The Association of Southeast Asian Nations (ASEAN) is one of the most dynamic and fastest growing economic regions in the world, and the incorporation of the ASEAN Economic Community (AEC) in December 2015 is expected to further fuel this growth. The region’s GDP is projected to grow by at least 4 per cent per year on average over the next five years, but growth could be as high as 6 per cent, provided ASEAN moves towards greater integration, where member states continuously implement domestic structural reforms to raise their productivity and competitiveness under the framework of the AEC. ASEAN as a single economy is forecast to become the fourth largest economy in the world by 2030, behind only the US, the European Union and China.
AEC has been formed to transform the ASEAN economy into a region with free movement of goods, services, investment, skilled labour and capital. ASEAN comprises 10 members – Brunei Darussalam, Cambodia, Indonesia, Lao PDR, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam. AEC aims to establish ASEAN as a single market and production base, making it more dynamic and competitive with new mechanisms and measures to strengthen the implementation of its existing economic initiatives; accelerate regional integration in priority sectors; facilitate the movement of business persons, skilled labour and talent; and strengthen the institutional mechanisms of ASEAN. It will help connect the less developed economies with the more developed ones, bringing about more equitable economic development across the region.
Electricity demand in the ASEAN region is expected to grow by 4-6 per cent per year between 2016 and 2020. Regional energy cooperation will not only help meet this growing energy demand but also support regional economic growth and security. This has been clearly recognised by the AEC and efforts to create a well-connected, competitive and resilient ASEAN energy network are under way. 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.
In 2003, the Heads of the ASEAN Power Utilities/Authorities (HAPUA) completed its first ASEAN Interconnection Master Plan Study (AIMS I) and concluded that it was uneconomical to create an ASEAN grid. The study recommended 11 bilateral interconnections to be constructed by 2019. Later, in 2010, HAPUA conducted a second study (AIMS II), which was more ambitious and concluded that it was economically viable to establish the APG. As per the new study, the APG involves linking the 10 ASEAN countries by implementing 16 high voltage transmission projects comprising 31 cross-border lines.
The APG has also found a key place in the ASEAN Ministers on Energy Meeting’s new ASEAN Plan of Action for Energy Cooperation (APAEC) 2016-2025 released in 2014. To realise the APG, the plan aims to first encourage cross-border bilateral interconnections, then gradually expand to sub regional connections, and finally to a fully integrated ASEAN power grid system. Based on the success of the first five years of the plan (2016-20), ASEAN members will work on planning for the next five years (2021-25) to embark on multilateral trading in the APG.
Power Line provides an update on the status of the projects and progress on multilateral trading under the APG. This is based on the presentations made by the ASEAN Centre for Energy and HAPUA at a recent conference organised by Global Transmission Research on “Power Transmission in South East Asia”.
Status of APG
As of March 2016, of the 31 high voltage transmission lines proposed to create the APG, 13 lines were already in operation. Another four links are under construction and are expected to be completed by 2020. Nine cross-border links are planned for operation during 2020-25 while another five projects are yet to be confirmed.
Two of the most recent projects to be completed in 2016 were the Sarawak (Malaysia)-West Kalimantan (Indonesia) and the 220 kV Xekaman 1 (Laos)-Pleiku 2 (Vietnam) transmission lines. The Sarawak-West Kalimantan project entailed the construction of a 120-km-long, 275 kV line between Bengkayang in the Indonesian province of West Kalimantan and Mambong in Sarawak. The Xekaman-Pleiku project involved the 191-km-long line to link the Xekaman 1 substation in Laos to the Pleiku 2 substation in Vietnam.
Two more APG projects are planned to be completed by 2020, namely, Sarawak-Sabah-Brunei and Thailand-Lao PDR. Under the Sarawak-Sabah-Brunei project, the Sarawak-Brunei line is operational, while the Sarawak-Sabah line is expected to be executed by 2020, thereby completing the interconnection project. The Thailand-Lao PDR project entails the construction of three interlinks by 2019: the Udon Thani 3-Nabong (converted to 500 kV), the Ubon Ratchathani 3-Pakse-Xe Pian Xe Namnoy and the Khon Kaen 4-Loei 2-Xayaburi lines.
It is expected that by 2025, there will be up to 19,576 MW of cross-border power purchase and 3,000 MW of energy exchange through the cross-border interconnections established under the APG. The integration of the ASEAN network is also likely to result in a net saving of $788 million and a reduction in installed capacity by 2,013 MW.
Strategies for multilateral trading
Given that the focus has so far been on bilateral interconnections, the new strategy is to embark on multilateral interconnections. In the past, the APAEC and both the AIMS reports have been silent on the issue of building a regional power market. However, this has now changed, with the APAEC 2016-2025 introducing multilateral power trading in the first phase (2016-20) of the 10-year period.
In order to move towards multilateral trading, HAPUA is also accelerating the creation of three subregions under the AGP, namely, the Northern subsystem (Cambodia, Lao PDR, Myanmar, Thailand and Vietnam), the Southern sub-system (Indonesia, Malaysia and Singapore) and the Eastern subsystem (Brunei Darussalam, Indonesia, Malaysia and the Philippines), by 2018.
A more recent initiative to enable multilateral interconnections is the Laos-Thailand-Malaysia-Singapore (LTMS) Power Integration Project. The pilot 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 by interconnecting the grids of Thailand and Malaysia. Under the LTMS project, existing interconnections (five 115 kV links between Lao PDR and Thailand, the 300 kV high-voltage direct current 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. An agreement regarding project implementation is expected to be signed in September 2017. The project is expected to pave the way for other power integration projects in ASEAN.
Works on harmonising the technical codes and guidelines for grid planning design, operations and maintenance, needed for the successful operation of the APG are also under way. In 2013, the HAPUA Working Group 2 (APG/ Transmission), together with the Asian Development Bank, completed a joint study in this regard. HAPUA is increasing its efforts to harmonise the legal and regulatory practices and technical standards; identify possible financing models; and establish the APG Transmission System Operator Institution and the APG Generation and Transmission System Planning Group Institution by 2018.
With respect to securing financing for proposed cross-border projects, HAPUA is conducting feasibility studies for individual project sponsors and is seeking guidance on implementing a market outreach programme to identify potential investors and creditors for developing the APG grid infrastructure.
On regulatory and legal issues, HAPUA is planning to cooperate with the ASEAN Energy Regulatory Network to carry out various studies, such as on Taxation and Tariff for Cross-Border Transaction, and Regulation on Public-Private Participation in APG Projects.
The realisation of the APG will depend solely on the involvement and engagement of various sectors and institutions of the ASEAN member countries. The governments of the respective countries will play an important role in helping to overcome the regulatory, financial and technical challenges in project implementation.