Vietnam, Malaysia, Singapore sign for ASEAN power project

Vietnam, Malaysia and Singapore have joined hands through their respective government-owned power companies to explore the feasibility of transferring renewable energy, especially off-shore wind power from Vietnam through an under-sea cable and then transfer it overland to Singapore.

The idea is to create an ASEAN power grid. But it is still at a very early stage. Only when the consortium finds it possible to pursue the idea further that the issues of costs and who would bear the cost of which part of the project will be decided.

The deal was signed on the sidelines of the ASEAN summit hosted by Malaysia on May 26. Malaysian Deputy Prime Minister and Minister for Energy Transition and Water Transformation Fadiullah Yusof said that the business and technical details remain to be worked out. Singapore Prime Minister Lawrence Wong said in a Facebook post, “These efforts are part of our broader vision for an Asean Power Grid – connecting our region with a more resilient and reliable energy supply. Step by step, we are making this a realty.”

The consortium comprises Singapore-based Sembcorp Industries and Petro Vietnam Technical Services Corporation, a member of Vietnam National Industry-Energy Group, and Malaysia’s MY Energy Consortium, an unincorporated consortium established by national electricity provider Tenaga Natonal Berhad and state oil giant Petronas.

It makes sense that the governments of the three countries are represented by their corporations because power relates to infrastructure and it is best handled by the government. It would have been possible for the entire idea to be conceived and implemented by private companies, but the three countries, because of their peculiar political-economic structure, are forced to fall back on the state power for both credibility and financial viability.

Among the three, Vietnam is a communist party-ruled state. Like in China, private enterprise is given a free hand, the key sectors are still in the hands of the state. Malaysia is in many ways a free market economy-based model, but none of its private companies are big enough carry the task through. Singapore too is more like a communist party-ruled state, with this difference that there are free elections and there is room for other parties, but the ruling People’s Action Party (PAP) has a stranglehold over the state and society. It is quite possible that this states-owned consortium might need additional private financing and they may have to go to the marker to raise the money to meet the costs of the project once it gets moving.

For Asean, right from its inception in the 1960s, the focus has been on economic development and integration, on the lines of the European Union (EU). But EU had moved far ahead on political integration and creating Europe-wide political institutions like the European Parliament and European Commission, which is elected by the European Parliament. The leaders of Asean have been pragmatic, and kept the integration goal to the economic sphere.

The idea of an Asean power grid makes sense because instead of incurring separate expenditure of what is a common utility meets the ideal of economic integration. The project will likely take some time to take off, but all the stakeholders are committed to it because they see the common advantage.

Renewable energy is as such a high-cost venture right now. The prices will come down once it becomes the common practice to use renewable energy. But until then, there will be need for governmental support. In other words, subsidies of one kind or another. The governments are also in a position to absorb the costs at the beginning with no prospect of immediate returns. State involvement in projects like these which require strong political push along with economic support makes sense.