Authors: I Dewa Made Raditya Margenta; Hidayatul Mustafidah Rohmawati*
Indonesia’s presidency at the next ASEAN Chairmanship may hold the key to unlocking the region’s most ambitious and promising energy project, the ASEAN Power Grid (APG) project.
This year, Indonesia will chair a multilateral meeting (again) called the 2023 ASEAN Chairmanship, with the theme of “ASEAN Matters: Epicentrum of Growth.” This meeting will hone in on enhancing ASEAN’s institutional capacity and effectiveness to be a fast-growing, inclusive, and sustainable economic region. This chairmanship will also further strengthen Indonesia’s diplomatic influence following the success of the G20 Presidency in 2022.
In this year’s chairmanship, Indonesia raises three priority issues in the economic sector: recovery and rebuilding, digital economy, and sustainability. These priorities implementation is translated into 16 Priority Economic Deliverables for 2023. One of the priorities focuses on building sustainable energy security through interconnectivity and market obligation. Therefore, this is a gate opener for a more substantial commitment to the long-awaited ASEAN energy project, ASEAN Power Grid.
Quo Vadis of the ASEAN Power Grid.
The ASEAN Power Grid project is the flagship program mandated in 1997 by the ASEAN Heads of State/Governments under the ASEAN Vision 2020. The project intends to boost grid modernisation and resilience, promote clean and renewable energy integration, and increase regional multilateral electricity trading between ASEAN member states. It could also provide an electricity solution for remote or undeveloped areas inaccessible by national transmission lines.
The ASEAN Power Grid could also assist the ASEAN member states in shifting their fossil fuel dependency by optimising renewable energy sources. ASEAN is projected to need an additional 479 GW of electricity by 2040 to fuel its economy. However, all ASEAN member states have a firm reliance on fossil fuels. Currently, fossil energy is still the primary electricity source in ASEAN, around 75% of the electricity production mix.
At the same time, the electricity generated from renewable energy sources also grows annually. Besides, ASEAN has abundant renewable energy potential; 8,119GW Gross Capacity of solar and 342GW of wind. Optimising renewable energy in the project could contribute up to 112,267 million tons of CO2e and 64 thousand tons of N2O of emission reduction by 2040. It could also significantly reduce the dependence on fossil fuels around 259 million tons of coal, 11.2 million tons of oil and 77 million m3 of natural gas. The ASEAN Power Grid project, therefore, could heavily rely on renewable energy and, ultimately, intertwine the economic development and climate mitigation in the ASEAN region.
Economically, the ASEAN Power Grid can reduce the annual operational costs of the ASEAN power sector by USD 1 billion. It corresponds to a supply cost reduction of around USD 1 per MWh. Increasing the cross-border interconnection infrastructure in ASEAN has further economic advantages and can support higher percentages of renewable energy use. The annual operations costs can be cut by 4-5 billion USD.
Other benefits also include potential green jobs. It is estimated that 100,000 – 200,000 green jobs could be created in 2040 and grow up to 700,000 in a more ambitious scenario.
(De)bottleneck the problem through multilateral cooperation
However, realising the ASEAN Power Grid has to deal with numerous challenges, primarily political mistrust towards the project. Some ASEAN members highly value the ideas of nationalism and sovereignty. Besides, the concept of self-sufficiency also becomes the bottleneck of cross-border electricity trade. For instance, exporting renewable energy is prohibited in Malaysia and Indonesia. Consequently, only half of the key cross-border ASEAN Power Grid interconnections were in operation from the first announcement.
Governments often need to be made aware of the potential of regional electricity connectivity. This connectivity could close the gap between electricity supply and demand, potentially widening in the next two decades. Furthermore, the uneven distribution of natural resources endowments within regions also prohibits the accomplishment of self-sufficiency, and it needs multilateral collaboration to realise energy security.
Therefore, Indonesia’s presidency on ASEAN Chairmanship 2023 must be the perfect timing to strengthen the ASEAN’s political will on the ASEAN Power Grid. As the natural leader within ASEAN, Indonesia could optimise their influence to enhance the political trust between members. Indonesia may not want to lose the political momentum when the G20 presidency was successfully held amid unprecedented circumstances, such as the Russia-Ukraine war.
As the leader, Indonesia might encourage the development of a consistent yet adaptive intergovernmental collaboration framework in the energy sector. This commitment is crucial for risk sharing and providing a clear line in the planning and permitting. This commitment is also vital as a certainty for the multilateral or private financiers to support the project financing.
In light of the significance of the ASEAN Power Grid for the regional economy and efforts to mitigate climate risk, it will be interesting to examine Indonesia’s viewpoint and political decision in the 2023 ASEAN Chairmanship.
*Hidayatul Mustafidah Rohmawati is a research staff of Purnomo Yusgiantoro Center (PYC). She has research interest in biobased energy and green industry sectors. She completed her degree from Universitas Brawijaya, Indonesia.