Challenges and opportunities

ASEAN grids need better policy alignment and clean technologies

Rapid growth of wind and solar parks call for better grid planning and implementation

Modernisation of the national grid is urgently needed to accommodate the rapid rise of renewables and evolving energy demands. At the same time, a significant financing gap threatens to stall progress, underscoring the need to unlock investment at scale. Addressing these challenges will require stronger alignment of strategies and more effective partnerships across governments, industry, and financiers.

Quite a few ASEAN countries have recognised the importance of grids in solving power transmission issues. In response to the power disturbance in 2019, Indonesia’s state-owned electricity company, PLN, implemented plans to expand transmission line infrastructure and enhance the integration of generation, transmission, and distribution management systems. These improvements aim to detect anomalies more efficiently and mitigate disruptions in the power supply.

Similarly, grid operators in Vietnam and the Philippines addressed power outage incidents caused by the tropical cyclone seasons by upgrading their power infrastructure. These upgrades focused on strengthening grid resilience, improving response mechanisms, and enhancing overall reliability in the face of extreme weather events.

Additionally, with increased solar and wind deployment plans and interconnections of the ASEAN power grids being planned, advanced technologies are essential for optimising grid operations and ensuring regional power system stability. At the 2024 ASEAN Grid Operation Technical Workshop, innovations such as Wide Area Monitoring, Protection, and Control (WAMPAC) systems, micro-synchrophasors, and micro-phasor measurement units (PMUs) were discussed as tools to improve cross-border grid coordination and real-time grid management. 

To ensure countries derive the full benefits of the next phase of the transition, it is necessary to implement grid solutions at scale and across the entire system.

Currently, most of ASEAN countries’ electricity systems are based on fossil fuels. Coal plants typically operate as baseload generation, while geothermal, biomass, large hydropower and gas plants provide flexibility, ranging from baseload to peak demand. As of 2023, Indonesia owns the largest fossil fuel power capacity at 78 GW, followed by Thailand with 44 GW, Viet Nam with 35 GW, Malaysia with 32 GW and the Philippines with 20 GW.

Renewable energy, particularly wind and solar, is still in early stages of deployment in most countries. With the exception of Vietnam, which leads the region with 23 GW of installed wind and solar capacity. In contrast, other countries have capacities ranging from 0.7 GW to 5 GW. However, due to the lack of pricing mechanism and grid constraints, Viet Nam had to reduce the utilisation rate of its largest solar farm by as much as 40% in 2022. To provide solutions to such curtailments, the country is currently implementing a large-scale energy storage project in the South Central region where solar farms installed capacity is around 70% of total solar capacity.

Countries located along the Mekong river and the island of Borneo have abundant hydro resources. However, there was a drop in hydro production spurred by droughts and seasonal variations that necessitates diversification of renewable energy sources.

Collectively, the ASEAN power system has 8 GW of wind and 26 GW of solar capacity, with a regional target to increase this by 51 GW for solar and 109 GW for a combination of wind, hydro, geothermal and bioenergy by 2040.

Viet Nam’s experience highlights the importance of grid and flexibility, when curtailments happened over concerns of power system stability. Due to the under-capacity of transmission grids, the government and state utility of Viet Nam have been cautious about issuing further policies to promote wind power. Grid operators in the region are currently assessing long-term power system planning practices, and analysing system effects and cost implications of greater solar and wind integration. Particularly, since solar and wind energy sources are projected to increase according to scenarios by the ASEAN Centre for Energy and the IEA.

Grid emission factors represent the amount of emissions produced per kilowatt-hour (kWh) of electricity generated. These factors vary by grids depending on the energy mix and overall grid efficiency. Grids that rely primarily on fossil fuel-based electricity generation tend to have higher emissions, which significantly influence the approach to electrification infrastructure development.

In ASEAN, some of the highest grid emission factors are observed in Indonesia’s Sumatra (0.9 tCO2e / MWh), Java-Bali-Madura (0.9 tCO2e / MWh) and the Philippines’s Mindanao (0.8 tCO2e/MWh). These figures highlight the environmental cost of electricity in these areas as the region advances electrification across multiple sectors, including transportation and cooking.

For instance, while electric vehicles (EVs) eliminate tailpipe emissions, their sustainability benefits depend on the emissions from electricity generation. As a result, regions with carbon-intensive grids must prioritise decarbonisation efforts alongside EV adoption to fully realise the environmental advantages of electrification.

There are various clean flexibility options that can be integrated into energy systems, each with different applications and technical requirements. Clean flexibility is the process of balancing supply and demand to maintain grid stability, by storing renewable electricity for later use, shifting non-critical demands to periods where supply is abundant and sharing it across the grid. Such flexibility options may include battery storage, pumped hydro storage and demand-side management. Grids and interconnectors are also essential clean flexibility tools to allow the sharing of resources.

Pumped hydro

The pumped hydro storage system, or pumped hydro, uses the height difference between two reservoirs to store energy. The system is operated by pumping the water between two dams. Water is pumped using off-peak electricity and discharged in peak hours. The two reservoirs are connected by penstocks, with a height difference ranging from 50 to 800 meters. 

Pumped hydro is often considered as a mature technology to provide grid stability and support the development of intermittent renewable energy, such as wind and solar. The system is capable of storing energy for daily, weekly or monthly cycles, and can operate over annual and pluri-annual cycles. The technology could also play a role in dealing with load problems emerging from strong seasonal fluctuations in electricity consumption and supply seasonal variations due to increasing use of intermittent power sources. With long-duration storage (+8 hours) and low operating cost, pumped hydro can provide inertia, providing more stability to the grid.

In Southeast Asia, with the use of pumped hydro, the electricity sector could in principle achieve a penetration rate of solar and wind resources between 78%-97%, achieving between 1,170-1,480 GW in a scenario where there is optimal sharing of hydropower resources across the region. However, given the competition of land with other infrastructure development, geographically feasible, commercially and socially acceptable sites selected for pumped storage are becoming scarce. The high capital cost and long gestation period for this technology could also be potential barriers to adopt.

Currently, 2.7 GW of pumped hydro is under construction and the remaining 13.3 GW is in various stages of development. The Philippines introduced a target of 4.3 GW of pumped hydro in the 3rd Green Energy Action Plan for 2025-2035. Similarly, Viet Nam aims to deploy 2.4 GW of pumped hydro by 2030 according to the Power Development Plan (PDP8). Indonesia is promoting this technology in the National Electricity Master Plan, with 3.7 GW projects in the pipeline. Thailand has projects underway in the provinces with a combined capacity of 2.5 GW by 2037.

Battery Energy Storage Systems (BESS)

BESS offers significant benefits, particularly with its fast response times and modular, scalable design. Technologies like lithium-ion batteries can respond in milliseconds, making them ideal for frequency regulation and short-term balancing in grid operations. As the costs of these batteries continue to fall, they present an increasingly cost-effective solution, especially for applications requiring quick power adjustments.

However, challenges remain, particularly for long-duration storage. Despite their advantages in rapid response, energy storage solutions often face high upfront costs per megawatt-hour (MWh) for systems that provide extended discharge durations. Most systems currently only last 2 to 4 hours, limiting their ability to provide sustained energy during non-solar hours. Additionally, there are environmental concerns surrounding the extraction and use of raw materials for batteries. These factors highlight the trade-offs involved in scaling energy storage technologies.

There have been some projects integrating solar and battery in ASEAN. For example, a 45 MW storage project in Thailand, a 4 MW BESS facility in the Power Development Plan, a 400 MWh in Malaysia’s Sabah, and a combined 3.5 gigawatt-peak () of solar power capacity with 4.5 GWh of battery storage in the Philippines. Indonesia and Singapore are also developing 2 GW solar plus 8 GWh of utility-scale BESS ventures. Additionally, Indonesia is planning to develop a 50 MW Kalseltengtimra Solar Power Plant with a 14.2 MWh BESS in the new capital city, Nusantara. In Singapore, LFP Energy Storage Systems that can store and deliver up to 200 MW of power for one hour in a single discharge are being built to enhance grid reliability.

Demand-side management (DSM)

Demand side management (DSM) offers a low-cost flexibility option for grid operators, helping to reduce strain during peak demand periods. DSM adjusts electricity use by controlling end-user devices to enhance grid flexibility, in response to increased renewable energy integration. 

By incentivising consumers to adjust their usage patterns, DSM can balance supply and demand, preventing grid overloads and reducing the need for expensive peak generation. smart meters and targeted incentives make these adjustments more feasible and scalable. An example of a demand-side management tool is ‘peak shaving’, or levelling consumption during peak hours. This strategy is mainly employed by industrial and commercial power consumers to minimise the occurrence of high peaks. In China, peak shaving is now integrated into spot market mechanisms, providing a market-based solution to grid imbalances.

Despite its potential, DSM faces challenges that hinder broader adoption, particularly in ASEAN countries. Effective DSM implementation requires supportive policies, regulatory frameworks, and consumer participation, all of which are still lacking in many regions. Furthermore, the successful integration of DSM relies on digital infrastructure and market readiness, which remain underdeveloped in several ASEAN countries. These barriers highlight the need for a concerted effort to align policy, infrastructure, and consumer engagement to fully realise the benefits of demand-side management.

In ASEAN, the Philippines Department of Energy issued a circular establishing a framework for energy storage systems (ESS) to support variable renewable energy integration. The ESS will be applied to serve a variety of functions in electricity management, including energy generation, peak shaving and ancillary services.

Another tool, smart electrification refers to the optimisation of the charging of EVs, and use of heat pumps or electric stoves, in accordance with sunny hours on a daily basis. As ASEAN is slated to become more electrified, managing the demand has the potential to become a large source of flexibility.

Grids and interconnections

Strengthening and expanding grid interconnections across ASEAN is vital to scale up renewable energy while improving grid efficiency. By linking national grids, countries can share clean energy resources across borders—reducing the risks of curtailments and smoothing variability from solar and wind over a wider geographic area. Grids also offer temporal and spatial flexibility, helping optimise system operations across daily, seasonal and regional patterns. This enables more cost-effective renewable integration, as nations can balance supply and demand more flexibly, alleviating constraints on the grid and making better use of surplus generation.

However, turning this vision into reality comes with hurdles. Cross-border grid projects require strong political coordination, harmonised regulations, and long-term investment commitments. Development timelines can span years, and investors may view such projects as high-risk due to the complexity of regional governance and financing structures. Overcoming these barriers will require bold leadership, policy alignment, and innovative investment frameworks to realise the full benefits of a connected ASEAN power system.

Expediting the pace of connectivity will bring economic benefits, with projected GDP growth ranging from 0.8% to 4.6% and the creation of 2000 to 9000 new jobs annually. More interconnection capacity will allow for more renewables penetration. As a result, positive impacts could be generated. These include better economic exchange, increased energy supply and renewable generation assets to be optimised across interconnected countries.

Other flexibility options

Other clean flexibility technologies are also available. Though many currently face some technical limitations (e.g. balancing the wind-solar-hydro flexibility since there is only a small solar and wind capacity in ASEAN), their small-scale applications (e.g. household battery storage) and minor relevance in the decarbonisation path (e.g. CCGT).

Industrial demand-side as a flexibility application could be potential if the lack of data transparency is being addressed. Other options, day-ahead market and intraday market will work in the multi-buyer market structure.

While these solutions may play a limited role today, many could become more impactful over time as technologies mature, markets evolve, and policy framework improves. In the future, these technologies and applications may play a more prominent role in the provision of grid–stabilising services.