Is the interconnection of Asian power grids a new battleground in the Sino-US rivalry? For a long time, this question seemed to be unfounded, since the interconnection of electrical networks was based essentially on commercial considerations. Today, the situation has changed due to the progressive electrification of Asian companies and the Sino-American technological rivalry.
The electrification of societies has, on the one hand, facilitated the development of large interconnected electricity networks at the regional level. On the other hand, this interconnection of networks relies on the control of key technologies that are the object of a real geopolitical battle. This is why regional electricity networks are emerging as new areas of struggle for influence between powers. Located at the heart of global growth, Southeast Asia is a decisive territory in this context of rivalry.
The development of power grid interconnection in Southeast Asia
In recent years, Southeast Asia has placed great emphasis on the interconnection of power grids to enhance its energy security. This is the case of the Mekong countries forming a common network called the Greater Mekong Subregion (GMS). The latter links China to Cambodia and Myanmar and crosses Laos, Vietnam and Thailand. ASEAN has also unveiled an ambitious plan to interconnect and modernize its power grids called theASEAN Power Grid.
This desire to interconnect electricity grids can be explained by significant gains in the integration of renewables. As they are difficult to control, they create imbalances in the electricity markets, especially during peak hours. An interconnected grid can therefore limit this instability by facilitating the exchange of electricity between states. According to the World Bank, Southeast Asia could save nearly 5% in electricity production costs.
The interconnection of networks can also allow this region to significantly reduce its dependence on imported fossil fuels. Thailand and Vietnam take advantage of the GMS to import hydropower from Laos and Cambodia. For these countries, this is a major challenge in order to achieve their climate objectives defined in the Paris Agreement. For this reason, Southeast Asia is expected to experience strong growth in its power systems in the coming years.
China’s role in the interconnection of Asian power grids
In order to facilitate regional trade, Asian networks will have to undergo a major technological upgrade. This will include the installation of interconnectors as well as long-distance lines capable of handling a large flow of electricity. In this field, Chinese players dominate the market due to their technological lead. The Chinese State Grid and Southern Power Grid are the only companies that can install ultra-high voltage lines.
This so-called UHV technology is particularly important for facilitating the interconnection of electrical networks. Indeed, by reducing losses over a long distance, it leads to a reduction in electricity transmission costs. The mastery of UHV therefore gives Chinese players a major competitive advantage over the competition in Southeast Asia. Pakistan, Laos and Cambodia have already entrusted the modernization of the electricity network to Chinese companies.
This push by Chinese players is encouraged by Beijing as part of its Belt and Road Initiative (BRI). The government is promoting an ambitious plan for continental interconnection, the Global Energy Interconnection Initiative (GEII), by 2049. Economically, this plan is designed to export China’s excess electricity capacity. Politically, the GEII aims to strengthen Chinese influence by creating a de facto interdependence between Beijing and its neighbors.
The geopolitical dimension of the interconnection of Asian power grids
In order to counter China’s hold, the United States is defending a strategy called Free and Open Indo-Pacific. This strategy aims to invest in energy infrastructure and promote free competition standards in Southeast Asia. At the level of electricity networks, this is reflected in the support shown for alternative interconnection projects to Chinese projects. Washington supports the SAARC, a project of interconnection of the Indian subcontinent defended by New Delhi.
Similarly, the United States has signed the US-Mekong Partnership to counteract the GMS, which is largely dominated by China. Nevertheless, the Americans are having a hard time offering a competitive network interconnection. This is because the United States has not mastered the technologies associated with interconnected and centralized networks. For example, in the United States, there is currently no interconnection between the country’s three main power grids.
This delay has paradoxically allowed the American private sector to invest massively in technologies related to electricalmicrogrids. This point is crucial because far from competing with China on interconnected networks, the United States dominates decentralized networks. However, a microgrid can promote the integration of renewables by improving demand flexibility. As a result, decentralized networks have the potential to drastically reduce the need for interconnection of electrical networks.
In Southeast Asia, there is growing interest in microgrids. On the one hand, the geographical conditions of the region, made up of mountains and islands, favor microgrids in terms of cost. On the other hand, the numerous typhoons make it necessary to develop decentralized networks as a factor in balancing the electricity markets.
The United States and China have thus made power grids a new battleground in their strategic rivalry. Today, in Southeast Asia, we are witnessing a real struggle for influence between the two powers in this area. Without doubt, this competition can open our eyes to the geopolitical importance, unfortunately long underestimated, of the interconnection of electrical networks.