The global energy landscape is rapidly shifting away from fossil fuels towards renewables and electrification, amid escalating concerns over climate change and energy security. What’s more, the transition to a decarbonised energy system demands substantial investments to overhaul existing grid infrastructure and expand renewable capacities.
US$3.1 trillion in grid investments is needed by 2030 for building an additional 18 million kilometers of grid network globally to limit global warming to 1.8°C. This would bring the total length of all power grids worldwide to 104 million kilometers by 2030, expanding to 140 million kilometers by 2050 – almost the same distance between Earth and the Sun.
These investments are critical for ensuring efficiencies in electricity distribution to meet growing energy demand, which in turn enables consumer prices to remain stable in the short term. Over the long term, robust grid investments will facilitate the emergence of new technologies and business models to power a greener, more sustainable world.
Navigating surging grid investments
In the United States, the cost of fully decarbonising the nation’s power grid is estimated to be around $4.5 trillion – representing a staggering cost of US$35,000 per household, nearly US$2,000 per year if assuming a 20-year plan. This underscores the significant financial commitment needed to support the integration of renewable energy sources.
Here in the Asia Pacific, the region has seen a rapid increase in renewable installations like wind and solar, which are dramatically reducing carbon emissions from its power generation mix. However, this much-needed growth in capacity is already being challenged by transmission and distribution grids ill-suited for renewable energy.
The result is a rising inability of national grids – designed to deliver power from traditional coal and gas plants – to support the level of renewables needed to put the region on a pathway to net zero. In many Asian countries, power market operators face no alternative but to leave renewables capacity stuck in transmission grid interconnection queues.
Over the past decade alone, Asia’s wind and solar capacity has grown from 10% of grid peak loads to over 50% this year, leaving grid systems and storage struggling to keep up. And with another $1.6 trillion going into renewable projects over the next decade expected to push this figure above 100% – the issue grows more urgent every day.
Vietnam is a salient example. Although the nation has made remarkable strides in clean energy investment – boasting Asia’s highest share of renewables in its generation mix – it surprisingly halted the approval of new wind or solar projects back in January 2022 , citing distribution challenges due to national grid constraints.
This comes to show that there can be no energy transition without energy transmission. The new energy system of the future necessitates an upending of fossil fuel industries and a complete redesign of the energy sector – which itself demands substantial investments to address shortcomings in energy storage and distribution technology.
Future-proofing Malaysia’s national grid
Malaysia’s National Energy Transition Roadmap (NETR) marks a milestone in the nation’s journey to net-zero, with projected investments worth RM435 billion to RM1.85 trillion by 2050. These investments are pivotal for fortifying grid infrastructure, seamlessly integrating renewables, and steering towards a sustainable energy future.
Among the efforts outlined in the NETR to enhance the national grid include the implementation of smart grid technologies to promptly adapt to shifts in energy demand and supply. This encompasses smart meters, predictive maintenance and real-time grid monitoring, data analytics, automation, as well as cybersecurity measures.
Furthermore, the government aims to implement Third-Party Access (TPA) in Malaysia’s electricity supply industry – which will empower independent power producers (IPPs) to use the national electricity grid and sell electricity directly to consumers, guaranteeing cost-reflective competitive pricing and enabling higher penetration of renewable energy.
The move is welcomed by analysts such as RHB Research and Affin Hwang Investment Bank Research – both of which have expressed neutral to positive sentiments as it allows Tenaga Nasional Berhad (TNB), the country’s main electricity provider and custodian of the infrastructure to benefit from increased grid utilisation and higher wheeling charges.
According to RHB Research, “The impact of the TPA framework on TNB’s transmission and distribution (T&D) arm will also be rather neutral, assuming the utilisation of T&D assets will be compensated for fairly with wheeling charges.”
According to RHB Research, “The impact of the TPA framework on TNB’s transmission and distribution (T&D) arm will also be rather neutral, assuming the utilisation of T&D assets will be compensated for fairly with wheeling charges.”
Meanwhile, Affin Hwang Investment Bank Research reckons that, “the implementation of the TPA, if well taken-up, should increase the country’s electricity generation and consumption, thereby increasing the traffic on TNB’s grid infrastructure, enabling TNB to collect wheeling charges.”
As the nation’s leading electricity utility, TNB has been actively supporting the government in upgrading the national grid for the energy transition. Taking cues from more mature markets, TNB recognises that the grid could potentially become a bottleneck that delays the scale-up of renewables in the country.
As such, TNB announced plans to deploy an additional RM35 billion between 2025 and 2030 to futureproof the power grid, on top of another RM54 billion in non-energy transition investment allocation for the grid over the same five-year period. This brings the total of TNB’s investment into Malaysia’s national grid to RM90 billion over five years.
Beyond the benefits that an evolved grid will have for the country, timely grid modernisation and preparedness efforts provide a significant opportunity to boost Malaysia’s position in the region. By emerging as a center for renewable energy, the nation can lead ASEAN towards a more resilient and interconnected energy system.
Advancing ASEAN’s interconnected energy future
Malaysia is already demonstrating its regional leadership potential through efforts like the Malaysia-Thailand high-voltage direct current (HDVC) interconnection . This initiative aims to increase efficiency and power transmission capacity with a 120km, 300kV HVDC transmission line that connects converter stations in both countries.
With limited land capacity for large-scale renewables, Singapore has also tapped onto Malaysia’s energy resources through the Energy Exchange Malaysia (Energem) platform – completing a pilot auction of 100MW. This serves as an important example of how the region can work together to strengthen energy systems while increasing self-sufficiency.
A robust and interconnected grid has allowed European countries for instance to pool resources and keep energy distribution networks stable , while allowing the integration of volatile renewable sources like wind power. Similarly, an interconnected grid would go a long way in helping ASEAN countries to share energy resources across borders.
Indeed, cooperation in the energy sector has been a key topic of discussion for ASEAN since the 1980s, which eventually led to the establishment of the Agreement on ASEAN Energy Cooperation in June 1986. Since then, cooperation in the energy sector is guided by a series of five-year plans: the ASEAN Plan of Action for Energy Cooperation (APAEC).
The current APAEC 2016-2024 Phase II: 2021 – 2025 is the fifth of these implementation plans – and among its key strategies include the continued development of the ASEAN Power Grid (APG): an integrated regional electricity grid system which aims to bolster energy security and improve electricity access while meeting regional climate targets.
Building on the Laos-Thailand-Malaysia-Singapore-Power Integration Project (LTMP-PIP) – a ‘pathfinder project’ in APAEC’s Phase 1 for the first foray into multilateral cross-border electricity trading – Phase 2 of the plan will see new interconnection projects such as the Brunei-Indonesia-Malaysia-Philippines Power Integration Project (BIMP-PIP).
Enhancing resilience through key grid investments
Ultimately, the pathway to a decarbonised power system in Malaysia and broader ASEAN is clear: renewables integration and grid expansion require significant investment, coordination, and commitment – not only from governments, but from all players in the value chain including power operators, businesses, and individual energy consumers.
Going forward, stakeholders must collaborate closer together to streamline regulatory frameworks, expedite permitting processes, and incentivise private investments in grid modernisation. This will not only bolster energy security but also stimulate economic growth and job creation in the booming clean energy sector.
By fortifying the grid infrastructure today, Malaysia and its ASEAN counterparts can lay a robust foundation for a cleaner, greener, and more resilient energy future, ensuring sustainable development and climate resilience for generations to come.