Biofuel and Rural Renewable Energy Initiative in the Greater ...

Rural Renewable
Energy Initiative
in the Greater Mekong Subregion

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Over the last 15 years, the Greater Mekong
Subregion (GMS) experienced high levels of
economic growth that averaged 15% per annum.
But sustaining such growth could be hampered by
various factors, such as access to energy services.
Seventy four mil ion people in the subregion
are energy insecure, with an average per capita
energy use of about 75% of the world average
for developing countries and less than 10% of the
average in the developed world.
The broader use of renewable energy sources,
especial y bioenergy, is seen as an innovative and
important option to provide energy and heat in
Bioenergy is renewable energy from plants
various sectors, help reduce dependency on costly
and animals (in contrast to energy from
oil imports, solve and mitigate environmental
fossilized remains of plants and animals).
problems, and help spur growth in the agriculture
Biogas is bioenergy in gas form, while
and rural sector. Modern bioenergy offers a
biofuel is in fuel form. Organic matter
containing bioenergy is known as biomass
promising alternative to traditional fuels, such
that can produce heat (e.g. burning wood)
as wood charcoal, farm residues, and animal
or genetically modified to create cellulosic
wastes, which are still widely used in the GMS.
ethanol. Since almost all bioenergy can
It also provides the opportunity to develop new
be traced back to solar energy, bioenergy
agricultural cropping systems and generate
has the advantage of being a renewable
economic and environmental benefits, especially
energy source, and should be harnessed in
to small farmers. However, uncontrolled biofuel
a sustainable manner.
production expansion could encroach into
valuable ecosystems, especial y those that support
much of the world’s biodiversity (e.g. forests
being cleared and peat wetlands being dried in
Indonesia for palm oil plantation).
Photos taken by GMS Study teams

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Milestones in the GMS Rural Renewable Energy (RRE) Initiative
Date
Event
December 2006
Fourth Meeting of the Working Group on Agriculture (WGA-4) Meeting
in Siem Reap, Cambodia endorsed an initiative to support national and
regional level assessments and feasibility studies on rural renewable
energy, including identification of country-level investment opportunities
April 2007
GMS Agriculture Ministers’ Meeting in Beijing, People’s Republic of China
(PRC) reaffirmed interest to explore opportunities in biofuels and rural
renewable energy sources
June 2007
Planning Workshop on Strategies and Options for Integrating Biofuels
and Rural Renewable Energy for Poverty Reduction in the GMS held in
Bangkok, Thailand
October 2007
Initiation workshops on the Impact Assessment Study on RRE in GMS
countries to develop a regional RRE strategy; also initiated the Analysis
of the Impact of Global Biofuels Development in the GMS (using an
enhanced global trade model)
December 2007
Provided update on various initiatives, including country RRE impact
studies, framework development and methodology during the WGA
National Coordinators’ Meeting in Bangkok, Thailand
January–August 2008
Study teams conducted relevant country workshops, modeling exercises,
and report writing
September 2008
Regional RRE workshop in Vientiane, Lao People’s Democratic Republic
(PDR) to draft the Regional RRE Development Framework
September 2008
Findings of the GMS RRE Study and Biofuel Modeling Study will be
presented at the Fifth Meeting of the Working Group on Agriculture
(WGA-5) in Vientiane, Lao PDR, and the GMS Regional RRE Development
Framework is expected to be endorsed at this meeting

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Impact Assessment Study on Strategies and Options
for Integrating RRE for Poverty Reduction in the GMS
The initiative’s overal goal is to develop appropriate and sustainable
strategies and options for the RRE sector that would help promote growth
and reduce poverty, but wil not endanger food security. More specifical y,
the study aims to:
• Undertake a preliminary (but more comprehensive) assessment of the
economic and market potentials of RRE sources to identify promising
areas for investment to promote rural development;
• Assess the adequacy of current technologies for RRE systems
development and identify needs for research and development, and
for training and human capacity building; and
• Review current policies on promoting RRE development and identify
the appropriate policy levers to encourage sustained growth in the
subsector, especially in strengthening public–private sector partnerships,
encouraging investment, and promoting cross-border trade.
The final output of the study is the formulation of national and
regional frameworks and strategies for the sustainable development of
RRE in the GMS. The study has five components, specifically:
Market Outlook: Similar to other developing countries, increased
use of primary energy is inevitable in the GMS. Fossil fuel utilization,
in particular, has increased proportional y to population and economic
growth. The gap in the projected supply and demand of/for petroleum
products, in particular, is shown to widen in the GMS (Figure 1).
Importing fuel to fil up oil requirements wil be more difficult with the
unabated rise in oil prices.
Figure 1: Percentage Increase in Oil Consumption and
Production in the GMS, 2001 and 2005.
0
Lao
0.21
0
Cambodia
0.12
t
r
y
n
10
u Myanmar
o
8.35
C
18.24
Vietnam
75.43
69.63
Thailand
227.39
50
100
150
200
250
'000 barrels/day
Production
Consumption
Source: http://tonto.eia.doe.gov/country/index.cfm.

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While vast resources for energy production abound in the GMS
countries, the extent of their exploitation and development differs,
primarily because of varying levels of development and, hence, needs
for and use of energy. Except for Thailand, most of the GMS countries
still derive their energy supply from biomass for lighting and heating
purposes. Development of other energy sources has been relatively
slow because of their high investment cost. Only resources that had
the immediate potential of generating additional income for the
country (primarily through exports) have been developed. Examples
are Lao PDR’s development of its hydropower resources to generate
electricity for exports to Thailand and Myanmar’s development of its
natural gas for export to its neighbors.
Among various technological options for bioenergy production,
biogas is the most widely practiced technology in most of the GMS
countries like Cambodia, PRC, Lao PDR, Myanmar, and Viet Nam.
It has provided rural households access to cleaner energy and has
helped reduce indoor air pol ution. Time devoted to search for fuel
was also reduced, enabling households to al ocate more time for
other economic activities.
On the other hand, the rapidly growing interest in biofuels is spurred
by the realization that these represent the most feasible substitute
for petroleum fuels to date, particularly for the transportation sector
based on technologies developed so far and available resources.

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Ethanol and biodiesel, if harnessed in a sustainable manner, could provide
potential solutions to current and emerging issues, including rising oil
prices, energy insecurity, rising climate instability, environmental pol ution,
and deepening poverty in the rural areas. Biofuels could potential y
contribute to the aims of GMS agriculture cooperation, which is to reduce
rural poverty through agricultural development, especial y when feedstock
production stays with the small farmers and is cooperatively managed by
them, and are increasingly integrated in the biofuel supply chain rather
than being marginalized by huge biofuel processing plants.

Characteristics of the Resources Base: Cultivating the so-cal ed
“energy” crops used as feedstocks in biofuel production is not new
in the GMS. Four crop by-products and one animal-based by-product
are proposed for biofuel processing: molasses from sugarcane; cassava
for bioethanol production; and oil palm, Jathropa Curcas and fish fat
for biodiesel. Sugarcane, cassava, and oil palm are grown extensively
in most of the GMS countries, mostly as food crops. Jathropa Curcas,
on the other hand, has been extensively grown on roadsides and used
as residential fencing. The choice of these crops is primarily based on
four key criteria—potentials for increasing yield (rather than expanding
cultivation areas, such as in the case of sugarcane, cassava and oil
palm); suitability of cultivation in marginal areas (e.g. Jathropa Curcas);
and the availability of technology support for biofuel processing, either
from local experience or from more advance countries like Brazil, PRC,
and Thailand. Table 1 shows the production levels, yield, and area
harvested for proposed energy crops by each GMS country. The figures
are significantly lower than the average for developing countries.
Increasing yields to increase production will hopefully ensure non-
encroachment in areas cultivated for food crops.
Among the GMS countries, PRC and Thailand are more advanced in
commercializing biofuels. Existing and projected plant capacities in these
countries may require importing feedstocks from neighboring countries.
Biofuel production is still undertaken in a very limited scale in Myanmar
and Viet Nam, and is stil at an experimental stage in Cambodia and
Lao PDR. Commercialization of biofuels in these countries may take
sometime considering the need to synchronize the development plans
of both feedstock production and the construction of processing plants,
and the investment required for undertaking both initiatives. This may
be advantageous for Cambodia and Lao PDR since they could learn from
their neighbors’ experiences and other developing countries, by adopting
or modifying beneficial practices.

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Table 1: Total production of selected energy crops, by yield
and area harvested in the GMS, 2007.
Countries
Production
Yield
Area Harvested
(tons)
(tons/hectare)
(hectare)
Sugarcane
Cambodia
130,363
19.34
6,739
Laos
223,300
31.76
7,030
Myanmar
6,368,000
44.85
142,000
Thailand
64,973,804
57.94
1,121,413
Viet Nam
15,879,600
55.33
287,000
Cassava
Cambodia
362,050
16.09
22,507
Laos
55,500
6.81
8,150
Myanmar
139,000
11.30
12,300
Thailand
21,440,488
20.28
1,057,341
Viet Nam
5,572,800
14.53
383,600
Palm Oil
Cambodia
—
—
—
Laos
—
—
—
Myanmar
—
—
—
Thailand
5,182,000
16.74
309,600
Viet Nam
—
—
—
Source: FAO Production database, www.indexmundi.com.

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Agri-business Options in Biofuel Production: The ideal agri-
business model for the biofuel industry should increasingly involve
small farmers, while ensuring the steady supply of feedstocks to
processing plants. Such agri-business ventures can be operated in
three different scale types:
• Community-based, smal -scale industries: Biogas projects in the
villages; bio-digesters/gasifiers using rice husk and wood chips
that are easily available in the vil ages; prototype Jatropha crude
oil processing machines, which could possibly be applied as
vil age-level biodiesel sources; smal -scale ethanol plants using
sugarcane or cassava as feedstock
• Small- and medium-scale industries: These are ethanol processing
plants utilizing sugarcane to produce 3,600–25,000 tons of
ethanol per year, or bio-digesters/gasifiers with the capacity of
100 kilovolt-amps (KVA) or 60 kilowatts (KW) using rice husk or
220–500 KVA or 132–250 KW using wood chips.
• Large-scale industries: Factories that produce ethanol at a level
of more than 36,000 tons per year
Cross-border trade in feedstocks and biofuels: Considering
the diverse nature of GMS countries in terms of resource
endowments, political and social systems, bureaucratic structure,
availability of infrastructure facilities, skills and expertise of

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manpower, cross-border trade in both feedstocks and biofuels is
a viable option to promote and strengthen economic cooperation
and achieve the vision of an integrated subregion. Biofuel crops can
be produced in one country, processed in another country, then
exported and marketed in yet another country. The Ayeyarwady–
Chaophraya–Mekong Economics Cooperation Strategy (ACMECS)
that involves Cambodia, Lao PDR, Myanmar, Thailand, and Viet Nam
is a platform on which such cross-border trade could be started.
Subregional energy trade faces a number of barriers, including the
supporting legal framework. These barriers have to be analyzed and
resolved so all countries can achieve the benefits of integration.
Policy reforms and recommendations: Biofuel policies are
required to ensure sustainable development; and growth of the
subsector should capture a wide spectrum of activities involving
(i) land use and land-use change; (i ) impact on natural resources,
particularly water; and (iii) address the economic, social, and

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environmental implications of widespread biofuels production
use and trade. Key policy recommendations include:
• Land policy: This includes policies on the use of abandoned
lands (such as mine lands) which can be utilized for energy
crop production, land reform, and strengthening property
rights and security of tenure among farmers.
• Bioenergy production and use policy: This would help regulate
the proliferation of biofuel processing plants and strategize
their location to gain maximum support from the country’s
infrastructure development plan. The use of prime crop land
for ethanol and biodiesel production for fossil fuel blending
must also be regulated. The policy should take into account
food security issues and regulation of food crops for biofuel
production.
• Area development and feedstock selection: This should
consider agro-ecological characteristics and land suitability of
the crop areas, consider competition for food use in selecting
the type of feedstock; and develop a feedstock development
plan that should fit the socio-economic plan of the selected
area.
• Research and technology development and training: To
improve efficiency, modernize the industry, and enhance
human resource capacity by engaging in advanced studies
in areas related to the needs of the subsector; conduct short-
term training.
• Institutional strengthening: For strict and proper guidance on
biofuel development plans and programs and coordination

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