Vietnam Utility Dares Mekong Devastation

Inertia and the inherent tone-deafness of an authoritarian regime have set Vietnam on a course toward economic and political disaster. It is not too late, however, for the ruling party's top leaders, the Politburo, to disavow support for state-owned PetroVietnam's plans to build a huge dam on the Mekong River.

If it is built, the US$2.3 billion Luang Prabang hydropower dam won't be the first dam on the Mekong mainstream in Laos. That dubious distinction goes to a dam built further upstream at Xayaburi by a Thai consortium. And three other dams, all financed and constructed by Chinese firms, would likely be put into service before the project led by a subsidiary of PetroVietnam, PV Power.

The dam foreseen at Luang Prabang will be a uniquely Vietnamese political disaster, however, because, barring 11th hour reconsideration, it will be the Vietnamese regime that allows this project to go forward.

When pressed for comment, Vietnam's representatives are apt to mumble something about living up to commitments, and yes, it is true that PetroVietnam signed an agreement with Laos back in 2007.

Since then, it has become abundantly, incontestably clear that the damming of the Mekong and its many tributaries is devastating the environmental and economic health of the Lower Mekong region, lowlands that are home to some 20 million Vietnamese and 10 million Khmer farmers and fishermen. These impacts are no longer a matter of conjecture.

As Asia Sentinel has warned in previous stories, starved of annual increments of sediment and nutrients, the Mekong Delta's famous fertility is bleeding away. Migratory fish have been the mainstay of the world's largest inland fishery, but now, because they are unable to reach spawning grounds, these populations are crashing. This year the region has experienced cataclysmic drought followed by record flooding. Climate change is partly responsible, but according to Vietnamese experts, uncoordinated storage and releases of water from upstream dams aggravate the seasonal variations on which farmers depend.

The monsoon rains have just ended, yet Tonle Sap water level remains far below normal. Photo credit: Pham Long

In June 2019, PetroVietnam reconfirmed its readiness to lead the Luang Prabang Dam project and called on the Vietnamese government to "establish a policy framework." Reportedly, PV Power would have a 38 percent share, the Lao government would own 20 percent, and the remainder would be owned by "private investors," which were subsequently identified as a Lao state-owned company.

A month later, Laos informed the Mekong River Commission of its intentions, and in October the MRC announced the start of a six-month consultation process during which any of the riparian nations, Thailand, Cambodia, Laos or Vietnam, could pose objections to the project.

The MRC consultation process hasn't derailed any of the four mainstream dams that have been reviewed so far, and though the usual cast of NGOs and quasi-official civil society organizations, including the Vietnam Rivers Network (VRN), promptly denounced the project, conventional wisdom has held that none of the MRC's members would spike the Luang Prabang dam project. So far they've been right.

Further, some Vietnamese experts have gone wishy-washy. They've argued that Vietnam's best strategy is to mitigate collateral damage by running the project in a way that does the least harm to downstream farmers and fishermen. Some have speculated that if Vietnam gives up the project, Chinese interests will surely step in.

Invoking evil Chinese ambitions is a sure way to stoke up Vietnamese public opinion. But would Chinese banks and companies actually take over the project if Vietnam abandoned it?

China, specifically Sinohydro, Datang International and China Power, all state-owned companies, have been big players in the taming of the Mekong and its tributaries. They have considerable influence in Laos, where they've hustled business as good hydropower development opportunities were exhausted within China's borders. Their activity lines up nicely with Beijing's "Belt and Road" strategy of building infrastructure that connects China to the rest of Eurasia. The prospect of China's taking over the Luang Prabang dam project disquiets strategists in Hanoi who aim to keep Laos in Vietnam's orbit.

And yet, there's good reason why the dam planned at Luang Prabang, or others at Pak Lay, Pak Beng or at Sambor and Stung Treng in Cambodia may never be completed, either by China nor by Vietnam. It has nothing to do with the well-being of the lowlands downstream, and everything to do with the economic viability of such mammoth power projects. Simply put, the cost of generating photovoltaic solar power has fallen far faster than imagined, driven by advances in technology and production methods. It has fallen so far and fast that the bankability of more big hydro in the Mekong River basin is increasingly in doubt.

Consider Pak Lay, the Mekong mainstream hydropower project that was approved last year. Sinohydro expects to begin construction in 2022 and be complete in 2029. The China Export-Import Bank is the project's principal funder, advancing US$1.7 billion. According to the economic evaluation that was provided to the MRC during the approval process, Sinohydro expects to sell power for US8.2¢ per kilowatt-hour throughout the 30-year life of the project, and to retire the China EximBank loan in Year 18.

Given that utility-scale solar photovoltaic power can now be delivered for US7¢ or less per kWh, can be flexibly deployed as demand grows, and co-located to complement existing hydropower plants, projects like Pak Lay are already economic dinosaurs.

Notionally, China shouldn't care much if dam building grinds to a halt. It also dominates the global solar panel industry. Practically speaking, however, China's big bet on hydropower in Laos has considerable inertia. The Chinese state enterprises may be so deeply committed that they will persevere in the face of plummeting demand for the power their projects will produce.

Vietnam's engagement is by contrast modest. Though on the verge of a huge commitment to the Luang Prabang project, Vietnam at this moment has put little money on the table. It – specifically state-owned PetroVietnam – can still pull out of the project. It can withdraw the promise it made to the Lao in 2007, citing a well-established principle of international and contract law: "unforeseen, fundamentally changed circumstances" may excuse non-performance of a treaty or contractual obligation.

And indeed, those circumstances have changed in two fundamental ways.

First, the downstream consequences of damming the Mekong and its tributaries were not so well understood in 2007 as they are now. In those days, hydropower was still widely perceived as a benign 'renewable' technology; experts had as yet given little study to its multiple negative impacts on environment and livelihoods.

Second, the economic return and environmental cost of hydro compared to alternative means of generating electric power have radically changed. Solar power generation was in 2007 regarded as an expensive, somewhat geeky technology that in the distant future might make a modest contribution to the world's energy balance.

Now utility-scale 'solar farms' can now be deployed quickly, scaled up incrementally as demand for power grows, and produce electricity at substantially lower cost than a comparable hydroelectric dam project (even if external costs such as loss of livelihoods and reduced fertility are not considered). Rather than allow more dams to be built, Laos' best strategy will be to develop floating solar farms that complement existing hydropower facilities on existing reservoirs.

Indeed, as Thailand and Vietnam hasten to reorient their own power development strategies toward solar and wind power, there's a substantial risk that Lao exports of power to both nations will fall far short of expectations.

If Vietnam persists as guarantor of PV Power's Luang Prabang Dam project, it is likely to be left as the owner of a large, very costly, loss-making enterprise. In that case, the Hanoi regime will have failed not only its citizens in the Mekong Delta but also all of the nation's taxpayers.

David Brown, a regular contributor to Asia Sentinel, is a former US diplomat with extensive experience in Southeast Asia and particularly Vietnam.