Malaysia leads drive for cross border energy trading in South East Asia

Malaysia aims to play a lead role in the development of an ASEAN (Association of South East Asian Nations) regional electricity grid and cross-border energy trading system, to increase efficiency and cut the costs of decarbonisation for member states.

Malaysia’s TNB electricity company has already signed six agreements with counterparts in Thailand, Vietnam and Laos, and has two feasibility studies planned with utilities in Indonesia and Singapore.

Further regional grid optimisation in the ASEAN region could cut the net present cost of full decarbonisation by 11pc from $7.2 trillion to $6.5 trillion, according to international classification society DNV.

The Malaysian government is creating the Energy Exchange Malaysia (Enegem) to allow for cross-border green electricity sales to neighbouring countries, starting with pilot sales to Singapore.

The auctioning process for cross-border sales of clean electricity will begin with a 100MW pilot run, using the existing connection between peninsular Malaysia and Singapore. If successful, it could be expanded to a gigawatt level.

The project includes an auction for suppliers of renewable energy into the exchange, which will aggregate all the renewable energy sector participants, predominantly in the solar sector, then provide the energy to Singapore.

One of the key obstacles to overcome is reconciling different pricing systems and subsidies in different countries.

“The energy exchange can level the economic and commercial playing field, so that money can flow. Once the money can flow, the electrons will flow,” said Rashdan Yusof, chair of the Energy Commission Malaysia.

There are already several bilateral power agreements in the region, including the Laos-Thailand-Malaysia-Singapore Power Integration Project, which connects renewable power supplies from Laos to Singapore. But Malaysia argues that ASEAN countries need to scale up to multilateral power trading, to fully benefit from regional grid interconnectivity.