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

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

Objectives of Regional Interconnection

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

Interconnected System

Economic

Benefits

Political,

Societal &

Enviromen

tal Benefit

chnical

enefits

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

Collective cost reduction

Investment in larger plants result in lesser cost per unit

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

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

BENEFITS OF ITERCONNECTIONS

Political, 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

“Connectivity creates Stronger,

Safer, Better Economics”

“Stronger Economics, stronger

ASEAN, stronger Member States”

Source: ASEAN Secretariat

ASEAN has a huge of natural resources, high energy demand, high economic growth

Why we need ASEAN Connectivity

The three pronged strategies to achieve overall ASEAN connectivity

People to People

Connectivity

-Education & Culture

-Tourism

Physical

Connectivity

-Transport

-ICT

-Energy

Institutional

Connectivity

-Trade liberalization

& facilitation

-Regional Transport

Agreement

-Cross border

procedure etc.

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.

Background of ASEAN Connectivity

Source: http://www.asean.org/

BACKGROUND ASEAN Community

ASEAN Ministerial Meeting

ASEAN Regional Forum

Defense

Law

Transnational Crime

(AMM)

(ARF)

ASEAN

Political- Security

Community ASC ASEAN Economic Ministers

ASEAN free trade area

Energy

Food, Agriculture & Forestry

Finance

Investment

Etc.

ASEAN

Economic Community

AEC

(AEM)

(AFTA)

ASEAN

Socio-Cultural Community

ASC

Culture & Arts

Disaster Management

Education

Environment

Haze

Health

Information

Etc.

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

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

TAGP

CCT

EE&C

RE

REPP

NEC APG

APAEC

• Development of the APAEC

• Global Energy Landscape

• ASEAN Energy Development

APAEC

ASEAN ENERGY COOPERATION IN ASEAN CONNECTIVITY

TAGP

APG

APAEC

ASCOPE

HAPUA

APAEC

Infr

astr

uct

ure

ASE

AN

C

on

ne

ctiv

ity

ASEAN – Energy Cooperation

REGIONAL POWER INTERCONNECTION

in ASEAN

Blessed with abundance of natural resources. Potentials yet to be explored Transmission networks need to be expanded Grid density is still low

ASEAN abundant energy resources

The thirst for energy can be fulfilled by the region’s wealth of natural resources

ASEAN’s POTENTIAL ENERGY RESOURCES

Need for efficient utilization of energy sources

ASEAN’s POTENTIAL ENERGY RESOURCES

Fosil Energy Resources: Oil

Gas

Coal

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

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

Indonesia, Malaysia, Philippines, Thailand, Vietnam

Renewable Energy Resources:

Hydro

Geothermal

Solar

Wind

Biomas

Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Vietnam

Indonesia, Philippines

All Countries has various amount

Limited potential

All Countries has various types and amount

APG

The APG is the key infrastructure to enable power

trade between ASEAN countries.

Diversified Resources

Price-demand disparity

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

(Indonesia)

Cheaper system can sell to more expensive system

Enablers for ASEAN Power Trade

Three key drivers that enable Power Trade among ASEAN countries

ENABLERS FOR ASEAN POWER TRADE

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

OPPORTUNITIES

Source:Southeast Asia Energy Outlook 2013 & CIMB ASEAN Research Institute (2013)

Sell to Expensive

System

Demand increase, selling price may increase

Then overall electricity price may increase

Electricity price may decrease

31 Source:Beni Suryadi (2014)

Cheaper

System

Electricity Trade Pricing Lower average system cost is envisioned with the realization of interconnection projects

OPPORTUNITIES

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

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

*): The MOU of APG signed by

ASEAN Energy Minister in July 2007

Facilitate cross-border power purchases/exchanges within the region

Allows effective development and utilization of resources

Optimize usage of diverse energy resources in the region

Enable power transfer from efficient generation in the region to load centers

Reduce capital investment required for generation capacity expansion

Capitalizing difference of demand peaking time

ENCHANCING

REGIONAL ENERGY

SUSTAINABILITY,

SECURITY,

RELIABILITY, TOWARD

MORE EFFICIENT,

ECONOMIC AND

SECURE OPERATION

OF POWER SYSTEM

Objectives of APG

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

BENEFITS OF ASEAN POWER GRID

National impediments to

promotion of power trade

• Differing national policies of AMS

• Countries desire for self‐sufficiency before interconnection is allowed

• Countries concerns over restructuring of ESI under Multilateral Electricity Trading

Electricity industry restructuring and

evolution into a multilateral power

trading

• No harmonized operational & regulatory framework or tariff structure

• No mechanisms for power wheeling, pool rules, power bidding, regulatory framework and ensuring system reliability & security

• Financing Modalities for funding sources

Enviroment Awareness

• High penetration of intermittent renewable energy sources

• Aware and concern on environment impact

APG’s CHALLENGES

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

Earliest COD 1) P.Malaysia – Singapore

• 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

• Nakhon Phanom 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

13) Lao PDR – Cambodia

• Ban Hat - Kampong Sralao Existing

• Ban Hat - Stung Treng post 2018

14) Thailand – Cambodia (New) post 2020

• Aranyaprathet – Banteay Meanchey Existing

• Thailand – Cambodia post 2020

15) East Sabah – East Kalimantan TBC

16) Singapore – Sumatra post 2020

The earliest COD information is as of May 2017

The original COD is according to AIMS II results.

The Priority Projects, which refer to the APAEC 2016-2020, are underlined and indicated in Red.

TBC stands for to be confirmed

UPDATED LIST OF ASEAN POWER GRID PROJECTS

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.

Exist

On-going (Up to 2021)

Future Total

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

CURRENT STATUS OF ASEAN POWER GRID PROJECTS

Background

• AMIS-II was completed in 2010, need to be updated.

• The National Power Development was not really considered in AIMS

• High penetration of intermittent renewable energy sources in the region

• Awareness and concern on environment impact

Objectives

• To incorporate the proper mechanisms and incentives that would allow it to deliver full benefits of power interconnection,

• To deploy the renewable energy; expansion of access to electricity, and optimization of regional resources

Resource for the Study

• Funding has been discussed with and proposed to USAID.

• Expected to commence in 2018 for one year study period.

PLAN to REVIEW THE AIMS - II

MULTILATERAL POWER TRADING

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.

POTENTIAL BENEFIT

APG MULTILATERAL POWER TRADE

Abundant hydropower and natural

gas resources, their development is

vital to support economic growth

Source: Southeast Asia Energy Outlook 2013

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

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

ASEAN MEMBER STATES

ELECT.

XCHANGE

BILATERAL ARRANGEMENT

A P

G

BILATERAL +

THIRD PARTY

X-BORDER

LINK

MULTI -

LATERAL

POWER

TRADING

ROAD TO MULTILATERAL POWER TRADE

The Nordic Pool Model ASEAN Multilateral Electricity Exchange

Objectives:

a) achieve long-term security, availability

and reliability of energy supply;

b) enhances efficiency by optimizing the

region’s energy resources; and

c) Allow access to affordable energy to

populations across the region

The key benefits:

a) the system enhances efficiency,

b) delivers electricity at the most cost-

effective price,

c) maximizing the benefits of both

producers and consumers.

1. No interference with the national electricity supply industry,

2. No need to : - modify national pricing systems (including subsidies),

- change the ownership structure of utilities (privatization),

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

Approach Conduct FS

Can Nordic

model works?

LESSON LEARNT FROM NORDIC MODEL

MULTILATERAL POWER TRADE: LTMS Case

LTMS TO ASEAN Multilateral Power Trade

THAILAND

SINGAPORE

MALAYSIA

An evolution

from bilateral

(emergency

power) exchange

to multi-lateral

power trading.

LAO PDR

Lao PDR, Thailand, Malaysia and Singapore

(LTMS) Power Trade

THAILAND

LAO PDR

SINGAPORE

MALAYSIA

From emergency exchange and sharing spinning reserve to economic exchange

ITEM DESCRIPTION

1. Seller Lao PDR

2. Buyer Singapore

3. Capacity [MW] 100

4. Transit Thailand & Malaysia

5. Interconnector Existing

TH MY

LA SG PPA

WHEELING

CHARGE

Thailand/Malaysia Transit

License transmission company

Wheeling arrangement

Interconnector capacity arrangement

Taxes/GST

LAO PDR

License generator

License transmission

company

License exporter

Power Purchase

Agreement (PPA)

Commercial and Legal

Arrangements

Taxes/GST

SINGAPORE

License importer

Market Participant

PPA

Commercial and Legal

Arrangements

Taxes/GST

LAO PDR

exporter SINGAPORE

importer

LTMS Power Trade Principles

Final Energy Price = PPA (Energy

Charge) + Transmission/Wheeling

Charge + Others*)

100 MW

*) Congestion Costs, System

losses, Administration Cost,

Tax, etc.

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

LTMS Power Trade Principles

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.

Update on the LTM(S) - PIP

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

CURRENT AGENDA OF APG

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

CONCLUSION

THANK YOU

Contact: apgcc.hapua@gmail.com