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August 16, 2013

Chinese investments play large role in Southeast Asia hydroelectric growth

graph of cumulative hydroelectric capacity additions financed by China, as explained in the article text
Source: Association of Southeast Asian Nations

China has emerged as a key player in both financing and building the hydroelectric power infrastructure in Southeast Asia. China invested more than $6.1 billion between 2006 and 2011 in financing 2,729 megawatts (MW) of capacity additions. Between 2006 and 2011, Chinese investors—such as the state-owned enterprises Export Import Bank of China and China Development Bank—financed 46% of all hydroelectricity capacity additions in Cambodia, Laos, and Myanmar and developed previously untapped hydroelectric resources in countries bordering the Mekong and Irrawaddy river basins. This investment represented 6% of the total global hydroelectric power capacity currently under construction and 10% of the planned capacity additions outside of Brazil, Russia, India, and China.

Southeast Asia has one of the world's fastest-growing regional economies and is also home to some of the world's largest untapped hydroelectric resources. Through 2018, the International Monetary Fund expects the relatively small economies of Cambodia, Laos, and Myanmar will see rapid economic growth within the region and will meet the increased energy demand with electricity from the new hydroelectric capacity. The combined percentage of hydroelectric generation relative to total generation in these three countries is expected to rise to 96% in 2030 from 80% currently, according to data from the Association of Southeast Asian Nations (ASEAN).

Much of the future electricity generated from the Chinese-financed and -constructed hydroelectric facilities in neighboring Myanmar and Laos is expected to be exported to China's rapidly growing southern regions. Cambodia does not share a border with China.

Details on hydroelectric projects and funding in each of the three countries follow:

Cambodia. According to ASEAN, hydroelectric power is expected to account for 77% of Cambodia's total electric generating capacity by 2030. By contrast, hydroelectric power accounted for less than 4% of Cambodia's 386 MW of electric generating capacity in 2007. Much of Cambodia's hydroelectric power expansion to date was financed by China. In December 2010, Sinohydro—a Chinese state-owned hydropower engineering and construction firm—completed the construction of the 184 MW Kamchay Dam project at a cost of $280 million with financing from the Export Import Bank of China. Separately, at a cost of $1 billion, China is sponsoring construction of Cambodia's Stung Tatay and Stung Russey dams, which upon completion will be among Cambodia's largest hydroelectric power projects. Cambodia plans to build 10 dams between 2010 and 2019, adding 2,045 MW of capacity. Chinese entities are providing financing for six of these dams.

Laos. Almost all of Laos's 731 MW of electric generating capacity was water-based as of 2007, and all future capacity additions are expected to be hydroelectric. China's investment capital is expected to add more than 2,000 MW of capacity to the Laotian grid. Added capacity has turned Laos into a major regional exporter of electricity, much of which goes to China. In 2011, Laos exported almost 678 million kWh, or nearly 32% of its total generation, and electricity exports accounted for about one third of its total exports.

Myanmar. About 98% of Myanmar's electricity needs are expected to be generated by hydroelectric plants in 2030; in 2007 this figure was about 50%. A centerpiece of China's investment in Myanmar's hydroelectric generating capacity is the 6,000 MW Myistone facility. Estimated to cost $3.6 billion, Myistone was to be one of the largest hydroelectric plants ever built. Even though the Myistone Dam project remains on hold, construction has begun on 13,200 MW of future hydroelectricity capacity in Myanmar's Irrawaddy River basin, financed by both Chinese and Thai investors. The electricity produced by these dams is intended for export to China and Thailand.

EIA recently released its International Energy Outlook (IEO) 2013, which includes projections of electricity generation and capacity worldwide through the year 2035.