Southeast Asia’s neighbours have big energy plans. Both China and India have said they want to trade clean electricity with the region through grid interconnections, while Australian firm Sun Cable is already raising money to build 4,000 kilometres of cables to route power from solar panels in Australia to Singapore.
These projects, while still many years in the making, add another dimension to Southeast Asia’s search for green growth. The region’s fast-rising energy demand is still met mainly with fossil fuels today. The Association of Southeast Asian Nations (ASEAN), the regional bloc, wants renewables to make up 35 per cent of its installed power capacity by 2025, up from over 33 per cent today, but this rate of deployment is too slow to meet the goals of the Paris Agreement in keeping global warming to 2 degrees Celsius above pre-industrial levels.
Could clean energy imports hold the key for Southeast Asia, or will their complexity outweigh benefits? Eco-Business explored this issue with two energy experts: Beni Suryadi, manager of the Power, Fossil Fuel, Alternative Energy and Storage department at the ASEAN Centre for Energy, and Elrika Hamdi, energy finance analyst at the Institute for Energy Economics and Financial Analysis, a US-based think-tank.
Tune in as we discuss:
- The current prospects for clean energy imports into Southeast Asia
- Whether Southeast Asia need clean energy imports from other countries
- The technical, geopolitical and financial challenges in clean energy imports into the region
- The key ingredients for successfully leveraging opportunities
- Expected trajectory for clean energy import projects in the next few decades
This is the Eco-Business podcast. I’m Liang Lei. Southeast Asia’s energy demand is rising fast but the region is slow in adopting clean electricity. Nearby countries have said that they would like to share renewable energy with the region by connecting the power grids. Will it work?
In a recent report by energy think-tank Ember, in the past six years, under 40 per cent of Southeast Asia’s new electricity demand was met with clean energy sources like solar, wind and hydropower. So the growth of fossil fuels is outpacing renewables. While the focus has been on increasing domestic supply of renewables within Southeast Asia, neighbouring countries have presented plans to provide clean electricity through grid interconnections.
There is China’s Global Energy interconnection project from back in 2015. The One Sun One World One Grid initiative announced by India and the United Kingdom last November also involves connecting Southeast Asia to a larger Asian clean energy network. Meanwhile, Australia from Sun Cable is raising money to build 4,000 kilometres of undersea cables to send solar power to Singapore.
These projects come with policy considerations for Southeast Asia. Does the region need the import of renewables? Is it beneficial? What are the key challenges and how can the region best leverage on such opportunities?
For these questions, I’m joined by two experts. On the podcast is Beni Suryadi from the ASEAN Centre for Energy, an intergovernmental organisation in Southeast Asia. Beni is the manager of the power, fossil fuel, alternative energy and storage department at the centre. We also have Elrika Hamdi, an energy finance analyst at the US-based Institute for Energy Economics and Financial Analysis or IEEFA. Elrika keeps a keen eye on Southeast Asia and is based along with Beni in Indonesia. Thanks both for joining me today.
Elrika Hamdi [01:50]
Thank you for having us over.
Liang Lei [01:53]
Let’s start with you, Beni. What are the current prospects for clean energy imports into Southeast Asia? Where are they now, and other perhaps other initiatives I’ve missed beyond the ones I’ve mentioned from China, India and Australia?
Beni Suryadi [2:06]
Thank you, Liang Lei. The export and import of clean energy in and out of Southeast Asia are actually not new. In April 2009, the 600-megawatt Shweli River Cascade 1 hydropower station was completed and put into operation. It transmitted 300 megawatts of electricity respectively to China and Myanmar.
In the same year, China’s southern power grid supplied electricity to northern Laos via 115 kilovolt lines to alleviate local power shortages. Up until now, China has transmitted more than 1,000 gigawatt-hours of electricity to Laos. This transmission is part of a power interconnection project involving Laos, Thailand and China.
Another example is the power interconnection project between Myanmar, Bangladesh and China. Myanmar lacks power supply but has abundant resources in hydropower. So in the short-term, Myanmar receives supply of electricity from China, but in the long run it will be vice versa.
A recent study also identified that the China-Vietnam interconnection project is technically and economic feasible. This project will send four gigawatts of electricity from Yunnan, China to Ho Chi Minh city, Vietnam via 600-kilovolt transmission cables.
You’ve already mentioned the Sun Cable project, and the One Sun One World One Grid initiative. So I see that there are clear prospects for clean energy imports into this region.
Liang Lei [4:00]
Elrika, do you want to add anything based on what you see in the region?
Elrika Hamdi [4:05]
I know that Beni will probably be more positive on this. The ASEAN Centre for Energy has done tremendous work on the ASEAN Power Grid. Despite the prospects that Beni mentioned, I think many of the examples that he gave are bilateral agreements. These are mostly based on considerations of geopolitical security.
For bigger interconnections between more countries, the issue is more than just on supply and demand. Building grid interconnections requires a lot of tedious work, especially on synchronising each country’s power infrastructure.
There’s also always the issue of energy security. ASEAN has a cooperation agreement in place, but each country also has to address their own energy security and reliability issues.
There are also regulatory and socio-economic issues that vary among countries – for example challenges in land acquisition or getting right of way for subsea cables.
I’m not saying that there are no prospects for energy imports, but there are issues and risks to highlight. These risks will make scaling projects up difficult.
Liang Lei [5:51]
That’s a great point, we will get to that later. I want to keep the conversation at a bird’s eye view for now. Elrika, does Southeast Asia need clean energy imports from other countries?
Elrika Hamdi [06:05]
The gestation period for the interconnection project from Laos to Singapore took eight years, and the ASEAN power grid has been discussed for more than 20 years. This highlights the scale of challenges.
Elrika Hamdi, energy finance analyst at IEEFA
To put it simply, Southeast Asia definitely needs more energy as its economy grows very rapidly. However, I think the only country that may need to import energy currently is Singapore, because they are land-constrained and because their power consumption is higher per-capita.
Also, Singapore is probably the only country that can afford more expensive renewable energy in the next few years. If we are talking about solar energy with existing battery storage technologies, or wind energy with battery storage, it is still more expensive in Southeast Asia compared to hydropower, especially if the existing hydropower station has been built for many years.
Other Asian countries, including China and India, currently also have high power demand domestically. I think they might be better off trying to build up their own power supply for use domestically first, before putting it out there for other countries.
And recall that it is not just supply and demand, but also grid infrastructure and the condition of each country’s grids. If you try to connect a lot of countries, it will take a long time. The gestation period for the interconnection project from Laos to Singapore took eight years, and the ASEAN power grid has been discussed for more than 20 years. This highlights the scale of challenges.
Liang Lei [07:50]
Beni, what do you think about this?
Beni Suryadi [07:53]
It could be yes, it could be no. I’ll echo Elrika in saying that the demand is rising. To meet the rising demand sustainably requires a change from the status quo, a transition away from fossil fuels to clean energy.
Meeting future regional demand with clean energy is technically and economically feasible. Except for Singapore, the ASEAN region in general has abundant clean energy resources. In our recent study, the ASEAN interconnection masterplan study, the technical capacity in the region is over 8,000 gigawatts of solar, and 300 gigawatts of wind per year. We could generate about 12,000 terawatt-hours of solar power, and 700 terawatt-hours of wind power annually. This is way more than what is needed in the region.
On the economic side, the cost of clean energy generation especially for wind and solar power is becoming more and more competitive against fossil fuels.
But there are several obstacles for scaling up renewable energy within Southeast Asia. First, solar and wind resources could be located far from demand centres, creating this geographic mismatch between supply and demand. Second, there is also temporal variation, where demand peaks do not align with supply peaks, at the daily and seasonal scales.
This is where clean energy imports, within ASEAN or with its neighbours, could help to address the obstacles and increase the ratio of clean energy in our energy mix.
Liang Lei [10:05]
Beni, to follow-up on what you said – that Southeast Asia has more renewable energy potential than what’s needed, but there may be some mismatches in tapping on it. In this case, what role will energy imports from other countries play – is it to support countries who may not be able to tap on its resources, or are there still opportunities for a wider integration?
Beni Suryadi [10:26]
It could be both. For example in Myanmar, which face difficulties utilising their own resources, importing clean energy from China becomes a better option. In Thailand, where some business locations are close to the Laos border and far from its own renewable energy sources, utilising oil and gas could be more costly than tapping on clean energy imports from neighbouring countries (within Southeast Asia).
Liang Lei [11:16]
Gotcha Beni. Elrika, let me go back to what you mentioned about the ASEAN power grid being a little slow in its development. Is it the case then that Southeast Asia as a bloc isn’t able to fully leverage on the benefits of clean electricity imports into the region, because we can’t share it efficiently?
I think it’s much more complicated than that, because cross-border cooperation entails a lot of issues between countries. There are geopolitical issues. Energy exports and imports are great in concept, but they might be hard to realise in practice considering the issues, for example, in geography, in political systems, in a country’s level of economic growth, whether it can afford energy imports as asked by the supplier.
Wealthier countries and more democratic systems might have more leverage to see such cooperation go through to the finish line, but to have a project on the scale of, let’s say, the European interconnections, there are a lot more issues that will be harder to tackle. At the end of the day, we are talking about economic and political cooperation among countries.
Liang Lei [12:49]
And after all, energy is a very important commodity that can affect self-sufficiency and economic development within Southeast Asia, isn’t it? Are there any geopolitical issues to look out for when we talk about energy imports?
Let me give an example. For the proposed Sun Cable project, if we’re just talking about the supply side, there is no issue, basically, for the Australian government. They have just cleared the environmental permits for Sun Cable to build their generation capacities in northern Australia. I think Sun Cable is currently trying to find financing for it. Also, there is no issue on the demand side. Singapore will be very willing to take the power supply.
The issue is the interconnection. It needs to go through Indonesian waters, and up until today, the permit Sun Cable has received from Indonesia is only a permit to conduct surveys for their undersea cables, and nothing more than that. I’m pretty sure that there is an ongoing discussion behind the scenes, but it shows that the project is not going as smoothly as Sun Cable would have wanted. Energy security is probably the most critical issue that is always at the back of every government’s mind.
Liang Lei [14:26]
We’ve talked a lot about challenges. Let’s talk about the ingredients for success. Beni, do you want to start us off? We’ve heard that there are opportunities with energy imports, although there are also challenges. What are some of the key things we have to do to make sure that we can fully leverage this opportunity in the next few years?
Beni Suryadi [14:50]
Clean energy cross-border interconnections cannot be only about economic benefits. Projects must take in more comprehensive views, addressing a spectrum of issues relating to the economy, security, geopolitics et cetera.
Beni Suryadi, manager of the Power, Fossil Fuel, Alternative Energy and Storage Department at the ASEAN Centre for Energy
Yeah, just to continue from the previous points, the main obstacle is more on geopolitical concerns. Then, the key ingredient will be the leadership of the governments involved in cross border connectivities.
Take for example the Laos-Thailand-Malaysia-Singapore integration project (within Southeast Asia), which just recently commenced, where Singapore importing up to 100 megawatts of renewable hydropower using existing interconnections. The leadership by their governments is definitely the key ingredient for the success of this.
Elrika mentioned that the ASEAN Power Grid initiative has existed since 20, 30 years ago. Much of the discussions used to be between utility firms, talking business-to-business, how much to gain, how much to lose. Clean energy cross-border interconnections cannot be only about economic benefits. Projects must take in more comprehensive views, addressing a spectrum of issues relating to the economy, security, geopolitics et cetera.
Liang Lei [16:15]
Beni, just to stay on you, when we talk about energy imports from other countries into Southeast Asia, for example, the kind of plans with India and China, should such projects be talked about at a country level where individual states are involved, or should there be a larger ASEAN-level plan or policy around such imports?
Beni Suryadi [16:37]
The way we approach building the regional cross-border interconnections is starting on a bilateral basis, and then gradually moving to sub-regional, and then eventually aiming for full integration. The process always starts bilaterally, and then we continuously expand from there.
Elrika mentioned a very pertinent point about pilot projects. Starting bilaterally with pilot projects allows both sides to build confidence. Neighbouring countries can also learn from that experience. This is our approach, and I see this to continue being the approach in the long run towards multilateral power integrations.
Liang Lei [17:37]
And Elrika, your thoughts on the level of planning, collaboration and policymaking that we should be talking about when it comes to energy imports into Southeast Asia?
Elrika Hamdi [17:46]
It’s a very complicated question to answer, but I would echo what Beni said. It’s the leadership from each country that will make a difference. When you’re talking about power, stronger cooperation among countries bilaterally or regionally is the key to success. Exchanging lessons learnt from whatever pilot projects that have already existed too.
Another important key ingredient for success is the availability of financing from wealthier countries. It could also be the enabler for transmission infrastructure projects, because transmission projects are very capital heavy upfront. So the kind of financing that is available, the kind of willingness from the government to provide additional support, for instance, guarantees or support on land acquisitions for right of way, those are probably the things that would accelerate interconnection projects.
Liang Lei [19:19]
That’s an important point isn’t it? When it comes to the scale of the project we’re talking about, energy imports from other countries into Southeast Asia, who should be providing the financing? Is it the role of multilateral banks, do countries have to collaborate, or are there any other ways to finance such big projects? After all, we are talking about, possibly, very long transmission cables and very huge storage facilities right?
Elrika Hamdi [19:46]
Ideally, it would be coming from concessional financing because we need cheaper financing for these kinds of projects, right, because transmission and grid infrastructure would not have huge profit margins. So concessional financing from multilateral development banks, from the World Bank, from the Asian Development Bank, those kinds of financing will be crucial. So will each country’s equity finance too, from each ASEAN country. That’s why I said that the availability of financing from wealthier countries would probably unlock difficulties that projects face.
Liang Lei [20:39]
Sure, and one last follow up on this, Beni. What is an optimal level of clean energy imports in the next few years for Southeast Asia, balancing what potential Southeast Asia already has, and the need to decarbonise faster. Just how big should the role of clean energy imports be for the region?
Beni Suryadi [21:05]
As mentioned before, we have around 7,700 megawatts of existing cross-border electricity trade (in Southeast Asia), about 600 megawatts is under construction, and based on countries’ power development plans and our ASEAN interconnections study, there will be another 18 or 20 gigawatts of new interconnectivity in this region. This will, at one point, be enough to fulfil the clean energy needs in the region by ourselves. The success of the Laos-Thailand-Malaysia project, now integrated with Singapore, have provided significant confidence that the region can collaboratively harness regional resources to support the clean energy transition.
With that in mind, energy imports will be more for fulfilling the remaining gaps that countries have. We’re talking about countries with direct borders with neighbours that are rich in clean energy resources.
I’m not sure I can provide a number, but from our estimation, imports will make up probably five per cent of the region’s total energy supply.
Liang Lei [22:45]
Sure, thanks Beni. I’m sure it’s hard to provide an estimate now when the projects are still many years away. Elrika, what’s your general thoughts on the optimal level of energy imports into Southeast Asia?
Elrika Hamdi [22:54]
I don’t have a number too, it’s very difficult because when you talk about renewable energy in particular, are you talking about the baseload, are you talking load following, peak load…this will vary between countries and markets.
Optimally, every country in this world needs to transition as fast as possible. But whether they should be doing it through energy export and import, it will depend on, going back to the basics, on whether it’s the case of an energy surplus economy selling to an energy starved economy, and whether exporters have their own local demand to fulfil, before even thinking about interconnections.
Liang Lei [24:03]
Gotcha, quite a few considerations there. I think we’ve covered a lot of ground already. I have one last question. Elrika, perhaps you could start first. If you could look forward to 2030, 2040, 2050, how do you expect the situation with energy imports into Southeast Asia to play out?
Elrika Hamdi [24:25]
I think the energy export and import are great in concept. Interconnections should be spoken about in the same breath with supply and demand considerations. So we don’t only talk about generation capacity, but also interconnection capacity.
But there are some challenges that need to be taken into account. And I guess the way forward is basically to look at whether each country has already fulfilled their own energy demand. If they have a surplus of supply, then they can start to think of selling it to other places.
I would really want to see Southeast Asia as a region, to not just be an importer, but also exporter of renewable energy. Will that be easy? I don’t think so. But maybe in the next few years, the situation could change and there could be stronger cooperation.
Liang Lei [25:52]
That’s a really interesting outlook, if one day Southeast Asia can be a renewable energy exporter. Beni, what’s your thoughts on how energy imports in Southeast Asia will play out in the next few decades, especially since you’re quite involved in all the discussions I’m sure.
Beni Suryadi [26:08]
The vision that we have when building the ASEAN power grid is not to be just an isolated regional power grid, but integrated with a larger region where the export and import of electricity can happen in more ways. That’s the long-term vision.
But it has to start by fulfilling the regional demand. Theoretically, I mentioned that we will be able to fulfil our own regional energy demand by sharing resources among the countries. In this context, energy imports into Southeast Asia may not play a significant role, basically just fulfilling the remaining gaps.
But we also recently experienced more geopolitical concerns and higher competition amongst countries in Southeast Asia. We’ve heard that Malaysia issued a moratorium against selling renewable energy electricity to Singapore. And Elrika has also mentioned the case of Indonesia. If that continues, then countries in this region might look for alternative options, finding their own ways to get energy from outside the region. So this is the context where energy imports will play a bigger role.
At the end of the day, it is again back to how the governments in this region should look at this issue not as individual countries, but as a collective region, so that we can achieve the clean energy transition in a much faster way, in a more economical way, allowing everyone to harness the full potential of clean energy.
The podcast has been edited for brevity and clarity.
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