Gridlock or growth? The Asean Power Grid faces a critical window of opportunity
Recent events have created a compelling business case for regional clean energy trade.
The Asean Power Grid (APG) holds significant potential as a regional growth catalyst, yet the bloc faces a critical window of opportunity to establish standards and frameworks that can transform its vision into tangible action. Proposed in 1997 under the Asean Vision 2020 blueprint, the APG's objective was to enhance energy security and economic integration among member states.
However, the vision lingered for years until 2026 emerged as a pivotal year. Escalating energy requirements and the necessity for decarbonisation in Southeast Asia have bolstered a compelling business case for regional clean energy trade.
According to BT's Powering Asean’s Future 2026 survey, conducted among 514 regional business leaders, over 70% of respondents expressed that substantial progress on the APG would encourage their willingness to invest and expand within the region. Indonesian businesses displayed the highest optimism, with 84% anticipating positive outcomes, closely followed by companies from the Philippines and Malaysia at 70% each.
Nonetheless, the APG currently lacks the necessary regulatory clarity to render projects bankable. For example, Singapore's conditional licensing of six projects for clean power imports from Indonesia has been hampered by regulatory obstacles. Jakarta's licensing rules necessitate permit renewals every five years, a short timeframe that fails to instill confidence among banks and investors for financing such projects.
Additional challenges include the absence of an enforceable electricity-trade agreement among governments and uncertainties surrounding the recognition of renewable energy certificates across borders, as highlighted in a September report by the Singapore Sustainable Finance Association.
A Wood Mackenzie report predicts that Singapore will fail to meet its target of importing 6 gigawatts of low-carbon electricity by 2035, despite granting conditional approvals and licenses for multiple projects. The delay in regional agreements will have severe repercussions, with each year beyond 2035 potentially costing the region US$2.6 billion (S$3.3 billion), according to energy think-tank Ember.
While governments must balance the ability to export clean energy with ensuring reliable and affordable power for their citizens, Laos confronts a challenge between its aspiration to become the "battery of Southeast Asia" through hydropower exports and the persistent issue of blackouts affecting its own population. Indonesia, cautious about potential risks, postponed an APG deal until terms were mutually advantageous, according to regional reports.
Moreover, even when two countries agree on electricity trade, they must secure endorsement from any third-party nations that the electricity must traverse. This was evident in the Laos-Thailand-Malaysia-Singapore Power Integration Project (LTMS-PIP), which aims to export hydropower from Laos to Singapore. The project's renewal in 2024 stalled due to disagreements over transmission through Thailand and Malaysia, finally resolved in January 2026.
Sentiment regarding the short-term prospects for the APG is varied. In BT's survey, 80% of Vietnamese businesses anticipate meaningful progress within the next three to five years, while firms in the Philippines and Malaysia are more reserved, at 54% each. Industry experts recognize the difficulty of achieving consensus across the region and advocate for incremental steps forward.
OCBC group chief sustainability officer, Mike Ng, believes that bilateral agreements can serve as stepping stones, potentially leading to organic growth within the APG. Nevi Cahya Winofa, a renewables and power research analyst at Rystad Energy, emphasizes Singapore's power import projects as a critical near-term opportunity. Successful completion could foster investor confidence and serve as a model for future cross-border projects, including the Brunei-Indonesia-Malaysia-Philippines PIP.
The APG's ability to provide clean energy access may also prove advantageous in the AI race, as noted by Sanjeev Gupta, Asean and Singapore energy leader at EY-Parthenon. Gupta stressed that the winner in AI will not solely rely on advanced platforms or technology but will also depend on access to efficient, reliable, and clean energy sources.
Written by urgent.news from Straits Times Business's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
