With ASEAN electricity network integration taking a step closer in 2017 with the signing of a tri-partisan energy agreement, what does that mean for the future of ASEAN’s shared energy networks?
In part 2 of our expert Q&A with Nord Pool Consulting, we explore the challenges and opportunity of integrated electricity networks in ASEAN.
Energy Watch (EW): What opportunity is there for shared energy networks in ASEAN?
Nord Pool Consulting (NPC): In the ASEAN region there are great opportunities for further developing the region’s interconnections, something raised by many of the studies conducted in the field. Recent studies such as the AIMS 2 study and the ASEAN Plan of Action for Energy Cooperation (APAEC) 2016-2025, highlight the regional ambition of creating an ASEAN power grid (APG) as a key suggested initiative.
There is already existing interconnection infrastructure in the region and much more is planned for coming years. There are also processes towards enabling better coordination of the infrastructure (both existing and future interconnection) to increase the overall efficiency of the power generation. The Greater Mekong Subregion (GMS) has been a forerunner in the development of regional cross border trading. As many of the GMS countries are also part of the ASEAN this could be a great opportunity for the whole region.
EW: What steps do we need to take to better interconnection in ASEAN?
NPC: Unlocking efficient cross border trading in the ASEAN region will need a lot of work to be undertaken, such as:
- An Inter-Governmental agreement on regional power trading
- TSO – TSO operational agreement for interconnection
- Harmonisation of technical standards and operations
- A third-party access agreement to transmission infrastructure
- A common available transmission capacity management and a common wheeling methodology
- Balancing arrangements
- Information sharing and standardisation
- Market rules for how to behave in the regional market
An interconnected regional grid is of great use for many reasons, especially when there are large investments in renewable energy underway. An interconnected grid could assist in the integration of these new generation resources, as some of them offer challenging control of output due to seasonal and daily variations.
The political decisions needed to move the ASEAN region towards a regional market can of course be time consuming to reach. It takes time to develop, establish and agree the list of key points above. Not to mention the time it takes to build interconnectors. One must be aware that this type of regional market implementation takes time, and should be implemented based on a stepwise approach. It’s important to use established regional organisations for agreeing on the needed points while leveraging the knowledge that these organisations possess.
EW: Are there any other barriers to a shared ASEAN grid?
NPC: Aside from the regulatory difficulties, another challenge is to build an efficient and secure IT infrastructure for connection of the countries involved. This will enable an efficient sharing/distribution of information and operational data.
When speaking of regional cooperation, it is important to emphasise that increasing regional cooperation does not directly correlate to losing national control of the electricity sector. Both European cooperation and Southern African Power Pool coordination are living examples of this ideology.
The development of the Nordic market model has attracted many other regions wanting to learn from the development over the years. One of the long-term relationships has been with the Southern African Power Pool (SAPP). SAPP was created in 1995, with the primary aim of providing reliable and economical electricity to consumers in SAPP member countries, consistent with reasonable utilisation of natural resources and minimised negative impact on the environment.
SAPP is a good example, showing that it is not always necessary to unbundle, privatise and have full national market deregulation to initiate effective cross border trading. In the African regional market, many different national markets types coexist, and still the flow of interconnectors can be calculated using the implicit capacity allocation.
EW: How do we explore the market that suits ASEAN’s needs?
NPC: In the picture above, a multi-type regional market structure is presented where a single buyer (without a national market) operates together with a national market. Both of these types of markets can bid on cross-border capacities. The benefit of this model is that it allows national markets to follow their own path at their own pace. Price coupling to determine the interconnector flows is the international best practice and should be seen as the most efficient way for the ASEAN region to fully utilise the potential of cross border trading. The risk of dominance of the largest market can be considered low since the trading is based on only cross-border capacities.
An important aspect of regional cooperation is that it does not require total standardisation of all markets in order to achieve efficient cross border capacity trading. Instead, successful regional cooperation allows the national markets to follow their own paths. However, when creating a regional market place, it’s important to spread ownership and operations of this organisation between all involved countries in the ASEAN region to support an effective evolution of the market.
Nord Pool Consulting sees major potential for ASEAN regional trading. As a final point worth stressing, a stepwise approach to integration of the markets should always be considered.
Nord Pool is Europe’s leading power market and offers trading, clearing, settlement and associated services in both day-ahead and intraday markets across nine European countries.