REGIONAL POWER MARKET AND CROSS-BORDER POWER INTERCONNECTION

ASEAN Power Grid: MULTILATERAL POWER TRADE

Presented By:

Bambang Hermawanto Chairman, ASEAN Power Grid Consultative Committee (APGCC)

ADB Workshop - Seoul 14 November 2017 Regional Power Interconnection: Introduction

ASEAN Connectivity

Regional Power Interconnection in ASEAN

ASEAN Power Grid

Challenges to Realize the APG

ASEAN Multilateral Power Trade

Multilateral Power Trade: LTMS Case Conclusion REGIONAL POWER INTERCONNECTIONS Objectives of Regional Interconnection a) Promote more efficient, economic and secure operation of individual power system  Sharing of reserve margin, including spinning reserves  Power exchange during difference of peak load b) Optimize usage of diverse energy resources in the region  Enable power transfer from efficient generation in the region to load centers c) Reduce capital investment required for generation capacity expansion  Capitalizing difference of demand peaking time d) Facilitate cross-border power purchases /exchanges within the region  Allows for effective development and utilization of resources

BENEFITS OF ITERCONNECTIONS Benefits of Interconnections An interconnected grid system brings not only technical and economic advantages, but also an overall political, societal & environmental benefits

chnical

Interconnected System enefits

Economic Benefits

Political, Societal & Enviromen tal Benefit BENEFITS OF ITERCONNECTIONS Economic Benefits When discussing the reasons for developing a power grid interconnection between countries, economic benefit is the top of the list as the key driver. Economies of scale Investment in larger plants result in Collective cost lesser cost per unit reduction

Optimal cost of investment & operation Delay in new power plants construction Target peak load with cheaper resources Sharing of spinning reserve Different peak load time Improve adequacy while reducing cost

Reduce import of fuel from outside ASEAN Less reliance from other region

Savings for importer while extra income for exporter of energy BENEFITS OF ITERCONNECTIONS Technical Benefits The technical rationales for grid interconnections include improving reliability and pooling reserves.

Larger interconnected system is more stable

Emergency response – fast reserve More stable & reliable HVDC – frequency limit control

More reliable system

Share of reserve – spinning & non- spinning Coordinated outage and maintenance of generators and lines Asynchronous systems can also be connected (HVDC)

Improving load factor

Minimizing usage of non-efficient plants such as OCGT Less ramping up/down of power plants Incorporating of intermittent resources such as solar plants Political,BENEFITS OF ITERCONNECTIONS Societal & Environmental Benefits The interconnection is also foreseen to strengthen regional cooperation between member countries

Strengthening regional cooperation

Stimulate regional and domestic economies

Opportunities for local business & transfer of technologies Provide more employment, technical expertise & knowledge database

More reliance on greener source of energy thus less pollution

Development of hydropower potentials Exploring of greener alternatives due to stronger supporting systems

Fossil Fuel ASEAN CONNECTIVITY Why we need ASEAN Connectivity

“Connectivity creates Stronger, Safer, Better ASEAN has a huge of natural resources, high Economics” energy demand, high economic growth “Stronger Economics, stronger ASEAN, stronger Member States”

Source: ASEAN Secretariat Background of ASEAN Connectivity

The vision of ASEAN Leaders to build an ASEAN Community by 2015 calls for a well-connected ASEAN that will contribute towards a more competitive and resilient ASEAN.

The three pronged strategies to achieve overall ASEAN connectivity

Physical Institutional People to People

Connectivity Connectivity Connectivity

-Transport -Trade liberalization -Education & Culture -ICT & facilitation -Tourism -Energy -Regional Transport Agreement -Cross border procedure etc.

ASEANBACKGROUND Community

ASEAN has emphasized regional cooperation in the “three pillars”, which are political-security, sociocultural integration, and economic integration.

ASEAN ASEAN ASEAN Political- Security Economic Community Socio-Cultural Community Community ASC AEC ASC  ASEAN Ministerial Meeting  ASEAN Economic Ministers  Culture & Arts (AEM) (AMM)  Disaster Management  ASEAN free trade area  ASEAN Regional Forum  Education (ARF) (AFTA)  Environment  Defense  Energy  Haze  Law  Food, Agriculture & Forestry  Transnational Crime  Finance  Health

 Investment  Information  Etc.  Etc.

Source: http://www.asean.org/ ASEAN ENERGY COOPERATION IN ASEAN CONNECTIVITY

“Enhancing Energy Connectivity and Market Integration in ASEAN to Achieve Energy Security, Accessibility, Affordability and Sustainability for All” APG NEC

TAGP • Development of the APAEC REPP APAECAPAEC • Global Energy Landscape CCT • ASEAN Energy Development RE EE&C

ASEAN – Energy Cooperation

HAPUA APG

APAEC ASEAN ASEAN

ASCOPE Connectivity TAGP Infrastructure REGIONAL POWER INTERCONNECTION in ASEAN ASEAN’s POTENTIAL ENERGY RESOURCES

ASEAN abundant energy resources The thirst for energy can be fulfilled by the region’s wealth of natural resources  Blessed with abundance of natural resources.  Potentials yet to be explored  Transmission networks need to be expanded  Grid density is still low Need for efficient utilization of energy sources ASEAN’s POTENTIAL ENERGY RESOURCES

Fosil Energy Resources: , Cambodia, Indonesia, , Oil Myanmar, Philippines, , Vietnam

Gas Brunei, Cambodia, Indonesia, Malaysia, Myanmar, Philippines, Thailand, Vietnam

Coal Indonesia, Malaysia, Philippines, Thailand, Vietnam

Renewable Energy Resources: Hydro Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Vietnam

Geothermal Indonesia, Philippines

Solar All Countries has various amount

Wind Limited potential

Biomas All Countries has various types and amount ENABLERSEnablers FOR ASEAN POWER for TRADE ASEAN Power Trade

Three key drivers that enable Power Trade among ASEAN countries

APG The APG is the key infrastructure to enable power trade between ASEAN countries.

Diversified Resources ASEAN’s availability of abundant of natural resources, e.g. Hydro (Myanmar, Laos), Gas & Oil(Malaysia, Brunei), Coal (Indonesia)

Price-demand disparity

Cheaper system can sell to more expensive system OPPORTUNITIES Opportunities for Power Trade among ASEAN countries The completion of APG highway open doors of opportunities for ASEAN countries to benefit from power trade, be it Bilateral or Multilateral

ASEAN countries rely mostly on fossil fuel based power plants to generate electricity.

With power trade enable across the region, more hydro will be utilized.

Lower system cost

Pull factor for power trade: carbon tax, fuel price volatility Push factor : intensive capital investment, readiness of transmission network

Source:Southeast Asia Energy Outlook 2013 & CIMB ASEAN Research Institute (2013) OPPORTUNITIES Electricity Trade Pricing Lower average system cost is envisioned with the realization of interconnection projects

Cheaper Expensive Sell to System System

Demand increase, selling price may increase Electricity price may decrease

Then overall electricity price may increase

31 Source:Beni Suryadi (2014)

LEGAL BASIS: The MOU of ASEAN Power Grid (APG)

The ASEAN Power Grid (APG) is a flagship program mandated in 1997 by the ASEAN Heads of States/Governments under the ASEAN Vision 2020.

The 17th AMEM in Bangkok July 1999 has adopted The APAEC 1999- 2004 tasked to implement the ASEAN Power Grid (APG) program

Objective: to strengthen and promote power interconnection and trade to help ensure greater regional energy security and sustainability on the basis of mutual benefit

*): The MOU of APG signed by ASEAN Energy Minister in July 2007 Objectives of APG

Facilitate cross-border power purchases/exchanges within the region Allows effective development and utilization of ENCHANCING resources REGIONAL ENERGY SUSTAINABILITY, SECURITY, Optimize usage of diverse energy resources in the RELIABILITY, TOWARD region MORE EFFICIENT,

Enable power transfer from efficient generation in ECONOMIC AND the region to load centers SECURE OPERATION OF POWER SYSTEM

Reduce capital investment required for generation capacity expansion

Capitalizing difference of demand peaking time BENEFITS OF ASEAN POWER GRID

Greater economic generation and transmission of electricity

Greater reliability and security of electricity supply in member countries

Provision of a platform for future ASEAN electricity trade APG’s CHALLENGES

• Differing national policies of AMS National • Countries desire for self‐sufficiency before impediments to interconnection is allowed promotion of power trade • Countries concerns over restructuring of ESI under Multilateral Electricity Trading

• No harmonized operational & regulatory framework or Electricity industry tariff structure restructuring and • No mechanisms for power wheeling, pool rules, power evolution into a bidding, regulatory framework and ensuring system multilateral power reliability & security trading • Financing Modalities for funding sources

• High penetration of intermittent renewable energy Enviroment sources Awareness • Aware and concern on environment impact ASEAN Interconnection Master-plan Study (AIMS)

• Objective : To identify possible interconnections between ASEAN countries, which eventually form APG • Encompass the 20 years horizon of power system development (2000~2020) • AIMS–I completed in year 2003, reviewed in year 2010 o 11 interconnections identified in AIMS-I o Additional 5 identified in AIMS-II (total 16) • Methodology of study o Optimization of power plant development by comparing individual plan (consider indigenous resource) vs integrated ASEAN plan o Derive the least-cost plan that satisfies reliability, stability, and fuel supply constraints

UPDATED LIST OF ASEAN POWER GRID PROJECTS

Earliest COD 1) P.Malaysia – • Plentong – Woodlands Existing • P.Malaysia – Singapore post 2020 (2nd link Plentong – Woodlands) 2) Thailand – P.Malaysia • Sadao – Bukit Keteri Existing • Khlong Ngae – Gurun Existing • Su Ngai Kolok – Rantau Panjang TBC • Khlong Ngae – Gurun (2nd Phase, 300MW) TBC 3) Sarawak – P. Malaysia 2025 4) P.Malaysia – Sumatra 2021 5) Batam – Singapore post 2020 6) Sarawak – West Kalimantan Existing 7) Philippines – Sabah TBC 8) Sarawak – Sabah – Brunei 2020 • Sarawak – Sabah 2020 • Sarawak – Brunei 2019 9) Thailand – Lao PDR • 2 - Thakhek - Theun Hinboun Existing • Ubon Ratchathani 2 - Houay Ho Existing • Roi Et 2 – Nam Theun 2 Existing • Udon Thani 3 - Na Bong - Nam Ngum 2 Existing • Nakhon Phanom 2 – Thakhek – Then Hinboun (Exp.) Existing • Mae Moh 3 – Nan – Hong Sa Existing • Udon Thani 3 – Nabong (converted to 500KV) 2019 • Ubon Ratchathani 3 – Pakse – Xe Pian Xe Namnoy 2019 • Khon Kaen 4 – Loei 2 – Xayaburi 2019 • Nakhon Phanom – Thakhek 2015 • Thailand – Lao PDR (New) 2019-2023 10) Lao PDR – Vietnam 2016 - 2020 • Xekaman 3 – Tranhmy Existing • Xekaman 1 – Pleiku 2 2016 11) Thailand – Myanmar 2018-2026 12) Vietnam – Cambodia (New) • Chau Doc – Takeo – Phnom Penh Existing • Tay Ninh – Stung Treng TBC TBC stands for to be confirmed 13) Lao PDR – Cambodia The original COD is according to AIMS II results. • Ban Hat - Kampong Sralao Existing The earliest COD information is as of May 2017 • Ban Hat - Stung Treng post 2018 14) Thailand – Cambodia (New) post 2020 The Priority Projects, which refer to the APAEC 2016-2020, are underlined and indicated in Red. • – Banteay Meanchey Existing • Thailand – Cambodia post 2020 15) East Sabah – East Kalimantan TBC 16) Singapore – Sumatra post 2020 CURRENT STATUS OF ASEAN POWER GRID PROJECTS

Exist On-going Future Total (Up to 2021)

Northern System 4,152 2,469 15,774-18,924 22,395-25,545 9 Thailand - Lao PDR 3,584 1,879 1,865 7,328 10 Lao PDR -Vietnam 248 290 TBC 538 11 Thailand - Myanmar - - 11,709-14,859 11,709-14,859 12 Vietnam - Cambodia 200 - TBC 200 13 Lao PDR - Cambodia TBC 300 - 300 14 Thailand - Cambodia 120 - 2,200 2,320

Southern System 450 600 1,800 2,850 1 P.Malaysia - Singapore 450 - 600 1,050 4 P.Malaysia - Sumatra - 600 - 600 5 Batam - Singapore - - 600 600 16 Singapore - Sumatra - - 600 600

Eastern System 230 30-100 600 860-930 6 Sarawak - W.Kalimantan 230 - - 230 7 Philippines - Sabah - - 500 500 8 Sarawak - Sabah - Brunei - 30-100 100 130-200 15 E.Sabah - E.Kalimantan - - TBC -

Northern - Southern System 380 100 300 780 2 Thailand - P.Malaysia 380 100 300 780

Southern - Eastern System - - 1,600 1,600 3 Sarawak- P.Malaysia - - 1,600 1,600

Grand Total 5,212 3,199-3,269 20,074-23,224 28,485-31,705 Remarks: - Ongoing Projects are projects with Tariff MOU/Contract signed. - TBC stands for To Be Confirmed. - The Priority Projects, which refer to the APAEC 2016-2020, are underlined and indicated in Red. PLAN to REVIEW THE AIMS - II

• AMIS-II was completed in 2010, need to be updated. • The National Power Development was not really considered in AIMS Background • High penetration of intermittent renewable energy sources in the region • Awareness and concern on environment impact • To incorporate the proper mechanisms and incentives that would allow it to deliver full benefits of power Objectives interconnection, • To deploy the renewable energy; expansion of access to electricity, and optimization of regional resources • Funding has been discussed with and proposed to Resource for the USAID. Study • Expected to commence in 2018 for one year study period. MULTILATERAL POWER TRADING

POTENTIAL BENEFIT

  Realization of a more efficient use of energy resources. Achieve a more efficient utilization of energy sources across the region, connecting countries with surplus power generation capacity to countries facing a deficit;  Delivery of economic benefits. Realize financial benefits across the region, from potential infrastructure savings as well as lower energy costs. It would also help utilities balance their excess supply and demand, improve access to energy services, and reduce costs of developing energy infrastructure; 

POTENTIAL BENEFIT Optimization of regional investment. Reduce the costs of developing national energy infrastructure, by reducing investments in power reserves to meet peak demand, lowering operational costs while achieving a more reliable supply and reducing system losses. Expansion of renewable energy. a) The abundant hydropower yet to be fully developed. b) Sharing of renewable energy sources would also help substitute hydropower to present coal and other fossil fuels, thereby helping to curb emissions; c) Accelerate the development and integration of renewable power generation capacity Improvement in the access to electricity. a) expand power networks and client base, in a region where millions of people still lack access to electricity and clean cooking energy sources. b) access to electricity will prove more economically viable through connections to the APG rather than extensions of the national grid, when additional investments are required. c) countries with an energy surplus can benefit from regional interconnections by servicing their deficit areas more efficiently with power imports from the APG. APG MULTILATERAL POWER TRADE

ASEAN Energy Policy

There is a need for greater stability and consistency in the application of energy -related policies. Currently, energy policies vary for each of the ASEAN countries depending mainly on the availability of the local fuel resources and government’s direction

Abundant hydropower and natural gas resources, their development is vital to support economic growth

Source: Southeast Asia Energy Outlook 2013

APG Cross-Border Power Trading Principle

 To clearly determine and design the operating platform for APG Cross - Border Power Trading Activities in accordance with APG power trading objectives only  The Platform should comply with the rights of each member country to have its power systems operation related to bilateral power cooperation agreement between two countries  To practically implement Performance Standard and Grid Code, are described as top priorities for ASEAN countries, in order to form an APG power system operating standard in this region  To strongly consider the Formulation of Power Trading Mechanism for implementation to enable third party access power trading scheme under the condition to minimize the effect to the internal power systems operation of each member country  To carry out a research survey to identify any obstacle in terms of regulatory issues which may block the development of APG

ROAD TO MULTILATERAL POWER TRADE

ASEAN X-BORDER BILATERAL MEMBER LINK ARRANGEMENT

STATES

APG

MULTI - BILATERAL + ELECT. XCHANGE LATERAL THIRD PARTY POWER TRADING LESSON LEARNT FROM NORDIC MODEL

ASEAN Multilateral Electricity Exchange The Nordic Pool Model

Objectives: Can Nordic The key benefits:

model works? a) achieve long-term security, availability a) the system enhances efficiency, and reliability of energy supply; b) delivers electricity at the most cost- b) enhances efficiency by optimizing the effective price, region’s energy resources; and c) maximizing the benefits of both c) Allow access to affordable energy to producers and consumers. populations across the region

1. No interference with the national electricity supply industry, 2. No need to : - modify national pricing systems (including subsidies), Conduct FS - change the ownership structure of utilities (privatization), Approach 3. No need to create regional bodies to supersede national regulatory authorities. 4. No need to unbundled and privatized the utilities and regulatory agency in each participant country can be retained. 5. each country has its own market transmission system operator, working closely with the regional operator.

A step wise approach is necessary, rather than a big bang where everything is attempted at the same time MULTILATERAL POWER TRADE: LTMS Case LTMS TO ASEAN Multilateral Power Trade

LAO PDR

THAILAND

An evolution from bilateral MALAYSIA (emergency power) exchange to multi-lateral SINGAPORE power trading. Lao PDR, Thailand, Malaysia and Singapore (LTMS) Power Trade

LAO PDR

ITEM DESCRIPTION 1. Seller Lao PDR THAILAND 2. Buyer Singapore 3. Capacity [MW] 100 4. Transit Thailand & Malaysia MALAYSIA 5. Interconnector Existing

From emergency exchange and sharing spinning SINGAPORE reserve to economic exchange LTMS Power Trade Principles

LAO PDR SINGAPORE Final Energy Price = PPA (Energy exporter importer Charge) + Transmission/Wheeling Charge + Others*)

LA PPA SG

WHEELING CHARGE LAO PDR 100 MW  License generator SINGAPORE  License transmission  License importer company  Market Participant  License exporter  PPA  Power Purchase TH MY  Commercial and Legal Agreement (PPA) Arrangements  Commercial and Legal  Taxes/GST  Thailand/Malaysia Transit Arrangements  License transmission company  Taxes/GST  Wheeling arrangement *) Congestion Costs, System  Interconnector capacity arrangement losses, Administration Cost,  Taxes/GST Tax, etc. LTMS Power Trade Principles

Technical Feasibility

 Allowable capacities  Time and duration of cross border power trade  System security and system reliability of the Parties  Planning and operation mechanism of system operators of the Parties  System Losses and Treatment of System Losses Update on the LTM(S) - PIP

1. LTMS-PIP Working Group (WG) and four Technical Task Forces (TTFs) were formed in November 2015 to look into technical, commercial, legal and tariff aspects of the project; 2. TTFs completed the Study on LTMS-PIP in September 2017 with findings/recommendation to implement the project in two phases: 3. Phase 1- 2018-2019 (LTMS-PIP): Power Trade of up to 100MW between Lao PDR and Malaysia via Thailand utilising only existing network interconnections; . Phase 2 - 2020 or beyond (LTMS-PIP): Possible expansion to include Singapore when second interconnection cable between Singapore and Malaysia is back in service. . MOU for Phase 1 (between LTM Governments) was signed on 21 September 2016 at the 34th AMEM in Nay Pyi Taw, Myanmar which is valid until 20 September 2021; Update on the LTM(S) - PIP

6. Completion of key milestones of LTM-PIP implementation such as the draft Energy Purchase and Wheeling Agreement (EPWA), Interconnection Operation Manual, and agreement on pricing were completed in June 2017 7. The EPWA has been signed during the 35th AMEM Meeting in Manila, Philippines on 18-22 September 2017 to allow electron transfer for LTM-PIP on 1 January 2018 8. Commercial Agreement for Phase 1 of the (EPWA) structure is consist of: a) Main Agreement, which applies to all three utilities and cover residual issues or matters such as commencement date for the agreement, conditions precedent, obligations of parties to be responsible for their own country’s laws and taxes; b) Part 1-Energy Sale & Purchase between EDL and TNB, which sets out the issues that are relevant to EDL and TNB relating to the sale by EDL and purchase by TNB of the LTM energy; and, c) Part 2-Wheeling Charge between EDL and EGAT, which sets out the issues that are relevant only to EDL and EGAT relating to the wheeling obligations of EGAT. CURRENT AGENDA OF APG

First electron flow LTMS PIP Phase I, January 2018

Study on the Formation of APG Institutions ATGP & ATSO

Feasibility Study on Multilateral Power Trade

Review AIMS to include National Power Development, Renewable Energy Sources and Environmental Impact

Continue to accelerate the development of the physical link between neighboring countries CONCLUSION

ASEAN countries collectively need to benefit from the abundance of indigenous resources within the region

APG is a step towards the optimization and conservation of energy in the ASEAN region

APG creates bilateral arrangement through cross border electricity trading toward multilateral trading arrangement

Need feasibility study on the Multilateral Power Trade to be implemented in ASEAN

Support and commitment are required from ASEAN Member States to realize the multilateral power trade arrangement THANK YOU

Contact: [email protected]