Addressing Financing Challenges for Cross-border Transmission Projects

Highlights:

• Financing of cross-border grid-to-grid transmission projects in ASEAN is prone to three obstacles:
  • National laws and regulations make it difficult to achieve regulatory approval for utilities to invest in cross-border grid-to-grid facilities given pressing domestic investment needs
  • A significant barrier to support by multilateral development banks and others for the financing of cross-border grid-to-grid transmission projects is their restrictive “green taxonomies”, which are unfavourable to grid-to-grid transmission projects.
  • Some of the projects that are most obviously supportive of multilateral power trade (MPT) in ASEAN, may be seen to be more beneficial to other states in the region than the two countries sharing the interface.
• Steps that could improve financing options for cross-border grid-to-grid transmission projects in ASEAN include:
  • National laws and regulations make it difficult to achieve regulatory approval for utilities to invest in cross-bordergrid-to-grid facilities given pressing domestic investment needs. A coherent regional approach to infrastructure planning and financing would be beneficial. The regional approach would undertake planning on an indicative basis, develop a framework to agree on which projects are most beneficial and supported by ASEAN member states, and identify a financing approach for each project.
  • Consider developing a common-use asset financing approach for critically important projects that could provide the infrastructural backbone for multilateral power trade development in ASEAN.
  • Form a regional transmission investment facility, with backing from one or more development banks (as seen in other markets, which was recently developed for the Southern African Power Pool).