The Intractable Challenges Facing Energy Trade in Southeast Asia

Abstract

ASEAN is expected to grow collectively by over 5 percent per year to become the world’s fourth-largest economy by 2030. At the same time, the ASEAN Centre of Energy has predicted that energy demand in the region will increase by more than 70 per cent between 2020 and 2040. In meeting that demand, energy in the region will also have to be secure, accessible and affordable. Arguably, the most substantive measure to be undertaken in the region is the ASEAN Plan of Action for Energy Cooperation (APAEC) which involves the upgrading of the electricity grid and development of a multilateral electricity trading platform. These activities may contribute to the target of reducing energy intensity by 32% by 2025. Energy cooperation is presently managed through consensus among national energy authorities under the authority of energy ministers in Southeast Asia. ASEAN Energy committees deliberate and decide on technical issues regarding the energy grid upgrade in multiple layers, including the Heads of ASEAN Power Utilities/Authorities (HAPUA), the ASEAN Power Grid Consultative Committee (APGCC), the ASEAN Ministers on Energy Meeting (AMEM), and the ASEAN Senior Officials Meeting on Energy (SOME). The ASEAN Power Grid programme aims to ‘enhance connectivity, energy security and sustainability’. Countries like Lao PDR are likely to produce energy in surplus, while middle income and advanced economies like Malaysia and Singapore would seek to buy electricity as part of their energy diversification and greening strategy. This trade structure can be achieved by connecting the individual national grids and agreeing on the pricing mechanism. Given present constraints, it is all the more important for existing sources of energy to be utilised more efficiently and in ways that reduce carbon emissions. This is where multilateral trading of energy will become relevant, and surpluses from one country can be sold to another through the power grid.