The Association of Southeast Asian Nations (ASEAN) region experienced an economic rebound in 2021, achieving growth of 4.1 per cent in 2023, which is projected to increase further to 4.7 per cent by 2025. This positions ASEAN, which comprises 10 members – Brunei Darussalam, Cambodia, Indonesia, Lao People’s Democratic Republic (PDR), Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam – and is home to 680 million people, among the world’s fastest growing economies. With rapid industrialisation and urbanisation, ASEAN’s energy demand is expected to continue increasing until 2050 and beyond. While the region remains dependent on fossil fuels to meet the growing demand, it is focusing on a sustainable transition to low-carbon energy sources along with energy security and economic growth. Renewable energy sources (RES) account for over one-third of the region’s installed capacity, which is set to increase to over 39 per cent by 2025, surpassing the 35 per cent target for the year.
In the long run, ASEAN is expected to witness a transformation of its energy mix with heavy dependence on RES for power generation. By 2050, RES such as solar, wind and hydro will contribute 1,742 TWh, or 63 per cent of the energy mix. This is driven by the region’s climate and energy goals. All ASEAN countries except Indonesia and the Philippines aim to reach net zero or carbon neutrality by 2050. While Indonesia aims to reach net zero by 2060, the Philippines does not have a specific target.
The ASEAN member states (AMS), through the ASEAN Economic Community (AEC), acknowledge the crucial role of regional cooperation in ensuring energy security, accessibility, affordability and sustainability at both national and regional levels. A key component of this energy integration is the creation of an interlinked grid network – the ASEAN Power Grid (APG) – amongst the ASEAN member countries.
The success of the Lao PDR-Thailand-Malaysia-Singapore Power Integration Project (LTMS-PIP) (which commenced operations in June 2022) has been acknowledged as a model for multilateral power trade (MPT). The LTMS-PIP recently entered Phase II with a doubling of electricity trade to 200 MW after an agreement between Singapore and Malaysia to import 100 MW. The feasibility study for another similar initiative – the Brunei Darussalam-Indonesia-Malaysia-Philippines Power Integration Project (BIMP-PIP) – is currently under way.
AMS is placing strong emphasis on establishing the necessary regulatory, policy, commercial and technical frameworks to enhance cross-border electricity trading as well as on the urgency of upgrading interconnectors and deploying technologies, such as subsea links, to support the APG vision. Ministerial-level working groups have been established among various countries, including Lao PDR-Cambodia-Singapore, Vietnam-Singapore-US, and Singapore-US to facilitate cross-border electricity trading projects. In 2024, efforts were made to advance APG interconnection and MPT, improve coordination among stakeholders, and improve sustainable and reliable electricity supply across AMS.
Another aspect that is key to advancing regional interconnection projects is the requirement of substantial investments. The Asian Development Bank and the World Bank support the energy transition programme in the region. It is important to ensure close coordination between multilateral development banks (MDBs) and ASEAN countries to establish financing facilities for the planned energy projects. By 2030, the region will need to invest $200 billion to upgrade both domestic and regional infrastructure to fast-track interconnections and the energy transition.
APG – Recent developments
First mooted in 1999, the APG envisions the integration of electricity markets, harmonisation of regulations, and the establishment of regional institutions in addition to construction of cross-border interconnections. The APG is divided into three geographic areas: the North System (Cambodia, Lao PDR, Myanmar, Thailand, Vietnam), the South System (Indonesia, Malaysia, Singapore) and the East System (Brunei Darussalam, Indonesia, Malaysia, the Philippines). The APG is expected to advance in three stages, starting with bilateral trade, followed by subregional trade, and finally becoming an integrated regional system.
As of October 2024, nine out of the 18 key interconnection projects envisioned under the APG had been completed, resulting in a total installed regional electricity capacity of 7.7 GW, which includes 4.7 GW of dedicated independent power producer (IPP) generation exports (generation to grid). Most of these interconnections are bilateral, with energy trade conducted through long-term power purchase agreements. Ongoing projects currently at various stages of implementation include subsea cables between the Indonesian island of Sumatra and Peninsular Malaysia, overland grids between Kalimantan and Sabah, and upgrades to the interconnections between Thailand and Malaysia.
The completion of the APG will have significant benefits for energy security, decarbonisation costs and emission reductions. The ASEAN Interconnection Masterplan Study III Phases 1 and 2 demonstrates that cross-border interconnections will facilitate the utilisation of 62 RES projects – 42 solar projects with a capacity of 8,119 GW and 20 wind projects with a capacity of 342 GW. Regional interconnections are expected to optimise energy systems, thus reducing the need for 1.2 TWh of electrical storage, 16 TWh of hydrogen storage and 600 GW of solar capacity by 2050.
Early results of energy integration are evident from the region’s first multilateral power project, the LTMS-PIP, which facilitates the import of up to 100 MW of hydropower from Lao PDR by Singapore via Thailand and Malaysia, using existing interconnections. The project has facilitated the trade of 266 GWh of electricity as of February 2024. In September 2024, Phase II of the project took off with Tenaga Nasional Bhd (TNB), Malaysia’s state-owned power utility, entering into a cross-border agreement with Keppel’s renewable arm to supply up to 100 MW of electricity. This followed the Singaporean Energy Market Authority’s decision to extend Keppel’s licence to import electricity for another two years until 2026.
The second multilateral project, BIMP-PIP, announced at the 41st AMEM in August 2023, envisions 17 interconnections between the four countries and is expected to reduce the price of electricity as well as the use of fossil fuels. The United States Agency for International Development is currently supporting a $2 million feasibility study on the BIMP-PIP. In addition to the BIMP-PIP, several bilateral interconnections that were not part of the original APG plan are now at various stages of discussion, including subse cables between Singapore and Vietnam, and Singapore and Cambodia, and an overland interconnection between Lao PDR and Vietnam.
The way forward
The implementation of proposed interconnections requires the development of institutional, market and technical capacities, which are expected to be reflected in the upcoming APG agreement. The ASEAN Framework Agreement for Power Trade, which is a key component of the APG MoU, is expected to facilitate the development of protocols on regional institutions, market development and infrastructure planning.
The establishment of a regional institution is vital to boost multilateral power trade in ASEAN. In terms of market development, there is a need to reform domestic power markets given that in most ASEAN countries, except Singapore and the Philippines (which have liberalised their electricity markets), state-owned integrated power utilities continue to monopolise the sector. To create a regional energy market, risks and challenges must be mitigated through the development of standardised wheeling charges and dispute resolution mechanisms, as well as maximising the opportunities in green finance such as renewable energy certificate (REC) markets. The APG MoU needs to direct resources for developing a standard regional wheeling charge methodology, dispute resolution mechanism and common REC market rules and guidelines to enable the creation of a robust integrated regional electricity market.
The key requirements for infrastructure planning and operations in ASEAN are the sharing of accurate and reliable data on energy supply, demand, consumption and system performance, the harmonisation of grid codes and the identification of priority “backbone” projects. While the LTMS-PIP has developed a platform to share data on sales, purchases, electricity wheeling and system constraints, the APG will require a much higher level of data sharing and standardisation. For this, ACE has proposed the development of “data-sharing framework and governance guidelines” to facilitate discussions on identifying the type, use and timeliness of data exchange in ASEAN. This needs to be endorsed by the AMEM and SOME and implemented at the national level subsequently to develop a platform and procedures for data sharing. Standardising grid code documents, procedures and terminology at the national level is necessary to develop a regional grid code. Further, the grid codes need to be updated to accommodate greater RES integration and use of distributed generation.
Fast tracking the progress of the APG needs high levels of political commitment, technical harmonisation and data sharing as well as massive infrastructure investments. The upcoming APG MoU provides an opportunity for policymakers to create consensus on the development of regional institutions, markets and infrastructure planning. A collaborative approach remains key for an integrated, energy-secure and sustainable ASEAN power market.
