Supplying power to remote villages in Lao PDR. — The role of off-grid decentralised energy options1

• Decentralised renewable energy (DRE) can be cheaper than grid extension.
• Users of grid electricity are more subsidized than users of solar home systems.
• DRE provides more opportunity for local empowerment than grid extension.

In Lao PDR, a least developed country in South-East Asia, provision of electricity to remote areas is a high priority for the Government, which has the objective of electrifying 90% of the population (in terms of number of households) by the year 2020. While this objective is commendable and tremendous progress has been made over the past 10 years in terms of rural electrification, some important questions remain unanswered. Currently, grid extension is the main technical option considered. One of the main reasons for this push for grid extension is the assumption that access to the grid means development. However, when analysed closely, the reality from the field is far more complex. Although grid electricity has tremendous potential to provide economic development opportunities in rural areas, it also has some drawbacks. In particular, productive activities fail to develop in many grid connected villages where the demand for electricity remains low even after a few years after having been grid electrified. This paper argues that alternative options to grid extension, e.g. off-grid decentralised renewable energy (DRE), exist, are often more attractive financially and could be promoted more effectively. These technologies can be cheaper than grid extension, even on a like-for-like comparison.2 DRE technologies also provide opportunities for development, even without driving large productive loads. These opportunities are presented in terms of 1) the flexibility of needs that DRE technologies can satisfy, 2) empowerment of rural communities and 3) decentralised decision making processes. So far, the promotion of DRE in Laos has not always been successful, but this should not be an argument against promoting these options. A close look at recent rural electrification project budgets reveals indeed that grid extension is far more subsidised than DRE, raising concerns about the social equity of such projects.