On the industrial outskirts of Yangon, a rusted chimney exhales wisps of white smoke as a three-decade-old gas-fired power station chunters on. Just meters away on the same compound in Thaketa Township, a low mumble, but nothing in the way of visible emissions, is coming from a row of 16 boxed-up gas-fueled engines—Austrian-produced Jenbacher machines from US firm General Electric.

With new technology like this, there are signs Myanmar is gaining ground in its struggle against the chronic energy crisis that held back its people and its economy for years. Less than a quarter of the estimated 60 million population has access to electricity, and those businesses brave enough to set up here despite an unreliable power supply are forced to buy and run their own generators.

The new 50-megawatt power plant is run by Maxpower Thaketa—a local subsidiary of Indonesia-based Navigat.

“You can see that the engine color is green, so you can see we are environmentally friendly,” joked U Henry Zaw Tun, Maxpower Thaketa’s business development manager, on a visit to the plant in March.

The machines are state of the art. Their vital signs are watched over on a single computer monitor. To catch problems in their workings before they occur, engineers in blue jumpsuits peer at the screen of a small digital camera, which projects an image from an endoscope inside one of the engines’ bowels.

To produce about the same amount of power as the new plant, the old Thaketa plant, a gas-powered turbine generator run by the state-owned Myanmar Electric Power Enterprise, burns twice as much gas, U Henry Zaw Tun says. “And we only use 10,000 gallons of water per year for cooling. They use 300,000 to 400,000 gallons per day!” he says.

With an investment of US$35 million, work was completed last August. In February, Maxpower was rewarded with a power-purchasing agreement under which the Myanmar government provides the gas and buys back the power produced.

The build-operate-transfer agreement, the specific details of which have not been disclosed, will see the site handed over to the government in 30 years.

In a statement to The Irrawaddy, the company said the contract terms had been approved by President U Thein Sein’s cabinet and that the government planned to use it as a “template for future power projects” as a new generation of power plants arrives.

Yangon currently sucks up about half of the country’s total supply of about 1,850 MW of energy, and demand in the former capital is met by a mixture of hydropower and existing gas generation. In the hot and dry months from March to July, however, demand is driven up by air-conditioners, and supply is shorter as lower water levels mean hydropower can contribute less energy to the grid.

While the government in the long run is looking to exploit the country’s huge river network for more hydropower to fuel development, those projects are politically sensitive and take a long time to get online. Two years ago, when the hot season caused widespread blackouts in the country’s commercial capital—sparking candle-lit demonstrations—the government put out an open invitation for companies to come forward with fast-track solutions to meet fast-rising energy demand.

Cooking with Gas

Alongside the new Thaketa plant, a new 240-MW gas plant is about to begin producing power at Ywama, with turbines donated by the Thai government.

According to Yangon’s state-run provider, the Yangon Electricity Supply Board (YESB), gas generators—one at Ywama in Insein Township, one run by Toyo-Thai Corporation Plc in Ahlone, and another at Hlawga in Mingaladon—are at present producing about 230 MW of power combined. Nationwide, gas accounts for about 550 MW, compared to 930 MW from hydropower, according to the YESB.

But gas is set to contribute more to Myanmar’s energy mix, especially as the amount of gas coming onshore increases.

Although existing projects controversially send the majority of the gas extracted from Myanmar’s seabed abroad, a proportion stays in Myanmar. The government has promised to keep more of the gas from future developments for domestic use.

The Yangon gas generators are being fueled by Total’s Yadana project in the Andaman Sea. The Shwe field in the Bay of Bengal is also now sending gas ashore, and the Zawtika field, developed by Thailand’s PTTEP, was expected to start producing this hot season.

The World Bank is funding the upgrade of an aging gas power plant in Thaton, Mon State, which is expected to reach 106 MW. Also in Mon State, Singaporean company Asiatech Energy has announced it has secured funding for a 230-MW gas-fired plant in the state capital, Mawlamyine, to be completed in late 2015.

Also on the horizon is a short-term power-supply project that will see Florida-based company APR Energy install a 100-MW gas-powered plant in Kyaukse, Mandalay Region, to burn gas from the Shwe project. The company lauded its deal to bring a “turn-key” power plant—beginning sometime between April and June and running to late 2015—as a “bridging solution for the medium term while the country develops its long-term power generation infrastructure.”

Both APR and Maxpower said they were looking to take on more power supply projects in Myanmar.

“We would like to invest further in Myanmar,” said Clive Turton, APR Energy’s head of business development for the Asia-Pacific region, declining to give details of “several” other projects the company was looking at.

Demand for power is rising nationwide by 12 percent per year, said Mr. Turton, who said he believes natural gas will be an important tool as the country’s energy demand grows.

“I absolutely think [natural gas] should be a major part of the solution,” Turton said.

Alongside natural gas developments, the government has numerous hydropower and coal plans, but it is a challenging task to meet rising demand, which could reach 5,000 MW by 2020, according to a 2012 energy sector assessment conducted by the ADB.

Summer Shortage

U Maung Maung Latt, the vice chairman of YESB, said that despite an expected annual increase in demand of 15 percent, the city would not this year see the rolling power cuts residents are used to. As of early March, infrequent power cuts had begun in downtown Yangon, but not on the scale seen in previous years.

“This summer, both the production rate and the consumption rate will be up in Yangon. Normally consumption is about 800 MW, but in this dry season it could rise to 1,000 MW in Yangon alone,” he said. “But the recent situation is that production and consumption are balancing.”

Unsurprisingly, given the protests of the past, YESB makes sure residential power demand is met before sending power out to industrial zones. U Maung Maung Latt was hopeful, however, that the city’s factory districts would see some benefit from the city’s newly bolstered power supply.

“For certain, it won’t go back to zero hours of power for industrial zones, like last year,” he said. “I can say this year there will be more electricity not only in residential areas, but also in industrial zones. We are receiving more power from gas turbines and dams are saving water through new technology. Also, we’re upgrading the national grid and other related power lines.”

He said industrial zones would get at least 18 hours of power a day—with power cuts timed during the peak evening hours. That is good news for manufacturers, whose alternative is to run diesel generators.

Industrial Growth Stifled

U Myat Thin Aung, the chairman of Hlaing Tharyar Industrial Zone, which houses almost 600 factories in western Yangon, said using generators was more than four times as expensive as the state-subsidized power from the grid—costing just 75 kyat ($0.08) per kilowatt hour.

When cheap power is not available, some factories simply close their doors, he said. “If production costs increase, sales profits go down. Eventually, factories have to shut.”

Hlaing Tharyar is one of 20 mostly small industrial zones in Yangon that altogether demand about 165 MW of power.

Myanmar’s planned large special economic zone projects in Thilawa, Dawei and Kyaukphyu will have their own off-grid power sources. U Myat Thin Aung said some factories were keen to run their own gas-fired power generation, but the government had not come forward with a reliable source of cheap gas for this.

The country’s low-cost labor partly offsets the high cost of powering a factory and other infrastructure bottlenecks. Investment in simple, labor-intensive garment factories is reportedly rising, with investment coming from China, Taiwan and Hong Kong. But investment in heavy industry is yet to take off.

“The electricity shortage in Myanmar is one of the biggest challenges for foreign heavy industry to invest here,” said U Myat Thin Aung. “[Heavy industry investment] will stay away as long as the government can’t supply enough electricity for local industrial zones.”

A Little Help

Since Western countries began embracing Myanmar and its reformist government, the country’s power shortage—in the face of abundant resources—has become a favorite cause for foreign donors.

In January, the visiting World Bank President Jim Yong Kim pledged US$1 billion in aid and investment over a number of years to help expand electricity provision. Japan’s international aid agency, JICA, is developing a nationwide master plan for power in Myanmar.

“All the development agencies spent the large part of 2013 talking to the government about areas of support. They have divided up all the areas that the government asked for help with,” said Grant Hauber, the ADB’s principal public-private partnership specialist for the Asia-Pacific region.

Donors were setting up as many as 25 projects on power in Myanmar as part of a “divide and conquer” approach to tackling the numerous problems in the power sector, he said.

“A lot of the projects are going to be implemented simultaneously so there will be a fairly significant uptick in grid capacity,” he added.

There is also work underway by the ADB and others on improving the national grid to reduce power losses, and to upgrade the national grid’s “backbone” to a 500-kilovolt line that can transfer power without losses between Myanmar’s north—where the larger hydropower projects will be—and the south—where thermal generation is planned.

This work “will reduce power losses by tens of megawatts,” said Hauber said. “It’s like getting a new power plant.”

Reprinted with permission from Irrawaddy, with which Asia Sentinel has a content sharing agreement