3. Regional perspectives

This section examines existing efforts to establish multilateral power trade among AMS and the potential for expanded regional integration beyond AMS.

The first subsection begins with a brief overview of the APG, the largest and oldest effort to develop a regional power system among AMS, and also the one that underpins the effort to develop multilateral power trading among ASEAN countries. It then discusses two subregional efforts among AMS: the LTMS–PIP, which has been functioning since the beginning of 2018, and the more nascent BIMP–EAGA interconnection project, an ambitious effort that, if completed, would connect the Philippines to the rest of ASEAN for the first time. Finally, this section ends with a focus on the ADB-led effort to develop a regional power market among the GMS countries, which includes five ASEAN countries plus southern China.

Existing regional integration efforts among AMS

The APG

It would be impossible to discuss existing efforts at regional integration within ASEAN without first detailing the largest and oldest effort, the APG.

The proposal to connect the power grids all of the various AMS was first established at the Second ASEAN Informal Summit, held in Kuala Lumpur in December 1997. The APG was one of the key components of the ASEAN Vision 2020, which included a resolution to establish interconnected grids for electricity (the APG), natural gas (the Trans-ASEAN Gas Pipeline) and water within ASEAN.

The main objectives in establishing the APG were to:

Promote more efficient, economic and secure operation of power systems through harmonious development of national electricity networks in ASEAN by region-wide interconnections.

Optimise the use of energy resources in the region by sharing the benefits.

Reduce capital required for generation capacity expansion.

Share experiences among member countries.

Provide close power co-operation in the region.

Development of the APG so far has progressed only on a bilateral basis between neighbouring countries. The expectation has always been, however, to move from bilateral interconnections to subregional power systems (focusing primarily on three subregions: North, South and East, and finally to a fully integrated regional system.

The Heads of ASEAN Power Utilities/Authorities (HAPUA) have been tasked as ASEAN’s official specialised energy body under the APAEC. One of its primary roles is to ensure regional energy security by promoting the efficient utilisation and sharing of resources. Under

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Establishing Multilateral Power Trade in ASEAN Regional perspectives

IEA (2019). All rights reserved.

Note: TBC = to be confirmed.

The majority of APG interconnectors developed in the last few years have been between Thailand and Lao PDR.

Development of the full APG is critical for the establishment of full multilateral power trading among ASEAN countries, as trading cannot occur without sufficient supportive infrastructure. To date, the APG effort has focused primarily on infrastructure development, with market arrangements also being organised only on a bilateral basis.

LTMS–PIP

In December 2013, the idea to transfer up to 100 MW of electricity from Lao PDR to Singapore via Malaysia’s and Thailand’s transmission grid networks was mooted during a special Senior Officials Meeting on Energy (SOME) in Manado, Indonesia. This LTMS–PIP would serve as a pathfinder to complement existing efforts towards realising the APG and the ASEAN Economic Community by creating opportunities for electricity trading beyond neighbouring borders. As a pilot project, the focus is primarily on identifying and resolving issues that could affect crossborder electricity trading among the AMS more broadly.

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Figure 32. Structure of the LTMS–PIP working group and technical task force

Source: ASEAN Centre for Energy.

Each of the countries of the LTMS–PIP leads a work stream that is required for realising the project.

To implement this project, a LTMS–PIP Working Group (WG) was formed with four technical task forces looking into technical, commercial, legal and tariff aspects of the project (Figure 32).

As a first step, each country developed a grid study to confirm that it would be technically possible to transfer 100 MW of electricity from Lao PDR to Singapore using existing transmission facilities in each participating country

Based on the recommendation of a technical task study (2016), the LTMS–PIP was divided into two phases:

Phase 1, 2018-19: power trade between Lao PDR and Malaysia via Thailand only utilising existing network and interconnections

Phase 2, 2020 or beyond: possible expansion to include Singapore.

A consideration to the inclusion of Singapore is the fact that Singapore has a fully liberalised power market. Under the current proposal, in order to support power trade, the exporting country will need to establish a local subsidiary to sell electricity directly into Singapore’s market.

In the first phase, the LTMS governments signed an MoU on 21 Sept 2016 at the 34th AMEM held in Myanmar for implementation of Phase 1. The MoU is valid for five years.

After the MoU was signed, a wheeling mechanism was developed. The Energy Purchase and Wheeling Agreement was signed by EDL, EGAT and TNB at the 35th AMEM held in Manila for implementation of Phase 1. The timeline of project finalisation on the LTMS–PIP is illustrated in Figure 33 below.

Trade under the LTMS–PIP commenced in January 2018. As of March 2019, 24.97 GWh has been traded under this scheme.

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Figure 33. Timeline of Phase 1 of the LTMS–PIP

Note: Singapore did not participate in the power trade in Phase 2 of the LTMS–PIP.

Source: ASEAN Centre for Energy.

The first LTMS–PIP power trade took place on 1 January 2018.

ASEAN sees the LTMS–PIP as a “pathfinder” project for developing multilateral trade in the region. The success of this project in meeting both its timeline and its overall goals suggests there are no fundamental obstacles to developing multilateral power trade across the region as a whole.

The LTMS–PIP is a multilateral trading arrangement insofar as it includes more than two countries. However, it is also a unidirectional trade, and so it is more limited than multilateral trading as defined by this study. However, certain key elements of the LTMS–PIP are very relevant to the broader goals of the APG. Two stand out in particular: the development of the wheeling charge and the underlying process for developing the LTMS–PIP in the first place.

To establish multilateral power trading in the region, it will be necessary to develop a common wheeling methodology. The LTMS–PIP wheeling methodology could be an appropriate start. The LTMS–PIP wheeling charge is based on the following elements: the distance of the trade (megawatts per mile); a loss charge (charged per megawatt hour); a balancing charge (also per megawatt hour); and a fixed administrative charge. To generalise this methodology to ASEAN as a whole, the LTMS partner countries will need to share additional details on how each of these components are calculated. It should be emphasised, however, that this can be done without sharing the actual wheeling charge applied to the LTMS–PIP trade, should this information be considered too sensitive to share publicly.

The underlying process used to develop this project is also very relevant to the ASEAN-wide discussion. In particular, work on the project was divided across four working groups, which looked at 1) tax and tariff structure; 2) commercial arrangement; 3) technical viability study; and 4) regulatory and legal arrangements, each of which was led by a different country (Figure 32). There are two key lessons from this arrangement. First, dividing work across the participating countries is a good way of giving everyone a stake in, and a sense of ownership over, the underlying process and therefore the project as a whole. Second, it is possible for a particular AMS to be actively involved in the development process even if it does not take part in the trading arrangement itself. This is an important lesson for ASEAN as a whole, as it is certain to be the case that some AMS will participate in multilateral power trade early on while others will wait.

One last relevant point on process is the timeline for development. The LTMS–PIP process included setting a specific timeline for project development (Figure 33). By setting a schedule with concrete deliverables and milestones, the LTMS–PIP partner countries could allocate resources as appropriate, and they had reference points for measuring both their own work and progress on the project as a whole.

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