More investments needed for infrastructure as Asean works towards an interconnected grid

By The Straits Times | Created at 2025-01-14 07:47:30 | Updated at 2025-01-17 20:43:15 3 days ago

ABU DHABI – The Asean power grid, which will allow countries in the region to trade electricity with one another, has made some headway with several recent agreements. But scaling it up would require more investments in grid infrastructure, said panellists at an energy conference on Jan 12.

Grid infrastructure includes overland and subsea cables. These are critical in ensuring that electricity can be distributed from the generation source, such as a renewable energy project, to where users are.

Increased investments in grid infrastructure will help to make the transition to renewable energy more affordable in developing countries still reliant on fossil fuels, said the panellists. It will also help to strengthen interconnections between countries to facilitate cross-border electricity trade, they added.

They were speaking at a discussion on finance for the energy transition in developing countries held at the 15th Irena Assembly in Abu Dhabi, United Arab Emirates. Irena is the International Renewable Energy Agency.

Dr Rowena Guevara, the undersecretary at the Department of Energy in the Philippines, said greater funding support can help the country make transition to renewable energy more affordable.

For example, she cited how transmission lines are needed to connect renewable energy plants with homes and offices. If multilateral development banks can help to fund such infrastructure for renewable energy developers, it can help to lower the cost of capital for the private sector.

The Philippines hopes to increase its renewable energy share in the energy mix to 35 per cent by 2030 and 50 per cent by 2040.

In 2023, 22 per cent of its electricity came from renewables, while coal-fired power plants accounted for 43.9 per cent of the overall energy mix, the Philippine Daily Inquirer reported in May 2024.

“At the end of the day, in order for the energy transition to be just, people in the Philippines should be able to afford the electricity from renewable energy. But in order for that to happen, we hope our partners will be able to address the financing gap,” said Dr Guevara.

In South-east Asia, renewable resources are unevenly distributed, so having a connected grid could allow countries to trade electricity freely to meet its rising demand. Such a grid would hedge against the intermittencies of renewables, by distributing energy more efficiently.

The Asean power grid has been decades in the making, but made progress with the 2022 launch of the Laos-Thailand-Malaysia-Singapore (LTMS) electricity import pilot.

Subsequently, the Brunei-Indonesia-Malaysia-Philippines power integration project was announced in August 2023. It aims to create multiple interconnections across the grids of the four countries.

Mr Jonathan Goh, the director for external relations at the Energy Market Authority of Singapore (EMA) who was also a panellist at the discussion in Abu Dhabi, noted: “The transition to net-zero (carbon emissions) will require massive amounts of investment, and government funding alone will be insufficient.”

Net-zero carbon emission refers to the goal set by many countries to take out as much planet-warming greenhouse gases from the atmosphere as each country releases. Burning fossil fuels is the main source of such emissions.

“According to the International Monetary Fund, the private sector will have to supply up to 90 per cent of the capital that is needed annually by emerging markets and developing economies to reach net zero by 2050,” Mr Goh said.

For example, to realise the regional grid, grid upgrades need to take in a greater share of renewables, and this requires large amounts of investments, Mr Goh said.

He also noted that investments in infrastructure such as overland and subsea cables have to be strengthened to improve the commercial viability of renewable energy projects.

Speaking to The Straits Times on the sidelines of the event, he said: “Given the different capacities in different regions, the cost of financing grid infrastructure across the region can be quite varied.”

But Mr Goh said that the establishment of an Asean power grid could also offer up many opportunities for the region.

Pointing to the results of the first phase of the US-Singapore feasibility study on regional energy connectivity, the regional grid can generate US$2 billion (S$2.74 billion) annually in research and development and create as many as 9,000 jobs a year.

The study, which started in April 2023, had examined the renewable energy landscape and existing grid infrastructure of Asean countries, along with the socio-economic impact of having regional connectivity. The ongoing second phase of the study will look into regulatory frameworks, and how the grid can fit within international laws.

“As we develop a more interconnected power grid in Asean, there will be more investments needed,” Mr Goh told ST. “If we do not put attention to financing, we are not going to get there.”