Mountainous terrain and heavy annual rainfall give Laos considerable hydroelectric potential. The Mekong River and its tributaries in Laos have an estimated hydroelectric potential of between 18,000 and 22,000 megawatts, or roughly half that of the river as a whole. The remaining potential belongs to Cambodia and other riparian countries. Total installed capacity in 1991 was 212 megawatts, the majority of it hydroelectric, or only about 1 percent of the potential.
Production of hydroelectricity, the country's major export until 1987, expanded slowly throughout the 1980s, from 930 thousand megawatt-hours in 1980 to about 1.1 million megawatt-hours in 1989, an increase of about 17 percent. The majority of electricity produced--approximately 75 to 80 percent, as of 1992--is exported to Thailand, which has an agreement to purchase all surplus electricity. The remainder is supplied to power networks for domestic consumption. Through 1986 the sale of electricity to Thailand was the country's most important source of foreign exchange. Despite increased production, in 1987 hydroelectricity yielded its place as the principal export to wood products, because of the drought, which lowered water levels, and a reduction in the unit price of electricity to Thailand. By 1991 a new agreement between Laos and Thailand had raised the unit price of electric power.