The ambitious ASEAN Power Grid (APG) initiative to interconnect Southeast Asian electricity grids for better energy security and sustainability is stalled by persistent bottlenecks in financing, geopolitics, and supply chains, as highlighted in a recent BMI analysis.
Recent progress includes the October 2025 endorsement by ASEAN energy ministers of the Terms of Reference for the ASEAN Submarine Power Cable Development Framework, aimed at harmonizing rules for subsea interconnectors linking offshore renewables to demand centers.
Financing: The Primary Hurdle
Financing remains the biggest obstacle for cross-border grid projects, requiring massive capital for high-voltage direct current (HVDC) corridors amid uncertain revenues and sovereign risks.
Unresolved issues like ownership models, wheeling tariffs, and risk allocation deter investors, especially in fiscally constrained emerging markets.
The Indonesia-Singapore HVDC import projects exemplify this, with conditional licensing tied to government ownership involving entities like Temasek-linked firms and Chinese state utilities.
Supply Chain Strains Intensify
Global supply chain tightness, driven by record grid investments and limited capacity for submarine cables and converter stations, leads to 3-5 year lead times and growing backlogs.
Cost inflation from surging prices of copper (55% since 2020), electrical steel (70%), and aluminum (80-100%) further complicates procurement for APG projects.
Geopolitical and Political Risks
Geopolitical tensions, such as Thailand's political instability delaying the LTMS-PIP Phase 2 expansion and potential Thailand-Cambodia clashes, threaten power trade stability.
Historically, APG has shown slow execution despite its vision, with the ASEAN Centre for Energy (ACE) coordinating but lacking enforcement power.
While the Asian Development Bank (ADB) pledges up to $10 billion over the next decade, this falls short of the $100 billion needed by 2045 for transmission infrastructure.
Looking ahead, BMI forecasts gradual and uneven APG expansion, dependent on project economics, financing innovations, and import needs during the 2026 Philippines ASEAN Chairmanship.
These challenges impact regional energy transition, underscoring the need for stronger governance and multilateral support to unlock Southeast Asia's interconnected grid potential.
Andrew Lee
