By Fitch Solutions
- Laos’ status as a key supplier of electricity for the Southeast Asian electricity demand will be cemented over the coming years, as developments for an integrated power grid progresses, increasing electricity trade in the region.
- Risks to the technical practicality and regulatory feasibility have been alleviated, with new power import agreements and developments of electrification programmes resolving issues.
- There is scope for Southeast Asia to be connected to Australia’s power market, capitalising on Australia’s high solar irradiance levels for solar power capacity growth. However, we do not include this project in our forecasts, due to technical and regulatory hurdles that have yet to be addressed.
Laos’ status as a key supplier of electricity for the Southeast Asian electricity demand will be cemented over the coming years, as developments for an integrated power grid progresses, increasing electricity trade in the region. Laos’ cross-border electricity grid is extensive, connecting its national grid to all five of its adjacent markets (Cambodia, Mainland China, Myanmar, Thailand and Vietnam). The Laos-Thailand-Malaysia-Singapore Power Integration Project (LTMS-PIP), a key project that integrates power grids across the four markets, will allow Laos’ to be a key regional supplier of electricity. This will utilise its abundance of hydropower to provide stable baseload power, ensuring power supply flexibility for neighbours through an integrated grid. The LTMS-PIP will extend electricity export capabilities to markets which are not adjacent to Laos, such as Malaysia and Singapore. For example, as Laos exports electricity to Singapore, it will be able to utilise Thailand and Peninsular Malaysia’s electricity grids.
We highlight that several obstacles to greater power sector cooperation in Southeast Asia remain. These are driven by power markets in the region being at different stages of development and having varying regulatory structures (including market structure and mechanisms, power prices) and technical issues (such as voltage and frequency, wheeling charges), which governments have not yet reconciled. Furthermore, mutual agreements on data and information sharing are required, which can be a key concern in the protection of sensitive information on critical infrastructure. Difficulty in attaining infrastructure financing to build more cross-border transmission lines, particularly in some high-risk markets, will also present challenges. These factors present downside risks to ramping up a vibrant electricity trade through the LTMS-PIP.
LTMS-PIP To Play A Large Part In Integrating Southeast Asian Power Markets
Southeast Asia – Key Cross-Border Power Transmission Projects (2020)
Risks to the technical practicality and regulatory feasibility have been alleviated, with new power import agreements and developments of electrification programmes resolving issues. In June 2022, Singapore commenced its first hydropower electricity import from Laos. This agreement allows Singapore to draw electricity from up to 100MW of hydropower capacity within Laos’ borders, with the electricity travelling directly through Thailand and Peninsular Malaysia’s power grid before arriving in Singapore. Further in September 2022, Singapore and Laos strengthened their cooperation on energy and water resource management, which we expect to present upside risks to our electricity trade forecasts for the region. We expect cross-border electricity trade agreements to bring clarity to the technical and regulatory challenges that markets face, such as the areas where grid infrastructures need upgrading, and which markets should provide the funding for that. Additionally, with rural electrification schemes registering progress across the past 10 years, Southeast Asian markets are more connected than ever. The advancement of technology, such as improvements in the high-voltage direct current (HVDC) systems and subsea cables, have also aided in accelerating cross-border connections between markets in the region. This will further extend the integrated Southeast Asian grid to areas in Malaysia and Indonesia that are separated from Laos by water bodies, such as Sarawak and Sabah in Malaysia, and Kalimantan in Indonesia. As Southeast Asia becomes more connected, we expect Laos’ status as a net exporter of electricity to strengthen, with electricity exports to grow from 25.1TWh in end-2021 to 43.8TWh in 2031, at an annual average of 5.9%. Concurrently, other Southeast Asian markets will increase their import of electricity, notably Thailand, Vietnam, and Singapore.
Southeast Asia Electricity Trade To Strengthen, Exports Supplied Mainly By Laos
Southeast Asia – Net Electricity Imports by Market, TWh
There is scope for Southeast Asia to be connected to Australia’s power market, capitalising on Australia’s high solar irradiance levels for solar power capacity growth. Australia has plans to be an exporter of electricity, utilising the abundance of potential the market has for solar photovoltaic (PV) power development. Prominently, Sun Cable is planning the construction of the 17-20GW Tennant Creek Solar Farm in the Northern Territory. This power project, also known as the Australia-Asia PowerLink project, includes the development of a 4,200km stretch of HVDC subsea cables from Darwin to Singapore, through Indonesia. 3.2GW of the 17-20GW capacity that the solar farm has will be available on demand for Singapore’s electricity needs. This is the largest power project in planning in the world (as reflected in our Key Projects Database). We highlight updates signalling that the project is still progressing despite its magnitude, with Sun Cable securing AUD210.0mn (USD151.0mn) from a series B financing round in March 2022. The funding will go toward the development of the AUD30.0bn (USD21.5bn) Australia-Asia PowerLink project between Singapore and Australia. The series B round was led by Grok Ventures and Squadron Energy.
However, we do not include this project in our forecasts yet, due to technical and regulatory hurdles that have yet to be addressed. Despite the momentum of the project, we currently do not expect this project to come to fruition given significant technical complexities and remain cautious about the feasibility at present. Highlighting the elevated risks, the power off-taker for Singapore’s 3.2GW share of the Tennant Creek Solar project, iSwitch, folded its operations in October 2021, adding uncertainty to the project, as it is unclear whether the agreement was transferred to any other power retailers
Australia’s Subsea Cable Project Is Ambitious, With 4,200km Of Subsea Cable Crossing Through Indonesia
Australia, Indonesia & Singapore – Sun Cable’s Power Project (2021)
This article has been sourced from Fitch Solutions and can be accessed here