Need for strong commitment from all states-

The Association of Southeast Asian Nations (ASEAN) region (constituting 10 Southeast Asian countries, namely, Brunei Darussalam, Cambodia, Indonesia, Lao PDR, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam) accounts for around 5.7 per cent of the world’s total energy production. In contrast, the region’s per capita electricity consumption is about half of the world’s average while the electrification rate is only 78.7 per cent. During 1990-2013, the region’s power sector expanded dramatically (at an average of 7.5 per cent annually), even outstripping the annual economic growth rate of 5.1 per cent. In 2013, ASEAN’s total installed generation capacity was 184,156 MW, of which 45,673 MW or around 25 per cent was from renewable energy sources, surpassing its 2015 target of a 15 per cent share of renewable energy in the installed power generation capacity mix.

As per the 4th ASEAN Energy Outlook, during the period 2013 to 2035, economic growth in the region is expected to be 6.1 per cent on average every year. Under the business-as-usual scenario, total final energy in ASEAN is expected to increase at an average annual rate of 4.3 per cent from 437 million tonnes of oil equivalent (mtoe) in 2013 to approximately 1,107 mtoe by 2035. To meet the increasing demand for electricity in ASEAN, installed power capacity in the region is forecast to increase from 184 GW in 2013 to 374 GW in 2025 and to reach 607 GW in 2035, at an average growth rate of 5.6 per cent.

ASEAN member states have recognised the critical role of an efficient, reliable and resilient electricity infrastructure in stimulating regional economic growth and development. While huge investments in power generation capacity are required to meet future electricity demand, a well-connected and integrated power system can provide significant advantages such as promoting efficient utilisation and sharing of resources, and energy security, to the whole region.

In line with this, the 10 member states have agreed to establish the ASEAN Power Grid (APG), which involves the construction of cross-border transmission lines for electricity trade/exchange. The creation of the APG under the ASEAN Vision 2020 was adopted in the Second ASEAN Informal Summit in December 1997.

ASEAN Power Grid

The APG involves implementing 16 high voltage transmission projects comprising 46 cross-border lines. The construction of the APG will first be done on cross-border bilateral terms, then expanded to the subregional level (North System [Cambodia, Lao PDR, Myanmar, Thailand and Vietnam], South System [Peninsular Malaysia, Singapore, Batam and Sumatera] and Eastern System [Sarawak, West Kalimantan, East Kalimantan, East Sabah, Sabah, Brunei and the Philippines]), and finally, to an integrated regional system.

The creation of the ASEAN grid will provide vast opportunities to exploit the abundantly available energy resources – such as large hydropower, oil, natural gas and coal – collectively within ASEAN, thereby reducing the need for and dependence on imported fuel from other regions. The interconnection of the ASEAN countries’ grids is also expected to provide benefits such as more economic generation and transmission of electricity, greater reliability and security of electricity supply in member countries, and the provision of a platform for future energy trade.

Progress with respect to the realisation of the APG has been on the slow side, with 12 cross-border transmission lines being completed, connecting Malaysia to Singapore, Thailand and Indonesia, and via Thailand to Cambodia, Lao PDR and Vietnam. The Sarawak (Malaysia)-West Kalimantan (Indonesia) project, comprising a 120-km-long, 275 kV line between Bengkayang in the Indonesian province of West Kalimantan and Mambong in Sarawak is the most recent project, and was successfully put into operation in January 2016.

Interconnection projects

Six projects comprising 11 links are presently under way with tariff memorandums of understanding (MoUs)/contracts already signed. Of the six projects, three have been accorded top priority by ASEAN. These are the Peninsular Malaysia-Sumatera (Indonesia) interconnection, the Sarawak (Malaysia)-Brunei interconnection and the Lao PDR-Cambodia link.

The Peninsular Malaysia-Sumatera interconnection entails the construction of a 250 kV 2×300 high voltage direct current (HVDC) undersea and overhead link between Garuda Sakti in Pekanbaru in Indonesia’s Sumatera region and Telok Gong in Malacca in Malaysia across the Malacca Strait. Currently, the state-owned power utilities of the two countries are in the process of reviewing regulations and negotiating the commercial terms. The link will facilitate power purchase and the exchange of 600 MW of electricity and is slated for completion in 2020.

The 275 kV interconnection project from Sarawak (Malaysia) to Lumut (Brunei) is expected to be ready by 2018-19 while the 132 kV interconnection project from Bangar (Brunei) to Lawas (Sarawak) is expected to be completed by 2019. The Sarawak-Brunei link will facilitate the export of renewable energy from the former to the latter.

The Lao PDR-Cambodia project entails the construction of a 115 kV line between Stung Treng in Cambodia and southern Laos. This project is expected to be completed in early 2016. A second line of 230 kV is also proposed to be constructed between the two countries. For this project, Lao PDR is seeking support from the Asian Development Bank (ADB); this is expected to be finalised by 2018.

Under the ASEAN Plan of Action for Energy Cooperation (APAEC), member countries have committed to accelerate the development and completion of the remaining three projects, namely, Thailand-Peninsular Malaysia, Thailand-Lao PDR and Lao PDR-Vietnam, by 2020.

Under the Thailand-Peninsular Malaysia project, the 132/115 kV Su Ngai Kolok-Rantau Panjang line will be constructed, which will enable energy exchange of 100 MW. The commercial operation date for the project is yet to be finalised.

The Thailand-Lao PDR project entails the construction of four 500 kV interlinks, namely, the Mae Moh 3-Nan-Hong Sa, the Udon Thani 3-Nabong, the Ubon Ratchathani 3-Pakse-Xe Pian Xe Namnoy and the Khon Kaen 4-Loei 2-Xayaburi lines, between 2015 and 2019. These cross-border connections will be used for the purchase of around 3,350 MW of power by Thailand from Laos.

Under the Lao PDR-Vietnam project, three high voltage cross-border links will be constructed to transfer power from Laos to Vietnam. Of these, two 500 kV lines, namely, the Xekaman 1-Ban Hat San-Pleiku line and the Luang Prabang-Nho Quan line, will enable the transfer of 1,000 MW and 1,410 MW respectively, and are slated for completion in 2016 and 2020 respectively. The third line will be the 230 kV Nam Mo-Ban Ve line. However, the quantum of power exchange and the year of completion are yet to be finalised for this project.

As for future projects, twenty-three cross-border lines involving 22,274 MW to 25,424 MW of electricity are expected to be constructed under the APG project after 2020. The integration of the ASEAN network is likely to result in a net saving of $788 million and a reduction in installed capacity by 2,013 MW when the projects are completed.

Multilateral trade pilot project

So far, efforts under the APG have been focused on bilateral interconnections. However, going forward, the ASEAN member states plan to embark on a new strategy focused on multilateral interconnections. In December 2013, at the Special Senior Official Meeting on Energy, a pilot project known as the ‘Lao PDR, Thailand, Malaysia, Singapore [LTMS] Power Integration Project [PIP] to explore cross-border power trade involving the four ASEAN member states was initiated. The pilot is expected to serve as a pathfinder to enhance multilateral electricity trading beyond neighbouring borders and help in the realisation of the APG.

The project will be the first multilateral power trade facility in ASEAN. The objective of the project is to enable power trade from Lao PDR to Singapore via the interconnection of Thailand’s grid and Malaysia’s grid. It is expected to pave the way for other power integration projects in ASEAN. Under the pilot project, existing interconnections (five 115 kV links between Lao PDR and Thailand, the 300 kV HVDC Gurun [Malaysia]-Khlong Ngae [Thailand] monopole, and the 275 kV Plentong [Malaysia]-Senoko [Singapore] link) among the four countries will be used to transfer up to 100 MW of electricity from Laos to Singapore.

While the required physical infrastructure is in place and the project is technically viable, the commercial arrangement/model for multilateral power trade is yet to be finalised. This involves signing of a power purchase agreement between Lao PDR and Singapore as well as wheeling charge agreements between Thailand and Singapore, and between Malaysia and Singapore. A balancing mechanism/agreement will also have to be finalised to handle the energy difference. While the energy ministers of the four involved countries have backed the project, an MoU is yet to be signed.

Next steps

Efforts are under way to harmonise the legal and regulatory practices and technical standards, as well as to identify possible financing models to support the realisation of the APG. On regulatory and legal issues, various studies such as on taxation and tariff for cross-border transactions, and regulation on public-private participation in APG projects are also expected to be carried out.

APG authorities have set a target of establishing electricity trading in at least one subregion by 2018. In this regard, a study to address barriers to interconnections, cross-border trade and investments will be conducted.

There are also plans to establish two new APG institutions by 2018, namely, APG Transmission System Operator Institution (ATSO) and APG Generation and Transmission System Planning Institution (AGTP). Lessons learnt from implementing the LTMS-PIP are expected to help resolve issues of legal and tax harmonisation likely to arise from the establishment of the ATSO and AGTP.

While efforts are under way to realise the APG, physical progress has been slow so far with only 12 of the 46 cross-border interconnections in operation after 10 years. To ensure the timely completion of the APG (by 2020), strong commitment from all member states is crucial.

Interview with Ir. Dr Sanjayan Velautham, Executive Director, ASEAN Centre for Energy

What key benefits are expected from the development of APG?

The APG is being developed to establish an integrated system interconnecting electricity grid within the region. This integrated system is expected to enable efficient utilisation and sharing of resources; to enhance electricity trade across borders which would help meet the rising electricity demand; and to improve access to energy services in the region. Therefore, it should drive energy market integration in the region.

What is the progress achieved so far with respect to the 16 high voltage transmission projects being developed under the APG?

Before developing the 16 high voltage transmission projects, the Heads of ASEAN Power Utilities/Authorities (HAPUA), as the coordinator of the APG, has completed the ASEAN Interconnection Master Plan Studies II, which incorporates key updates from ASEAN member states (AMS) including long-term power demand forecasts and identification of feasible interconnection projects like APG. Up to 2015, HAPUA had implemented six out of the 16 transmission projects under the APG, connecting Singapore and Peninsular Malaysia, Thailand and Peninsular Malaysia, and via Thailand to Cambodia, Lao PDR and Vietnam, with a total of 3,489 MW in power exchanges and purchase achieved.

To move beyond bilateral interconnections that are under the APG so far, HAPUA is exploring cross-border power trade involving four AMS. At the 32nd ASEAN Ministers on Energy Meeting held on September 23, 2014 at Vientiane in Lao PDR, the ministers welcomed a pilot project entitled Lao PDR, Thailand, Malaysia, Singapore Power Integration Project. The project will serve as a pathfinder to enhance multilateral electricity trading beyond neighbouring borders towards realising the APG.

What are the key challenges hindering development of interconnections in the region? What steps can be taken to mitigate these?  

The challenges faced by the AMS are due to the majority of them being developing countries – lack of financial support and technical knowledge. Technical issues related to operations such as frequency, voltage and load changes exist in the region. Providing finance for cross-border transmission lines will entail certain regulations that allow large investment costs to be recovered. Institutional barriers across the region, such as technical and reliability standards, and regulatory framework need to be harmonised, which could be a challenge with different policies and interests of stakeholders.

Experiences from other regions show that cooperation, in particular in policy development and implementation that boosts market integration and interconnection, are able to contribute significantly to reduce financial costs, which in turn would facilitate development of interconnection infrastructure and supporting activities (example, capacity building).

Under the new APAEC 2016-2025, which upholds the theme “Enhancing Energy Connectivity and Market Integration in ASEAN to Achieve Energy Security, Accessibility, Affordability and Sustainability for All”, action plans are made by the AMS to mitigate these challenges, in particular under the APG framework. These are:

  •  Conduct a study and identify areas where indigenous resources can be fully utilised to benefit the region;
  •  Conduct a study on the ASEAN primary energy resources for power generation;
  • Conduct a study on harmonisation of a legal and regulatory framework for bilateral and cross-border power interconnections and trade, on formulation of institutional and contractual arrangements for cross-border trade to include taxation, tariff and third-party access (wheeling charges), and on development of public-private partnership, including an incentive scheme;
  •  Review recommendations to support establishing new APG institutions by 2018; and
  •  Provide inputs on framework and schemes to facilitate multilateral electricity trade in the region.

In your opinion, what is the future of an integrated energy market in ASEAN?

There is a very promising future for an integrated energy market in ASEAN. We have different energy resources in the AMS, which enables us to complement each other’s resources and therefore integrate energy production lines. This is one of the basics to realise integrated energy market. Besides, the AMS have already started developing supporting infrastructures for that purpose like the Trans-ASEAN Gas Pipeline, the ASEAN interconnection project connecting gas pipelines between AMS. Under the new APAEC 2016-2025, governments have recognised the need to enhance energy security cooperation and to take further steps towards connectivity and integration under the framework of the AEC, by enhancing cooperation with dialogues partners and/or international organisations.