AEC Blueprint 2025 Analysis: Paper 20 | An Analysis of the ASEAN Cooperation in Energy
Energy cooperation is the backbone of the economic and business activities in ASEAN and of the development of the ASEAN Economic Community. The ASEAN Centre for Energy (ACE) has been working on initiatives to ensure energy security in the region, namely the ASEAN Power Grid (APG) and the Trans-ASEAN Gas Pipeline (TAGP). Nonetheless, there are other areas that need attention, particularly those related to renewable and alternative forms of energy, and issues pertaining to efficiency and the environment. Many of these areas are already covered under the AEC Blueprint 2025, and now it is a matter of implementing the strategic measures agreed. ASEAN needs to intensify the discussions and negotiations to expedite the whole process, particularly on harmonising energy policy and planning, so that more can be done to respond to the increasing future demand for energy in the region.
The following report is part of a series which attempts to provide a detailed analysis on the ASEAN Economic Community (AEC) Blueprint 2025. Each report will cover a single element of the blueprint, providing a comprehensive look at past achievements, present problems, and the future plans of the AEC. Special attention will be placed upon the strategic measures outlined in the AEC Blueprint 2025. This report aims to provide insight into the viability surrounding regional economic integration under the AEC.
ASEAN Energy Cooperation
The energy sector is of the utmost importance in driving the development of ASEAN economies and the AEC. It is crucial that ASEAN member states are able to guarantee energy security for the region as it can be expected that robust economic performances by each individual country and ASEAN as a whole will mean that consumption of energy will increase quite significantly. Given that each ASEAN member state has its own strength in terms of energy supply (with the exception of Singapore), ASEAN countries have been engaged in regional cooperation to develop their energy sector and to ensure energy security across the region to fully support the economic development and business activities. The reasons for this are elaborated by Nicolas (2009): (i) production of energy by one country may affect other countries as seen in the construction of dams for hydropower electricity in the Greater Mekong Sub-region (GMS); (ii) distribution of gas through pipelines across the region that may allow for more efficient distribution, lowering transmission costs and price for the consumers; and (iii) depletion of fossil fuel (non-renewable) and environmental impacts are better dealt with through regional cooperation and initiatives.
Different from the previous AEC blueprint, in the new blueprint energy is under the new pillar: enhanced connectivity and sectoral cooperation. Energy security will greatly support economic and business activities in region, and ASEAN needs to look at not only the traditional forms of energy, but also the renewable and clean energy, and nuclear energy as an alternative to the increasing demand for affordable energy. This report aims at analyzing the progress made in ASEAN energy cooperation and what ASEAN collectively needs to do to expedite the implementation side of the blueprint.
A. Targets under the AEC 2015 Blueprint
Under the AEC Blueprint 2015, energy cooperation was a part of the ASEAN infrastructure cooperation. While there was no definite strategic measures for energy cooperation, ASEAN member states agreed to work on:
- Securing reliable supply of energy including bio-fuel which is crucial in supporting and sustaining economic and industrial activities
- Collaborate in the Trans-ASEAN Gas Pipeline (TAGP) and the ASEAN Power Grid (APG) projects that would optimize the region’s energy resources for greater energy security
- Involve the projects listed in point (ii) in terms of investment (including financing) and technology transfer
- Develop interconnected networks of electricity grids and gas pipelines which offer significant benefits both in terms of security flexibility and quality of energy supply
The work on ASEAN energy cooperation has been greatly guided and implemented by the ASEAN Centre for Energy (ACE). The Centre was established in January 1999 as an independent intergovernmental organization within the ASEAN structure to represent the ASEAN member states’ interests in the energy sector. The Center ensures that integration of the each member states’ energy policies is in line with economic growth and environmental sustainability through provision of relevant information and expertise. The Governing Council of the ACE consists of Senior Energy Officials from member states and a representative of the ASEAN Secretariat as an ex-officio member.
To guide its activities and support the implementation of the AEC Blueprint 2015, ACE published the ASEAN Plan of Action for Energy Cooperation (APAEC) 2010-2015. The APAEC 2010-2015 focuses on initiatives that support development ASEAN energy infrastructure and enhance energy security through integrated development and energy policies. The seven key initiatives include APG, TAGP, coal and clean coal technology, energy efficiency and conservation, renewable energy, regional energy policy and planning, and civilian nuclear energy.
In addition to the AEC Blueprint 2015, ASEAN cooperation in energy was also outlined in the Master Plan on ASEAN Connectivity (MPAC) 2011-2015. ASEAN connectivity focuses on development of physical connectivity, institutional connectivity and people-to-people connectivity across the region. As outlined in the MPAC 2011-2015, strategy 7 under development of physical connectivity is to prioritize the processes to resolve institutional issues in ASEAN energy infrastructure projects. This strategy aims at expediting the completion of the TAGP and APG through addressing the technical and legal issues through harmonisation of standards. The proposed key actions under the MPAC 2011-2015 include:
B. Significant Achievements To Date
Energy cooperation in ASEAN has been progressing well, considering the different policies and laws in the member states, and the large amount of investment needed to develop the infrastructure. Given the three guiding strategic plans above (AEC Blueprint 2015, APAEC 2010-2015, and MPAC 2011-2015), the analysis below will look at the more concrete progress under this initiative.
C. Current Issues and Challenges
To expedite the interconnections of the ASEAN’s electricity networks under the APG, several barriers need to be addressed, particularly in terms of technical, financial and institutional obstacles1. The technical issues include those related to voltage, frequency and load changes (operational issues). The issues related to financing and investment mainly stem from the fact that investors have been focusing a lot more on expanding power generation capacities (doubled since early 2000s), while investment on the transmission and distribution side has not improved annually during the same period. On institutional barriers, more work needs to be done on harmonisation of standards and regulatory frameworks. This would also involve market design across ASEAN which depends on differences in policies and interests of stakeholders.
Some of the issues faced by the TAGP2 include technical, environmental, financial, taxation, jurisdictional, and organisational. These are due to the fact that ASEAN member states are in different levels of development and that aligning the overall regional TAGP strategy is quite challenging because of the different interests and regulations in each member state. The technical complexities are related to the constructions of the pipelines that start in different periods and are managed by different authorities. From the environmental point of view, gas pipelines could cause land degradation and may produce greenhouse gas. In addition, on-shore and off-shore construction activities such as drilling and transportation may have negative repercussions on the ecosystem. Financing the TAGP construction processes is another huge challenge and may require support from external entities. ASEAN is still in the early process of taxation cooperation and therefore aligning the regions’ different tax treatment for the cross-border activities under the TAGP may not happen in the near future. Jurisdictional complexities arise from especially the off-shore constructions, which require extensive programme management particularly on sea territory that is under dispute: South China Sea. There are several pipeline projects in this area. Lastly, organisational challenges stem from the fact that the ASCOPE as the implementor of the TAGP consists of representatives from ten member states of ASEAN, each of whom may have different agenda and political interests that could affect the progress of the TAGP.
While joint activities (mainly with Japan) have been implemented to improve EE&C in ASEAN, several challenges are still existing and need to be addressed3. Institutional regulatory framework for the implementation has not been fully developed, particularly to support energy efficiency efforts from both the supply and demand sides. The existing policies are mainly focusing on voluntary measures, therefore compulsory measures have not been enforced. This is apparent in the lack of uniformed energy standards in the transport, industry and building sectors across ASEAN. In addition, in some countries, the government still provide subsidies to consumption of fossil fuels, discouraging more efficient use of those fuels.
With regard to developing and utilising RE sources, the challenges may be larger as this would constitute a complete change of how energy is produced and consumed. A report by ACE-GIZ4 has outlined the possible challenges faced in going ahead with intensifying the development of RE sources in ASEAN. The report categorises the challenges from different perspectives: those of the project developers, financing side, utilities, and authorities/regulators. The project developers usually lack the necessary technology to develop RE resource, and there are very few consultants who have the necessary know how. Reliance on international standards is usually the way out but given that different regions have different characteristics, this normally does not result in optimum output. In addition, ASEAN lacks regional regulatory framework to facilitate the development of RE sources, and any relevant activities are implemented on case-by-case basis. From the financiers’ point of view, the main problem lies in their unfamiliarity with the RE technology and reliability, which discourages them from funding such projects and research. The existing power utilities’ current priority is to ensure reliable supply of electricity to the consumers and therefore exploring RE sources is not their main agenda. In addition, little does development of the RE forms take into account the existing power grids, making RE less attractive. The regulators are burdened with the responsibility to continuously secure supply of energy to the customers and there are more attractive (and definite) means to achieve it than RE sources. In terms of evaluating and monitoring actual development of RE, coordination among the relevant authorities is still a challenge in many countries.
D. Plans under the AEC 2025 Blueprint
Under the new blueprint, the region’s cooperation on energy is more comprehensive and has taken into account components from the APAEC and MPAC. The coverage therefore of the areas of cooperation is far larger than what the previous blueprint had envisaged. For the period 2016-2025, ASEAN’s energy cooperation has taken the theme “enhancing energy connectivity and market integration in ASEAN to achieve energy security, accessibility, affordability and sustainability for all.”
The strategic measures are based on the APAEC 2016-2025 which will be implemented in two phases: 2016-2020 and 2021-2025, and they include the following:
- APG: initiate multilateral electricity trade in at least one sub-region in ASEAN by 2018
- TAGP: enhance connectivity within ASEAN for energy security and accessibility via pipelines and regasification terminals
- Coal and clean coal technology: enhance the image of coal in ASEAN through promotion of clean coal technologies (CCT) as well increase in the number of CCT projects by 2020
- EE&C: reduce energy intensity in ASEAN 20 percent as a medium-term target in 2020 and 30 percent as a longer-term target in 2025, based on the 2005 level
- RE: increase the component of RE to a mutually agreed percentage number in the ASEAN Energy Mix (Total Primary Energy Supply) by 2020
- Regional policy and planning: better profile the ASEAN energy sector internationally through an annual publication on ASEAN Energy Cooperation
- Civilian nuclear energy: build capabilities on nuclear energy, including nuclear regulatory systems, amongst officials in ASEAN member states
The APAEC seems to be the main document used as a roadmap for the ASEAN as it was formulated by the ACE which represents the interests in ASEAN member states in the regional energy cooperation. It is expected that dividing into two implementation periods will allow for greater flexibility in adjusting the implementation side and in monitoring the progress.
E. AEC 2025 Blueprint Analysis
Energy cooperation, as other sectors under infrastructure, is a backbone of the development of AEC. The issue with energy is not only financing but also sustainability as the currently mostly consumed form of energy is the fossil fuel, which is non-renewable and will be depleted in the near future. In addition, there are many environmental dimensions to it as well. Therefore, clean and renewable forms of energy may be the answer for the future demand for energy. Some analyses on the progress on each area in the blueprint are as follows:
F. Conclusion: Moving Forward with the AEC 2025 Plans
Energy cooperation is very important for the realization of the AEC, and therefore member states need to take this very seriously. While fossil fuel is still widely utilized, given that it is non-renewable, ASEAN must put greater priority on sources of energy that are more sustainable and more friendly to the environment in the longer run. This includes greater cooperation and more intensive discussions on integrating and harmonizing the regulations concerning the ASEAN energy sector.
ASEAN has pledged to increase the share of RE to 23 percent in the total energy generated in the region by 2025, and at the same time, reduce the emission of GHG by 20 percent and energy intensity also by 20 percent during the same period. These would require common and joint efforts by all member states in (i) collaborating with dialogue partners and international organizations to tap into their expertise, and (ii) implementing the APAEC 2016-2025 consistently to achieve the desired targets. Member states also should consider providing incentives to entities that have utilized renewable and clean energy sources for their electricity needs and made efforts to improve energy efficiency and reduce negative impacts to the environment.
The main initiatives under the ASEAN energy cooperation: APG and TAGP must continue as they are currently the key responses to ASEAN’s demand for energy and electricity in the shorter term. Completion of the two initiatives will allow for better distribution and trade of energy and electricity that are very important in supporting economic and business activities across the region. Member states will have to address the existing barriers that have hampered the cross-border completion for APG and TAGP.
In the development of other sources of energy, ASEAN has ventured into developing civilian nuclear energy as an alternative way to generate electricity, which is understandable since nuclear energy is relatively clean and environment friendly so long as it is well managed and the technology used is safe. In this case, ASEAN needs to ensure maximum support from the more advanced economies with long experience in nuclear energy development and utilization. However, another source of energy can be considered: geothermal8. Currently, three ASEAN countries have developed their geothermal power plants: Indonesia, Philippines and Thailand. Particularly Indonesia and Philippines are located in the volcanic lines in the Asia Pacific region, which are abundant source of geothermal energy. The geothermal potential of Indonesia is 29 GW (40% of total global geothermal resources) and that of the Philippines is 4 GW. Other member states have strongly considered developing their geothermal power plants as well. Greater cooperation among ASEAN members may ensure greater use of geothermal source to generate electricity in large amount to support the realization of the ASEAN Community.
1 Southeast Asia Energy Outlook 2015 by IEA and ERIA
2 Setiawan, Shahroom, Huang, Zahidah (2016)
3 Same Energy More Power, ADB 2013
4 Renewable Energy in ASEAN, ACE-GIZ 2015
5 How Electricity Trades Progress in ASEAN , ASEAN Center for Energy
6 Energy Efficiency and Conservation, ASEAN Center for Energy
7 ASEAN-RESP Phase II , ASEAN Center for Energy
8 Civilian Nuclear Energy, ASEAN Center for Energy
List of Abbreviations
ASEAN Secretariat (2008). ASEAN Economic Community Blueprint
ASEAN Secretariat (2015). ASEAN 2025: Forging Ahead Together
ASEAN Secretariat (2015). A Blueprint for Growth ASEAN Economic Community 2015: Progress and Key Achievements
ASEAN Secretariat (2012). 4th ASEAN Energy Outlook
ASEAN Secretariat (2016). Master Plan on ASEAN Connectivity (MPAC) 2025
ASEAN Centre for Energy (2009). ASEAN Plan of Action for Energy Cooperation (APAEC) 2010-2015
ASEAN Centre for Energy (2015). ASEAN Plan of Action for Energy Cooperation (APAEC) 2016-2025
ASEAN Centre for Energy, various information in the website: www.aseanenergy.org
Asian Development Bank (2013). Same Energy, More Power: Accelerating Energy Efficiency in Asia
International Energy Agency and Economic Research Institute for ASEAN and East Asia (2014). Southeast Asia Energy Outlook 2015
Development in the Works: Trans-ASEAN Gas Pipeline (TAGP), in Petromin Pipeliner, July-September 2015
Trans-ASEAN Gas Pipeline: Accelerating Gas Market Integration within the ASEAN Region, Anton Setiawan, Alya Shahroom, Ting Huang, Noor Syaza Zahidah, The Complexities of Programme Management: Case Study of the Trans-ASEAN Gas Pipeline, 2016
Beni Suryadi and Sanjayan Velautham, Coal’s Role in ASEAN Energy, in Cornerstone Journal, 2016
Francoise Nicolas, ASEAN Energy Cooperation: An Increasingly Daunting Challenge, Institut Francais de Relations Internationales (2009)
Phinyada Atchatavivan, ASEAN Energy Cooperation: An Opportunity for Sustainable Regional Energy Development,
Thachatat Kuvarakul, Renewable Energy for ASEAN, under ASEAN-RESP, ASEAN Centre for Energy and Gesellschaft fur Internationale Zusammenarbeit