Region-wide electricity grid is slowly taking shape but pricing, taxation and technical issues are not easy to resolve.
Asean countries are making steady progress on the road to seamless and secure electricity supplies throughout the region under the Asean Power Grid (APG).
Fifteen investment projects worth nearly $6 billion are under way or planned and all had been scheduled to be completed by 2015. However, many of the completion dates have been moved back, and other barriers still exist to full interconnection of power supply in the region.
The creation of a region-wide grid is a response to growing energy demand in rapidly modernising Asean. The region’s primary energy requirements are projected to triple between 2005 and 2030 to 1,252 million tonnes of oil equivalent (mtoe). The average annual growth rate is 4%, higher than the world average of 1.8%.
The APG was first discussed as long ago as 1978 and formally adopted in 1997 by Asean heads of state and government under the Asean Vision 2020. The goal is to create an energy security system for the whole region by having an interconnected grid through which members can share electricity transmission.
The system would make it easier for countries with surplus electricity to supply others where power supply is short of demand.
The 15 APG investment projects with a combined value of US$5.9 billion are forecast to help save $662 million in new investment and operating costs if Asean member can share electricity transmission.
Worldwide, investments in national and regional electricity supply grids could go as high as $10 trillion in the next two decades, of which $5.5 billion would be for transmission alone, said Sridhar Samudrala, director for Asia of the World Association of Decentralised Energy (WADE), a non-government organisation.
Claude Galzin, sales director for East Asia with the French engineering group Alstom, said the global market for power grids was projected to grow from 16 billion euros in 2010 to 50 billion in 2020.
The concept and intention are sound. However, implementation is not easy, especially when dealing with issues that cross national borders. Energy efficiency is the main goal, but energy cooperation is also critical for success.
Some progress has been made on power supply interconnection in Asean, said Shiva Prasad Susarla, a research associate with the Energy Studies Institute at the National University of Singapore. For example, Thailand has signed power transmission agreements with Laos and Malaysia, and Malaysia with Singapore.
However, the region has a long way to go before it can complete all interconnection as planned. Other countries such as the Philippines and Myanmar have yet to see progress, he said on the sidelines of a recent conference in Singapore.
The Nam Theun 2 hydropower dam in Laos has been transmitting electricity to Thailand through Roi Et province in the northeastern part of the country since 2010. The dam, which was constructed by SET-listed Electricity Generating Plc (Egco) has installed capacity of 1,086 megawatts (MW).
PT PLN, an Indonesian power utility, is constructing two transmission lines to connect the power grids of Indonesia and Malaysia. The first will be laid from South Sumatra to peninsular Malaysia, and the second from West Kalimantan to Sarawak. Construction is expected to be completed by the end of 2014.
Although Mr Susarla said he believed that all Asean countries had a strong intention to cooperate in completing the APG projects, some barriers have not been removed, and mutual standards have not been fully addressed.
Each country, he noted, has its own electricity market, tariff structure and market design. Differing technical standards in each country are also a barrier. The differences between Laos and Singapore, for example, are quite pronounced. A single interconnection standard needs to be defined and agreed on.
The tax structure is another concern. Asean countries have to discuss and agree on tax rates for purchasing power across borders very clearly, Mr Susarla added.
Issues related to electricity pricing are a constraint as well.
“Each country has a different market design. Some countries have independent operators, but some still rely on subsidies, resulting in power costs not reflecting the real price,” said Mr Susarla.
“A fully integrated interconnection system is a long way off. Some countries have to at least get real pricing before we can have real interconnection.”
Mr Samudrala agreed that electricity purchasing prices would be a big issue. With the exception of wealthy Singapore, other Asean states are at various stages of development and do not want to charge their consumers, whether households or businesses, too much for electricity.
“I think it will take more than a decade for Asean to have real interconnection of its power grid. Members may have to wait until the countries have more development. They have to grow their economies more until they are ready to spend more for purchasing electricity from other Asean members,” he said.
Poor relationships among Asean countries, in contrast to the surface harmony the leaders always display, are also a big barrier, in his view.
“They hate each other and they do not trust each other. This has led to negotiations not happen,” he said.
Mr Susarla disagreed, saying only a few countries in Asean had conflicts, so this would not hinder wider cooperation.
“Most Asean members have good relationships. The border issues between some countries may be a barrier, but if we look at the big picture, I don’t think these conflicts will delay the whole process,” he added.
Maria van der Hoeven, executive director of the International Energy Agency (IEA), said the region’s policymakers needed to create a strategy based on an evaluation of the entire electricity system.
For Asean, the creation of smart grids and the Asean Power Grid (APG) are an opportunity for the region, and it should learn from the mistakes of other regions such as Europe.
“Spain is an example of a country that has renewable energy capacity but fails to have sufficient power grid infrastructure to support it,” she said in a talk at Singapore International Energy Week recently.
“So Asean should learn from the failures of the past and adapt [the lessons] to its system for success.”
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