Why an ASEAN power grid is key to tapping Southeast Asia’s green potential

This creates a problem.

ASEAN nations enjoy huge but as yet largely untapped potential for renewable energy, particularly PV solar, and onshore and offshore wind. The IEA puts the potential supply at 20 terawatts, about 55 times the region’s current production capacity. And this energy will be cheap. But growth in total demand now far exceeds new supply from renewable energy. Unless this changes, ASEAN countries will remain dependent on increasing fossil fuel imports, which exposes them to price risks, potential supply disruptions and rising greenhouse gas emissions.

Asian corporate executives have recently focused on dealing with tariffs and trade sanctions, potential supply chain disruptions and geopolitical insecurities rather than on energy and power. in the latest EY-Parthenon Global CEO Outlook SurveyAsia-Pacific CEOs expressed more unease about geopolitics, macroeconomics and trade than their peers in Europe and the US. They should not ignore that investments in modernizing energy supply and transmission today would yield significant benefits, including but not limited to low-cost electricity. And they must mobilize all sources of finance, private and public, for projects to achieve this.

That is why the recent announcement by the Asian Development Bank, the World Bank and ASEAN of a new financing initiative to support the Connected ASEAN Power Grid (APG) is so important. This comes ahead of an advanced memorandum of understanding to be signed by ASEAN countries later this year, which will finally realize the vision of a connected grid that has been prevalent since the 1990s.

It would be expensive to build, estimated at more than $750 billion. But the returns – cheaper and more reliable electricity, increased energy security and regional cooperation, lower emissions – will justify the cost, so long as the finance can be raised.

At the ASEAN Ministers of Energy meeting in October, ADB committed $10 billion over the next ten years. The World Bank is providing an initial $2.5 billion. Multilateral companies will also provide grants, guarantees, political risk insurance and other concessions, as well as technical assistance to attract private capital.

Why hasn’t this connected grid been created already? Partly for technical reasons. ASEAN countries use different voltages in their transmission systems. Their national grids are at different levels of sophistication. They employ different operating standards and regulatory frameworks. Politics has also played a role. Countries have previously prioritized domestic industrial development and national energy policies.

The growing urgency around the energy transition has shifted those priorities and focused attention on how to disseminate renewable energy from widely distributed sources that provide it to consumers who need it, even in other countries. The key now is to move from connecting countries’ networks to a more comprehensive upgrade of national grids.

In May, major energy companies from Malaysia, Singapore and Vietnam agreed to a strategic partnership to explore the use of undersea cables to transmit electricity generated primarily from Vietnam’s offshore wind farms via the Peninsular Malaysia national grid to homes and businesses in Malaysia and Singapore.

Vietnam is prioritizing investment in offshore wind as part of its strategy to become a regional renewable energy hub. Despite lacking the natural resources for large-scale renewable energy, Singapore intends to become a major promoter of cross-border trade in clean energy. It has given conditional approval to ten projects for its import, including solar energy from Australia; solar, hydropower and potential wind power from Cambodia; and solar energy from Indonesia; Also offshore wind from Vietnam. Thailand could be another big importer.

high return on investment

The vision of an ASEAN power grid, which would connect a population expected to reach 780 million by 2040 with a $10 trillion regional economy that will triple in size by 2022, was put forward at COP29 a year ago. Doubling the number of interconnections across the 10 ASEAN countries could increase connected capacity from 7.2 GW in 2022 to 33.5 GW fifteen years from now.

This will require more than just undersea cables and high voltage direct current lines capable of transmitting power over long distances with minimal leakage. To succeed at scale, a resilient ASEAN grid must address the key challenge facing all renewable energy – intermittency. Balancing increasingly variable supply with increasing demand requires investment in industrial-scale batteries and other storage and conversion technology. Managing that balance is essential to keeping the grid stable and preventing outages, including extreme weather events coinciding with widespread power outages.

Upgrading home networks should include the integration of new digital technology familiar from the Internet of Things, so that systems can be continuously monitored and measured, detecting potential vulnerabilities before supplies are disrupted and enabling stable maintenance rather than costly repairs.

ASEAN Power Grid paves the way for low-cost manufacturing and enhances competitive advantage, as the region continues to move up the manufacturing value chain.

In the long term, it could also improve climate-resilient food security and put the region in a positive feedback loop. Related investments in agritech could also boost biofuel production, potentially greening air travel and helping decarbonize other sectors that are difficult to electrify.

A significant share of total employment across the Asia Pacific region is in sectors directly affected by climate such as farming and fishing, leaving populations at higher risk from global warming and rising sea levels. With ASEAN Grid, governments, large utilities, energy companies and financiers are coming together to tackle this risk, and build a project that promises huge benefits for generations to come.