Reframing enabling policies for enhancing ASEAN’s infrastructure readiness on energy transition

Ensuring ASEAN is ready for the energy transition will require the region and its member states to scale up current plans.

In recent years, ASEAN has put efforts towards energy transition and carbon neutrality as targets, aligned with the global efforts. 

In 2025, most ASEAN countries had achieved an energy transition index higher than the average, reflecting the region's efforts towards energy transition. One of the critical aspects of the energy transition is ensuring that the necessary infrastructure, technologies, and policies are in place to accelerate the integration of renewable energy (RE). 

Whilst ASEAN is becoming more ambitious in its RE target, concerns persist that current efforts to develop grid infrastructure and the electricity market are insufficient to meet the region's growing needs. 

ASEAN has set a target to achieve a 35% share of RE in ASEAN's installed power capacity by the end of 2025. This target is set against the backdrop of rising energy demand in the region. According to the 8th ASEAN Energy Outlook, the region’s energy demand is projected to increase by a factor of 2.6 compared to 2022 levels under the baseline scenario.  

Current state of ASEAN grid infrastructure and electricity market
ASEAN's current plans for grid expansions are insufficient to meet the projected surge in electricity demand and the integration of high shares of renewable energy. ASEAN is projected to require an additional 100,000 kilometres of transmission and 1.6 million kilometres of distribution lines between 2021 and 2030 under the current pledge scenarios (APS). 

However, the current plans of the region only account for 2,824 kilometres of new interconnection through the ASEAN Power Grid Interconnection Project by 2040 and 45,078 kilometres of new local transmission line by 2030—less than half of what is needed.  

Moreover, in 2021, approximately 30% of the existing grid lines were over 20 years old. Given that many grid components have a design lifespan of 40 to 50 years, significant upgrades or replacements will be necessary to maintain system safety and reliability. 

In addition to inadequate grid planning, annual investment in grid infrastructure will need to increase significantly to meet future energy targets, rising from around $10b in 2024 to $29b by 2035, and reaching $43b by 2050. 

Another factor that could hinder the integration of RE in ASEAN is the lack of sufficient ancillary services. Renewable energy—particularly variable sources like wind and solar—relies on inverter-based technology, which lacks the physical rotating mass found in conventional generators and therefore does not provide inertia to the power system. Inertia is crucial for mitigating sudden frequency deviations and allowing system controls sufficient time to respond. 

Coupled with the fluctuating nature of wind and solar energy, which introduces greater supply-side variability to the power system compared to others, the power system is more prone to experience rapid frequency fluctuations, increasing the risk of grid instability or widespread outages. For AMS with higher shares of VRE, such as Vietnam and potentially others in the future, this presents a significant barrier to the effective integration of VRE into their power systems.

What needs to be done to make sure ASEAN is ready for a high-renewable energy future
ASEAN must significantly raise its ambition for grid development—not just in terms of physical expansion, but also in strategic planning, technological readiness, and regional coordination. 

ASEAN should set clear, measurable regional targets for smart grid deployment, cross-border interconnection capacity, and grid flexibility enhancements by 2030 and 2040.  These targets should be backed by national implementation plans that align with long-term energy and climate commitments. 

To ensure national plans like Vietnam’s PDP8 and Indonesia’s RUPTL are truly implemented, governments must strengthen institutional accountability, set clear timelines, and establish transparent monitoring mechanisms. Strong national commitments and governance will help build investor confidence, reduce the cost of capital, and accelerate the realisation of clean energy investment targets. 

Over time, this foundation can enable member states to adopt even more ambitious goals—built on realistic implementation capabilities and reinforced by effective institutional and regulatory frameworks.

To address the need for ancillary services, fossil fuel power plants can support early VRE integration by providing ancillary services such as ramping, reserve power, and filling supply gaps. However, rigid power purchase agreements (PPAs) require fossil fuel power plants to guarantee baseload generation and are not compensated to operate flexibly or provide ancillary services.

Reforming these PPAs could be done by adding performance-based incentives, availability payments, or hybrid contracts that allow partial dispatch aligned with real-time grid to their clauses. As a proof of concept, a pilot project or case study could be launched to test these revised contractual models and assess their effectiveness in enhancing system flexibility. 

By revising PPAs in this way, fossil fuel power plants can be repurposed or take on an additional role as transitional flexibility assets, rather than serving solely as baseload providers. In parallel, greater investment and regulatory support should be directed towards battery energy storage systems (BESS) and pumped hydro, which offer ancillary services with significantly lower emissions.

Ensuring ASEAN is ready for the energy transition will require the region and its member states to scale up current plans for grid expansion and refurbishment to meet projected electricity generation needs, as well as a fundamental rethinking of energy market design to enhance grid flexibility and reliability. 

Achieving this vision requires policymakers in each member state to take proactive steps, set clear national targets, and prioritise grid development alongside the continued growth of renewable energy.