The Association of Southeast Asian Nations (ASEAN) member states are collectively faced with exploding energy demand, vulnerability to risks of climate change, and the pursuit of sustainable economic development goals. Enhancing regional energy interconnectivity presents a transformative opportunity to meet these shared challenges.
The recently concluded Clean Energy Transition Asia (CETA) Summit, held at the Kuala Lumpur Convention Centre from 9-11 October 2024 as part of the International Greentech & Eco Products Exhibition & Conference Malaysia (IGEM) 2024, brought together decision makers and influencers from around the world to discuss key perspectives for delivering a just, secure, and affordable energy transition in ASEAN – with a special focus on regional collaboration.
Setting the stage for this crucial dialogue, Malaysia’s Deputy Prime Minister, Datuk Seri Fadillah Yusof, outlined the country’s ambitious roadmap for energy transition: “We aim to increase the share of renewable energy in our national electricity mix to 40% by 2035 and 70% by 2050. Though ambitious, these targets are within reach through innovation and commitment.” This holistic plan includes phasing out coal-fired generation, investing in smart grids and energy storage systems to enhance grid flexibility by 20% by 2035, and introducing the Corporate Renewable Energy Scheme (CRESS) to foster private sector participation in renewable energy development.
The Deputy Prime Minister further emphasised Malaysia’s commitment to regional collaboration, announcing that cross-border renewable energy delivery to Singapore would commence before the end of this year, marking a historic milestone in ASEAN’s energy integration journey. “These commitments reflect Malaysia’s determination in leading the charge to create a more sustainable regional energy system and landscape, rooted in our desire to leave a legacy of hope for future generations,” he stated.
A comprehensive and interconnected ASEAN power grid has been a long-held dream among governments in the region, first emerging into public discourse in the 1980s. Now, almost four decades later, ASEAN might finally be approaching a moment when growing pressures for climate action move this idea towards a more established reality.
“If we look at the ASEAN region overall, electricity demand could grow up to 5x times – from 133 Gigawatts (GW) in 2018 to 708 GWs by 2050 – due to wide-scale electrification occurring across end-users,” highlighted Dr. Mohd Fadzil Mohd Siam, Acting Chief Strategy & Ventures Officer at Tenaga Nasional Berhad, when delivering his keynote presentation.
Meeting this surging demand while balancing the energy trilemma of secure, affordable, and sustainable energy will not be easy. ASEAN states are increasingly turning to clean energy sources to form part of the solution, with the region’s renewable energy (RE) installed capacity projected to rise by 14.52%, from 174 GWs in 2020 up to 2700 GWs by 2050.
However, Dr. Mohd Fadzil acknowledges that integrating renewable technologies brings its own set of challenges. “Intermittent generation will require careful approaches to balance peak generation times with peak demand. What’s more, investment in both technologies and grid upgrades will be critical to ensure renewable electricity remains accessible to all.”
He also pointed out that renewables’ potential depends on local geography and weather, yet ASEAN’s diverse energy landscape is characterised by the uneven distribution of energy resources. Laos, for instance, boasts significant hydropower capability, while Malaysia, Indonesia, and Thailand hold massive potential for harnessing solar energy.
“Given the region’s vast RE technical potential with diverse natural resources in each country, combining these opportunities through an interconnected ASEAN power grid could unlock a new energy paradigm for the region”, he emphasised. This would not only improve energy security, but also promote equity and environmental sustainability.
ASEAN has already made strides in fostering energy interconnectivity with recent cross-border infrastructure initiatives. Regional grid projects like the Laos-Thailand-Malaysia-Singapore Power Integration Project (LTMS-PIP) and the Borneo-Indonesia-Malaysia-Philippines Power Interconnection Project exemplify efforts to enhance energy connectivity.
While there has been progress, Kaushik Das, Senior Partner at McKinsey & Company, noted that financial limitations remain a considerable challenge. In his keynote presentation, Kaushik drew attention to the fact that meeting net-zero targets will require spending up to $11 trillion a year by 2030, with Asia bearing up to 45% of the green investments needed.
This aligns with findings from the International Energy Agency (IEA), which estimates an will be needed specifically in ASEAN from 2026 to 2030. Kaushik explains that these large-scale investments will be critical for increasing the affordability of low-carbon technologies over the long-term.
In the meantime, climate decision-makers need a structured, forward-looking approach that offers the ability to compare the socioeconomic impacts of different climate scenarios. This would empower them to identify trade-offs when designing net-zero strategies that can help mitigate the cost burden of the clean energy transition, while maximising the benefits.
Kaushik cites McKinsey’s Climate Transition Impact Framework (C-TIF) as an example, which provides climate decision-makers with more than fifty metrics that help measure and improve the impact of climate policies based on key socio-economic dimensions, including lived environment and health, growth and competitiveness, as well as jobs.
Concluding his address, Kaushik shared the wise words of Brazilian Formula One champion, Ayrton Senna: “You cannot overtake 15 cars in sunny weather, but you can when it’s raining”. Similarly, the clean energy transition might pose obstacles for ASEAN right now, but it also presents a unique opportunity to propel the region as a global energy leader in the future.
Lessons from the European example
The journey towards enhanced energy interconnectivity is not unique to ASEAN alone. International precedents including the Nordic Power Pool (Nord Pool) across Norway, Sweden, and Finland, offers valuable lessons for the region – highlighted Helena Bernland, Senior Business Developer of International Markets at the Swedish Energy Agency.
Norway’s power production is dominated by renewable hydropower plants (more than 80% of the installed capacity), while its neighbours, Sweden and Finland, have immense power production capabilities from thermal power plants (including nuclear). During the dry season, Norway imports electricity from neighboring countries with excess reserves.
By having a common regional electricity market as a platform for the different countries to interact, Helena elaborated on how it empowers the Nordic countries to make optimal use of natural resources, while utilising the most optimum price for electricity and forging mutual collaboration in ensuring reliable access to electricity supply.
“These conditions are similar and can potentially be replicated already in the ASEAN region, which has relatively better grid interconnectivity among the countries and higher renewables potential”, said Helena. Integrating diverse sources of RE with complementary supply profiles can boost resilience, while accelerating the region’s pathway to net-zero.
ASEAN can also draw lessons from the synchronous grid of broader continental Europe, which benefits 24 countries and 450 million people. One key enabler in the development of the European grid is the Projects of Common Interest (PCIs) scheme, where key cross-border infrastructure projects gain access to exclusive financial assistance.
Given limited resources and the urgency of meeting net-zero targets in ASEAN, collectively prioritising projects of regional importance that offer the greatest impact is critical. By adopting a similar scheme like PCI in Southeast Asia, ASEAN member states can accelerate their energy connectivity efforts both optimally and equitably.
Powering ASEAN’s sustainability renaissance
Going forward, burgeoning energy linkages across ASEAN could rewrite the region’s development narrative, offering a renaissance opportunity driven by sustainability-focused growth. This point was driven home by Jarand Rystad, CEO of Rystad Energy, who expanded on the widespread benefits of a more interconnected energy system for ASEAN.
“Our vision of ASEAN’s renaissance is driven by three key factors: a large population of 670 million, most of which are young or below the age of 30; substantial opportunities for economic growth with potential contribution of US$ 5 trillion to the region’s GDP; as well as the creation of over 50 to 70 million impactful new jobs and careers,” explained Jarand.
To catalyse this renaissance, favourable policies that offer risk mitigation and blended finance mechanisms will be essential. It also hinges on a conducive environment for accelerated cross-border collaboration and abundance of diverse sources of clean, low-cost energy – from wind, solar, biomass, hydropower, hydrogen, as well as nuclear.
Positioned at the core of the transition, Jarand notes that Malaysia’s chairmanship of ASEAN in 2025 presents a significant opportunity for the nation to lead the way in fostering a more interconnected energy future. “We anticipate Malaysia will play a key role in advancing cross-border collaboration, particularly in carbon offsets and the regional grid”.
Ultimately, the path forward requires concerted effort from all stakeholders, including governments, the private sector, and global partners, to realise the vision of a cohesive and integrated ASEAN energy market. This year’s CETA Summit stands as a call-to-action for everyone to work together in achieving a sustainable, interconnected ASEAN.