ADB Response Regarding GMS Power Interconnection Project

Wednesday, December 10, 2003

Ms. Susanne Wong,
Southeast Asia Campaigner
International Rivers
1847 Berkeley Way
Berkeley, CA 94703
Fax No: 15108481008

Dear Ms. Wong,

President Chino has asked me to respond to your faxed letter of 12 November. In your letter you request suspending approval of technical assistance for the Greater Mekong Subregion (GMS) Power Interconnection Project, Phase I.

It is widely recognized that subregional electricity trade based on interconnected electric power networks will provide significant economic and environmental benefits for the GMS. All six GMS countries signed the "Inter-Governmental Agreement on Regional Power Trade in the GMS" in November 2002. The agreement aims to support power trade and development of a competitive electricity market within the subregion.

The overall aim of developing an integrated subregional electricity grid was explained in our letter to you dated 22 September 2003. The interconnection of grid networks would be beneficial irrespective of "fuel" sources for the power generation. Interconnection would link power generation plants using gas, coal, fuel oil, and hydro, improve power network reliability, reduce overall generation capacity requirements, lower national investments for power reserves needed to meet peak loads, contribute to reduction in greenhouse gas emissions, and improve overall economic competitiveness of the GMS countries.

The proposed project preparatory technical assistance (PPTA) for developing the link between Lao PDR and Viet Nam finances a feasibility study to determine the viability of an interconnection enabling Thailand and Viet Nam to exchange power, taking into account the differential in peak loads in these countries. The actual project will be implemented only if the study identifies a tradable quantity of power surplus. There are many technical and other issues that must be addressed to establish the viability of such a link. These include environmental and social concerns, commercial issues such as tariffs, analysis of costs and benefits, and compatibility of grid codes. These are issues to be addressed for and other future grid interconnection. Therefore the PPTA needs to proceed as planned.

I hope the above explanation addresses your concerns. We appreciate your interest in ADB’s GMS initiatives and look forward to continuing our dialogue with you.

Sincerely yours

Khalid I. Rahman
Infrastructure Division
Mekong Department