Study on Enabling Agreement amongst ASEAN Member States for Establishing Multilateral Power Trade and ASEAN Power Grid Institutions

Edited by Li YanfeiKei Sudo Study on an Enabling Agreement amongst ASEAN Member States for EstablishingMultilateral Power Trade and ASEAN Power Grid Institutions Economic Research Institute for ASEAN and East Asia (ERIA)Sentral Senayan II 6thFloorJalan Asia Afrika No. 8, Gelora Bung KarnoSenayan, Jakarta Pusat 10270Indonesia © Economic Research Institute for ASEAN and East Asia, 2024ERIA Research Project FY2024 No. 23Published in October 2024 All rights reserved. No part of this publication may be reproduced, stored in a retrievalsystem, or transmitted in any form by any means electronic or mechanical without priorwritten notice to and permission from ERIA. The findings, interpretations, conclusions, and views expressed in theirrespectivechapters are entirely those of the author/s and do not reflect the views and policies of theEconomic Research Institute for ASEAN and East Asia, its Governing Board, AcademicAdvisory Council or the institutions and governments they represent. Any error in contentor citation in the respective chapters is the sole responsibility of the authors. Materialin this publication may be freely quoted or reprinted with properacknowledgement. Note: ‘$’ in this publication refers to US dollars, unless otherwise specified. Foreword ASEAN countries are navigating a period where nations and companies face a turbulent,uncertain, and rapidly changing global energy landscape. The COVID-19-induced economicdownturn in 2020 triggered an unprecedented decline in global energy demand, carbonemissions, and investment, followed by a sharp rebound in energy demand and emissionsthe following year. In this context, Asian countries must seize the opportunity to acceleratethe energy transition – once gradual but steady – to meet the goals of the Paris Agreement.This is essential for fostering a greener growth trajectory while ensuring energy security,affordability, and the achievement of climate goals. At the same time, to meet rising electricity demand while reducing greenhouse gas (GHG)emissions in ASEAN, massive investments are needed in decarbonisation technologies suchas renewable energy and power system expansion. Addressing these challenges requiresa range of mechanisms and technologies, with one critical solution being the developmentof multilateral power trading in ASEAN, known as the ASEAN Power Grid (APG). This research project report introduces a groundbreaking theoretical framework for theASEAN Power Grid Intergovernmental Agreement – a pivotal step towards regional energyintegration and co-operation. Against the backdrop of recent trends in ASEAN energy co-operation, where member states are increasingly working together on renewable energyand grid connectivity, the study highlights the importance of harmonising policies andinfrastructure to create an integrated power trade market in the region. Through meticulous analysis and forward-looking recommendations, this report aims toilluminate the path towards establishing institutions necessary for multilateral power tradeinASEAN.The drafting process has been a collaborative effort,enriched by thecontributions of representatives from ASEAN member countries' energy ministries andutility operators. This initiative reflects the collective resolve of the ASEAN community, incollaboration with international think tanks, to overcome institutional barriers. It is expectedto serve as a timely and essential reference for policymakers and stakeholders across theregion. Naoto Okura Director General for Research and Policy Design,ERIA (Economic Research Institute for ASEAN and East Asia) Acknowledgements This study is a joint effort of the Economic Research Institute for ASEAN and East Asia, theASEAN Centre for Energy, Nord Pool Consulting,Bredesen Consulting, and Ricardo, withsupport from the Heads of the ASEAN Power Utilities and Authorities,ASEAN Power GridCoordinating Council, andASEAN Energy Regulators Network. This report would not have been possible without the contributions and support of all theauthors: Ms Nadiya Pranindita (ERIA),Mr Joni Ärmänen (Nord Pool Consulting), Mr Hans-ArildBredesen (Bredesen Consulting), Mr Jonathan Hedgecock (Ricardo), Ms Nadhilah Shani(ACE), and Mr Marcel Nicky Arianto (ACE). Finally, special thanks go to Stefan Wesiak, chief editor and publication director of ERIA, andhis team of editors and publishing staff, for helping edit and prepare the report forpublication. List of Project Members Yanfei LiResearch Fellow, Economic Research Institute for ASEAN and East Asia (ERIA) Kei SudoProgramme Manager on Energy, ERIA Nadiya PraninditaResearch Associate, ERIA Joni ÄrmänenSenior Consultant, Nord Pool Consulting Hans-Arild BredesenCEO, Bredesen Consulting Jonathan HedgecockTechnical Director, Sustainable Energy Systems, Ricardo Nadhilah ShaniSenior Research Analyst on Power, ASEAN Centre for Energy (ACE) Marcel Nicky AriantoAssociate Research Analyst on Power, ACE Table of Contents Forewordiii Ac