Abstract

Abstract

The ASEAN member states have a long-standing goal to establish multilateral power trading in the region. To date, regional power trading has been limited to a series of uncoordinated bilateral cross-border arrangements. Multilateral power trading can bring multiple benefits, including reduced system costs, increased energy security and an ability to integrate higher shares of variable renewable energy. An examination of international experiences shows that it is possible to establish multilateral trading while allowing for stepwise and voluntary development and respecting local sovereignty. At the same time, increased cross-border integration and power trade does require increased co-ordination and regulatory harmonisation.

This report identifies a set of minimum political, technical and institutional requirements that the ASEAN member states will need to meet in order to establish multilateral power trading in the region. Some of these minimum requirements can be met by building upon existing efforts in the region. The report also proposes a set of trading arrangements of increasing levels of ambition which, taken together, will enable ASEAN to establish multilateral power trading in a manner that is consistent with maximising national sovereignty and the equitable sharing of benefits. These recommendations include a summary of potential roles for regional institutions and an example transaction to show how trading might potentially work in practice.

1

Foreword

As the world’s leading energy authority, and in line with our “open doors” policy to engage more deeply with emerging economies, the International Energy Agency (IEA) is proud to be a key partner of the Association of Southeast Asian Nations (ASEAN) and its member states in their efforts to enhance the security, affordability and sustainability of energy in Southeast Asia.

At the 36th ASEAN Ministers on Energy Meeting, held in Singapore in October 2018, ministers called for “stronger institutional ties” with the IEA to help the region meet its energy priorities. The IEA has answered this call with an extensive work programme with ASEAN member states over the past year, covering a range of critically important areas.

As the role of electricity in the economies and societies of Southeast Asia is growing rapidly, a key aspect of the collaboration has focused on power markets, including through this report. Increasing electricity trade across borders is critically important and rightly has a central place in Southeast Asia’s energy co-operation plans. Regional power system integration can enhance electricity security, improve the affordability of electricity and scale up the deployment of the region’s abundant renewable energy resources.

Based on extensive analysis and a review of international experiences and best practices, this report sets out a comprehensive roadmap by which Southeast Asia can achieve those objectives through greater power trade. The report outlines the preconditions that are needed – such as institutional development, grid code harmonisation and information sharing – and how these can be put in place. It then provides guidance on different operational models for multilateral power trade that the region could pursue.

I am confident that this report will provide invaluable and concrete assistance to policy makers in Southeast Asia as they continue to pursue ever-greater power system integration. I would also like to thank the leaders of ASEAN member states for their strong collaboration with the IEA over the past year.

Dr. Fatih Birol

Executive Director

International Energy Agency

2

Acknowledgements

This report was concieved of in 2017 under a mandate from the Heads of ASEAN Power Utilities and Authorities (HAPUA) and the ASEAN Power Grid Consultative Committee (APGCC) for the APG Special Task Force to oversee a feasibility study that would examine frameworks, schemes and options for realizing multilateral electricity trade in the ASEAN Power Grid. The IEA was approached by the ASEAN Secretariat upon the request of the APG Special Task Force to assist ASEAN in delivering the feasibility study. Initially entitled the Feasibility Study on ASEAN Multilateral Power Trade, it is presented here in its public form.

The IEA would like to thank the ASEAN–Australia Development Cooperation Program Phase II for generously providing financial support for the production of this report and related activities, workshops and missions.

The content for this report was prepared by the IEA’s Gas, Coal and Power Markets Division and Asia Pacific and Parnerships Division. The main authors were Matthew Wittenstein, Kieran Clarke and Randi Kristiansen. Other principal contributors were Eric Shumway and Varun Hallikeri from Delphos International Ltd; Hans-Arild Bredesen, Wilhelm Söderström and Matias Peltoniemi from Nord Pool Consulting; and Craig Glazer and Joseph Rushing from PJM, who each provided essential contributions to the international case studies and various other chapters. Beni Suryadi and Aloysius Damar Pranadi from ASEAN Centre for Energy provided essential research and contributions to chapters 1, 2 and 3.

The IEA team would like to extend our heartfelt thanks to a range of ASEAN member states, institutions and bodies for their support for this programme of work. In particular, the ASEAN Secretariat Energy & Minerals Division has acted as a critical partner with the IEA throughout, and organised together with the HAPUA Secretariat three invaluable workshops for ASEAN member states to provide input to the analytical process. The IEA would like to thank ASEAN member states for strong attendance of these workshops as well as for the extensive comments and guidance at all stages of this project. Thanks also to HAPUA, AERN, APGCC and the APG STF.

Valuable comments and feedback were provided by IEA senior management and numerous other colleagues in the IEA, in particular, Keisuke Sadamori, Peter Fraser, Aya Yoshida, Paul Simons, Paolo Frankl, Peerapat Vithayasrichareon and Zoe Hungerford.

Thanks also go to the IEA Communications and Digital Office (CDO) for producing the final report and website material, particularly to CDO Acting Head, Jad Mouawad, as well as to Astrid Dumond, Robert Stone, Sabrina Tan and Therese Walsh. Erin Crum is thanked for editorial support.

This publication is supported by the Government of Australia through the ASEAN–Australia Development Cooperation Program Phase II (AADCP II).

3