Multilateral power trade in Southeast Asia

CHALLENGE

The Association of Southeast Asian Nations (ASEAN), a regional grouping of 10 nations across the Southeast Asia region, is looking to develop regional power trade between countries as a means of improving supply security, increasing the penetration of renewable energy and decarbonising the electricity sector in the region. A study of the minimum requirements to enable Multilateral Power Trade (MPT) was required, building on the analysis of the future development of the ASEAN Power Grid (APG) completed in recent regional planning studies.

SOULTION

Cross-border power trade in the ASEAN region is currently dominated by bilateral trading between countries using interconnectors that are dedicated for this purpose. The technical and commercial arrangements are typically negotiated on a case-by-case basis. The most ambitious example of bilateral power trade to date is the Laos-Thailand-Malaysia-Singapore Power Integration Project (LTMS-PIP), which enabled the transfer of 100MW of power in its first phase, with the potential for further expansion that is currently under discussion.

Recent regional planning studies in ASEAN have identified the considerable technical and economic benefits to be gained from wider regional interconnection. This however needs to be accompanied by robust technical, commercial, regulatory and institutional arrangements if the goal of full regional MPT is to be achieved, a key outcome of which will be the increased uptake of renewable energy across the region and the decarbonisation of the regional power sector.

Ricardo was appointed to carry out the study for the United Nations Office for Project Services (UNOPS), supported by the EU-ASEAN Sustainable Connectivity Package Energy - ASEAN Power Grid (SCOPE Energy) through the Southeast Asia Energy Transition Partnership (ETP) to carry out seven tasks focused on identifying the priority initiatives needed to promote regional power trade. Delivered for the ASEAN Power Grid Advancement Program (APG-AP) of ETP, the ASEAN Centre for Energy (ACE), the project Clean, Affordable and Secure Energy for Southeast Asia (CASE), and the United Nations Economic and Social Commission for Asia and the Pacific (ESCAP), these tasks comprised:

• A review of the current status of interconnections between the ASEAN Member States (AMS) and the future role of High Voltage Direct Current (HVDC) technology in making higher capacity interconnectors a reality;
• A review of the existing electricity market structures in the AMS and proposing options for the development of MPT;
• An examination of the political requirements that must be fulfilled to enable MPT to proceed, focusing on an analysis of the existing Memorandum of Understanding underpinning the ASEAN Power Grid (APG), assessing future enhancements to this and establishing the general level of engagement of the AMS with the concept of enhanced MPT;
• An evaluation of existing multilateral power trade taking place between the AMS, focusing on the LTMS-PIP and identifying the learning that can be taken from this relating to transmission tariffs/wheeling charges, third-party network access, data sharing and transmission capacity allocation;
• The development of an institutional market model design for future power trade, focusing on a Day Ahead Market (DAM) as a secondary market for trading electricity between countries, alongside existing national markets and bilateral cross-border trades. This would be applied initially at a subregional level, with the two subregional markets then being coupled to create a single regional market. The emphasis in the model is on a stepwise evolution of the market, enabling individual AMS to join at their own speed and not requiring any national market changes or the relinquishing of control of national power systems;
• Recommendations for the creation of an AMS Regulatory Board, which would oversee the functioning of decentralised market operation, system operation and system planning functions and ensure full transparency and accountability in the operation of the new MPT arrangements;
• Proposing an Implementation Strategy for MPT, drawing on the findings from the above workstreams and parallel work that was carried out on regional Integrated Resource and Resilience Planning (IRRP) and the development of regional grid operating guidelines and a future regional Grid Code.

BENEFITS

The recommendations and the implementation strategy from this work have been presented at a number of stakeholder engagement events and in bilateral consultation meetings with representatives of the AMS. The core recommendations have also been taken forward by the ASEAN Centre for Energy to the meetings of the Heads of ASEAN Power Utilities/Authorities (HAPUA) and will be discussed at future meetings of the Senior Officials’ Meeting on Energy (SOME) and the ASEAN Ministers on Energy Meeting (AMEM).

The findings from this study provide the main reference for operationalising the APG Enhanced Memorandum of Understanding. This will put the foundations in place for the expansion of MPT across the ASEAN region, building on international best practice in electricity market design, and ensuring that the technical, commercial and regulatory measures are in place. This will maximise the availability of affordable, reliable and low-carbon electricity to consumers throughout the ASEAN Member States.