Strategic insights

Nimble strategies to create modern, flexible grids

Coordinated planning and unified voices in grid planning will unlock solar and wind potential

A shift in grid planning already underway. For example, Singapore and Malaysia prioritise digitalisation to support better grid stability, grid operations and absorption of intermittent energy sources, Thailand plans to transfer more electricity to neighbouring countries via smart interconnections, and the Philippines is merging grid planning with the development of renewable energy zones.

These developments mark the beginning of a necessary shift.

Grid development priorities in ASEAN differ at regional and national levels of energy planning. At the regional level, grid development plans encompass priority infrastructure projects shaped by both regional and national energy models, power trading frameworks, and potential financing sources—including governments, multilateral development banks, international organisations, and private foundations.

At the national level, however, grid development plans primarily focus on transmission and distribution expansion, as seen in Indonesia’s PLN Electricity Supply Business Plan (RUPTL). Beyond transmission and distribution expansion, there are limited details on strategies for grid modernisation in Indonesia’s electricity sector plan.

This absence of modernisation strategies may be linked to the fact that grid scales are expanding without significant changes in the power supply mix, leading national grid operators to show less concern about grid fluctuations. For example, between 2018 and 2023, Indonesia added only 0.6 TWh of solar and 0.3 TWh of wind capacity. Similarly, the Philippines added just 1.2 TWh of solar and 0.9 TWh of wind during the same period. However, this perception should change as ASEAN is expected to increase the deployment of solar and wind in the coming years. 

Additionally, the regulated monopoly structure of grid networks in countries such as Indonesia often discourages companies from modernising infrastructure or embracing innovation at the pace of other industries. The reason being is a monopolised structure does not incentivise utilities like Indonesia’s PLN to modernise the grid, and its legal mandate is to provide affordable electricity even if it’s sourced from coal.

To accelerate progress, utility financing and/or Public-Private Partnership model should be designed to manage a spectrum of risks, including technical, regulatory, commercial, and political, through leveraging existing ASEAN partnerships and exploring the establishment of a dedicated APG financing facility. Developing a common-use asset financing approach by involving development partners and commercial banks, such as through Public-Private Partnership (PPP) can attract significant investment. This can be in the form of existing initiatives such as the Just Energy Transition Partnership (JETP) or engaging directly with multilateral development banks, as seen in Cambodia’s ADB-funded grid reinforcement project.

To facilitate the growth of a robust renewables market, grid policies in ASEAN must evolve to support a system that is clean, reliable, flexible, and inclusive. Grid development planning should enable the transformation, expansion and modernisation of this critical infrastructure. While the local contexts differ, based on current literature and scholarship, we identified six broad categories or pillars that a good future grid development plan should include.

1. Smart grid modernisation

Upgrade existing grid infrastructure with digital tools and smart technologies. Policies should support the deployment of smart meters, automation, real-time monitoring, and cybersecurity systems to enable a more intelligent, responsive grid that can efficiently manage variable renewables.

2. Strategic grid expansion

Extend and strengthen the physical grid to connect generations from variable energy resources and reach growing demand. Planning and investment in new transmission lines—especially to renewable-rich zones—and extending access to underserved areas are critical to unlock clean energy potential.

3. System flexibility and resilience

Equip the grid to adapt to fluctuations in supply and demand while withstanding shocks, enabling the power system to maintain balance between generation and load under uncertainty, and changes in needs, technologies and conditions. Flexibility policies should enable energy storage, demand response, and fast-ramping resources. Resilience measures should address climate risks, grid hardening, and cyber threats.

4. Regional integration and interconnection

Build regional power systems that share resources and improve efficiency through trade. Policies should promote cross-border interconnectors, harmonised standards, and regional planning to unlock diverse renewable energy resources and balance supply across borders.

5. Market and regulatory reforms

Create open, transparent, and competitive power markets at the regional level that support clean energy. This includes unbundling of utilities, open access to the grid, cost-reflective pricing, and enabling participation of new players like prosumers and storage providers.

6. Sustainable finance and investment mobilisation

Ensure long-term financing for grid upgrades, new infrastructure, and innovation. Governments should deploy financial instruments -such as green bonds, public-private partnerships, and risk guarantees can de-risk projects and mobilise both domestic and international capital.

Such a framework helps governments, regulators, and development partners align grid policy with the evolving needs of renewable-dominated power systems.

Embedding the six-pillar framework into national grid strategies will help ASEAN countries move from reactive grid expansion to proactive system transformation. 

Examples from Europe and Southern Africa show the benefits of grid capacity expansion and coordination, including better integration of wind and solar and resource distribution.

Europe

One example of a very developed integrated power system is Europe’s power system consisting of cross border, high voltage cables linking national power grids and shared market rules. It is the world’s largest interconnected grid with 400 interconnectors, linking 600 million customers and 93 GW of capacity. Managed by the European Network of Transmission System Operators for Electricity (ENTSO-E), the interconnected grid integrates 39 Transmission System Operators (TSOs) across Europe to enable electricity supply and demand in response to price signals. 

In spite of the grid’s need for modernisation, the EU appears to be on the right track toward its dual goals of updating the grid and ramping up renewables. There are continued roll-out of grid-enhancing technologies, renovation of high-voltage transmission lines, and an accelerated renewable energy permitting process. Additionally, two groups of countries CORE (Austria, Belgium, Croatia, the Czech Republic, France, Germany, Hungary, Luxemburg, the Netherlands, Poland, Romania, Slovakia and Slovenia) and Nordics (Norway, Sweden, Denmark, and Finland) have been pioneering Flow-Based Market Coupling, which improves efficiency of exchanges thus favouring security of supply and improvement of social welfare.  

Here, where renewable energy shares are rapidly growing, there is significant potential and need to deploy clean flexibility solutions. Clean flexibility is even more important given the long queues for grid connections, which are one of the bottlenecks for wind energy expansion in the EU. Grid operators have a strong opportunity to balance power demand and supply through interconnections and clean flexibility tools such as battery storage, demand-side flexibility and pumped hydro storage. Such real-time trading is possible because of the established markets (intra-day and balancing markets) which allow coordination of power purchases by TSOs across Europe. This balancing is further simplified as ENTSO-E can oversee and coordinate grid operators across Europe.

Southern Africa

In Southern Africa, power connectivity has progressed significantly. The Southern African Power Pool (SAPP) comprises 22 utility companies from 13 countries. To unlock financing, a dedicated facility known as the Regional Transmission Infrastructure Financing Facility (RTIFF) project was scheduled to run from 2020-2025. The RTIFF project receives funding from the World Bank to the Common Market for Eastern and Southern Africa (COMESA) and the Trade and Development Bank (TDB).

The underlying purposes behind this regional power sector integration are to enhance energy security, bring economies-of-scale in investments, facilitate financing, enable greater renewables penetration and allow sharing of complementary resources. For South Africa, the aim was to meet future increases in demand by importing low-cost hydropower from its northern neighbours. The trading agreement also facilitates the expansion of the grid to connect members not connected on the SAPP grid, and introduces a short-term energy market (STEM) to cater for the trading of surplus energy under existing contracts. STEM has been replaced by a fully competitive day-ahead market (DAM).

Unlike the EU which has a dedicated regional transmission system operator, SAPP operates under an intergovernmental memorandum of understanding (MoU) and operating agreements. These agreements authorised and guaranteed the inter-utility contractual obligations and operating agreements.

In the onset, there was no new capacity expansion of any significant size developed. However, since 2007, there has been an urgency in expanding generation capacity. Cooperation has also resulted in the sharing of benefits in auxiliary services and demand-side management measures. For example, the reserve margin can be reduced.

Since its inception, SAPP has aimed to share excess generation among its members through bilateral and multilateral agreements. Despite challenges such as competitive market barriers and obstacles in renewable energy project development, its success in fostering cooperation and transitioning to a competitive market could serve as a valuable model for the ASEAN market. 

Ultimately, the focus should not be on whether ASEAN replicates the SAPP or European power systems, but on building a resilient and connected market. Currently, ASEAN remains at a stage where utility-scale electricity trade occurs bilaterally and unidirectionally, often involving transit countries. The key issue here is achieving a shared understanding amongst the ASEAN’s power market players that energy security could be enhanced through sharing of solar and wind resources.

Developing the ASEAN Power Grid is not just a matter of securing financing—it requires meticulous coordination, planning and implementation. At the onset, evaluating infrastructure requirements is crucial given the variation in market structure across ASEAN countries. The right incentives could motivate grid development in both multi- and single-buyer systems. The establishment of a system operator composed of representatives from Member States’ grid operators could assume responsibility for network planning and investment needs (e.g. this role could be delivered by HAPUA – Heads of ASEAN Power Utilities/ Authorities, ASEAN Power Grid Consultative Committee (APGCC) and ASEAN Energy Regulators Network (AERN)). Then, a dedicated ASEAN fund could accelerate the physical interconnection of the Southeast Asian electricity system.

A unified grid demands standardised grid codes and agreed wheeling charges to ensure seamless operation across borders. Additionally, a centralised platform is needed to mediate multilateral power trade, ensuring an efficient and resilient trading system, taking in the form of unified market and operations, while tagging environmental attributes to parties involved. 

Grid operators must also prepare for the technical challenges of an integrated regional power network. These include the coordination of trading across borders, disruptions from intermittent solar and wind power, the complexities of long-distance transmission, and the broader implications for energy security. Addressing these issues requires robust flexibility measures to ensure that electricity flows reliably across the region, meeting the needs of all ASEAN nations.

The Greater Mekong grids connecting China, Cambodia, Myanmar, Laos, Thailand and Viet Nam serve as an example where innovations could be applied. Since the onset of the Inter-governmental Agreement on Regional Power Trade signing in 2002, the power trade has been limited to a few uncoordinated bilateral cross-border exchanges of electricity. Key obstacles include inadequate infrastructure consisting of low-voltage lines, inflexible power trade agreements, a lack of third-party access, and the absence of a regional coordinating body. 

To advance power connectivity at a higher level, infrastructural and political innovations can deliver system-wide benefits. Infrastructure efforts should prioritise planning for clean flexibility to maximise existing interconnection capacity and reduce stress on the power grid. Meanwhile, political support for a shared vision of a more interconnected ASEAN can drive further progress. With growing discussions on wheeling charges and third-party access at the regional level, the region appears to be on the right track.