Market Design for Multilateral Trade of - IA de Investigación especializada en el MIT

Market Design for Multilateral Trade of
Electricity in ASEAN: A Survey of the
Key Components and Feasibility*

Yanfei Li
Hunan University of Technology and Business
y
Economic Research Institute for ASEAN and East Asia
No. 569 Yuelu Avenue, Changsha
Hunan, P.R. Porcelana
yanfei.li@eria.org

Tsani Fauziah Rakhmah
University of Otago
362 Leith Street, North Dunedin
Dunedin 9016, New Zealand
tsani.fauziah@postgrad.otago.ac.nz

Junichi Wada
International Business Development Office
Tokyo Electric Power Company Power Grid, Cª.
1-2-2, Uchisaiwai-cho
Chiyoda-ku Tokyo, 100-0011, Japón
wada.jun1@tepco.co.jp

Abstracto
The member states of ASEAN have together identified a need to develop the ASEAN Power Grid and
enable the multilateral cross-border trade of electricity in a coordinated manner within ASEAN. Este
has been set out in the ASEAN Plan of Action for Energy Cooperation (APAEC) 2016–25. Moving for-
ward from the current situation, this paper reviews the key components and feasibility of establishing
an interconnected and competitive multilateral electricity market within the ASEAN countries. An in-
dicative roadmap is developed based on an in-depth survey of experts to profile an appropriate market
design for the multilateral trade of electricity in the ASEAN.

1. Introducción

The ASEAN Power Grid (APG) is a ﬂagship program that was initiated in 1997 by the
ASEAN Heads of States/Governments under ASEAN Vision 2020 to ensure regional

* We would like to thank the Asian Development Bank Institute and the Asian Economic Panel for
organizing a workshop with the Bank of Finland, in Helsinki, on 18–19 June 2019. The discussions
at the workshop helped us to improve our research further. We also thank the experts from the
policy bodies for the electricity and energy sector in the member countries of the Association of
Southeast Asian Nations as well as the experts from the utility companies of these countries who
participated our survey and gave feedback. All remaining errors are the authors’ own.

Asian Economic Papers 19:1

Tecnología

https://doi.org/10.1162/asep_a_00763

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Market Design for Multilateral Trade of Electricity in ASEAN: A Survey of the Key Components and Feasibility

Cifra 1. Indicative map of APG interconnection projects

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Fuente: Authors based on APAEC 2016–25 (original map: courtesy of mapcruzin.com).

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energy security while promoting the efﬁcient utilization and sharing of resources. The APG
programa (Cifra 1) involves all the ASEAN countries and concerns the interconnection of
all their power grids. It consists of 16 interconnected projects to develop the cross-border
transmission lines within ASEAN and is an integral and key part of the ASEAN Economic
Community Blueprint 2025 (ASEAN Secretariat 2015) and ASEAN Plan of Action for En-
ergy Cooperation 2016–25 (ASEAN Centre for Energy 2015).

The economics, ﬁnancial feasibility, prioritization of power grid interconnection projects,
and basic technical and physical harmonization of power grid operation and regulation
required have been studied by academia as well as international organizations. Mesa 1
summarizes the important ﬁndings from the past studies on the APG.

The trading of electricity in ASEAN is currently limited to the bilateral mode, cómo-
alguna vez. To develop the APG and achieve its full potential for economic and social beneﬁts,

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Asian Economic Papers

Market Design for Multilateral Trade of Electricity in ASEAN: A Survey of the Key Components and Feasibility

Mesa 1. Assessments of the beneﬁts of the APG in the literature

Scope of study

Metodología

Main ﬁndings

Authors/
organización

Asia Paciﬁc Energy
Research Centre
(APERC) (2004)

Asian Development

Bank (ADB)
(2009)

ASEAN

Greater Mekong
Subregion
(Cambodia,
Porcelana, Laos,
Myanmar,
Tailandia, y
Vietnam)

ASEAN Interconnection
Master Plan Study
(2003)a

MESSAGE (Model of
Energy Supply
Systems Alternatives
and their General
Ambiental
Impacts)

11 proposed transmission links are

identiﬁed as cost-effective options.
Among these, 7 selected projects
generated total net savings of US$ 662 million in 2000. Over the next two decades, 19 percent of the total electricity costs or nearly US$ 200
billion could be saved for the subregion.
To reap such beneﬁts, the subregion needs
to invest US$ 585 billion in power and transmission infrastructure. Coal-based power generation could be lowered by 40 por ciento, while decentralized solar photovoltaic power could double its capacity in the subregion. Interconnection projects with positive net economic beneﬁt, which indicates the economic feasibility of the project, are identiﬁed. These prioritized projects include the Viet Nam–Lao–Thailand– Malaysia–Singapore route, the Cambodia–Thailand route, and the Malaysia–Indonesia route. The savings in the total system cost could be as high as US$ 9.1 billion by 2035 for all the 12
countries.

The Thailand–Lao route has the highest
return to investment, followed by the
Lao–Thailand–Malaysia–Singapore route
and lastly by the Vietnam–Lao–Thailand
route.

Por 2050, in the most aggressive scenario of
renewable energy integration, 62 por ciento
of the electricity supply in the ASEAN
will come from renewables. Esto es
enabled by fully developed power grid
interconnection in the ASEAN. El
average cost per kWh will also be
reduced by US$ 0.02/kWh. The total system cost of the electricity supply between 2010 y 2030 will be reduced by 3 percent compared with the scenario without any power trade. In absolute terms, the savings will amount to US$ 20.9 billion.

With an interconnected power grid in the
ASEAN, feed-in tariff policies appear to
be more effective in reducing carbon
emissions and promoting the
development of renewable energy.

In the case of optimal capacity of
cross-border transmission
interconnection, 0.67 percent of the total
system cost of the electricity supply for
el 12 countries covered in the study
could be saved.

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Economic Research
Institute for
ASEAN and East
Asia (ERIA)
(2014)

ASEAN, Porcelana, y

Optimal power

India

generation planning
modelo

Economic Research
Institute for
ASEAN and East
Asia (ERIA)
(2015)

UN ESCAP (2018)

ASEAN

Power infrastructure
simulation model
(project ﬁnancial
análisis)

ASEAN, Porcelana, y

India

Regional interconnection
comprehensive beneﬁt
modelo

Chang and Li (2013)

ASEAN

Linear dynamic

programming model

Chang and Li (2015)

ASEAN

Linear dynamic

programming model

Li and Chang (2015)

ASEAN, Porcelana, y

Dynamic linear

India

programming model,
with a ﬁnancial
sub-model for
transmission
infrastructure

Fuente: Authors summarized based on literature.

Nota: a. A study conducted by the Heads of ASEAN Power Utilities/Authorities (HAPUA) en 2003, the report of which is not publicly

disponible.

Asian Economic Papers

Market Design for Multilateral Trade of Electricity in ASEAN: A Survey of the Key Components and Feasibility

multilateral trading of electricity is needed. The recent Lao PDR–Thailand–Malaysia en-
ergy integration initiative by these countries, demonstrating the cross-border trading of
electricity among them through negotiated terms and agreements, clearly indicates the
strong willingness of the ASEAN countries to develop multilateral trading of electricity.

Por lo tanto, at this junction, the key issues to be discussed include the liberalization of na-
tional electricity markets, the harmonization of the operation, and the regulation of the
transmission system, especially the cross-border power grid interconnection, the elec-
tricity market framework/model for the region, coordination in network planning and
capacity development, the development of common algorithms for capacity allocation,
and the sharing of infrastructure on the basis of fair compensation (Rakhmah and Li 2016;
IEA 2019).

This paper thus aims to review comprehensively the key components and feasibility of es-
tablishing an interconnected and competitive multilateral electricity market within ASEAN
countries. A survey method is adopted to collect opinions from utility experts as well as
energy policymakers from the ASEAN member states regarding the acceptability and
feasibility of an ASEAN electricity market framework/design. Sección 2 provides a liter-
ature review on the issue, especially referring to existing market models from other parts
del mundo, such as the European Union regional electricity market. Sección 3 presents
the methodology of the survey on the opinions of power sector experts in the ASEAN. Sec-
ción 4 discusses the results and key ﬁndings of the survey. Sección 5 concludes and draws
policy implications.

2. Theoretical framework of an integrated electricity market:

Lessons from the European market

The EU represents one of the most advanced regions in interconnection in terms of the
electricity markets’ integration across borders. Sección 2.1 summarizes the lessons on the
overall market design. Sección 2.2 highlights the key components of such a market design
as functioning integration of the electricity markets in ASEAN.

2.1 The design of an integrated electricity market
2.1.1 The overall market structure
The increasing concern for energy supply secu-
rity has pushed the EU member states to formulate a common energy policy that allows
energy to ﬂow freely across borders. The Lisbon Treaty and the adoption of the Third En-
ergy Package made a clear commitment to the completion of the Internal Energy Market by
2014, allowing free ﬂow of gas and electricity across borders. En 2006, the EU created seven
regional electricity markets, marking an interim step toward the target of a single Euro-
pean electricity market in which energy would be traded freely across borders. El siete

Asian Economic Papers

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Market Design for Multilateral Trade of Electricity in ASEAN: A Survey of the Key Components and Feasibility

Cifra 2. Structure of the electricity market in Europe

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Fuente: Autores.
Nota: OTC = over the counter, PTRs = physical transfer rights, FTRs = ﬁnancial transfer rights, ENTSO-E = European Network of Trans-

mission System Operators for Electricity.

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regional markets are the France–UK–Ireland, Central-East, Central-West, Central-South,
South West, Baltic, and Northern markets (IIEA 2014).

En general, the current electricity market in Europe is divided into two main components:
the wholesale market and system service (Cifra 2). The wholesale market allows electric-
ity generators, retailers, large consumers, and other ﬁnancial intermediaries to buy and
sell electricity either through an organized market or through the over-the-counter type
of markets.

Electricity in the organized spot market is mainly traded in an intraday market and single
day-ahead market through implicit auctions. The transmission capacity and electricity
are traded together in the implicit auction, which is also known as market coupling. En
the intraday market, participants trade closer to real time and trading mostly takes place
during the operation day.

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Asian Economic Papers

Market Design for Multilateral Trade of Electricity in ASEAN: A Survey of the Key Components and Feasibility

Such trading requires the calculation of the available cross-border capacity in a coordi-
nated manner at the regional level to ensure reliable capacity calculation and the availabil-
ity of the optimal capacity to the market. Transmission System Operators (TSOs) establish
a common grid model that covers the estimation of electricity generation per hour, load,
and network status to achieve this integrated calculation. This mechanism allows power
to ﬂow from low-price to high-price areas. The market coupling operator uses a common
algoritmo, the so-called European Hybrid Electricity Market Algorithm (EUPHEMIA), a
match bids and offers optimally. The results from this calculation are made open to all the
power exchanges in a non-discriminatory manner.

Al mismo tiempo, electricity can be traded in derivative markets (forward markets), en
which suppliers can buy and use long-term and forward contracts in advance to cover
their consumption portfolio. The derivative markets could also include explicit auctioning
to allocate long-term transmission rights to market participants as ﬁnancial transmission
rights (FTRs) and physical transmission rights (PTRs). These derivative markets aim to re-
duce the risk associated with an electricity price hike and to secure the electricity supply
(ENTSO-E 2013).

2.1.2 Preparation for the integration of electricity markets
The integration of the
European electricity markets started with a top–down process of liberalization and coor-
dination. The European Commission adopted a set of directives and regulations known
as the Third Energy Package on 3 Marzo 2011. The package targeted reform in ﬁve main
areas: (1) ownership unbundling, which stipulates the separation of energy suppliers from
network operators; (2) strengthening the independence of regulators to generate a com-
petitive internal energy market and to ensure that regulations are fairly implemented and
enforced; (3) the establishment of the Agency for the Cooperation of Energy Regulators
(ACER), which plays a central role in encouraging electricity market integration and en-
hancing competition through the development of the EU-wide network and market rules;
(4) the cross-border cooperation between the TSO and the creation of the European Net-
work of Transmission System Operators for Electricity (ENTSO-E); y (5) increased trans-
parency in retail markets to beneﬁt consumers (European Commission 2016).

Looking at the situation of liberalization and deregulation of electricity markets across
ASEAN, Singapore was the ﬁrst country to launch a competitive, liberalized, and deregu-
lated electricity market. The Philippines and Vietnam followed the trend by establishing a
competitive wholesale electricity market. Indonesia, Malasia, and Thailand have achieved
partial liberalization, speciﬁcally including the unbundling of transmission and generation,
corporatization of utilities, independent power producers, an independent regulator, y
third-party access, but have yet to introduce wholesale competition into their electricity
market (Sen et al. 2017).

Asian Economic Papers

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Market Design for Multilateral Trade of Electricity in ASEAN: A Survey of the Key Components and Feasibility

ASEAN has established the Heads of ASEAN Power Utilities/Authorities to coordinate the
utility companies in the ASEAN as well as the ASEAN Power Grid Consultative Commit-
tee to coordinate the electricity market regulators and policymakers in the ASEAN. Estos
bodies function more as a secretariat, sin embargo, than as formal institutes to carry out regu-
lar coordination activities such as harmonization, infrastructure planning, monitoring and
exchange of operation information, etcétera. The region thus has yet to establish formal
institutions, like ACER and ENTSO-E in Europe.

The multilateral trade of electricity in the ASEAN will most likely be developed as a loose
over-the-counter market ﬁrst. Eventualmente, sin embargo, it will have to evolve into organized
markets to cater to the needs of active regular trading of various products and services, como
described in the next two subsections.

2.2 Key components of and steps toward an integrated electricity market in ASEAN
To establish a multilateral electricity trading framework in the ASEAN with the basic func-
ciones, we identiﬁed the following basic building blocks to be developed.

2.2.1 Open access
Open access to transmission and distribution grids by market par-
ticipants from all member states is a fundamental step toward the integration of electricity
markets. Opening access to the grid is a long-term process rather than a discrete event.
The initial step toward open access is to enforce legal rights for suppliers to access the grid
and to sell their electricity and capacity and for buyers to have an agreement with sup-
pliers, whether it is a direct agreement or one reached through an authorized market op-
erator. The institutional requirement at minimum includes transparency in regulations
and procedures on market and grid operations, unbiased TSOs, and ﬁnancial objectives
(Banco mundial 2013).

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In a liberalized electricity

2.2.2 Capacity estimation, allocation, and compensation
market, the available cross-border capacity should be calculated in a coordinated manner;
in the European electricity market, the calculation is conducted by TSOs. The network code
on capacity allocation and congestion management regulates the available capacity trade.
The forward capacity allocation network code, por otro lado, regulates long-term ca-
pacity trade, whereby TSOs establish a common grid model according to the individual
grid model from each TSO. This model incorporates the generation estimates, hourly load,
and network status.

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Electricity trade also involves cross-border electricity ﬂows and normally leads to elec-
tricity losses. Por lo tanto, compensation is necessary for the infrastructure costs for host-
ing cross-border electricity ﬂows and the costs for electricity losses incurred by particular
transmission systems that host cross-border ﬂows. The European electricity market has

Asian Economic Papers

Market Design for Multilateral Trade of Electricity in ASEAN: A Survey of the Key Components and Feasibility

established the Inter-TSO Compensation mechanism to compensate for electricity losses
and grid congestion (EC 2010).

There are two components to the calculation of compensation. The ﬁrst component is the
transmission losses based on a with-and-without-transit model. Losses are calculated for
each TSO’s transmission grid in a load ﬂow situation with and without transits. TSOs are
compensated for the costs incurred as a result of hosting cross-border electricity ﬂows on
their networks. In addition to this, the national transmission system operator from which
cross-border ﬂows originate and the systems where those ﬂows end provide the compen-
estación. Compensation is made on a regular basis with regard to a given time period in the
pasado (EC 2010).

The second component is an infrastructure cost to compensate for hosting cross-border
ﬂows. The level of payment for this infrastructure is based on the infrastructure cost as-
set value used to host cross-border ﬂows and the amount of cross-border ﬂows between
participating TSOs. The cost calculation for hosting cross-border ﬂows is established
on the basis of forward-looking long-run average incremental costs that also incor-
porate investment in new infrastructure, account losses, and an appropriate propor-
tion of the existing infrastructure cost (Androcec et al. 2011). The beneﬁts incurred as
a result of hosting cross-border ﬂows are also taken into consideration to reduce the
compensation payment.

2.2.3 Market coupling, market splitting, and auctions Market coupling is one way
to achieve market integration. It takes place in a network that consists of several areas or
countries, among which market transactions will be settled through a common algorithm
that takes grid constraints into account. If there are differences in the market area prices,
then the operators will calculate the tradable transmission capacity in their market areas
to even up the price in the coupled markets. A system price is thus created through this
mechanism (Toljan et al. 2011).

Sin embargo, in circumstances in which the necessary trading capacity exceeds the intercon-
nector capacity, bottlenecks occur and the market is necessarily decoupled. Después,
the prices between previously coupled areas will differ and these areas will no longer use
the system price. It implies that, without sufﬁcient interconnection between different mar-
kets, a single price system cannot operate. De este modo, bottlenecks will create different prices in
each of the bidding areas even if they are in the decoupled market. This is known as the
market splitting procedure (Van den Bergh et al. 2016).

2.2.4 Nodal or zonal pricing
prices, which are calculated in a number of locations on the transmission grid, known as

Nodal pricing is a method to determine market clearing

Asian Economic Papers

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Market Design for Multilateral Trade of Electricity in ASEAN: A Survey of the Key Components and Feasibility

Cifra 3. From grid interconnection to market integration—Key components and steps

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nodos. Nodes refer to each point on the transmission system at which generators inject en-
ergy or loads withdraw energy. Because nodal prices reﬂect the marginal costs of electricity
provision at different locations, these prices give incentives for the trading of electricity
(Oren et al. 1995).

Nodal prices may be different at the individual node in the network where a single trans-
mission line is contested (Stoft 1997; Hogan 1998). Por eso, network nodes are segregated
into price zones that share similar prices. This approach is known as zonal pricing, cual es
also called market splitting (De Vries and Hakvoort 2002).

3. Survey methodology

Based on the literature review, we summarize the guiding principles of the market design
for multilateral trading of electricity in the ASEAN as follows:

1. Maximize the economic potential of the APG;
2. Ensure the safety and reliability of the ASEAN member states’ power grid;
3. Incentivize transmission infrastructure investment; y
4. Enable open access and a common transmission capacity mechanism.

Respectivamente, we identify the theoretical components and steps toward the building of an
integrated regional electricity market in the ASEAN as shown in Figure 3.

Asian Economic Papers

Market Design for Multilateral Trade of Electricity in ASEAN: A Survey of the Key Components and Feasibility

Cifra 4. Delphi method

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Sin embargo, we fully understand that the feasibility of such an ideal market model is subject
to the reality of ASEAN member states, especially concerning their own electricity market
estructura, legislation, regulations, standards, and even politics. Por lo tanto, we conducted
the ﬁrst round of the survey on the following ﬁve blocks of issues:

1. Part I: General opinions on multilateral electricity trade;
2. Part II: The feasibility of establishing ASEAN multilateral electricity trade based on

the APG;

3. Part III: Institutions for third-party use of transmission capacity in ASEAN multilateral

electricity trade (estimation, allocation, and compensation);

4. Part IV: Market design for multilateral electricity trade in the ASEAN; y
5. Part V: Setting up institutions for coordination and cooperation in multilateral

electricity trade.

The ﬁrst round of the survey produced indicative results of the components and the kind of
overall institutional framework that are preferred. Sin embargo, a common market model de-
rived from such preferences and thus customized for the ASEAN is still to be recognized as
acceptable to most member states. Por lo tanto, a second round of the survey was conducted
to assess the acceptance of a two-stage market development model for ASEAN.

This survey method is also known as the Delphi method (Cifra 4). The Delphi method is a
forecasting method based on the results of questionnaires sent to a panel of experts. Several
rounds of questionnaires are distributed, and the anonymous responses are aggregated
and shared with the group after each round.

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Market Design for Multilateral Trade of Electricity in ASEAN: A Survey of the Key Components and Feasibility

Cifra 5. Purposes of the survey

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Nota: AMS = ASEAN member state.

The adoption of the Delphi method is thus not only an analytical process to provide solu-
tions to the research questions but also a capacity-building and consensus-reaching process
for the experts of ASEAN countries in their power sector. It is believed that such a practice
could also to some extent facilitate the relevant parties future actions toward the formation
of a multilateral and regional electricity market (Cifra 5).

The questionnaire for the ﬁrst-round survey as well as the second-round survey contains
questions that scale the responses to ﬁve levels, from very negative, negative, and neutral
to positive and very positive.

4. Results and key findings

4.1 The first-round survey
The ﬁrst-round survey received a total of seventeen responses from experts from
nine ASEAN countries. The opinions collected from the survey can be summarized in
three categories:

Primero, issues that have been conﬁrmed or agreed by most experts, which include
the following:

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Market Design for Multilateral Trade of Electricity in ASEAN: A Survey of the Key Components and Feasibility

• The majority of respondents lack knowledge about competitive multilateral electricity

trade in an integrated market, such as the EU and U.S. regional markets;

• ASEAN cannot follow any existing market models and needs its own market design due

to its own characteristics;

• ASEAN needs common guidelines for the technical and physical interconnection of

power grids;

• ASEAN countries can share data about cross-border transmission capacities;
• The net transfer capacity should be used in estimating the available cross-border

transmission capacity;

• ASEAN needs a common model to estimate the loop ﬂow in the cross-border intercon-

nections and compensate for it accordingly;

• Any of the methods, a saber, market splitting, market coupling, and nodal pricing,
could be used to manage congestion in cross-border transmission interconnectors;
• ASEAN countries agree to set up several institutions to support and coordinate issues
related to an ASEAN common electricity market, including a planner group, regulator
grupo, and TSO group, as well as an ASEAN-wide infrastructure development plan; y

• ASEAN countries agree to establish a special ﬁnancing fund for an ASEAN common

electricity market.

Segundo, there is a weak preference for or motivation to develop the following issues in the
ASEAN electricity market:

• A common market model for electricity pricing;
• A common guideline/coordinated method for the allocation of cross-border transmis-

sion capacity and compensation for open access;

• A common methodology for the conﬁguration of trading/bidding areas/nodes;
• ASEAN countries can share data about domestic electricity generation, transmission,

distribución, and load;

• Implicit auctioning of cross-border transmission capacity for the trading of electricity in

the ASEAN context;

• PTR and FTR can be useful for market participants to manage better the risks related

to transmission; y

• An ancillary services market is necessary as an integral part of the future ASEAN inte-

grated electricity market.

Tercero, there are several issues that the majority of experts perceived to be less important
and infeasible in ASEAN:

• An explicit auction of available cross-border transmission capacity;
• The development of PTR or FTR to incentivize investment in the cross-border

transmission infrastructure;

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Market Design for Multilateral Trade of Electricity in ASEAN: A Survey of the Key Components and Feasibility

• A common guideline for the grid operation procedure, performance standards, y

grid codes; y

• Liberalization or unbundling in the domestic market of the ASEAN member countries.

4.2 The second-round survey
Based on the information collected and comprehended during the ﬁrst round of the survey,
we can identify components that are commonly agreed to be the building blocks for the
beginning stage of market development in the ASEAN. Less-preferred components serve
as the building blocks for an advanced stage of market development in the ASEAN. El
second-round survey on the feasibility of an electricity market grand design generated
eleven responses from eight ASEAN countries. To avoid overweighting the opinion of a
country with more responses than others, we take the average of the responses from the
same country. Por lo tanto, in the following Table 2, the outcome of the survey is presented
as the scoring of the opinions of eight countries.

The results of the second round of the survey reafﬁrmed the previous ﬁnding that certain
components are readily acceptable among most ASEAN countries and are in principle
sufﬁcient to support a regional electricity market for multilateral trading. Sin embargo,
moving toward a more organized and competitive market in the region (es decir., compo-
nents 7–10 in Table 2) requires deeper structural reforms of the domestic electricity mar-
kets, legislation, and regulations—for which the preferences of most ASEAN countries
become neutral.

According to the results of the two rounds of survey, we present the following roadmap
summary as a feasible one (Cifra 6), with key building blocks for the regional electric-
ity market design in ASEAN. To implement such a roadmap for market development,
we recommend that the following stakeholder groups are formed to take coordinated
comportamiento (Cifra 7).

Primero, the policymaker group aims to achieve consensus and agreements at the policymaker
level to foster more harmonized multilateral electricity trade. This group especially targets
the improvement of the way in which the internal electricity market functions as well as
addressing structural issues.

Segundo, the regulator group is responsible for monitoring the functioning of the cross-
border electricity market. It will need to provide a framework for market integration,
which will serve as a base for formulating a set of common guidelines that govern both
the power systems and the power markets.

Tercero, the TSO group is responsible for coordinating and maintaining effective and trans-
parent access to the transmission networks across participating countries. It also provides a

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Market Design for Multilateral Trade of Electricity in ASEAN: A Survey of the Key Components and Feasibility

Mesa 2. Results of the second-round survey

About the survey
process and
methodology

Basic market

building blocks:
Feasibility in the
near future

Advanced market
building blocks
and market
diseño:
Feasibility in the
medium to long
term

No. Question

Very
negative Negative Neutral Positive positive

Very

Has the survey process so far

13%

38%

50%

helped you in enhancing your
knowledge about market
design/models for a
competitive multilateral
electricity market?
Common guideline for
technical/physical
interconnection of ASEAN
member states’ power grid
Common guideline for sharing

data and information that are
necessary for coordinated
operation and planning

13%

38%

50%

13%

75%

13%

Common guideline for

13%

38%

50%

coordinated estimation and
allocation of available
cross-border transmission
capacity

Common guideline for a

38%

63%

compensation mechanism for
third-party access to the
transmission capacity or grid
en general

Setting up institutions such as a

100%

policymakers’ group, regulator
grupo, planning group, y
TSO group in the ASEAN
Deregulation, unbundling, y
domestic electricity market
reforma

Harmonization of the grid
operation procedure,
performance standards, y
grid codes

A common regional market
model to determine the
(implicit) allocation of
cross-border transmission
capacity, congestion charge,
and nodal/zonal electricity
pricing as well as the
conﬁguration of
trading/pricing zones

Developing advanced auxiliary
and derivative markets, semejante
as a balancing service market
and markets for long-term
transmission capacity
allocation rights

38%

50%

13%

63%

25%

63%

38%

13%

75%

13%

common platform that governs the way in which electricity is produced, traded, transmit-
ted, and distributed.

Finalmente, the ASEAN-wide planning group develops a coordinated approach to region-
wide infrastructure planning and aims to develop and promote a ﬁnancing mechanism for
the APG.

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Market Design for Multilateral Trade of Electricity in ASEAN: A Survey of the Key Components and Feasibility

Cifra 6. A feasible roadmap for the regional electricity market design in ASEAN

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Cifra 7. Stakeholder groups for the implementation of the proposed roadmap

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Nota: TSO = Transmission System Operator.

We hope that this illustration clearly explains how a regionally integrated electricity mar-
ket works and what the necessary building blocks are. The ideal market model will de-
pend on the preferences of the ASEAN member countries, however—particularly taking

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Market Design for Multilateral Trade of Electricity in ASEAN: A Survey of the Key Components and Feasibility

into consideration the existing legislation, regulación, and market structure in each
member state.

5. Conclusions and the way forward

En conclusión, a two-phase market development strategy is recommended for ASEAN to
move forward into an integrated electricity market. Such a strategy would be based ﬁrst
on the experiences and lessons learned from the EU integrated electricity market. The pro-
posed framework/model is subsequently tested through a structured survey on the feasi-
bility as well as the priority sequence of developing the necessary building blocks.

In phase 1, to facilitate sporadic multilateral trade of electricity, the following are consid-
ered as the necessary building blocks:

• Enabling open access;
• Sharing data and information for coordinated planning and development of the power

infrastructure;

• Coordination for the allocation of available cross-border transmission capacity; y
• A compensation mechanism for open access to the grid.

Entonces, for phase 2, the following should be developed to establish a fully integrated re-
gional electricity market:

• Harmonization of technicalities, standards, and principles;
• Mandate a minimum interconnection level;
• A gradual shift to nodal/zonal pricing;
• Organized day-ahead and intraday markets; y
• Develop balancing service and ﬁnancial (futures) markets.

Our ﬁndings coincide with and reafﬁrm the main policy advice given by the study on the
feasibility of multilateral power trade conducted by the International Energy Agency for
ASEAN (IEA 2019), which offered ASEAN the options of developing a “secondary” market
model ﬁrst before moving to a “primary” market model. Our study also further explored
the feasibility of the building blocks in each phase of market development. The survey
showed a certain extent of consensus among ASEAN countries on these issues and thus the
validity of the proposed two-phase framework/model.

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