Equity, transparency and clarity needed to propel ASEAN energy interconnectivity plan – SIEW 2023

ASEAN’s first multilateral electricity trading project, the Lao PDR-Thailand-Malaysia-Singapore Power Integration Project (LTMS-PIP), had dominated the conversations around ASEAN energy interconnectivity at this year’s SIEW.

Under LTMS-PIP, Singapore has imported more than 170,000 megawatt hours of electricity from Laos, via Malaysia and Thailand, since June 2022. Discussions are currently under way to continue power trade between the two countries.

This is one of two multilateral power trading projects in ASEAN, along with the upcoming Brunei Darussalam-Indonesia-Malaysia-Philippines Power Integration Project (BIMP-PIP) announced this year.

GovInsider highlights the takeaways from LTMS-PIP, and what is needed to propel the ASEAN energy interconnectivity plan in the coming years. 

Inequality a deep-seated issue

Affordability is key and pricing must be fair to all countries participating in the power trading, said Dr Chanthaboun Soukaloun, managing director of state electricity company, Electricite du Laos.

Cost-sharing negotiations remain a thorny issue, said Matthew Wittenstein, chief of energy connectivity with the United Nations’ Economic and Social Commission for Asia and the Pacific (UNESCAP).

“We’re talking about a region that has very different levels of development. So, it’s not a simple question of 50-50 dividing the cost between countries and everyone’s going to be happy. 

“We [need to] think very carefully about ensuring fair sharing of the cost of these projects, and cost recovery in a way that does not cause undue burden on consumers and allows you to earn back from the investments made in these projects.”

To address the unintended consequences of implementation, ASEAN member states need to collectively communicate the benefits to affected residents to better nurture trust and build political will, said Dr Mirza Huda, lead researcher with Singapore-based research institute, ISEAS – Yusof Ishak Institute.

Another issue is the region’s capacity to enable multilateral cross-border interconnections.

The region needs to invest around US$200 billion into infrastructure alone by 2030 to push forward with the renewable energy transition, Dr Huda said.

He suggested for governments to work with development banks and financial institutions to tap on their funding sources and advice, as well as to help implement market reforms.

His research conducted around the multi-stakeholder experiences following LTMS-PIP implementation will be published next month.

Investors’ confidence on the rocks

However, public-private partnership prospects appear bleak.

Nikita Yu, director of regional business development with renewable energy company, EDP Renewables, pointed to the lack of transparency and clarity in the region, which discourages investments.

“When we look into investments, we definitely want to understand the plan: If our investment is matching the country’s development roadmap … and if the government framework promotes or encourages a fair competition environment for private sector to participate in.”

This was alluded to by Dr Huda who highlighted that the lack of clarity into decision-making can lead to disagreements among stakeholders and affect their confidence.

Taking the issue of wheeling charges, or energy export fees, he said: “We found that the wheeling charges are not necessarily based on economic considerations, but the priority … was to push through the project essentially. So, there were some conflicting perceptions.”

“Some stakeholders felt that the wheeling charges were too low, which discourages investment, while others felt that they were too high, which discourages generation.”

He said it was important to develop best practices to define pricing mechanisms. An example comes from the Southern African Power Pool, where a wheeling charge pricing formula was agreed upon by its members.  

While best practices around dispute resolution and liability have been established under LTMS-PIP, the details of agreement remain confidential and unpublished, said Dr Phuwanart Choonhaparn, OERC assistant secretary general with Energy Regulatory Commission (Thailand).

LTMS' first phase is a pilot project under government-to-government (G2G) collaboration, and there is still a need to communicate transparently around setting pricing mechanisms for multilateral trade in the future, added Dr Choonhaparn.

ASEAN commonality around renewable energy targets

Nonetheless, there has been some consensus around renewable energy targets driving individual countries to strengthen their connectors to enable energy trade, according to Dato' Ir. Ts. Abdul Razib Bin Dawood, CEO of Energy Commission (Malaysia).

“Interconnectivity allows you to more rapidly, more affordably and more securely meet your net-zero emissions or low-carbon targets,” said UNESCAP’s Wittenstein.

ASEAN has committed to achieve 23% renewables share in its total primary energy supply by 2025.

Despite that, Beni Suryadi, manager with multilateral organisation, ASEAN Centre for Energy, said that meeting the goal is “unlikely to happen.” 

Regional efforts are centered around reducing energy intensity, including investments and policies to improve the plant’s energy efficiency and set minimum energy performance standards for end products, he explained.

It remains early years for ASEAN energy interconnectivity plan. The implementation of LTMS-PIP spells a successful collaboration, to some extent, with plenty of lessons learnt to carry forward to the next.

At this year’s SIEW, Singapore’s Energy Market Authority (EMA) also announced a potential bilateral trade agreement to import 1.2 gigawatt of low-carbon electricity from Vietnam.

Editor's note: Comments made by Dr Phuwanart Choonhaparn, OERC assistant secretary general with Energy Regulatory Commission (Thailand) were edited on 6 November 2023 for greater clarity.