Overcoming Southeast Asia’s energy insecurity: The ASEAN power grid

The ASEAN region’s economy is growing rapidly at an annual rate of 5% and is expected to become the world’s fourth largest by 2030. To satisfy its burgeoning economic growth, primary energy demand in the region is predicted to triple in value. With this in mind, and the region’s energy security still far from secure, the rising bloc faces a plethora of challenges to solving its energy insecurity issue. One of the proposed solutions to this issue is the ASEAN power grid (APG). 

Understanding ASEAN’s Energy Insecurity

First, stemming from the region’s growing population and economy, a significant obstacle has arisen from the inability to ensure a sufficient energy supply. The total primary energy supply is projected to increase 2.5 times over the period 2015-2050, growing at an average rate of 2.6% annually. Second, ASEAN has an overdependence on fossil fuels, the dominance of which is not expected to change despite ASEAN’s vision of achieving 23% renewables in its total primary energy mix by 2035. The ASEAN Centre for Energy predicts that even in a best-case scenario, the share of renewable energy will only increase to about 30% by 2040. Sustainability concerns are of high priority in the region, especially given the fact Southeast Asia is among the world’s most at-risk regions when it comes to the impact of global warming. Third, energy accessibility is still a challenge, particularly in ASEAN’s rural communities. It is estimated that around 65 million people in the region do not have access to electricity. Lastly, providing affordable energy is an ongoing struggle, due to the vast diversity  of electricty prices faced by ASEAN Member States. While some member states have lowered prices through subsidies, incentive programmes, and the availability of cheaper fuel sources,  others have a heavy reliance on imported fossil fuels and suffer from uncompetitive market structures. For instance, electricity prices in the Philippines are amongst the highest in Southeast Asia and are considered high in comparison to global standards. As an emerging economy, the high prices, as well as the instability of the energy supply, have profound effects on the economic growth of the country.

Solving ASEAN’s Energy Dilemma

A possible solution to the region’s increasing energy insecurity is via energy integration, with projects such as the APG and the trans-ASEAN Gas Pipeline (TAGP) already underway. The APG has been monumental in increasing electrification rates in the region while also overcoming some of the issues regarding affordability, accessibility, and sustainability. The APG is an initiative aiming to construct a regionally integrated power grid, first on cross-border bilateral terms, then on a sub-regional basis, and finally through full regional connection. The envisioned benefits of an integrated regional power system are numerous. First, it promises to enhance the region’s reserve capacity by limiting excess power generation, reducing energy prices, and solving supply issues. Second, in terms of energy security, the APG promotes more diversified sources of reserve energy and ensures a more stable flow of electricity in the region. Third, the economic gains associated with the construction of APG are significant. There are prominent economic savings to be made via economic integration, as it encourages further development of renewable energy resources in Southeast Asia. A secure flow of electricity and continued collaboration between ASEAN member states (AMS) will also have the knock on effect of promoting trade and investment to encourage collective regional economic growth. 

Geographical map of APG interconnections

 The APG has seen progress in its recent development, with the first successful cross-border electricity trade connection officially opened on June 23rd, 2022. After an initial two-year power purchase agreement was signed between Keppel Electric and Lao PDR’s state-owned Electricite du Laos (EDL), Singapore has begun importing renewable energy from Lao PDR through Thailand and Malaysia. The Lao PDR-Thailand-Malaysia-Singapore Power Integration Project (LTMS-PIP) will import up to 100 megawatts of renewable hydropower using existing interconnections, marking the first multilateral cross-border electricity trade involving four ASEAN countries. First proposed in 2013, the rationale behind the LTMS-PIP was for Lao PDR to export a portion of its large hydropower excess to its southern neighbours, allowing the country to mitigate its supply excesses without wasting energy, all while using its low carbon energy resources as a pivot point toward the region’s renewable energy goals. The project is part of a broader strategy to develop the first multilateral power market across ASEAN. According to Senior Energy Research Institute Scientist Dr Mhaisalkar, the trial is “very forward thinking and it would, in a way, create demand. Once the demand creation is happening, then new ideas and new investment opportunities will also present itself.” He also noted the other potential positive knock-on effects of the connection, citing opportunities for Malaysia to set up solar energy farms, and ​​​​​the ability to “directly or indirectly contribute to the adoption of renewable energy across areas across ASEAN.”

LTMS-PIP framework

The LTMS-PIP’s development is a significant step towards realizing the vision of a fully integrated APG. This will encompass multilateral cross-border electricity markets that can increase energy investments into the region, as well as set the platform for the development and deployment of low-carbon and renewable energy solutions. As this is a pilot project and an essential “pathfinder” for future connections, its goal is to identify and resolve the major issues associated with ASEAN regional power integration. Further examination and revisions made to this project will be pivotal for the APG’s future, as it will provide the basis for establishing a broader framework for the region’s multilateral trading. Additionally, renewable energy is at the forefront of the project with a gigawatt-scale extension of a wind farm in Lao-PDR planned by the tripartite alliance, aiming to bring a greener and more sustainable future to the ASEAN region.