ASEAN Economic Community 2015: Integration of Energy Infrastructure
ASEAN is one of the fastest growing economic regions in the world and has a fast rising energy demand driven by economic and demographic growth. ASEAN has been demonstrating a sharp rebound from the global crisis. In 2010 the region’s real GDP grew above the world average with some countries even recording two-digit economic growth. Total GDP of the region in 2010 was US$1,850 (at current prices) having grown by 7.4 percent from the previous year. The population of ASEAN reached 598.5 million in 2010, 1.3 percent more than the previous year.
The region’s economic and population growth had resulted in a consequential increase in final energy consumption. With the assumed GDP growth rate of 5.2 percent per annum from 2007 to 2030, it was estimated the final energy consumption increase to 427 MTOE (million tons of oil equivalent) in 2010 and will grow at an average annual rate of 4.4 percent to 1,018 MTOE in 2030 (ACE and IEEJ; the 3rd ASEAN Energy Outlook: BAU Scenario). This growth is very much higher than the world’s average growth rate of 1.4 percent per year in primary energy demand over 2008-2035 (IEA World Energy Outlook 2010).
In view of the high economic growth and need of energy supply, the challenge to ensure a secure supply of energy is an overriding concern for ASEAN. Energy is crucial to the transformation of ASEAN into a stable, secure, prosperous, rules-based, competitive, resilient and integrated economic community by 2015, named ASEAN Economic Community (AEC) 2015, that was formulated as AEC Blueprint, declared by ASEAN Senior Officer on Energy (SOE) Leaders on the occasion of the 40th Anniversary of ASEAN and the 13th ASEAN Summit in Singapore in 2007.
As the follow-up, ASEAN developed The ASEAN Plan of Action for Energy Cooperation (APAEC) 2010-2015 under the theme “Bringing Policies to Actions: Towards a Cleaner, more Efficient and Sustainable ASEAN Energy Community”. It covers the energy component of the ASEAN Economic Community Blueprint 2015, to ensure a secure and reliable energy supply for the region through among others collaborative partnerships in the ASEAN Power Grid (APG) and Trans-ASEAN Gas Pipeline (TAGP), the promotion of cleaner coal use, energy efficiency and conservation, and renewable energy, including biofuels as well as nuclear energy as an option, to support and sustain economic and industrial activities.
APG and TAGP are the flagship programs mandated in 1997 by the ASEAN Heads of States/Governments under the ASEAN Vision 2020 towards ensuring regional energy security while promoting the efficient utilization and sharing of resources, which called for co-operation to establish interconnecting arrangements for electricity and natural gas within ASEAN through the ASEAN Power Grid (APG) and a Trans-ASEAN Gas Pipeline (TAGP).
ASEAN Power Grid (APG)
To continuously and reliably meet the growing demand for electrical energy, ASEAN needs to connect all national grids become regional grid. Countries with high power demand can meet their electricity shortfalls with power import from neighboring countries at reasonable prices and countries with abundant natural resources but with little requirement for electric supply can generate income from their surplus power. EGAT, Electricity Generating Authority of Thailand, member of HAPUA or The Heads of ASEAN Power Utilities/Authorities – ASEAN specialized body for ASEAN Power Grid – describes the grid as a win-win economic relationship within ASEAN countries.
Capital investments for the installation of additional generating capacities and transmission lines are necessary and could be a problem; however, it was found that one effective way to lower the requirements for capital investments is to interconnect the power systems via transmission lines between neighboring countries. Regional power grid will provide cheaper electricity supply for all members and ensure sustainability of energy resources as well as energy efficiency which will enable the region to be more competitive in the world markets.
HAPUA conducted the ASEAN Interconnection Master Plan Study (AIMS). The first study or AIMS I was completed and adopted in 2003 and ASEAN has also adopted AIMS II that was completed in 2010. AIMS proposed a comprehensive plan of regional transmission network that links ASEAN power systems, first on cross-border bilateral terms, then gradually expands to sub-regional basis and, finally to a totally integrated Southeast Asian or ASEAN power grid (APG) system.
Currently, the APG is in progress with four on-going interconnection projects and additional 11 projects are planned for interconnection through 2015. The investment requirement of the APG is estimated at $5.9 billion. A potential saving of about $662 million in new investment and operating costs is estimated to result from the proposed interconnection projects.
The AIMS II also identifies significant potential saving in investment of new power projects and operating costs within member countries. By 2025, there will be up to 19,576 MW of cross-border power purchase and 3,000 MW of economic exchange through the cross border interconnections. The integration of ASEAN Network resulted in a net saving of $788 million and a reduction in installed capacity by 2,013 MW.
Trans-ASEAN Gas Pipeline (TAGP)
Coordinated by the ASEAN Council on Petroleum or ASCOPE, TAGP aims to develop a regional gas grid by 2020, by linking the existing and planned gas pipeline networks of the ASEAN member states. The updated ASCOPE-TAGP Masterplan 2000 involves the construction of 4,500 kilometers of pipelines mainly undersea, worth $7 billion. The gas pipeline infrastructure had grown from 815 km in 2000 to 2,300 km of cross border gas pipelines in 2008; consist of eight bilateral gas pipeline interconnection projects. These pipelines formed part of the Trans ASEAN Gas Pipeline (TAGP), but all are bilateral in nature.
In 2008, ASEAN adopted the Trans-ASEAN Gas Pipeline (TAGP) Updated Masterplan 2008 as an update of the Trans ASEAN Gas Pipeline (TAGP) Masterplan 2000. However, following the conclusion of the supply-demand data verification by ASCOPE member states, there are no significant or major additions to the updated Master Plan that have been identified. No new significant gas reverse discoveries since year 2000 which makes East Natuna D-Alpha remains as the single largest resource, but the major pipeline to ASEAN region has yet to be developed because of pending commercial issues. Its commercialization therefore becomes even more crucial for the region since it is projected that there will be a widening supply gap as early as 2015 rising to more than 12 BSCFD (billion standard cubic feet per day) by 2025. This shortfall reflects declining gas reserves causing gas supply to plateau and starts to decline while at the same time demand continues to rise strongly.
As ASEAN heading towards the ASEAN connectivity by 2015, further optimization of the power grids and gas pipelines would be necessary to minimize any unnecessary cost for the integration of energy infrastructure.
A similar platform need to be established for regulators/governments to collaborate in addressing regulatory issues and thereto facilitating the harmonization all power market and gas market structures in ASEAN.
The ability for all markets to access electricity and gas resources from almost any location in ASEAN will not be achieved until ASEAN make a concerted effort on complex issues, for example an open access system, a more cooperative structure to facilitate trading and oversee the physical stability of interconnected systems, and harmonization of gas specifications and gas transit principles. This will promote electricity and gas trading beyond bilateral connection only.
The required framework, government support and business models need to be ready when the time comes to transport electricity and gas in the most economical and efficient manner. This proactive initiative is important for the region to understand the key success factors required for market readiness.
Moreover, this situation will be further cushioned by the physical integration of energy infrastructures such as the APG and the TAGP. This provides optimal solution for stimulating and strengthening the economy of the ASEAN region.
On top of that, continuous strong commitment from ASEAN Member Countries to co-operate and collectively pursue initiatives towards realizing the ASEAN Economic Community 2015 is the main key.
ASEAN Energy Policy Analyst
This article is originally posted in OGE Asia Magazine, 15 August – 15 September 2011.
Also published in
The world’s best thinkers on energy & climate.
- Integration of ASEAN Energy Infrastructure (talkenergy.wordpress.com)