Dr Sanjayan Velautham, Executive Director, ASEAN Centre for Energy

“Availability of finance for cleaner coal-fired power plants remains a crucial challenge for ASEAN”

Several efforts are in place for powering the ASEAN region and plug the demand-supply gap. The most crucial aspects to be considered to energise the region are enhancement of energy connectivity and market integration to achieve energy security. The ASEAN Power Grid (APG) is one such much-talked-about programme in the region. The programme’s objectives are in line with ASEAN’s realisation of the role of an efficient, reliable and resilient electricity infrastructure in stimulating regional economic growth and development.

In an interaction with Southeast Asia Infrastructure, Dr Sanjayan Velautham Executive Director, ASEAN Centre for Energy, talks about the progress of key programmes, needs and requirements in ASEAN’s power sector…

What, according to you, have been the most noteworthy developments in the Southeast Asian power sector in the past one year?

When we discuss power development in ASEAN, inevitably the focus will be on the APG, which is a long-term goal to have a totally integrated regional grid system. The APG is an interconnection project of ASEAN not only to increase its electrification ratio (at 83.1 per cent as of 2015 data) but also to achieve sustainable energy accessibility for ASEAN.

The construction of the APG is first being carried out on cross-border bilateral terms, then being expanded to a subregional basis and finally to a total integrated regional system. Eight out of the 16 planned APG interconnection projects have been completed, bringing the total capacity of the APG to 5,502 MW as of November 2017.

However, the most noteworthy achievement in the ASEAN power sector this year is the signing of the energy purchase and wheeling agreement (EPWA) among Lao PDR, Thailand and Malaysia, which is the very first multilateral electricity transaction in ASEAN. The signing took place during the 35th ASEAN Ministers on Energy Meeting in Manila in September 2017. The EPWA implements Phase 1 of the Lao PDR-Thailand-Malaysia-Singapore Power Integration Project (LTMS-PIP) and will enable the purchase of up to 100 MW of power from Lao PDR by Malaysia, using Thailand’s existing transmission grid. This will provide an impetus to more multilateral electricity integration of the region.

Another initiative in the ASEAN power sector that would greatly support the realisation of the APG project is the ASEAN Integration Multilateral Study (AIMS) III. AIMS is a study to assess the current situation of the power landscape in AMS that includes key updates and long-term power demand forecasts.  Different from the second version which was released in 2010, AIMS III covers fully operable bilateral and multilateral power trade in the region with high utilisation of renewable energy as ASEAN’s indigenous resource, while maintaining system reliability and power quality. The ASEAN Centre for Energy (ACE) was appointed as the implementing agency to work with all the utilities in ASEAN under the Heads of the ASEAN Power Utilities/Authorities.

What are the key emerging trends that are likely to transform the Southeast Asian power sector over the next few years?

Higher penetration of renewable energy and distributed generation are the two emerging trends in the ASEAN power sector in the coming years. Abundant renewable energy resources and the declining cost of solar and wind are driving the penetration of renewable energy in ASEAN member states (AMS).  The AMS are expecting to inject more solar, wind and other renewable sources to their power system. This will assist in achieving the goals of the ASEAN Plan of Actions for Energy Co-operation 2016-2025 of having 23 per cent renewable energy in the total primary energy supply by 2025. At the same time, due to the geographical situation, distributed generation is gaining position in the AMS as an option to provide reliable yet affordable electricity to people in the islands and in rural and remote areas.  The main obstacle in electrifying ASEAN’s remote areas is related to the fact that the region is composed of numerous islands. There are 13,000 inhabited islands in ASEAN which are in dire need of electricity. Notably, Indonesia and the Philippines are archipelagic countries where decentralised generation using renewable energy could be one of the solutions to improve people’s quality of life. However, the most prominent thing would be the digitisation of the power sector. The adoption of internet of things in the power sector will make the penetration of renewable energy even more efficient, not only to the on-grid system, but also to the off-grid system.

What are the biggest issues and challenges in the Southeast Asian power sector?

Due to various factors affecting security of supply and affordability, coal has become a favourable option for the AMS to fulfil the rapid growth in electricity demand as compared to other options. This is because of high demand for electricity, not only for industry and the commercial sectors, but also for the electrification of its populace in remote areas. However, while ASEAN takes cognisance that utilising coal does affect the sustainability of the environment, many member states have now made it mandatory to pursue commercially viable cleaner coal technology.

In order to achieve its renewable energy target, ASEAN expects to generate 42 per cent of its electricity from renewable energy, but 28 per cent of the total electricity will still be generated from coal. Therefore, availability of finance for cleaner coal-fired power plants remains a crucial challenge for ASEAN. Without a financing mechanism from development banks, countries that build new capacity will face a challenge in terms of selecting the most efficient designs because they are more expensive, and hence, these countries will run the risk of raising carbon dioxide emissions.

According to our recently released study, the 5th ASEAN Energy Outlook, which was launched during the 35th ASEAN Ministers on Energy Meeting, $155 billion-$215 billion is required to be invested in the power generation sector within the next decade to build required capacities, including for coal-fired power plants.

In addition, the reliability of infrastructure also remains a challenge. The transmission and distribution system not only needs to address issues of high power losses but also be resilient to the natural disasters that are pervasive in this region.