Asean Power Grid: Can South-east Asia finally plug into a shared power future?

[SINGAPORE] In 2011, Frank Phuan co-founded Sunseap Leasing, one of Singapore’s earliest solar energy providers. More than a decade on, he is chasing a bigger ambition: lighting up Singapore with Indonesian sunshine.

Phuan’s new company, Equator Renewables Asia, is set to import 400 megawatts (MW) of solar energy from the Riau Islands into Singapore, via a subsea cable.

His team has been working on the Indonesian project for about three years, but 2025 is “the year that we do see a lot of breakthroughs”, Phuan tells The Business Times.

One of these breakthroughs came recently. In June, Singapore and Indonesia inked an agreement to facilitate cross-border electricity trade within 12 months. This means less red tape for Phuan and many others who have gained a conditional licence or approval from Singapore’s Energy Market Authority (EMA).

“Once we demonstrate the success of one project, I think it will open the door to many of the projects in the region; the opportunity is immense,” says Phuan.

Equator is part of a growing number of private sector players jumping into projects related to the Asean Power Grid (APG) – the bloc’s effort to link up its 10 members’ power systems by 2045.

Under a regional masterplan, 18 interconnections are being prioritised – such as between Singapore and Sumatra, and The Philippines and Sabah.

The APG is critical in tackling climate change, by moving the region away from fossil fuels and towards clean power. Resources such as steady sunshine, wind and dams are unevenly distributed across South-east Asia. The only way to ensure equitable access is through the trade of clean power.

Phuan is not the only APG optimist. Singapore-based Gurin Energy, led by renewables veteran Assaad Razzouk, has teamed up with Malaysia’s Gentari to import 300 MW of solar power from the Riau Islands.

“I think any renewable energy developer – frankly, any energy company – doesn’t need much convincing to participate in those projects,” he says.

Accelerating after a slow start

The idea for an Asean power grid traces back to 1997, under the Asean Vision 2020 blueprint. The bloc’s members identified the interconnections of the national electricity networks as a way to strengthen energy security and economic integration.

But it has been slow to take off. Of the 18 prioritised cross-border interconnections, only about half are already in place, according to a January report by the US Agency for International Development and the Asean Centre for Energy.

“Technical incompatibilities across national grids, a lack of harmonised standards, and limited infrastructure, especially for long-distance and subsea transmission, posed significant barriers,” says Sharad Somani, head of infrastructure at KPMG Asia Pacific.

Uncertainty over cost-sharing and political sensitivities were additional hurdles, notes Gilles Pascual, Asean power and utilities leader at EY-Parthenon.

As a result, the APG remained on the backburner for many years. However, the concept has now gained fresh momentum.

One key driver is the improved economics of renewable power, with solar and wind energy becoming increasingly cost-competitive in the region.

Another is countries’ need to diversify their power sources, for energy security. Asean is expected to account for 25 per cent of global energy demand growth over the next decade, according to the International Energy Agency. By 2050, the region’s energy demand is set to overtake the European Union.

For importers like Singapore, the APG offers not just energy security, but a pathway to net zero by 2050. The city-state aims to import 6 gigawatts (GW) of low-carbon electricity by 2035.

Trading clean power is more economical for countries than trying to generate all of it domestically.

“Electricity trading across borders allows countries to leverage economies of scale, optimise generation assets and reduce overall system costs,” says Somani, noting that this makes energy more affordable and reliable for consumers.

Exporting countries also stand to gain economic benefits. For instance, Indonesia could enjoy a tax revenue increase of US$210 million from exporting electricity to Singapore, based on a report by the Institute for Energy Economics and Financial Analysis.

Phuan is already witnessing some of these economic benefits. His team has worked with solar panel and battery manufacturers outside of Indonesia to set up factories in the country and become suppliers for Equator.

“We help to set up the ecosystem of green manufacturing… and that will also help to lift the capability of Indonesia in the renewable sector overall,” he said, adding that the country could be elevated into a renewables “powerhouse”.

Proof of concept

Adding to the optimism is the fact that one multilateral project has taken off under the APG: the Laos-Thailand-Malaysia-Singapore Power Integration Project (LTMS-PIP).

In its first phase, the LTMS-PIP imported up to 100 MW of green power from Laos to Singapore, via the two other countries.

The project is now entering a second phase, with the maximum capacity set to double to 200 MW. Wheeling charges, or the charges for allowing electricity to pass through the country, are still being worked out, but Singapore is eyeing a breakthrough this October, EMA’s chief executive previously told BT.

The LTMS-PIP could pave the way for other multilateral projects, such as the ongoing power integration project for Brunei, Indonesia, Malaysia and the Philippines, announced in 2023.

Dinita Setyawati, a senior energy analyst for Asia at think-tank Ember, estimates that APG projects can unleash an additional 24 GW of solar and 5.6 GW of wind capacity in the region.

With new renewable energy demand from the likes of Singapore, there is more awareness of the revenue potential, which could attract new developers to the APG. “Everyone wants to get a piece of the pie,” she tells BT.

Lingering obstacles

Yet major obstacles remain, especially on the financial front. The Asian Development Bank (ADB) has estimated that over US$100 billion in investments will be needed for transmission infrastructure, from both the public and private sectors.

Thus far, ADB has committed US$10 billion towards the APG, adding to grants provided by the World Bank under a separate US$2.5 billion programme.

Both organisations are now supporting the development of the Asean Power Grid Financing Initiative (APGF), a project to draw in more capital for the APG, which is set to be officially announced in October at the region’s annual meeting of energy ministers.

However, much more capital is needed. Private sector appetite is currently limited by the high upfront cost of APG projects and their long timelines, says EY’s Pascual.

Melvyn Yeo, managing partner of clean energy investor Trirec, notes: “In past years, major private investors remained cautious due to political and institutional risks, uncertain revenue models, and the lack of bankable projects.”

On the consumer front, there isn’t much clarity yet on how much more green energy imported via the APG would cost.

Another challenge is on the technical side, with Asean’s 10 member countries having varying grid codes and standards of grid infrastructure. “Subsea connections and limited landing sites also add logistical hurdles,” says Somani.

The intermittency of solar and wind power brings another layer of complexity, raising the need for investments in battery energy storage systems to ensure that power supply is consistent.

Equator’s project, for instance, will have to hit a load factor of 60 per cent – meaning that the project must be able to generate power consistently at least 60 per cent of the time, enabled by large-scale batteries.

In contrast, a solar power project in Singapore on average only generates power 12 to 15 per cent of the time, as sunshine isn’t constantly available.

To meet the required load factor, Equator will have to deploy 2.2 gigawatt-peak (GWp) of solar power on the Riau Islands – larger than the 1.6 GWp of solar capacity in the entire Singapore.

But Phuan is unfazed, quipping: “The project is interesting to me because it’s an engineering challenge.”

And then there is what could be the biggest difficulty: fragmented regulations and market structures. The LTMS-PIP, for instance, has reportedly faced delays due to disagreements with Thailand over wheeling charges.

The upside, however, is that the project can now serve as a “pathfinder” for future projects, by highlighting the need for early coordination on wheeling charges and other potential sticking points.

In particular, the design of power purchase agreements needs to be standardised across the different markets, says Tiza Mafira, director of the Climate Policy Initiative, a think-tank, in Indonesia.

Political will

Ultimately, the political will to persist with the APG is key – especially when it comes to investing in green energy, rather than backsliding to fossil fuels.

“For Indonesia, we’re quite protective of our own domestic supply of power, since we do need a lot of it. And unfortunately, that’s manifested in ways that are quite favourable to the incumbent coal source,” notes Tiza.

There is the risk that coal subsidies, for instance, could be an obstacle to making sure the grid is powered with renewables.

The commitment of the next Asean chair to the APG is also vital. “If next we have a leader that is not too interested in pushing this agenda… we could very well see a delay,” Tiza adds.

Still, some believe political alignment will strengthen over time. Progress is likely to “accelerate” over the next two decades, first at the sub-regional level, then regionally by the 2040s, says Trirec’s Yeo.

Private players are also trying to bridge gaps, which is what Equator has focused on.

“Our team has put in a lot of effort to create a narrative that is suitable and palatable for both Singapore and our neighbouring countries. It’s important to understand what our neighbours want,” says Phuan.

To Assaad of Gurin, no challenge is insurmountable, as long as Asean members work together. “(It’s) not new technology or some massive scientific breakthrough. It’s just an issue of scale and cooperation between countries,” he says, adding that interest already outstrips the current pipeline.

If realised, the APG could reshape South-east Asia’s energy landscape. But whether 2025 marks a decisive breakthrough, or just another waypoint in a decades-long project, will depend on whether politics can trump the hurdles.