Vietnam’s Power Revolution: What It Means for ASEAN’s Energy Future
Exciting news is coming from Vietnam that could shake up the power sector across Southeast Asia. The Vietnamese government has announced a groundbreaking Direct Power Purchase Agreement (PPA) or “Power Wheeling” scheme. What does this mean? For the first time, independent power producers (IPPs) can sell electricity directly to industrial consumers, bypassing the traditional state utility. Investors are thrilled, and it’s expected to spark a surge in renewable energy (RE) investments.
But this is not just Vietnam’s story. There’s a bigger trend of power sector liberalization sweeping across ASEAN, and it’s worth taking a closer look.
What Is Power Wheeling?
Before we dive deeper, let’s clear up what this “Power Wheeling” is. Depending on where you are or whom you ask, you might hear it called Direct PPA, Peer-to-Peer Power Trading, or Third Party Access (TPA). All these terms point to the same basic concept: a shift in how electricity is bought and sold.
Traditionally, many developing countries have electricity sectors dominated by state-owned utilities (like PLN in Indonesia). Private companies, when allowed, can only sell their power to these state utilities under fixed agreements (Power Purchase Agreement (PPA)). The utility then acts as a middleman, selling to consumers.
With Power Wheeling, this changes. IPPs can sell electricity directly to consumers. The model can work in two ways:
- The private company owns both the power plant and the transmission lines.
- The private company owns only the power plant and “rents” the transmission infrastructure from the state utility (this scheme is shown in the figure above).
This might sound like a small change, but its implications are enormous.
Why This Matters
When a government allows private companies to sell electricity directly, it’s a game-changer. It transforms how the entire electricity market functions.
Let’s look at it from two perspectives:
- Pro-Liberalization: For supporters of a free market, this is a major win. State monopolies are often seen as inefficient, with little incentive to innovate or lower costs. Breaking them up could lead to increased competition, driving down prices and inviting more private investment. In the context of renewable energy, this could also mean faster growth, as private players would have more freedom to enter the market.
- Pro-Conservatives: On the flip side, some argue that electricity is too important to be left to market forces. It’s a critical public service that affects everything from economic stability to social welfare. In their view, the government needs to maintain control over electricity prices and supply to ensure stability and affordability.
These contrasting views raise important questions:
- Will this drive down prices for consumers, or will the cost of electricity rise?
- Is it really the monopoly that’s holding back renewable energy growth?
- And ultimately, who benefits most from this shift?
The Trend in ASEAN
Let’s zoom out. Vietnam’s move is not happening in a vacuum — it’s part of a broader trend. Across ASEAN, electricity has traditionally been a state-controlled sector. In countries like Indonesia, Malaysia, Thailand, and even Vietnam itself, electricity has been largely monopolized by state utilities.
However, things are starting to change. Singapore and the Philippines are notable exceptions, as they’ve taken more substantial steps toward liberalization. Meanwhile, Vietnam’s journey started over a decade ago, with the introduction of competitive generation markets in 2012, followed by a gradual shift toward retail competition. The new Direct PPA scheme is another step in this ongoing evolution.
Vietnam Is Not Alone
Vietnam isn’t the only country in the region considering Power Wheeling. Thailand and Malaysia are also moving in that direction.
- Thailand: In 2022, the Energy Regulatory Committee announced the development of a Third Party Access (TPA) Framework to open up the distribution system for private retail entities. This move is designed to introduce competition in the market, much like Vietnam’s scheme.
- Malaysia: Peninsular Malaysia has launched the Corporate Renewable Energy Supply Scheme (CRESS), which allows corporate consumers to access renewable energy through a third-party access mechanism.
Power Wheeling is seen as a solution to accelerate renewable energy deployment in both countries. This points to a broader regional trend, one that Vietnam’s leadership could influence.
Beyond national borders, ASEAN itself is aiming for greater integration through the ASEAN Power Grid (APG), which seeks to create a unified electricity market. A trial project called the Lao PDR, Thailand, Malaysia, Singapore — Power Interconnection Project (LTMS — PIP) has already seen electricity wheeled from Laos to Singapore. Again, this involves Power Wheeling at a multilateral level.
Will Indonesia Follow Suit?
That’s the million-dollar question. Power Wheeling is included in the draft of Indonesia’s New and Renewable Energy Law. Most aspects of the law have been agreed upon, but the Power Wheeling provision remains a hotly debated topic. Resistance, particularly from the PLN workers’ union, is strong, as the implications for the state utility’s role would be significant.
It’s hard to predict how things will unfold, but it raises a bigger question for Indonesia:
Should Indonesia follow its neighbours and adopt Power Wheeling? Would it benefit the country’s push toward renewable energy, or would it risk destabilizing the electricity market?
What do you think? Would breaking up the monopoly help or hurt Indonesia’s energy future?
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Reference:
Vietnam DPPA
Malaysia CRESS
Thailand TPA
ASEAN Power Grid LTMS-PIP
