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10 - Hydropower4. Status of hydropower developmentOver the next ten years, according toprojections made by the AsianDevelopment Bank in 2001, MRCmember countries will need to developabout 20,000 MW of new generatingcapacity. After this period, generatingcapacity will have to be developed at aneven higher pace. Most of the powergeneration developments currentlyplanned for Thailand and Viet Nam arethermal and gas turbine projects (fuelledprimarily by natural gas and coal). Thereare plans as well for the development ofhydropower, but mainly in Lao PDR (ontributaries of the Mekong) and in VietNam (mostly outside the Mekong Basin).Hydropower dam on the Nam Ngum River, one of theMekong’s tributaries in Lao PDRSince hydropower potential in the Mekong Basin is largely undeveloped, hydropower may becomean increasingly important source of electricity in the future. However, for now, plans involve only asmall part of the potential, concern only the tributaries and are likely to take a long time to beimplemented. No plans are currently being considered for damming the mainstream in the lowerbasin. One small project is under consideration for the mainstream in Lao PDR but this will notinvolve damming the river. The Thaknoh hydropower project, which is currently at the pre-feasibilitystage, is a small run-of-the-river project. As such, it would use the river’s natural flow to generatepower and not require damming the river.There are a number of reasons why it is difficult to develop hydro projects. These include:4.1 Difficulties in finding fundsHydropower projects are generally characterised by high initial investment and a long paybackperiod. These conditions have made it difficult for developing countries to fund hydro projects fromdomestic sources and instead, they have usually obtained funds from international lending agenciessuch as the World Bank and the AsianDevelopment Bank. In recent years,however, because investment costs are sohigh and hydro projects can have adverseimpacts on the environment and on localpeople, international funding agencies havebeen much less willing to fund projects. Asresult, developing countries have had to turnto the private sector for funding.The pay-back period for a hydro project is typicallytwo or three times longer than that fora thermal projectIn Lao PDR, all the large-scale hydroprojects currently being planned will bedeveloped by independent power producers(IPPs). These IPPs are consortia made upprimarily of private investors and it is the211