development, it was actually quite a new idea. We have traces from a long time ago, throughout the 60s 70s 80s. When you look at the at the press, at the time, there was this very explicit message coming from the Commodore from the junta, that the responsibility to bring electricity to people was, number one, the responsibility of the people themselves, their village authorities, the municipalities, and perhaps, maybe sometimes Township and district authorities. And that was it. It was not seen as something that the central government should be involved in, in any in any way. Right. So there's this change in the late 2000s, that may be caused by the fact that Tanduay was really committed to this road towards democracy. And that he's he believed that maybe it would be a good way to increase the popularity of the model, from the perspective of a Termidor that would be involved in politics through the USDP and things like that. Perhaps I don't have clear evidence about what drove that change. I think that what we see then under Tane Singh, and the NLD, is indeed a very strong push a change of mentality among the ruling elite have Myanmar, that the central government does have a role to play, and actually a complete reversal in their perspective, where they actually started centralizing everything. And so expanding access to electricity became a monopoly almost of the central government, not of the Union government. And they actually took those powers away from local governments, giving a few crumbs here and there to the state and regional government saying, Well, if you want to build a power plant that is below a certain threshold of capacity, and that it isn't going to be connected to the national grid. Yes, you can do that. That's in the Constitution in the 2008 constitution. But in effects, that was actually really nothing compared to the amount of power that was central suddenly centralized in Naypyidaw under 18, St. And then under Aung San su chi, when it came to the energy sector.
Brad 12:49
So let's take it back a step. So you're saying that the Thermador was saying that it is the responsibility of local governments and the communities themselves to provide electricity? I'm just, I'm just curious, what was the gameplan? You know, no local community, no village certainly is in the is in the position to be able to build an entire power station for itself. What did they think the people were going to do? How are they going to achieve this?
Guillaume 13:19
So the way that it was once explained to me by a senior civil servant is that they call this supply side driven electrification. And what that actually meant was that the central the union, government, and state and regional governments were not interested in connecting more villages to the national grid than there was capacity connected, right. So basically, we don't want to increase demand, more than we can supply. But at the same time, they weren't investing nearly enough in supply. So they weren't building new power plants or anything like that. And so basically, what this supply side driven electrification means is we're only going to connect new areas of the country, once we have added a new power plant, a new dam, a new gas plant, or something like that right. Now, because they weren't adding that new generation capacity. That meant well, let's slow down the electrification of the country as much as possible. Because if we add new people to the national grid, that reduces the quality of supply for the people already connected, but you get more power cuts, because you have to share the existing amount of power with a greater number of people. So in effect, what this really meant was that the union government was actually trying to actively slow down the expansion of access to modern energy across Myanmar, in order to protect its own supply in the Beaumont lowlands. Yeah, So.
Brad 15:02
So just to clarify, then there was no intention of these communities electrifying themselves, they they didn't actually seriously consider the possibility that these communities would solve that problem. They were just expected to wait in in darkness until such time as the government decided to expand,
Guillaume 15:20
guess or to come up with their own off grid solutions. So for example, what the Ministry of Industry did at one point was that it would supply fuel for diesel generators. So I would say like, you're a village and you want to get electricity. Neither we nor you are willing or able to connect your village to the national grid. So here's what we're going to do. You are going to purchase a diesel generator, you're going to build the lines within your village. And then you can apply for some support from us, the central government, and we can if we decide if we agree to it, we might supply you with some fuel to power that generator. That was the extent of the involvement of the central of the Union government in supporting access to electricity in the rural parts of the country.
Brad 16:22
But the Hang on, let me just launch through this. Surely, even if the villagers have somehow managed to afford the generator and the importation of the generator, and have somehow managed to overcome the fact that they need outside expertise to lay those power lines, you know, moving past that, surely the fuel that goes into a small scale diesel generator like that, is significantly more expensive per megawatt, than actually operating a power station like surely this is the central government saying, effectively, a yes, I will support the electrification of your village and be I will do it in the least possible cost efficient way for myself.
Guillaume 17:12
Yes, but I think that you need to understand that the need to see development and access to infrastructure from the point of view of the terminal, and it's in power, and I think that can inform our understanding today. Also, the terminal doesn't, didn't see let's say before, before democratic nation before the transition, the terminal never saw itself as an agent as a proactive agent of development of the country. If if it if it did their failure to build electricity, in Myanmar, it would not be visible from space, right? Like Myanmar is one of those countries that like South Korea, you look at you look at a map of at night of Myanmar. And you look at India, you have lights everywhere, right? Then you enter into Qin state or is the guy totally dark, totally, totally dark. And then you go into moving from from west to east. Then you get you see Mandalay, there's lights there. You see a few villages and some lights between Mandalay and Yangon, there's that there's that bright spot there. And then as soon as you're back into Shan State, Korean mon state Tony and Tyree, it's, again, totally dark, and then you pass the border, and literally at the border, suddenly bright lights, right, because it's Thailand. It's Laos, it's China. So if the terminal was really concerned about access to electricity to infrastructure development, they had about 60 years to show that they thought so. And they didn't. So I don't think that the time I don't ever considered that, you know, what you're pointing to a very valid point, which is, it doesn't make sense, right? Why didn't they just build the grid in the way that every other successful country in the world, including all the countries around Myanmar, that have been massively successful at getting access to modern energy, right, including a lot of non democratic countries don't need to have democracy to build access to modern infrastructure. They just have not been particularly interested in that aspect of governance, in my view, and, and punch we realize that in the later years of his role, and realize that if the top model was ever going to be to transition to a democratic force, as a political party that could actually gain seats and be powerful in the Peter luto. It would have to start reckoning with the fact that people want access to roads because they want easier transportation They don't want to be completely locked out of the rest of the country as soon as it rains, right. People want to have access to cell phones, people want to have access to electricity, to clean water, to health care, like those are very, very essential basic building blocks that the terminal throughout its rule of Myanmar completely ignored. It was just not part of the their definition of what governance was supposed to be.
Brad 20:27
So okay, so you've raised a very important point there. You don't need democracy to have electrification. And, of course, the the reasoning there is not just the the obvious stuff. I mean, when we look at things like the internet, and telecommunications infrastructure that requires electricity, there are massive economic advantages to that. But of course, the Dumbledore were very interested in minimizing the people's access to telecommunication for a very long time. But when we look at industries, electrification, generates profit, because those industries operate significantly better. Factories can operate after dark machines can be used and so on, especially in Myanmar country where the majority of the wealth, or the largest portion of the economic pie was coming from mineral extraction. And then the second largest portion of the pie comes from textiles and fabrics. Both of these industries benefit immensely from having electrification. So, did that not factor into the thinking of the military to say, like, we could generate wealth for ourselves by guaranteeing electrification?
Guillaume 21:40
I think that whenever you speak to people who are well informed about the state economic enterprises of the Ministry of Industry, for example, they will tell you that these state run industrial activities were never really designed from the point of view of profitability, right? Profitability was not the objective. The objectives were, number one, having some industries in country so that you could produce some things and be more sovereign in terms of your economic production of certain certain key goods. Secondly, it was about employment, right, as you see in a lot of Soviet countries, which Myanmar was not to be clear, but yeah, it's a similar mechanism. So they start from the point of view of sovereignty and employment. And from that point of view, access to electricity. And making these these factories more productive, really wasn't a priority. And it was not obvious from the point of view of the people who were managing the state owned factories. So I don't think that I think that in order to understand the top muddles economic thinking, you have to understand that it's first and foremost, based on extractive industries, not productive activities. And those are very, very different economic models. The top models, most of its activities are based on extracting natural resources and extracting rents from those natural resources. extracting these natural resources, you can do that without a massive national grid without building massive dams. It's pretty simple. You put on a generator, maybe if you want, if you want, you can add like water turbine if you're in the mountains of Qayyarah, or Shawn, or whatever. It doesn't require a particularly complex logistical chain. I think the challenge for the Commodore has always been to transition from this extractives oriented economic thought to the fact that Myanmar has actually undertaken saying and then under Aung San su chi, transition towards much more productive activities, and reduce its dependence on natural resource extraction. And those activities require a lot more modern energy. Energy is a key element of the cost of production. But it's a completely different aspect of economic thought, right? It's a completely different economic thought perspective on the economy than where can we build a new mine? Where can we extract more gas? That's very different from how can we improve the productivity of our factories or reduce their costs or be more internationally competitive?
Brad 24:35
I don't know just what you're saying about the term of those economic thinking. It just reminds me of the possibly apocryphal tale of Friedman visiting China when he sees 100 People with shovels digging up a field and he says, Well, why why aren't you using tractors? And they say, Well, if we use a tractor, we could only employ two people. If we use shovels we can employ 100 people, he says, well, then give everybody a spoon and you can employ 10,000 People Mmm, it's it's ridiculous when you take it to its logical conclusion. You know, it's not it's not sustainable.
Guillaume 25:07
But yes, here we are. Yeah. Yes, I think I think that the you have to understand that a country without access to energy in terms of electricity cannot in the same way that a country without access to clean water and food, you can't build much on top of that right. And so I think that, to a large extent, the fact that the term adult ignored electrification for decades, in many ways, constrained the development of Myanmar's economy. It focused Myanmar's economy on extractive industries, and low productivity, state owned manufacturing. And there there was a major transformation to be done there. Now, that is not to say that automation and all of that, and that's a much broader discussion about what's the place for automation, what's the place for increased productivity in rural economies, in transition phases, right, you need to provide employment indeed to a lot of people who are going to lose jobs as you modernize your economy and you shift away from agriculture towards industry or and or services. Nevertheless, the terminal trapped Myanmar's economy and Myanmar's workforce in these deeply unproductive activities for decades. And that started to change very, very rapidly. In the what I would nicknamed the the failed decade of transition, right, the 2011 to 2021. That started to change quite significantly. And you started seeing some very structural reforms of how state owned enterprises functioned, reforms of the Ministry of electricity and energy, you started seeing a lot of world bank funding going into electrification. A lot of people started saying, Okay, the first step towards developing Myanmar is helping it to catch up in terms of access to electricity, we need to put light bulbs everywhere in all households. And we need to give that basic amenity of modern life to across the country, and then we can start focusing on other things. But we need to start with that, because the country is so far behind every other ASEAN country so far behind the rest of the world. So yeah, and I think that the the NLD. And the Bureau, the the NLD, was in somewhat of a conflict with the bureaucracy, because it tried to change that mentality quite radically, from this extractives and supply side driven electrification to, let's just build power lines everywhere. Let's connect everyone. And then we'll see right, and then we'll also build more dams will build more solar and all this added generation. So there was some friction there that I attribute to this change in mentality, the state change in perception, within the bureaucracy that was going from having military leaders, military leadership to having civilian and LD leadership, we had to transition from this old school way of seeing to this new way of seeing that let's all catch up as fast as possible.
Brad 28:27
So then let's let's talk about that. You talk about this decade of failed transition, I usually refer to it as the period of full democracy. What actually happened in terms of the expansion of the electrical grid, like what changes did people experience within urban centers and what changes the people experience in rural areas?
Guillaume 28:50
You saw a massive push, to put it to put it simply in between 2006 and 2010. So during those four years at the start of the big electrification drive, the hunter was adding about 100,000 new people to the grid every year. After 2011, that starts to increase to grow, to grow to grow. And suddenly by the time the NLD is in power, you're adding about 400,000 people every year, right? That is just an amount of investment in infrastructure that was partly supported by external donors, but to be honest, first and foremost, funded by regional governments. That wasn't
Brad 29:44
to do any other countries. Electrification so we have a reference for what 400,000 people a year is
Guillaume 29:51
400,000 people a year is what it means is that between 2019 and 2021, for example, simply in terms of what was used from the World Bank funding as a $400 million loan, they brought electricity to about 2.72 point 8 million people. Right? It's a huge drive. I think that the only infrastructure project that can compare during these years is the expansion of rural roads, which which was, which was absolutely massive across the country, and had a deep impact on rural economies. So what was achieved during that time was was absolutely remarkable. If you also look at, let's say, okay, 400,000 new connections a year. That's, that's more than were added of new connections for the entire decade of the 1980s. And more than what was added in the 1990s. Right. It was just a completely a change of paradigm that suddenly electricity was coming to communities in the country. And there was this sense of excitement that you could feel it whenever you went to communities and you ask them, What is the one thing that is going to change your your life that you're most looking forward to? And you would just have, like, hundreds of people screaming at you electricity, right. So there was this expectation, this optimism that it's coming, it's coming, it's finally coming. We've been waiting for it for so long. So yeah, it was a remarkable thing that today is pretty much dead in the water.
Brad 31:30
Yeah, but so, like a follow up to that. What was the experience for people like because if you're in urban centers, it's a bit different. If you're in the rural areas, you didn't have electricity, and now you do. It might not be particularly reliable. It might not be particularly consistent, but at least you have it. But let's contrast that to people living in Mandalay. Yangon, Naypyidaw, places like this, where they already had electricity did the reliability of that electricity supply improved for them as well over this period of time?
Guillaume 31:59
No electricity supply quality deteriorated for many people during that time. And I think for anyone who lived in Myanmar, in the last five years, we all feared the power cuts of the hot season, right? It could just get really, really brutal, and really hot for those who didn't have a generator, which was the overwhelming majority of the population. So now, the quality of supply definitely deteriorated, in part because the demand was growing much faster than was expected. And because electricity has that is a particular kind of service. It's what's called an experience. Good. So basically, if you ask someone who doesn't have electricity, who hasn't lived in an electrified life, yet, you ask them, the day that you get electricity? How are you going to use it? What kind of appliances are you are you going to buy? How is it going to change your daily schedule? They'll tell you something. Right. And then they get electrified. And you ask them again, that same question. But now, in retrospect, how has it changed your life? How has it changed your lifestyle, your daily schedule, what appliances Have you purchased, and you realize that once people get electricity, it opens up a world of possibilities for them that they hadn't even foreseen before. And so that their electricity demand is usually much higher than what they had expected before. If it's affordable, and so that, I think, created a situation in which the demand for electricity across Myanmar was much higher than what had been forecast. And at the same time, the authorities were way too slow at adding new new generation capacity in the country, too slow to add new gas, new dams, new solar, and whatever your your pick your poison. So yeah,
Brad 33:58
so actually, I want to ask something, because I think this is very important that the demand the increase in demand, do we know whether the increase in demand was driven by industry, or whether it was driven by private citizens wanting to use appliances or whether both of those just skyrocketed
Guillaume 34:17
now that the increase in demand was driven by a surge in in residential demand, okay, and households consuming far more electricity than then was expected, including a lot in cities. You started seeing parts of the all the major cities, because electricity was so so cheap. People were leaving their air cones on while they were out at work. It was very common to have very wasteful kinds of behaviors with electricity because it was so dirt cheap. It was one of the lowest tariffs for electricity in the world. So yeah, what drove the the higher demand was not as much and just straight as much as it was residential demand.
Brad 35:04
Do we understand what it was that was that was driving these like, is it mainly air conditioning that people are using? Or is it other appliances like fridge and heating appliances, water heaters and things like this.
Guillaume 35:17
The spread of modern appliances in urban areas drove the drove the demand, the rise in demand, so any appliance but of course the more power hungry ones were aircon, fridges. Those were the two big ones that drove electricity demand at that time, and still and still does. I mean aircon is the first is the first thing that once you've purchased you know, your rice cooker, your TV, your you know, you can charge your phone. The thing that is going to be that first luxury item that is going to make your life significantly more comfortable is that aircon but aircon of course, is something that consumes a lot of electricity. And the problem was that you had a lot of people in the country investing in aircon devices, because they saw it as a high fixed costs, right? It's an initial purchase, but then actually operating it would be cheap, because electricity was so cheap in the country. And so there was that mixed mixed messages, let's say in terms of price signals. And that changed afterwards in 2019, when the prices increased significantly.
Brad 36:25
So So I want to move on to that actually, you've mentioned to me in the past that the electricity sector was was running at a at a deficit, basically, it was not really profitable. And simultaneously, you're telling me that the price of electricity was just, you know, so incredibly low. In your across the country? What was the reasoning for this?
Guillaume 36:52
Well, it's never popular in any country to raise energy prices, right. And very often you'll actually get riots, social unrest when price of energy is increased in ways that are either not progressive enough or that affect one community more than another and things like that. Right. So it is a politically very sensitive issue. The NLD was aware of this, everyone knew since at least 2014, that prices needed to be adjusted. When they tried to adjust the prices in 2014, there were protests. And so the 10 cent administration back down and they only increased prices on Industries at the time. But that only kicked the can down the road, which is something that happens everywhere in the world, whether it's democracies or authoritarian regimes, there was never a very strong political incentive to increase prices for energy. Every year, every month I would hear when I was in Naypyidaw, people saying we need to increase prices, we need to increase prices. But no one seemed to know how to do it, how to do it in a progressive way, how to do it in a way that wouldn't torpedo the popularity of the NLD. And so that just kept being postponed. And by 2018 2019, the Ministry of electricity and energy was losing hundreds of millions of dollars every year in electricity subsidies effectively. So that meant that basically, the government was spending more on subsidizing electricity, mostly to more wealthy, rich, more wealthy, urban customers, then he was spending on education, for example. He was spending more on electricity than almost anything other than the defense spending. So So effectively, it meant that the country was subsidizing the wealthy urban or upper middle class people in the cities who were using their air cones and their fridges and all that. So there was this real imbalance that ended up being addressed in June 2019. But it took a very long time, they really waited until the last minute, let's say.
Brad 39:21
So hang on. So let's let's look at the economic model here. Because the state does not own the majority of the power generation infrastructure. Those are still technically private companies who collect the revenues from the people directly. And then they on sort of that they pay through their taxes, a portion of that money to the government. So the government doesn't actually own the infrastructure. The government doesn't actually set the price of electricity. Is that correct?
Guillaume 39:50
Well, so you have two things. So first of all, let's let's take a step back. For those who don't know about the power sector. We divided into three big blocks that First generation transmission and distribution generation is the production of electricity transmission is the high voltage cables that you see crossing fields, you know, in the countryside, connecting towns connecting major power generation to where the demand is right. And then you have distribution. And those are the lines that you see within a city that are connecting your house to a local transformer, right. So we look at these three different blocks as separate because they have different economics. In the case of Myanmar, the way that it works is that electricity can be produced either by companies that sell electricity to the government, or by the government itself, a majority of electricity is produced by private companies, and then it gets sold to the government. And then the government sells it to you to just simplify. A portion of that of the electricity is also produced by state owned dams and state owned gas plants. And then that also gets sold to you. The final consumer price is the same for everyone, every grid connected consumer in the country. And so if there's any discrepancy between the price at which the companies are selling electricity to the government, and the price at which the government is selling electricity to you, then that's the subsidy. That's the gap between the cost of supply and the cost, and the and the the income per unit that they that they collect.
Brad 41:34
Right. So it's it's not so much that the electricity generators behave as completely independent free enterprises who pay taxes, the government makes itself an obligatory middleman, between generating prices and the ultimate consumer.
Guillaume 41:53
That's correct. And so here, I'm only talking specifically about the national grid system. There are other parts of the country, if you look at like, for example, Chang tune a couple of Eastern SHAN Or if you look at putao, you have some cities like that in the country that are not connected to the national grid and have their own system going on with their own generation and own distribution system. But for everyone who's connected to the national grid, yeah, everything, whether it's produced by a private sector stakeholder or by a government, stakeholder, everything gets channeled through this one state owned enterprise that purchases all that electricity, and then dispatches it to other state owned enterprises that are going to sell it to you as the final user. Right? So it all goes so fully vertically integrated in that sense.
Brad 42:46
So that allows us to move forward into the the meat of the issue. And that is post coup. So as of the current situation, the electricity grid of Myanmar, the entire pie effectively, except for the these ones, like Buddha that you've mentioned, I presume, is controlled by the junta government.
Guillaume 43:08
Is that correct? Yeah, that's correct.
Brad 43:11
And the people who want electricity when they pay their electricity bills, are handing money over to that one to government.
Guillaume 43:20
Yeah, that's right. Okay.
Brad 43:22
So really the situation is? Yeah, he's a little bit extreme. So all right, can you can you tell me about what changes have happened as far as the grid is concerned, and as far as the economics of the grid is concerned, since the coup,
Guillaume 43:38
let's look at what was happening in the few years right before the coup in the energy sector. At that time, it was pretty clear that there was going to be some kind of energy crisis. Because as I said, Before, the electricity demand was growing faster than expected. And whether it was the tensing or NLD administration's were not adding enough generation capacity to the system. And so that gap kept growing, and there was a point where it was going to reach a crunch. Let's see. Some decisions were made in 2019 and 2020, that were designed as emergency measures to avert this crisis. So in 2019, as I said, they increased the electricity prices, which was really important because they were at that point losing about $500 million in electricity subsidies. They commissioned a bunch of emergency rental gas power plants, some of which would be running on imported gas from the Middle East. And then in 2020, they commissioned 29 solar farms, solar plants, to be dispatched kind of all over the country. Now what the coup did was that it's not that it triggered a crisis, the coup, canceled out the emergency measures that were decided by the NLD administration, because what happened was, as soon as the coup happened, the solar companies that were going to build the solar plants, were thinking, well, the country risk just went way up. And we don't know if we can import materials into the country, if we don't know if we can bring workers into the country to actually build the power plants. This all seems very tricky. On top of that, we agreed to sell electricity to the government at a certain price that were quite low, very competitive prices. But now that there's massive instability in the country, well, we don't really think that our true cost of producing that electricity is reflected in that pre coup price. Right? It's sort of like if before the coup, you had agreed to import a bunch of bananas into Myanmar, at a given price and sell it to the government. But then after the coup, you realize, well, there's a high chance that my container full of bananas is going to be stuck at the port for a long time, and I may lose my shipment entirely right? Or it might be confiscated. Or someone, I may have to bribe a bunch of people in order to get it to get it to my customer. Or the government may decide I'm going to take your bananas, but I'm not going to pay for it. Right. So that's an added risk. And that risk was not taking into account. And the junta was saying, well, we want to buy that electricity, we want you to go ahead with those projects, according to the original pre coup terms. And the companies, of course, we're like, there's no way we're not doing that. So that's 1000 megawatts of solar that just disappears overnight and doesn't get get built. Then you have a Chinese in Hong Kong is company called V power that had started producing a lot of the emergency gas plants that I just mentioned. Now, that company says, Well, we believe that the Ministry of electricity and energy is probably not going to be able to pay us long term for the electricity that we're supplying to it. And so we prefer stopping production right now. Rather than take the risk of producing and not getting paid. Combined with that with the fact that's international gas prices were increasing. And so the company, the power was importing gas and at a higher price, but selling electricity that was produced by burning that gas at a fixed price to the to the government. So the burden of that increased global price of gas was on the company, not the ministry. So that company decides, well, we're going to shut down a lot of our power plants in the country, including two big big power plants around Yangon. And other one in HRQ in Rakhine. And another one, we don't know whether it was in Maine, John or McWay. So Dan had those two things combined, sort of, is a major blow dealt to the power sector at the time. And now on top of that, you start having a tax on powerlines. Right. Now, I don't know if some of your listeners might remember this. But in last August, and then in November, there was there were reports of attacks on power lines that connected some dams in chaos state. And anyone who follows the situation in Myanmar pretty closely well know that your state is a hotspot of the confrontation between PDFs and, and the junta. Now, some PDFs blew up key power lines that connected three dams to Naypyidaw with the explicit purpose of disconnecting of reducing the power supply to new people. Of course, that's not really how a power grid operates, because the electricity as soon as it's injected into the system kind of runs free. So it's not really like a pipeline or water, it's a bit different. Nevertheless, what happened is that they blew up those power lines and they prevented any electrical engineers from coming to repair those power lines and they're still preventing them to this day. So that took out another chunk of power generation from from the grid. So basically, today, the power supply in Myanmar is lower than in 2017. It's about at the same In level as 2016 It's a dramatic drop in power generation in the country, which is why today, I think the country that you could compare it most accurately to is probably Lebanon, right in terms of a complete collapse of the generation production capacity. A few caveats to that. First of all, a bunch of people are saying now that Oh, then the last week, and we are recording today on the fourth of June, and the last week electricity supply, and Yangon has suddenly become much better. The reason for that is into two parts. First of all, the monsoon has returned and so the dams are starting to fill up. And so that there's going to be an increase in quality of supply over the next few months. Second of all, Naypyidaw has actively decided to channel a lot more of the power that was being dispatched to rural areas to Yangon. Because the probably because the discontent delivered, the level of anger and Yangon were starting to be really problematic. And so they are the better quality of supply that you're seeing in Yangon in the last week is at the direct expense of secondary and tertiary cities in the rest of the country. That's the situation of the electricity sector. Post true, I think that looking ahead, it's going to remain every dry season is going to remain very, very tricky, at least for the next two, three years, at least. And I think that the objective of reaching 100% access to electricity, and enough power for all of those new customers on the grid, which used to be 2030, that deadline is most likely going to be missed, because of a lack of funding, a lack of interest of the junta electrification. And also the fact that very few companies today are willing to cooperate to work with the junta mo e, there are going to be some companies that are going to jump in. But nowhere near the level of the pre coup times. And so a lot of dam projects now are completely suspended or abandoned, or in some kind of limbo state. A lot of solar projects are now completely abandoned or suspended. And the country risk in general has increased. So if there are new projects that are built there, it'll be at a higher price to the government.
Brad 52:36
So an important question, then is, now that we've gone through this electrification does not want to grasp the importance of the sector, or are they still willing to abandon electrification and just let the country sink into darkness again, because they see it as a secondary concern.
Guillaume 53:00
I think we would have to speak to people who are, who have a good understanding of the mentality of men online. And so when I think that in the past, let's say until 2011, in 2015, during that time, you either had a grid connection, and you had, let's say, an okay supply of electricity, or you didn't have the grid at all. That's a different situation from having a lot of people in Myanmar today who have a good connection in their village, they're in their household, and who are not going to get any electricity. Right. It's it's different to not have something than to be given something and then being that thing being taken away from you. I think this reasoning can apply to the coup in general, right, and to why the resistance to the coup has been so strong, it's very different to not have something than to have something taken away from you. And so if the junta is smart, which I wouldn't necessarily bet on at this stage, but who knows? They would be aware that electricity supply is one of the things that it's it's the government being in your life in a very direct way, right, electricity supply, when it is supplied by the government. If there is electricity supply, or there is an electricity to supply, it is a metric of whether the government is performing well or not, at your very personal level in terms of supplying your own house, which is why it can get politically very sensitive in a lot of countries. So I think if the hunter is smart, they will understand that they need to work on this as fast as possible. And I think that there have been indications that they are looking for new partners including in China, and in Thailand, to work with them as soon as possible to start building new generation capacity, because it's going to be very hard to normalize themselves and to be seen as a legitimate governing force of Myanmar, if they are utterly unable to provide this very basic aspect of development and modern life.
Brad 55:25
So the question that because I know that reports have been made, that the junta are, in fact, using the lack of electricity as a punitive tool, to try and sort of get people under their control again, you know, almost like, well, if you want the electricity back, you have to accept the military boot heel. Is that? Is that indicative of, of their continued attitude towards electricity? And if so, do you think it's, it's going to be successful? Do people need the electricity badly enough?
Guillaume 56:03
I think that I think that electricity is an essential service. And if you don't have electricity, your life can be significantly worse. Right? It's much, much harder to it's not a superfluous thing, it's not a bonus, it's you need to have access to drinkable water. And you need to have electricity as a second priority to water and food, just in order to have lights to in order to have access to communication, very often in order to be able to work, and things like that. So I think that the challenge for organizations such as Daniel G, for example, is if you keep asking people to stop paying their bills, which is which has been up until now a very effective way of depriving the regime of very needed resources. There is a point where it affects your life in a very real way. And so the regulations even pre cool was if you don't pay, after three months, you get disconnected. And so I think we're seeing a mix of the junta sometimes punishing certain townships, we've seen that in certain parts of Yangon, that have been, let's say, more active in the resistance. So northa, Klappa. And Shri PETA and longtime those areas have been targeted with power cuts. But I think the majority of people who are feeling the pain of this and who are being disconnected, and they're not being disconnected because of direct retaliation. By the hunter, they're being disconnected because they chose to boycott and to boycott the hunter and to not provide provide those funds to to the regime. It's very tricky to see what's going to be done in the future, because it is relatively simple for the ministry of electric power, as it's now been renamed to disconnect a whole street to disconnect a whole Ward quarter or or Township, it's quite easy to do that. So I don't know exactly what their what their approach is going to be whether they're going to keep using, you know, combining electricity and internet cut offs, to show outages to target certain areas, as we've we've seen in the gang recently and in Maguey. It's unclear to me, what I can see is that there's also a financial incentive for the mo e to be much more aggressive, to combine their bill collection efforts with for example, the GED with the police and sometimes perhaps even with the military, to coerce people into paying because it's becoming this major financial crisis for the junta Ministry of electric power. They are losing again hundreds of millions of dollars a year at the at the current rate. And the question is, will the junta will the tatmadaw be willing to bail them out at some point or not? The big picture is that in the early days of the coup, we saw a complete collapse of of the government of the bureaucracy right of the actual capacity of an authority to exert control over over Myanmar. So I think that in this leads me to the kind of secondary port point and kind of a tangent, but I think it's an important one from an energy perspective. The early reporting that the tatmadaw has seized control of Myanmar after the coup, I think was not accurate. I think that what we saw was the terminal has has controlled of of Naypyidaw and had decapitated the NLD But for anyone who was in Myanmar at that time, it was pretty much a lawless area. And you could would see soldiers sometimes and there was repression and all that. But when you see that, for example, in Yangon, they come in in February, March, April, the mo e, the ministry was able to collect 2% of the expected electricity bill revenue, right. So that's a 98% collapse in Bill collection in Mandalay was 3%. In there in the rest of the country, it was about 20%. So there's just a complete collapse in the ability of the ministry to implement its policies and to enforce compliance. And then there's a whole boycott that begins where people think, Well, I haven't been paying my build up until now. And I have very strong incentive to not want to fund the junta, I don't want to give them money. And so I'm not going to pay my bills. The AUG supported that and advocated for that publicly. A lot of activists supported that. And then that became an really major part of the CDM movement, I would even argue that the boycott of electricity bills was one of the most successful parts of the civil disobedience movement, and it continues to this day. Of course, after a while, people were forced to pay, you saw bill collectors coming with JD officers with policemen and forcing people to pay. And if they didn't pay, they just got physically disconnected from the power grid. Nevertheless, to this day, every month, whereas before, the ministry would be able to collect about 98% of the owed bills. Today, that's about 55 to 60%, every month. So then people are basically waiting for the last minute, they're waiting for the soldiers to be at their doorstep or for the engineers to be there to disconnect them to pay. And they're they're really dragging their feet as much as possible. So this continues, and is still depriving the ministry of a lot of resources. And I wonder how, how the junta is going to be able to compensate for this financially. They have the financial resources to do it. But will they have the willingness to bail out the ministry of electricity and energy at the Ministry of electric power? Sorry.
Brad 1:02:34
So there's an interesting economic question here. I mean, let's say the military goes out, and they just start disconnecting houses left, right and center. And as a result of that, so, okay, it's a two way question. Really, number one, with the fact that so many homes are being disconnected, then mean that the non disconnected homes start receiving more reliable energy supply? And or does it mean that the hunter can then turn around to the energy suppliers and say, Look, demand has gone down? Therefore, I expect you to lower your supply, and I'm going to give you less money.
Guillaume 1:03:15
So the second part of the question, and is a very interesting one, the the government and by the government, I mean, in the abstract, like the Myanmar government, the Ministry of electric power, purchases, electricity at a contract price that is based on what's called a power purchase agreement. So that's a contract between the electric power generation enterprise that's a component of the ministry and the company that is generating the electricity. Within that contract, there is usually a standard clause that says that the governmental side is obligated to purchase a minimum amount of electricity from the power plant. The reason for that is it's supposed to these power plants are only financially viable if they produce a certain amount every day, because a lot of power plants are not good at you know, producing a lot suddenly and then producing license anyway. So it gives security to the company that the guarantee that there will be demand for their service every day. What that means also is that if the ministry wanted to reduce its costs, by reducing the amount of electricity that it is purchasing, there is a floor on there is a lower limit on its ability to do that, because it is still contractually obligated to purchase a very significant share electricity every day from these power suppliers that constrains the ability of reducing costs for the ministry. I also think that you It's not in the interest of households to be disconnected. It would really affect the lifestyles. I also think it's not in the interest of bill collectors and township officers and all these civil servants to implement disconnections on a broad scale, because we're seeing even this week, a bill collector was assassinated in broad daylight. And this has been happening all the time, right, we see on average about 20 to 25 attacks on mo e offices, or mo e staff every month, that's almost once a day. So there's a precarious balance there that is still being negotiated about how to enforce compliance on one side, but at the same time, people not really not not wanting to comply at all. But but also civil servants not wanting to die. So it's, it's a tricky situation.
Brad 1:06:00
I mean, it's definitely one of these very deep, and yet unsung elements of of the revolution. But Will there come a time when what the military is offering is just not enough? I mean, at the moment, unless I'm wrong, we're looking at approximately 12 hours a day of of electricity supply. So if if that supply starts going down, will it get to the point where people say, look, it's just not worth it to me, like, who cares about the two hours of electricity a day that I get, the food is going to spoil in my fridge anyway, my aircon is not going to call the house anyway. I can't charge my computer anyway. You know, is there a fear of that?
Guillaume 1:06:47
I don't think so. I think that looking at and commenting on Myanmar, from an outside perspective, we have to take into account that a lot of people their priority is yeah, like political incentives and matter. Right. What do you believe matters, of course. And the opposition to the coup is massive, overwhelming and sincere. At the same time, people have to live people have to people still have like, family plans, people still have career plans, they still want to grow and develop and all of that on an individual level. I mean, and I think that the only reason for someone to think, Okay, I'm just going to disconnect myself from the grid, because what's the point is either someone who is deeply, deeply, deeply politically moderate, motivated and willing to take on a very steep cost, or someone who has an alternative. So whether you have maybe a solar panel on your on your roof, and we're seeing much more demand for solar panels, individual solar panels, and Myanmar at the moment, there's a real spike in demand. higher demand for battery storage. Also, probably we're going to see in villages, higher demand for little hydro turbines that you put on a river, and things like that, right alternatives or solutions that are complementary with the power grid. But I don't know how long electricity supply can remain as politicized as it is right now. It's it because it's so key to to daily life. I mean, once you've lived with electricity, and you've bought all those appliances, can you really deprive yourself of that, like, I think among your listeners, if you've lived ever another unelectrified life, it's a very, very different kind of lifestyle, especially in very warm areas. It's it affects how you eat, it affects how you sleep, everything, how you communicate everything. So do I think that people will be hesitating to radically change their lifestyle for that? No. And I don't necessarily think that it's the best way to oppose the junta to be honest.
Brad 1:09:10
So you mentioned these alternatives. And we won't spend too long on that. But I'm curious, is there much recourse realistically to to gain a certain degree of energy independence? I mean, solar panels are first of all expensive, no matter where you are. The actual panel itself still costs quite a bit of money. Plus the difficulties with implantation batteries. I did look into that. When I was I was in Yangon a few years ago. What I was basically being told is no, it's it's just not economically feasible to invest in in a battery that can that can help supply your your apartment, even during a two three hour power cut. I was told he was just not economically viable. And when we talk about, you know, generate diesel generators. We've seen the cost of fuel triple since the coup. So is there really much Because for for communities to gain some amount of independence
Guillaume 1:10:05
for sure, yes, I think there are plenty of solutions out there that that would allow communities to have a better electricity supply despite the current circumstances. The question is that the key aspect, the key variable here is expectations. What do people expect, because expectations will drive your willingness to pay. If you expect, let's say that you own a little business that's drying Burmese cigars, true roots, and you don't use a lot of electricity, but still, you need some for the for the drying lights and, and things like that, okay. Now, if I tell you that there's going to be really bad electricity supply for about two years, and then it's gonna get better, what you might do is either scale down your production, you might get rid of some of your staff might reduce some of those variable costs. But you're still expecting the situation to get better in two years. And and you're aiming for that and to be ready to scale back up when the power comes back in a stable fashion. But if I tell you listen, the power situation is going to be really, really unstable and really bad, and probably increasingly expensive. On the grid, for the foreseeable future, for the next five, seven years, you're not going to get uninterrupted power until 2030. That changes your calculation, right, it should change your calculation as a business, it might also change your calculation as a household. It also changes the calculation for industrial zones. So I think the key here is about expectations. I think that we've gone through a massive U turn, where we've gone from a situation where everyone in the country expected power to get better. In terms of, you know, the grid expanding across the country, new power plants being built. Everyone expected it to just get better to now the reality is that it's going to be pretty bad for a long time, with some relief during the rainy seasons. But it's going to be bad, like the rain, the dry seasons are going to be really rough for the foreseeable future. We're in that moment where those expectations are right now being negotiated and adapted and adjusted. I think there are still a majority of people in the country, we think that it's going to, we're still optimistic, and the situation is going to improve soon. If only because I think a lot of people are so optimistic that there's going to be a change of regime. What I want to say is that in the current circumstances, it doesn't, it won't have much of an impact on the power sector, whether the political situation improves or not. If tomorrow, the civilian government elected in the November 2020, elections is reinstated. And the civilians are back in power, it would still take years to fix the damage done to the energy sector by the coup, it will take years to fix that it will take years to break to bring funding back into the country, it will take years for company for companies to trust again, and to lower their their country risk the perception of country risk. So the energy sector is very particular in that all these projects are big, expensive, and very, very slow to build and design to design and build sorry. What the coup did was that it created this giant disruption, massive shock in a sector that now a lot has been destroyed overnight. And it's going to get take a very long time to rebuild. So what needs to happen right now among businesses in Myanmar is an adjustment in expectations about the quality of electricity supply. They can either adjust to that by investing in rooftop solar, they can adjust to that by investing in, in many hydro turbines if they if they're rural businesses next to a river. They can adjust. Invest in plenty of alternative solutions. I think in terms of batteries. You're right that investing in large scale batteries, utility scale batteries, that's probably a bit too expensive for our business, but there are 1000s of people in Myanmar that in rural areas for whom the only access to electricity is battery storage, combined with a little solar panel or something like that, right and so If I'm a household today, I would probably invest in that too. So it's about expectations, adjusting expectations. I think one thing that we haven't touched on is the issue of gas, which I think the the issue of gas is quite critical. On the gas side, there is a broader kind of a deeper crisis looming, which is that the gas fields that were being exploited in Myanmar, their production is going to go down very significantly over the next few years, with the exception of one. Now, there were plans to bring several new guidance fields online, and that those fields would be mostly producing for a domestic audience. So they would reduce their exports to Thailand and have more production for Myanmar. Because of the coup, those developments are not happening right now. And developing again, as feel takes years, it takes five to eight years more or less, between the moment where you find the gas, and the moment where it actually comes online. So there's going to be a challenge there. I'm not saying that gas is a great source of electricity. It's something I'm saying this was part of the original plan for generation of electricity in Myanmar. And that is no longer happening. And so right now, we have a short term crisis, which is everything that we've talked about up until now. But there is also a more long term crisis about if Myanmar doesn't have more gas supply. By 2026 2728. There needs to be some kind of alternative to come online. And that can be dams. Dams can be sometimes very unpopular, can have pretty bad environmental and social impacts, if not done properly, and they take a very long time to build, right? Solar can be great, because great solar can be built in a very short amount of time. If you can sort out the problems of supply, can you import all the inputs? And also, can you have access to land, because you need a lot of land for solar. But there's going to be these problems, right, that are looming in the background. So right now, they need to address the problem of immediate shortages. But there are going to be these long term problems and everything in in the energy sector is slow. Don't be tricked by what we've seen with seen with Ukraine. It's exceptional to see such a radical change happening in energy policy. It's really once in a generation. In general, it takes decades to change the very, very massive and slow boat that is a country's energy policy. So that needs to be addressed. The other thing is there's going to be an issue for the new GE which is what do you tell the people? And what do you tell investors? The uncomfortable very uncomfortable fact today is that in order for electricity supply in Myanmar to improve in the very short term, the only way that that can happen is through Chinese and Thai companies that are willing to build solar plants in Myanmar today. Right? That that is a fact. They're the ones who are willing to operate in the country. They're the ones who are willing to go around the sanctions and and build these power plants. What do we do with that? Do we as as and what does the NUJ do about that? And what does the minute you tell these companies about what happens if civilian rule resumes? While those companies have to renegotiate the contracts? Will they be expropriated? What happens then? So there needs to be some very clear messaging on that sent by the energy to all these companies. And finally, again, expectations, expectations, expectations. For villages out there that thought that they were going to get electricity very soon, and it's not going to happen, then all those villages need to start thinking about, well, let's look for alternative solutions. If we have a river there, then maybe we could invest in something we could pull resources together and invest in some kind of mini grid there. If we have, if we're in the dry zone, maybe we can have some kind of mid scale solar plants that can supply us like it's time to get creative now, because if there's one thing that we know from the Commodores past track record in energy, it's that it only cares about energy to the extent that it can exist tractor rents from it. So that applies to gas that applies to oil. It does not apply to solar. It does not apply to hydro organics, it does not apply to building grid connections. These are not priorities for the title, so it's time to get creative.
Host 1:20:29
of the most tragic aspects of the current crisis in Myanmar is how isolated Burmese protesters feel, and in fact are thankfully, through a nonprofit organization better Burma, were able to ensure that all your donations successfully reached their intended target on the ground. So if you found yourself moved by today's discussion, and want to do what you can to help, please consider giving to our donation Fund, which is 100% directed towards supporting the democracy movement. If you would like to join in our mission to support those of Myanmar who are being impacted by the military coup, we welcome your contribution in any form currency your transfer method, Your donation will go to support a wide range of humanitarian missions, aiding those local communities who need it most. Donations are directed to such causes as the Civil Disobedience movement CDM families of deceased victims, internally displaced person IDP camps, food for impoverished communities, military defection campaigns, undercover journalists, monasteries and nunneries education initiatives, the purchasing of protective equipment and medical supplies COVID relief and much more. We also make sure that our donation Fund supports a diverse range of religious and ethnic groups across the country. We invite you to visit our website to learn more about past projects as well as upcoming needs. You can give a general donation or earmark your contribution for a specific activity or project you would like to support. Perhaps even something you heard about in this very episode. All of this humanitarian aid work is carried out by a nonprofit mission that or Burma. Any donation you give on our insight Myanmar website is directed towards this fund. Alternatively, you can also visit the better Burma website better burma.org That's BETTRBURM a.org and donate directly there. In either case, your donation goes to the same cause, and both websites accept credit cards. You can also give via PayPal by going to paypal.me/better Burma. Additionally, we take donations through Patreon Venmo GoFundMe and Cash App. Simply search better Burma on each platform and you'll find our account. You can also visit either the Insight Myanmar better Burma websites for specific links to those respective accounts or email us at info at better burma.org If you'd like to give it another way, please contact us. Thank you so much for your kind consideration and support. Right Hi everyone.