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For the ASEAN power grid, politics is the biggest turn off

S&P Global Platts news and analysis feature

By Eric Yep

At least three projects to create the long-delayed ASEAN power grid are in progress and the biggest hurdle for all of them is the lack of political will and coordination, which can be hard to find in Southeast Asia.

Building a regional power market needs two distinct components to come together: the physical infrastructure and the regulatory framework for the market to operate in.

Having the infrastructure without the market framework is like stocking up the bar and forgetting to send the party invitations.

In the northern reaches of Southeast Asia where the region blends into southern China, eight cross-border interconnections with a combined capacity of 3,215 MW already exist, according to the International Energy Agency.

This is the Greater Mekong Subregion, where Laos and Thailand are linked up with the southwestern Chinese provinces of Yunnan and Guangxi for bilateral power purchases. But there is no market design to facilitate power trading.

"This is not a wires problem, it is a market problem," Dr Philip Andrews-Speed, senior principal fellow at Singapore-based think tank Energy Studies Institute said in an interview in November.

China, Laos and Thailand have been talking about multilateral power trading for years, arguing over who would actually host the command center, but have not been able to come to an agreement. Bickering over the location of the command center is a turf war of geopolitical egos.

"Theoretically it shouldn't make any difference to the electrons. It is not an electron-management issue. They have been working on a design for the power market for years. I assume it is ready to go except for this political thing," Andrews-Speed said.

So far, the officials have given up on talks, and left matters to be resolved at a higher inter-governmental decision making level that could happen overnight or take decades depending on the prevailing political mood.

The second notable development in Southeast Asia has been the Laos-Thailand-Malaysia-Singapore Power Integration Project, which was intended to be the region's first multilateral cross-border electricity trading agreement.

However, progress has been slow on this project too, with Singapore being excluded from the first phase that kicks off on January 1, 2018 due to its already deregulated market.

Under the first phase, Malaysia will purchase up to 100 MW of hydropower-generated electricity from Laos via Thailand's power grid for a two-year period.

The third and latest initiative takes an ASEAN-wide approach.

"The Senior Officials Meeting on Energy has appointed a special task force to oversee a feasibility study that would draw, among others, on the Nordic model to create multi-level electricity trading," Andrews-Speed said.

He said fund donating organizations are lining up to support this effort, and by the beginning of 2018 one or more would be ready to go.

The feasibility study will look at the benefits of power trading, what systems need to be put in place and conceptually what might a multilateral power market in Southeast Asia look like given the state of national power markets today.

It will eventually lead to a design phase and an implementation phase.

Andrews-Speed said this is "potentially the most significant step in terms of multilateral trading" in the ASEAN Power Grid to date. "If you do storm ahead in five years' time, you could have a modest amount of trading."


A popular myth about the ASEAN Power Grid is that domestic electricity markets need to liberalize as a precondition to creating a regional power market.

"But that is not true. The Nordics did not do that. They created a market just at the borders as it were," Andrews-Speed said.

"You can trade potatoes and carrots but still be state-owned farms," he said, adding that a similar model has also been adopted in the South African power market. "You do not have to reform the domestic market. You are trading at the border."

Finally, there's the question of Chinese infrastructure investments under the Belt and Road Initiative, and whether BRI can boost ASEAN Power Grid projects.

If the Chinese come with money that is great, but there is a difference between building stuff and creating a market, Andrews-Speed said.

Clearly, market design supported by political will is paramount if the ASEAN Power Grid is to proceed.

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