Publication - International grid integration: Efficiencies, vulnerabilities, and strategic implications in Asia

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Title

International grid integration: Efficiencies, vulnerabilities, and strategic implications in Asia

Publisher

Atlantic Council

Author

Phillip Cornell

Published in

January 2020

Abstract

The new decade is poised to be one of fundamental change in the global electricity sector, with the widening cost advantages and spread of renewable energy. One result of that trend is that power networks and markets have entered a new phase of international and regional integration. More renewables benefit from larger, varied, and more flexible grids, which has spurred transmission build-out and grid modernization worldwide. Trading power across international borders and facilitating more complex markets both deliver increasing cost savings and efficiency gains, especially with rising demand and growing shares of renewables in the power mix. That is the case across many (otherwise very different) developing Asian economies. Evolving international electricity grids and markets also have regional political implications in a world where critical infrastructure informs trade and national security.

This report is intended to inform US policy responses to the energy transition as it spurs new interdependencies and reshapes geopolitical relationships.

As economic growth and power demand both increase in developing Asia (including the Middle East), countries are integrating cheaper renewables and shifting away from dependence on fossil fuels. Meeting demand while reducing costly emissions has encouraged new infrastructure and policy changes to increase cross-border trade. The changing political economy of electricity trade in the Middle East, South Asia, and Southeast Asia reflects trends that are likely to accelerate in this decade, and highlights the institutional challenges of international grid integration.

China’s role is significant. Its program to supply grid infrastructure that can support the energy transition, and a particular vision of global interconnection, are products of the country’s drive to engage its industrial capacity and sell to the region; to build a soft-power case for Chinese climate leadership; to expand regional political and economic influence; and to raise its national profile in a quiet rework of international energy governance. It is also a bet on a particular view of future continental electricity markets and architecture. The wider Belt and Road Initiative (BRI) to develop regional infrastructure networks with attractive financing and Chinese suppliers has raised concerns about debt traps and adequate standards, but transmission and smart grid technology can have additional implications for energy security, cybersecurity, and technology supply chains.

Against the backdrop of China’s efforts to become a global leader in energy infrastructure, the US has had to face its own domestic grid challenges—especially the lack of domestic interconnections and the need for improvements in cybersecurity—as well as contend with rapid innovation at the distribution level and the need for market reform to support distributed generation and microgrids. At the same time, the US is seeking to formulate a coherent foreign policy to address Chinese influence.

This report argues that providing institutional support for regional electricity trade, and also promoting innovation in decentralized electricity models, can contribute to a wider US policy in the region. A response to emerging challenges posed by integrated power infrastructure in Asia will require a comprehensive approach.

URL

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Admin:
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PIE Grant (Grid Portal)?
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• Energy Transition

• Grid

• Policies and Regulations

• Other