Short-term export licences and regulatory uncertainty could hinder Singapore’s plan to import up to 6 gigawatts (GW) of low carbon electricity by 2035 by making multibillion-dollar cross-border projects harder to finance, according to a new industry report.
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The challenge could also impede the wider Asean Power Grid, which will require an estimated US$800 billion in investment in generation and transmission infrastructure. The Singapore Sustainable Finance Association (SSFA) said projects would need durable legal and commercial frameworks capable of attracting long-term financing, alongside political commitment and engineering capacity.
Singapore’s import target depends significantly on proposed supply routes from Sarawak in Malaysia and Indonesia. But while both corridors are legally possible, their commercial viability will hinge on whether governments can provide long-term, enforceable rights for power exports and transmission infrastructure, found the study backed by OCBC.
“The bankability question within sovereign commitment and regulatory completeness is not whether the political commitment exists. Instead, it revolves around whether the regulatory chain is sufficiently robust … such that limited-recourse financing structures can underwrite the long-term financing tenors to support the import projects,” said the report titled From Ambition to Bankability: Commercial and Legal Foundations for the Asean Power Grid.
In Indonesia, the study identified the five-year cap on electricity-export licences as a major obstacle to cross-border electricity projects. The Southeast Asian nation has a regulatory rule that limits electricity and renewable energy export permits to five-year renewal cycles.
The SSFA study described the limit as a “primary tenor-mismatch bankability” issue because it is far shorter than the 20 to 30-year loan periods typically needed to finance large cross-border energy projects. The report said this gap makes it difficult for lenders to assess whether a project will generate enough stable revenue to repay its debt.
For instance, solar-plus-battery energy-storage projects, which makes and steadies the power in a cross-border electricity project, are generally financed over about 20 years, while subsea cables, which carries the power to another country, are designed to operate for 40 to 50 years.
If an export licence expires after five years and is not renewed, the commercial and financing value of generation and transmission assets is “substantially reduced” and risks becoming “stranded”, referring to investments that lose their economic value unexpectedly and prematurely before the end of their useful life, said the analysis.
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The Indonesia and Malaysia import corridors are not merely supply solutions for Singapore. They are the first concrete expression of what regional energy cooperation looks like when commercial interests, sovereign commitments, and financing structures are properly aligned.
Singapore Sustainable Finance Association (SSFA)
The Sarawak-Singapore route faces a different form of uncertainty. The report said electricity exports from Sarawak are legally permitted, but the Sarawak Electricity Ordinance, which establishes the need for licenses to use electrical installations, does not set a fixed or minimum term for export licences. Their duration and renewal depend on the terms of each licence and the relevant authorities’ discretion, according to the study.
In Sarawak, where the proposed route would rely on existing hydropower resources, the financing issue centres on the long-term transmission link. The report said its export licence should match or outlast the project’s 20 to 30-year financing horizon.
“Such a structure introduces a potential misalignment between export licence duration and long-term transmission project economics, particularly given limited-recourse financing tenors typically extending over 20 to 30 years,” the report said.
For the Sarawak route to be bankable, the report said licences should clearly spell out the approved export volumes, destination and counterparty, and should last at least as long as the project’s power-purchase agreement, transmission agreement and financing period.
The stakes extend beyond regulatory paperwork. Banks will not release funding unless projects have secured the necessary licences and comply with their conditions. They will also expect those conditions to be met throughout the life of the loan.
“Lenders will also [treat compliance with licence conditions as] a condition precedent to financial close for any financing connected to the project, and will include ongoing compliance with licence conditions as operating covenants under the financing documentation thereafter,” the report said.
The APG will be built “project by project, not through policy commitments or technology alone”, authors said. While the engineering behind cross-border cables, converters and renewable energy plants is well understood, the harder task is creating clear regulations, durable revenue arrangements and fair risk-sharing agreements that can unlock private capital, they added.
The Singapore-Sarawak and Singapore-Indonesia corridors of APG are financeable as demand is real, resources are available, and political will is present, it said.
“The Indonesia and Malaysia import corridors are not merely supply solutions for Singapore. They are the first concrete expression of what regional energy cooperation looks like when commercial interests, sovereign commitments, and financing structures are properly aligned,” said the study.
“Getting these first projects right, through disciplined structuring, clear regulatory framework and risk allocation, and durable offtake will set the foundation for a truly integrated Asean energy market.”
