ASEAN’s no-regret transmission corridors according to TZ-APG

Regional and thematic highlights from our new open source model

System Modelling

Energy Policy

ASEAN wins as a region

The general thesis goes that system connectivity promotes an efficient use of resources, and thus minimises overall generation capacity needs. TZ-APG v1 results support this theory, as outlined in our “From Vision to Voltage: Open Source Modelling of the ASEAN Power Grid” report. Let’s take a look at the regional and thematic highlights from our report on 4 different grid scenarios to understand how.

Regional insights

Overall cost and emissions savings

By analysing the region’s power mix and generation output across the four grid scenarios, we found that by the modelled year 2035, new grid capacity in Southeast Asia could reduce the size of the region’s power generation fleet by up to 7.5% compared to a business-as-usual (BAU) scenario where today’s transmission network is kept unchanged.

Even by just expanding the transmission capacity between existing partners (per the “Enhanced BAU” scenario), total system capacity could already fall by 5.5% compared to the status quo. Most of the savings are attributed to the drop in battery storage capacity (down by 22-25GW), gas (4-9GW), and some hydropower (1-4GW). Interestingly, the growth of solar and wind power are found to be similar across the modelled scenarios, emphasising the complementarity of these technologies with more dynamic grid capacity.

Meanwhile, some changes to the generation mix are also observed. Better connectivity leads to an optimal operation of the power assets in operation, which is reflected in upticks in the overall utilisation rates of coal generators (up by 0.6 percentage points compared to the BAU scenario), gas plants (up by 0.8pp), but also of hydropower assets (up 3.5pp).

Driven by a least-cost outcome, TZ-APG v1 shows that total system cost savings potential for the region could range from 0.8% (“Enhanced BAU” scenario) to 2.3% (Regional Interconnection and IDN Super Grid scenarios) compared to the BAU scenario. Total system cost includes all capital investments into the generation fleet in the modelling period between 2023-2035 and the system operating cost for the year 2035. The costs of transmission grid upgrades and new grid investments have not yet been accounted for in the total system cost of the modelled year 2035.

Although the model is not optimised for emissions outcome, TZ-APG v1 still shows that with better grid connectivity, Southeast Asia could register some emissions savings, and the reduction is most pronounced in the “Regional Interconnection” scenario (down by 0.9% compared to the BAU scenario). Improving this figure would require adjustments to the dispatch assumptions of fossil fuels generators, to the cost profile of brown power, among others.

The trading clusters

TZ-APG v1 identified two main trading hubs for the region.

First, the modelled results underscore the interdependency between the Greater Mekong Subregion (GMS) countries. About 66% of the region’s cross-border trading volume came from the four routes involving Vietnam, Lao PDR, and Thailand. This finding validates the status quo and highlights the importance of power grids, whether to support domestic or cross-border transmission, in balancing demand-supply in these countries.

In addition, TZ-APG v1 also reveals a highly potential transmission corridor for the region, connecting the three nodes of IDN Kalimantan, MYS Sabah, and PHL Luzon. If realised, this route could be responsible for 14% of the region’s cross-border trade in the year 2035. This corridor would be an ambitious technical undertaking, requiring long-range high voltage and subsea interconnectors from Borneo to Luzon island and an instrumental role of MYS Sabah as the wheeling country for such an import strategy.

The concept, however, is not without grounds. It is part of ASEAN’s second multilateral trading initiative, the Brunei Darussalam-Indonesia-Malaysia-Philippines Power Integration Project (BIMP-PIP) which was officially launched in September 2023. TZ-APG v1 confirms the economic rationale for this trading route, and also sheds light on the systems-level impact to the affected nodes and countries (see “The Green lane” section below).

Trading patterns

With regards to the nature of power exchange in the region, TZ-APG v1 shows that cross-border flows between the modelled nodes would be mostly unidirectional. This means that electricity in Southeast Asia would be almost exclusively transmitted from resource-rich, supply-abundant areas through to demand centres.

Two-way exchange is only observed in a handful of instances, such as between MYS Sarawak and IDN Kalimantan, and between KHM and VNM South. A deep dive into the trading activity between MYS Sarawak and IDN Kalimantan is simulated by the model at 2-hour resolution in 2035. While the former is the main exporter for the year, it needs to import electricity from Kalimantan in the months of July, November, and December to fill domestic supply gaps, even if in small amounts. Meanwhile, Vietnam’s southern region would rely on imports from KHM from July to October, and exports on a sustained basis, in small amounts, to its neighbour for the remainder of the year.

In both cases, the partners complement each other’s differences in seasonal, time-of-day demand and resource availability.

Thematic insights

TZ-APG v1 findings at the subregional and national levels give us another set of insights.

Grid displaces need for new gas

Gas is being promoted by many as a critical transition fuel for Southeast Asia and one of the key research questions that we set out to address with TZ-APG is whether better transmission and/or import capacity could help countries like Vietnam and the Philippines avoid or curb the need for new gas power capacity. Within the region, these two countries have set aggressive targets for gas power generation expansion in the next decade, most of which will run on imported liquefied natural gas.

TZ-APG v1 results suggest that the build-out of gas in these countries could be sensitive to new grid capacity. In the case of Vietnam, the country could reduce its gas capacity by up to 20% compared to the BAU scenario if transmission capacity with Lao PDR is enhanced by year 2035. This reduction would take place in Vietnam’s southern node. By the same token, if the Luzon grid was connected to Borneo island, the Philippines’ power system by 2035 would see a 44% drop in gas capacity compared to a no-connectivity scenario. Its coal fleet, which TZ-APG v1 has constrained to today’s capacity, would also see its utilisation rate slide by 2 percentage points, resulting in an overall emissions savings for the Philippines.

Even though TZ-APG v1 does not account for the cost of imported electricity when estimating total system cost of a modelled node, the above sensitivity analysis stresses the potential of new grid investments for two reasons. First, they help to curb long-term fossil fuel dependency and lock-in domestically; and second, they fill short- to medium- term supply shortages with imports until domestic renewables development can take off at scale.

Vietnam already appears to be adopting this approach, facilitating more imports from Lao PDR and China, as domestic power projects from gas to offshore wind reach an impasse on the negotiation table with the cost-sensitive state utility EVN.

The green lane

Can regional grid integration and transmission foster renewable energy development and, consequently, regional decarbonisation? Yes, it can. TZ-APG v1 pinpointed the potentially high-traffic transmission corridor between Borneo and Luzon islands, but it also revealed how the enabled connection could promote cost-effective hydropower development in IDN Kalimantan for export to the PHL Luzon consumers. The inflows would displace gas power in the Philippines. This insight is derived by examining the changes to the capacity and generation mixes of the involved nodes, and the trade flows between them, across the BAU and Regional Interconnection scenarios.

Under the “Regional Interconnection” scenario in which the interconnector between Borneo and Luzon islands is established, IDN Kalimantan sees an immediate expansion of its hydropower fleet (up by 66% compared to the BAU scenario), while gas capacity in PHL Luzon drops by 48%. Generation output data also reveals the same pattern. This reflects the set-up of TZ-APG v1 as a cost optimisation model that has taken into account the competitive cost profile and resource potential of hydropower in Kalimantan versus of gas generation in Luzon.

Interestingly, MYS Sabah which emerges as mostly a “wheeling” node, registers no change in its gas capacity across the grid scenarios, but these gas generators would be ramped up (output increases by 40%) compared to the BAU scenario if the export line to PHL Luzon is enabled. This is an illustration of the other potential impact of regional integration, where connectivity could lead to carbon “leakage” risks as it causes higher utilisation of fossil fuel generators. There are mitigating factors, however, as countries in Southeast Asia have diverse priorities and some will focus on efforts to address this risk and demand green credentials for traded electricity.

Singapore links

The city state has been the principal catalyst behind Southeast Asia’s renewed focus on the ASEAN Power Grid over the past three years. To realise the country’s 2050 net zero emissions target, energy planners at the Energy Market Authority have been working on a new blueprint for Singapore’s power sector development, one that marks a complete pivot from the historical planning mindset. From a country that had said no to electricity imports until 2022, Singapore is now targeting 6GW in importing capacity by 2035 to serve a third of its demand. Its planners are tapping different supply avenues and are currently pursuing several new interconnector projects to connect Singapore with renewable energy project clusters in Indonesia, Vietnam, Cambodia, and even as far as Australia.

In TZ-APG v1, we sought to examine the nature and merits of each of these interconnectors as well as any potential role Singapore might have as a regional electricity hub. The results indicate that an import diversification strategy would make sense for Singapore. In the “Regional Interconnection” scenario where the above interconnectors (excluding the one with Australia) are implemented, electricity inflows are registered from all partners in the modelled year 2035: MYS Peninsular (existing connection), IDN Sumatera, VNM South, and KHM. However, the import volumes differ by source, with IDN Sumatera becoming the main exporter while the other three exporters would only deliver modest amounts of electricity to Singapore. This suggests that although the transmission links from VNM and KHM would be utilised, their capacity factors would be low, at least within the modelling horizon. This could have implications on the financeability of the projects.

In addition, the results show that Singapore acts as an end consumption point, meaning that the subsea interconnectors appear to have no impact on multilateral trade in the region.

Once again, we note that TZ-APG v1 models grid-to-grid integration with no must-use constraints on the transmission lines. In contrast, based on available information to date, Singapore’s power import projects will likely follow the IPPs-to-grid model, which would entail long-term power offtake commitments that would enhance the financeability of the transmission lines.

Stay tuned for other thematic and country analyses from TZ-APG v1. In the meantime, check out the previous blogs on how we designed the first TZ-APG model and background on ASEAN cross-border transmission.