Asean Power Grid: Singapore, Thailand launch two-year push to clear hurdles by 2028

Minister for Transport and Second Minister for Finance Jeffrey Siow said the agreement followed recent discussions between the two countries’ leaders. Singapore is due to chair the Association of Southeast Asian Nations (Asean) in 2027, followed by Thailand in 2028.

The proposed Asean Power Grid would connect Southeast Asia’s national electricity systems, allowing the bloc’s countries with abundant solar, wind and hydropower resources to supply manufacturing and urban centres facing rapidly growing demand.

Siow described the grid as a major initiative for strengthening the region’s energy resilience, but said governments would need to align their regulations before electricity could be traded more widely across borders.

“The reality is that cross-border projects are always hard, and the real challenge is the regulations,” he said, speaking at Unlocking Capital for Sustainability summit in Singapore, organised by Eco-Business in partnership with the United Nations Environment Programme Finance Initiative (UNEP FI) and co-hosted with AT ONE IMPACT WEEK at the Suntec Singapore Convention & Exhibition Centre on Thursday.

He added that Singapore would maintain its climate commitments even as geopolitical fragmentation, protectionism and weaker international cooperation disrupted global climate action.

“Singapore is still committed to our net zero targets,” Siow emphasised. The country’s approach is balancing competitiveness with credibility, he added. Preparing for an increasingly carbon-conscious global economy was important to the country’s long-term competitiveness, while delivering on its commitments strengthened its influence in international negotiations.

Maintaining that credibility gave Singapore “greater say in international forums to shape the global discourse to set the rules”, Siow added.

Connecting national grids across land and sea

Asean aims to achieve fully integrated regional grid operations by 2045. The initiative would connect electricity systems serving more than 680 million people and help countries manage differences in electricity demand, generation resources and renewable-energy availability.

The International Energy Agency said in March that Southeast Asian electricity consumption had increased ninefold since 1990 and was expected to grow by 3 to 4 per cent annually through 2040, considerably faster than the global average.

Regional generation capacity is expected to more than double by 2040, with renewables accounting for 75 per cent of additions under existing policies. More than US$300 billion will be needed to expand and modernise electricity grids between 2025 and 2040, a 72 per cent increase from investment over the preceding 15 years, the IEA estimated.

Cross-border interconnectors alone will require about US$27 billion by 2040. Annual investment must surpass US$1 billion before 2030 and average more than US$2 billion thereafter – around 20 times the annual spending recorded between 2019 and 2024.

Siow said greater integration could connect countries capable of exporting clean electricity with manufacturing economies such as Vietnam and Thailand, where energy demand is rising. Investor interest was not the main constraint, he added, saying “there’s no shortage of interest”.

Only about US$2 billion has been invested in Southeast Asian cross-border interconnectors over more than five decades, according to the IEA. By comparison, the region invested US$3.6 billion in domestic electricity transmission in 2024 alone.

Most existing links were designed for one-way exports and financed through state-owned utilities, with revenues governed by individual bilateral contracts. Asean does not yet have harmonised commercial arrangements for multidirectional electricity trading.

Siow noted that domestic regulations differ in every country”, requiring project developers to navigate separate national systems. “You have to put together the regulations, and it’s a patchwork at the moment. Not very helpful,” he added.

Differences include national rules on access to power grids, transmission tariffs, wheeling charges, export licences and taxes. Governments and developers must also agree on how costs, revenues and risks will be divided among the countries participating in a project.

The IEA said reliance on bespoke bilateral agreements limited transparency and made projects difficult to replicate. Tariff certainty and borrowing costs were among the main factors determining whether cross-border links could provide predictable returns.

The existing Laos–Thailand–Malaysia–Singapore Power Integration Project has provided an early test of multilateral power trade. Launched in June 2022, it became Asean’s first renewable-electricity trading arrangement involving four countries, transmitting power from Laos to Singapore through Thailand and Malaysia.

Its second phase was designed to double maximum trading capacity from 100 megawatts to 200 MW and introduce multidirectional trade, with both Laos and Malaysia supplying Singapore.

The project had facilitated 266 gigawatt-hours of electricity trade by the end of 2024, according to the Asean Centre for Energy (ACE).

Siow said the demonstration had given governments greater confidence that a wider arrangement could work. The project remains small relative to national electricity systems, but has shown that power can be traded commercially through several separately regulated markets.

Asean had 2.8 gigawatts (GW) of operational grid-to-grid interconnection capacity in 2024, with another 13.7 GW planned by 2040, according to ACE. Six future submarine interconnections have been identified.

Those subsea links will present additional technical and financial challenges. Four proposed interconnectors would each be longer than the Viking Link between Britain and Denmark, currently the world’s longest operational submarine electricity connection, the IEA said.

Prices for transformers and cables have nearly doubled since 2018, while cable manufacturers and specialist installation vessels are operating at or near full capacity, increasing the risks of delays and cost overruns.

Siow said governments would need common rules covering matters including the duration of export licences and the inspection, maintenance and repair of submarine cables. 

“Our plan is to work on two specific areas,” he said. The first is to advance the Asean Submarine Power Cable Development Framework, which addresses the legal, regulatory, technical, commercial and governance arrangements needed for projects crossing national waters.

Asean has already endorsed terms of reference for the framework. Singapore is expected to help advance and operationalise it during its chairmanship.

The second priority is to address obstacles to project bankability, including wheeling charges and export taxes that could reduce returns or create uncertainty for developers, Siow said.

Asean, the Asian Development Bank and World Bank launched the Asean Power Grid Financing Initiative in October 2025 to help turn proposed links into commercially viable projects.

The World Bank announced an initial contribution of US$2.5 billion, including a US$12.7 million grant to the Asean Centre for Energy to prepare bankable projects. The ADB committed up to US$10 billion over 10 years, supported by an initial US$6 million in technical assistance.

The World Bank estimates that realising the broader Asean Power Grid vision will require about US$800 billion in generation and transmission investment by 2045. That figure includes generating capacity and domestic transmission infrastructure, rather than cross-border connections alone.

“The reality is that cross-border projects are always hard, and the real challenge is the regulations,” Siow said at the Unlocking capital for sustainability Singapore event on Thursday co-located with AT ONE IMPACT WEEK by TPC Group and No.17 Foundation. Image: No.17 Foundation

Grid push forms part of wider transport transition

Siow said the power-grid initiative formed part of Singapore’s broader effort to meet its climate targets while protecting the competitiveness of its aviation, maritime and financial sectors.

For aviation, Singapore aims to cut domestic aviation emissions from airport operations by 20 per cent by 2030 and reach net zero by 2050, even as a new terminal increases Changi Airport’s capacity by about 50 per cent.

Siow said building a new terminal offered an opportunity to incorporate lower-carbon and energy-saving systems from the outset rather than retrofit existing infrastructure.

Aircraft propulsion technologies were unlikely to change substantially in the short term, making lower-carbon fuel central to the sector’s immediate transition.

“Sustainable aviation fuel is really the only way forward,” he said. Singapore wants to develop an aviation-fuel ecosystem capable of producing, storing, blending and distributing sustainable aviation fuel. Finnish refiner Neste operates a sustainable aviation fuel production facility in the country.

Maritime transport requires a different strategy because no single fuel has emerged as the main replacement for conventional marine fuels, Siow said.

Singapore is therefore pursuing a multi-fuel approach that includes hydrogen, methanol and ammonia, while developing the infrastructure, supply chains and technical knowledge required to use them.

Siow said Japanese shipping company Mitsui O.S.K. Lines was among the companies working with Singapore to develop its understanding of the upstream and downstream requirements for ammonia.

The transition will also depend on international rules. The International Maritime Organization agreed in April last year on a draft net-zero framework combining mandatory emissions limits with a global pricing mechanism, but a decision on formally adopting it was postponed after intense lobbying by the current US administration. The decision is due again this October.

Siow said some countries remained uncomfortable with the proposed agreement and that their concerns needed to be addressed. He said the solution was not to abandon the process, but to continue working towards a consensus that participating governments could support.

The IMO is expected to revisit the framework in October. Siow said discussions were continuing constructively and that Singapore would support efforts to build consensus.

He characterised Singapore’s wider climate policy as a realistic and pragmatic approach under which the country would assess available decarbonisation options, scale those that became economically viable and pursue growth opportunities suited to its economy.

The government’s economic strategy review is also examining how Singapore should respond to a world that is less open and increasingly shaped by protectionism and national industrial policies, Siow said.

He said trust, reliability and policy certainty remained central to Singapore’s economic position. Businesses could manage rising costs if the future trajectory was clear, but uncertainty made investment decisions more difficult.

Siow said Singapore should build on that reputation, respond more quickly to economic and technological change, and strengthen its resilience through more diversified supply chains and greater scale.

Progress on those measures, the regional power grid and transport decarbonisation would require sustained cooperation between governments and businesses, he added.

“We have to keep pushing as hard as we can,” Siow said.