Southeast Asian countries should focus on bilateral power purchase agreements and large-scale solar and wind investments to boost regional power tradeThang Nam Do and Paul Burke write.
The Association of Southeast Asian Nations (ASEAN) has been working since 1997 on regional electricity interconnection through an ASEAN Power Grid (APG).
Increased connectivity could enhance ASEAN’s security of electricity supply by enabling efficient use of resources across borders. However, there are questions about how best to achieve this.
The current ASEAN Energy Cooperation Action Plan 2016-2025 prioritizes the expansion of multilateral electricity trade within the framework of the ASEAN Economic Community’s Agenda 2025.
However, according to our new research – conducted as part of the Australian National University’s Zero-Carbon Energy Project for the Asia-Pacific Grand Challenge – it remains premature for ASEAN to move too ambitiously towards cross-border multilateral trade. electricity. A better approach would be for the region to continue to focus primarily on strengthening bilateral contracts between individual ASEAN countries.
A bilateral approach based on power purchase agreements has a number of advantages. It implies fewer technical and institutional harmonization requirements. Bilateral negotiations are faster, easier and more likely to receive and retain political and industrial support. The model is well suited to the electricity market structures of countries such as Indonesia, given their heavy reliance on power purchase agreements.
ASEAN’s current largest electricity exporter is by far the Lao People’s Democratic Republic (Lao PDR), which exported 27 terawatt hours (TWh) in 2018, or 80% of its total electricity production. These are mainly bilateral agreements with Thailand and Vietnam.
To date, only one multi-country project has started in the region: a pilot project in which the Lao PDR exports electricity to Malaysia via Thailand. Singapore also plans to import 100 megawatts of power from Lao PDR under the deal. However, this scheme is still small-scale and does not imply a deep form of multilateral integration.
Policymakers would need a long timeframe – perhaps beyond 2030 – to make adequate progress in addressing the issues associated with expanding multilateral electricity trade.
For now, it would be better to seek to develop regional power trade through largely bilateral means, as success would be more achievable.
Cross-border power trade within ASEAN would also benefit from ensuring that new power generation comes from sustainable sources. In particular, solar and wind energy offer a huge opportunity. Indeed, Indonesia is already moving towards selling solar power generation to land-poor Singapore, and a project in Lao PDR will seek to sell wind power generation to Vietnam.
Jhere are some setbacks along the way. For example, in October 2021, Malaysia decided to limit the export of renewable electricity to Singapore with the aim of facilitating the domestic use of renewable energy. Strong bilateral contracts between partner countries could help reduce the risk of such actions.
By focusing on bilateral power purchase agreements and renewable energy projects, ASEAN could make progress towards both strengthening and diversifying electricity supply and decarbonizing the electricity mix. This could lay the groundwork for a deeper form of regional integration in the electricity sector in the years to come.