The report “Bankable by design: Financing ASEAN’s energy system transformation” published by EMBER states that, ASEAN’s energy transition financing problem has moved from raising capital to designing investable markets and assets. ASEAN has seen some success in getting capital to flow to utility-scale renewable energy projects. But that success does not extend downwards or outwards. Returns fall away sharply as project sizes shrink, storage sits at less than a third of the pipeline the region needs by 2030, and transmission earns single-digit returns that keep private capital away. Market design, more than capital or technology, is now the constraint for financing the region’s energy transition.
In recent years, ASEAN has become a credible destination for investments in renewable energy generation, especially large utility-scale projects. Over the past decade, solar capacity has risen to 39 GW and wind to 9.6 GW. The region is eyeing beyond tripling that capacity, driven by Indonesia’s 100 GW solar ambitions and Viet Nam’s PDP 8 targets. Along with the growth of solar and wind, the markets and regulatory framework need to keep pace with the expanding role of energy storage and grids. Financing must also match the regional renewable energy aspiration goals and interconnection development targets
This analysis finds that what complicates matters more is that ASEAN’s next phase of energy transition will move beyond utility-scale generation projects towards thousands of smaller distributed systems rather than a handful of large plants, on storage to absorb variable output, and on transmission to move power to where it is needed. The scale of this shift is already reflected in national and regional plans, including Indonesia’s ambition for around 80 GW of distributed solar and ASEAN’s need for 23-26 GW of energy storage by 2030. Currently, none of these assets fit the financing model that made utility-scale solar and wind bankable, and the analysis in this report quantifies the gap for each.
The financing challenge is therefore not about mobilising capital anymore but developing financing structures and market rules to cater to different characteristics of distributed renewable energy, storage, and transmission. The right approach will differ across ASEAN markets, but the common goal is to create more predictable and diverse sources of revenue that make these assets investable.
Access the full report here