This is an extract from a recent report “Wired for profit: Grid is the key to unlock ASEAN energy investment” by EMBER.
Understanding ASEAN’s grids planning strategy
The power grid is the backbone of the electricity system. Power lines transport electricity produced by generators to the final consumers, across different voltage levels. In ASEAN, where demand is skyrocketing and industries are expanding, the role of grids is becoming increasingly critical. Between 2013 and 2023, annual electricity demand in the region surged by around 50%, from 817 TWh to 1,277 TWh, with the majority accounted for by Indonesia, Viet Nam, Thailand and Malaysia. By 2030, electricity demand is set to rise by up to 41% again, redefining the scale and urgency of regional grid planning. To accommodate this growth, utilities in the region are under pressure to satisfy the growing need to connect energy sources, which requires building more transmission lines to carry electricity and more substations to change voltage. Aging grids are being strategically replaced with high-capacity lines, and more high-voltage cables are being installed in each and in between countries to improve regional flexibility and energy security. IEA estimates that 1.7 million km transmission and distribution grid should be added between 2021 and 2030, with around 6% comprising transmission lines and 94% distribution lines. However, collective national plans from some countries fall significantly short of these needs.
As greater electrification expands across transportation and household sectors, distribution and transmission grids should be prioritised. Transmission grid investment is equally critical to enable long-distance interconnections and resources sharing to avoid curtailments. Between 2023 and 2030, Indonesia plans to add 20,798 km of transmission lines. Viet Nam’s expansion plans include 12,300 km of transmission lines by 2030. The Philippines plans to add 3,935 km of transmission lines and Thailand will add 6,677 km, both by 2030. Overall, the combined total in these four countries’ plans accounts for around 45,078 km – about 45% of the IEA’s Announced Pledges Scenario (APS) transmission line expansion target of 100,000 km for Southeast Asia, between 2021-2030. There is a lack of available data on transmission expansion plans across several ASEAN countries, which poses a challenge in assessing regional plans against the IEA pathway. For instance, while four countries account for the vast majority of existing grid infrastructure in the region, there is limited data for other ASEAN countries.
Challenges and opportunities
Modernisation of the national grid is urgently needed to accommodate the rapid rise of renewables and evolving energy demands. At the same time, a significant financing gap threatens to stall progress, underscoring the need to unlock investment at scale. Addressing these challenges will require stronger alignment of strategies and more effective partnerships across governments, industry, and financiers. Quite a few ASEAN countries have recognised the importance of grids in solving power transmission issues. In response to the power disturbance in 2019, Indonesia’s state-owned electricity company, PLN, implemented plans to expand transmission line infrastructure and enhance the integration of generation, transmission, and distribution management systems. These improvements aim to detect anomalies more efficiently and mitigate disruptions in the power supply.
Currently, most of ASEAN countries’ electricity systems are based on fossil fuels. Coal plants typically operate as baseload generation, while geothermal, biomass, large hydropower and gas plants provide flexibility, ranging from baseload to peak demand. As of 2023, Indonesia owns the largest fossil fuel power capacity at 78 GW, followed by Thailand with 44 GW, Viet Nam with 35 GW, Malaysia with 32 GW and the Philippines with 20 GW. Renewable energy, particularly wind and solar, is still in early stages of deployment in most countries. With the exception of Vietnam, which leads the region with 23 GW of installed wind and solar capacity. In contrast, other countries have capacities ranging from 0.7 GW to 5 GW. However, due to the lack of pricing mechanism and grid constraints, Viet Nam had to reduce the utilisation rate of its largest solar farm by as much as 40% in 2022.
To provide solutions to such curtailments, the country is currently implementing a large-scale energy storage project in the South Central region where solar farms installed capacity is around 70% of total solar capacity. Countries located along the Mekong river and the island of Borneo have abundant hydro resources. However, there was a drop in hydro production spurred by droughts and seasonal variations that necessitates diversification of renewable energy sources. Collectively, the ASEAN power system has 8 GW of wind and 26 GW of solar capacity, with a regional target to increase this by 51 GW for solar and 109 GW for a combination of wind, hydro, geothermal and bioenergy by 2040.
Viet Nam’s experience highlights the importance of grid and flexibility, when curtailments happened over concerns of power system stability. Due to the under-capacity of transmission grids, the government and state utility of Viet Nam have been cautious about issuing further policies to promote wind power. Grid operators in the region are currently assessing long-term power system planning practices, and analysing system effects and cost implications of greater solar and wind integration. Particularly, since solar and wind energy sources are projected to increase according to scenarios by the ASEAN Centre for Energy and the IEA.
Grid emission factors represent the amount of emissions produced per kilowatt-hour (kWh) of electricity generated. These factors vary by grids depending on the energy mix and overall grid efficiency. Grids that rely primarily on fossil fuel-based electricity generation tend to have higher emissions, which significantly influence the approach to electrification infrastructure development.
Integrating diverse flexibility options into ASEAN’s evolving grid
Pumped hydro: With long-duration storage (+8 hours) and low operating cost, pumped hydro can provide inertia, providing more stability to the grid. In Southeast Asia, with the use of pumped hydro, the electricity sector could in principle achieve a penetration rate of solar and wind resources between 78%-97%, achieving between 1,170-1,480 GW in a scenario where there is optimal sharing of hydropower resources across the region. However, given the competition of land with other infrastructure development, geographically feasible, commercially and socially acceptable sites selected for pumped storage are becoming scarce. The high capital cost and long gestation period for this technology could also be potential barriers to adopt. Currently, 2.7 GW of pumped hydro is under construction and the remaining 13.3 GW is in various stages of development. The Philippines introduced a target of 4.3 GW of pumped hydro in the 3rd Green Energy Action Plan for 2025-2035. Similarly, Viet Nam aims to deploy 2.4 GW of pumped hydro by 2030 according to the Power Development Plan (PDP8). Indonesia is promoting this technology in the National Electricity Master Plan, with 3.7 GW projects in the pipeline. Thailand has projects underway in the provinces with a combined capacity of 2.5 GW by 2037.
Battery Energy Storage Systems (BESS): Despite their advantages in rapid response, energy storage solutions often face high upfront costs per megawatt-hour (MWh) for systems that provide extended discharge durations. Most systems currently only last 2 to 4 hours, limiting their ability to provide sustained energy during non-solar hours. Additionally, there are environmental concerns surrounding the extraction and use of raw materials for batteries. These factors highlight the trade-offs involved in scaling energy storage technologies. There have been some projects integrating solar and battery in ASEAN. For example, a 45 MW storage project in Thailand, a 4 MW BESS facility in the Power Development Plan, a 400 MWh in Malaysia’s Sabah, and a combined 3.5 gigawatt-peak of solar power capacity with 4.5 GWh of battery storage in the Philippines. Indonesia and Singapore are also developing 2 GW solar plus 8 GWh of utility-scale BESS ventures. Additionally, Indonesia is planning to develop a 50 MW Kalseltengtimra Solar Power Plant with a 14.2 MWh BESS in the new capital city, Nusantara. In Singapore, LFP Energy Storage Systems that can store and deliver up to 200 MW of power for one hour in a single discharge are being built to enhance grid reliability.
Demand-side management (DSM): Demand side management (DSM) offers a low-cost flexibility option for grid operators, helping to reduce strain during peak demand periods. DSM adjusts electricity use by controlling end-user devices to enhance grid flexibility, in response to increased renewable energy integration. By incentivising consumers to adjust their usage patterns, DSM can balance supply and demand, preventing grid overloads and reducing the need for expensive peak generation. In China, peak shaving is now integrated into spot market mechanisms, providing a market-based solution to grid imbalances. Despite its potential, DSM faces challenges that hinder broader adoption, particularly in ASEAN countries. Effective DSM implementation requires supportive policies, regulatory frameworks, and consumer participation, all of which are still lacking in many regions. Furthermore, the successful integration of DSM relies on digital infrastructure and market readiness, which remain underdeveloped in several ASEAN countries. These barriers highlight the need for a concerted effort to align policy, infrastructure, and consumer engagement to fully realise the benefits of demand-side management. In ASEAN, the Philippines Department of Energy issued a circular establishing a framework for energy storage systems (ESS) to support variable renewable energy integration. The ESS will be applied to serve a variety of functions in electricity management, including energy generation, peak shaving and ancillary services. Another tool, smart electrification refers to the optimisation of the charging of EVs, and use of heat pumps or electric stoves, in accordance with sunny hours on a daily basis. As ASEAN is slated to become more electrified, managing the demand has the potential to become a large source of flexibility.
Grids and interconnections: Strengthening and expanding grid interconnections across ASEAN is vital to scale up renewable energy while improving grid efficiency. By linking national grids, countries can share clean energy resources across borders—reducing the risks of curtailments and smoothing variability from solar and wind over a wider geographic area. Grids also offer temporal and spatial flexibility, helping optimise system operations across daily, seasonal and regional patterns. This enables more cost-effective renewable integration, as nations can balance supply and demand more flexibly, alleviating constraints on the grid and making better use of surplus generation. However, turning this vision into reality comes with hurdles. Cross-border grid projects require strong political coordination, harmonised regulations, and long-term investment commitments. Development timelines can span years, and investors may view such projects as high-risk due to the complexity of regional governance and financing structures. Overcoming these barriers will require bold leadership, policy alignment, and innovative investment frameworks to realise the full benefits of a connected ASEAN power system. Expediting the pace of connectivity will bring economic benefits, with projected GDP growth ranging from 0.8% to 4.6% and the creation of 2000 to 9000 new jobs annually. More interconnection capacity will allow for more renewables penetration. As a result, positive impacts could be generated.
Other flexibility options: Other clean flexibility technologies are also available. Though many currently face some technical limitations (e.g. balancing the wind-solar-hydro flexibility since there is only a small solar and wind capacity in ASEAN), their small-scale applications (e.g. household battery storage) and minor relevance in the decarbonisation path (e.g. CCGT). Industrial demand-side as a flexibility application could be potential if the lack of data transparency is being addressed. Other options, day-ahead market and intraday market will work in the multi-buyer market structure. While these solutions may play a limited role today, many could become more impactful over time as technologies mature, markets evolve, and policy framework improves. In the future, these technologies and applications may play a more prominent role in the provision of grid–stabilising services.
Interconnected ASEAN
To address the twin challenges of rising energy demand and the need for low-carbon electricity access, ASEAN Member States have been planning a unified regional energy integration since 1997. The ASEAN Power Grid (APG) envisions power sector integration through the development of grid infrastructure and a regional power market, comprising multiple cross-border transmission projects categorised into northern, southern, and eastern sub-regions. Under the ASEAN Interconnection Master Plan Study (AIMS), eighteen transmission interconnection projects are being prioritised, including key cross-border and inter-country interconnections such as Singapore-Riau Islands, Peninsular Malaysia–Sarawak, Kalimantan–Java and Sumatra–Java. The ASEAN Power Grid, including all the transmission interconnection projects, is expected to be fully established by 2045, underscoring the urgency of addressing key challenges related to regional grid planning. ASEAN is projected to have an interconnection capacity of 17,550 MW by 2040, based on the ASEAN Interconnection Masterplan (AIMS) III and will contribute to 2,824 km development of electricity grids in the ASEAN region.
Despite years of discussion, regional grid interconnection in Southeast Asia has yet to take off. But that may be about to change. A convergence of forces—rising renewable energy deployment, growing electricity demand, more affordable transmission technologies, and a rare window for political cooperation—is creating the conditions for breakthrough progress. Solar and wind are scaling rapidly across the world, creating opportunities for surplus generation that could be shared across borders. At the same time, rising electricity needs in the region make it clear that smarter, integrated systems are essential to ensure reliable, low-cost power. Enablers are lining up. High-voltage transmission technologies and infrastructure financing have become more accessible, lowering the barriers to long-distance power exchange. The Lao PDR–Thailand–Malaysia–Singapore Power Integration Project (LTMS-PIP) shows that cross-border trade is technically and commercially feasible.
The upcoming Brunei Darussalam-Indonesia-Malaysia-Philippines Power Integration Project (BIMP PIP), replicating the success of LTMS-PIP, is expected to produce a feasibility study by 2025. Other interconnection projects are proposed to be a priority, including the connection between Peninsular Malaysia – Sumatra – Singapore, Sarawak – Brunei, and the lines connecting Lao PDR, Viet Nam, Cambodia and Myanmar. While these developments are promising, efforts need to be accelerated to maximise the full benefits. Amid global geopolitical uncertainty, enhanced regional cooperation can offer a hedge against supply shocks and price volatility. The ASEAN Energy Ministers have issued a joint declaration to achieve a sustainable energy supply through interconnectivity. Building on this, stronger governance should be established to pursue unified electricity connectivity and a region-wide coordinated electricity market.
Several ASEAN countries and provinces have plans for more solar and wind projects, reflecting growing momentum toward renewable energy development. Based on the Global Energy Monitor’s list of ongoing solar and wind projects, Sumatra and the Riau Islands have a planned installation of 14 GW of solar power in the pipeline by 2035 but have no planned wind projects. Lao PDR is constructing 4.8 GW of solar and 4.9 GW of wind capacity by 2035, respectively. Cambodia is developing a 2.9 GW of solar and 0.2 GW of wind by 2035. Brunei is currently building 0.03 GW of solar capacity, while 0.1 GW of solar capacity is under construction in Sarawak and is expected to be operational by 2030.
By enabling power exchange between countries, ASEAN grid interconnection could be the potential driver to unlock the additional 24 gigawatts of solar and 5.6 gigawatts of wind capacity in resource-rich ASEAN countries. There are bottlenecks to creating the market for cross-border power trade in ASEAN, in the form of economics and institutional obstacles, creating a fundamental barrier to market integration and cross-border power trade. These include financial and institutional constraints in the post-pandemic recovery period. Questions also arise in the market model that could be adopted; supply chain stability in the midst of the US tariff and reliability and resilience risks tied to a model of an unified power market. This trajectory could be part of a wider goal in driving the economic growth of the countries.
Nimble strategies to create modern, flexible grids
Grid development priorities in ASEAN differ at regional and national levels of energy planning. At the regional level, grid development plans encompass priority infrastructure projects shaped by both regional and national energy models, power trading frameworks, and potential financing sources—including governments, multilateral development banks, international organisations, and private foundations. At the national level, however, grid development plans primarily focus on transmission and distribution expansion, as seen in Indonesia’s PLN Electricity Supply Business Plan (RUPTL). Beyond transmission and distribution expansion, there are limited details on strategies for grid modernisation in Indonesia’s electricity sector plan. This absence of modernisation strategies may be linked to the fact that grid scales are expanding without significant changes in the power supply mix, leading national grid operators to show less concern about grid fluctuations. For example, between 2018 and 2023, Indonesia added only 0.6 TWh of solar and 0.3 TWh of wind capacity. Similarly, the Philippines added just 1.2 TWh of solar and 0.9 TWh of wind during the same period. However, this perception should change as ASEAN is expected to increase the deployment of solar and wind in the coming years
Additionally, the regulated monopoly structure of grid networks in countries such as Indonesia often discourages companies from modernising infrastructure or embracing innovation at the pace of other industries. The reason being is a monopolised structure does not incentivise utilities like Indonesia’s PLN to modernise the grid, and its legal mandate is to provide affordable electricity even if it’s sourced from coal. To accelerate progress, utility financing and/or Public-Private Partnership model should be designed to manage a spectrum of risks, including technical, regulatory, commercial, and political, through leveraging existing ASEAN partnerships and exploring the establishment of a dedicated APG financing facility. Developing a common-use asset financing approach by involving development partners and commercial banks, such as through Public-Private Partnership (PPP) can attract significant investment.
ASEAN countries need a future-ready grid development planning
1. Smart grid modernisation: Upgrade existing grid infrastructure with digital tools and smart technologies. Policies should support the deployment of smart meters, automation, real-time monitoring, and cybersecurity systems to enable a more intelligent, responsive grid that can efficiently manage variable renewables.
2. Strategic grid expansion: Extend and strengthen the physical grid to connect generations from variable energy resources and reach growing demand. Planning and investment in new transmission lines—especially to renewable-rich zones—and extending access to underserved areas are critical to unlock clean energy potential.
3. System flexibility and resilience: Equip the grid to adapt to fluctuations in supply and demand while withstanding shocks, enabling the power system to maintain balance between generation and load under uncertainty, and changes in needs, technologies and conditions.
4. Regional integration and interconnection: Build regional power systems that share resources and improve efficiency through trade. Policies should promote cross-border interconnectors, harmonised standards, and regional planning to unlock diverse renewable energy resources and balance supply across borders
5. Market and regulatory reforms: Create open, transparent, and competitive power markets at the regional level that support clean energy. This includes unbundling of utilities, open access to the grid, cost-reflective pricing, and enabling participation of new players like prosumers and storage providers.
6. Sustainable finance and investment mobilisation: Ensure long-term financing for grid upgrades, new infrastructure, and innovation. Governments should deploy financial instruments -such as green bonds, public-private partnerships, and risk guarantees can de-risk projects and mobilise both domestic and international capital.
Turbocharging grids to develop the market for renewables
With the rise of clean energy technologies, renewables in the region are set to grow exponentially to meet increasing demand. There is no better time than now for ASEAN member countries to focus on stronger grids to keep pace with competition for foreign investments with requirements for clean energy, namely modernisation, expansion, adoption of flexibility options, regional integration, market reforms, and mobilisation of finance. Additionally, ASEAN’s commitment to ensure all member countries grow together means market-level development in the renewable energy sector is fuelling larger demand for interconnections. Sharing of renewable energy resources will happen at a more rapid pace in the future. Grids and interconnections, as enablers of these evolving dynamics, will bring cost reduction potential, faster net-zero emission vision, enhance energy security, attract more investment and create more jobs. As ASEAN moves toward deeper regional energy integration, prioritising grid infrastructure and political solutions will be essential to unlocking new opportunities and ensuring a more interconnected and resilient power system.
Beyond physical infrastructure, enabling data sharing across the region—while maintaining strong privacy protections—will be crucial for advancing innovative business models, streamlining bureaucratic processes and attracting new investment. Another critical area often overlooked is the implications of electrification, particularly the infrastructure needed for electric vehicle (EV) charging. Building strong incentives for operators to use green energy could accelerate grid modernisation efforts, making the system more flexible and capable of handling growing electricity demand. Ultimately, aligning grid investments with the evolving energy landscape will be key to ASEAN’s transition toward a more sustainable, efficient and competitive power system.
Access the report here
