Establishing Multilateral Power Trade in ASEAN |
Introduction |
1. Introduction
The ASEAN member states (AMS) have had a long-standing goal of integrating their power systems. The overarching aim is to develop the ASEAN Power Grid (APG). The APG is composed of a series of cross-border alternating current (AC) and direct current (DC) interconnectors. Power trade across the APG lines that currently exist is primarily bilateral, and organised under a wide range of different trading arrangements.
Figure 5. |
The APG |
IEA 2019. All rights reserved.
Note: Lao PDR = Lao People’s Democratic Republic.
The APG, when fully developed, will interconnect the power grids of all of the AMS.
More recently, the AMS have expanded efforts to develop the APG to include the establishment of multilateral power trading. At present, multilateral power trading is limited to a single pilot
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Establishing Multilateral Power Trade in ASEAN |
Introduction |
project among Lao PDR, Thailand, Malaysia and Singapore. The aim of this feasibility study is to provide guidance to the AMS on how to establish multilateral power trading, considering both international best practices and ASEAN’s unique circumstances.
Models of cross-border power trade
Cross-border power system integration efforts involve the tying together of two or more distinct power systems. Integration must therefore potentially contend with technical differences (e.g. different frequencies, different grid codes) and different power market structures (e.g. liberalised versus vertically integrated). There is no single path to cross-border integration, and integration is not a binary choice between all in or not at all. Rather, integration efforts exist across a spectrum ranging from limited to complete, with different choices across that spectrum bringing different sets of potential benefits, but also different sets of compromises and challenges.
Figure 6 lays out a hierarchy of power system integration models. These vary from ones that are very limited (e.g. the simplest model, unidirectional power trading) to ones that can be considered “complete”, or fully integrated (e.g. the PJM system in the United States, which organises markets, supports transmission planning and manages generator dispatch across a wide geographic area that includes multiple jurisdictions).
Figure 6. Degrees of cross-border power system integration: From limited to complete
Bilateral, unidirectional power trade
Bilateral, bidirectional power trade
Multilateral, multidirectional trade among differentiated markets
Mulitlateral, multidirectional trade among harmonised markets
Unified (pooled) market structure, differentiated operations
Unified market and operations
•Thailand imports from Lao PDR
•Malaysia–Singapore (non-financial)
•Southern African Power Pool (SAPP)
•European Union Internal Energy Market
•Nord Pool
•PJM
IEA 2019, All rights reserved.
Moving from “limited” models such as bilateral trade to more “complete” models such as multilateral or unified requires increased cross-border collaboration, including the sharing of resources.1
1 Under unified models, resources are optimised across jurisdictional (e.g. national) borders, which means a high level of integration and a lack of local markets that are distinct from the regional market.
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Establishing Multilateral Power Trade in ASEAN |
Introduction |
Among ASEAN countries, cross-border integration already occurs among many countries on a bilateral basis. Nearly all of the existing ASEAN cross-border integration efforts fit into the first two categories: unidirectional power trades and bidirectional power trades.
The Lao PDR–Thailand–Malaysia–Singapore (LTMS) power trade (also called the LTMS–PIP) is an interesting exception. The LTMS power trade involves the sale of 100 megawatts (MW) of electricity from Lao PDR to Malaysia, with Thailand acting as the transit, or wheeling, country.2 Three countries are involved in the trade, and so by definition it is “multilateral” in nature. However, it is important to separate the trade of electricity from the physical flow of the delivered power. The power flow is, in this case, multilateral: power is exported from Lao PDR and imported into Thailand, then exported from Thailand and imported into Malaysia.
The last four models highlighted in Figure 6 are all more formal multilateral arrangements, each with differing degrees of integration: multilateral power trading among differentiated markets; multilateral power trading among harmonised markets; unified market structure but differentiated operations; and unified market and operations.
The SAPP model falls into the first category. It involves multiple countries of differing levels of development, market structure and resource base, trading power with one another through a common market framework. SAPP is a “secondary” power market in that it is differentiated from national power systems, with national utilities and other participants choosing whether and how much of their resource base to trade regionally. Another example is the SIEPAC market in Central America.
The European Union (EU) as a whole falls into the next category of multilateral trade. Composed of a range of member countries that vary widely in terms of level of development and resource base, the structure of EU member (and even some neighbouring non-member) power markets are nevertheless well-harmonised. EU member countries retain full control over domestic power system operations and planning, but are able to trade with one another utilising different, but functionally identical, power market platforms (the so-called power exchanges).
Individual power exchanges within Europe can function either within a single country or across multiple countries. Nord Pool is Europe’s oldest example of a common market covering multiple countries. As in the rest of Europe, each country retains full control over system operations and transmission planning. Therefore, though there is a single market for the region, the national transmission system operators (TSOs) remain fully distinct from one another. It therefore falls into the “unified market, differentiated operations” category.
The last model of cross-border integration is the deepest of all: unified power market and system operations. PJM in the United States is responsible for organising electricity markets and for co-ordinating dispatch across all generators within its service territory, which extends across multiple states.
Another dimension of cross-border power system integration is worth emphasising: time. While the result of cross-border power trading is the physical delivery of electricity from one jurisdiction to another in real time, from a market perspective the trade could occur very close to the time of delivery (e.g. in the hour or day ahead) or months or years ahead of
2 The LTMS power trade described here refers to Phase 1 of the project. Phase 2 is planned to expand to include Singapore and will potentially move to multidirectional power trade. This is described in more detail in Section 3.
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Establishing Multilateral Power Trade in ASEAN |
Introduction |
delivery (Figure 7). There are many examples of each of these types of trades in the markets discussed above and in other markets as well, and different markets may trade different sets of various power “products”.
Figure 7. Degrees of cross-border power system integration: From long-term to short-term
Long-term |
Day-ahead |
Intraday |
Real-time |
Ancillary |
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IEA 2019. All rights reserved. |
Cross-border power system integration can function across multiple time dimensions simultaneously.
This study focuses primarily on long-term and day-ahead trading, though it will also refer to other types of trading when appropriate. The reason for focusing on the day-ahead market is that it is internationally recognised as a cornerstone of power market design. The day-ahead market typically creates a reference price that can be used in other markets such as forward markets and balancing markets, which are typically developed after a day-ahead market has been established. Developing regional day-ahead trading could have specific implications for countries that already have domestic wholesale markets in place. How such trading would interact with specific national markets in an ASEAN context is out of scope for this study, but AMS are encouraged to investigate this on a national level.
ASEAN principles for developing multilateral power trade
In April 2017, the ASEAN Power Grid Consultative Committee (APGCC) agreed to a set of principles that should underpin increased power system integration in the region. These principles were reaffirmed at a follow-on workshop organised under the auspices of this study, held in September 2018. As any effort to establish multilateral power trading among AMS should align with these principles, it is important to present them and discuss their implications.
The six principles are:
1.Efforts to establish multilateral power trading should be stepwise and voluntary.
2.Power trade should focus on gaps and excesses and not require the full participation of all domestic generation in a regional power market. In particular, multilateral power trading should not interfere with the operation of national power systems.
3.National regulations should be complemented by regional co-ordination. While some regulatory alignment may be necessary to support trade, multilateral power trading should not require complete regulatory harmonisation among the participating countries.
4.Multilateral power trading should be supported by the expansion of regional (crossborder) power system infrastructure. A master regional infrastructure plan should be developed with multilateral power trading in mind.
5.True multilateral power trading will require the development of a regional wheeling price model.
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