For ten years the story of the energy transition in Southeast Asia has focused on money — on whether the capital would come and on the terms upon which it would come. That issue has now largely been resolved. Regional investment in energy reached over 100 billion US dollars in 2025, and developers have said that they will spend about 540 billion US dollars on green capital in the power and EV sectors up to 2030. The limitation has shifted. Currently only about 315 billion US dollars of that pipeline is on a credible path to deployment — and the cause of the gap is not a shortage of financing. It is the grid. [1][4]
The capital is no longer the binding constraint
The demand is real and growing. Investment in clean energy in the region has gone up by around 60 per cent since 2015, and electricity demand is currently rising at twice the rate of total energy consumption — over the next ten years the additional amount will be equal to all of Japan's electricity generation. Money is being provided to satisfy this demand. [1]
Yet between 2021 and 2025, 50 and 60 per cent of the renewable energy projects in Vietnam, Thailand and Indonesia were cancelled or halted. Over a quarter of the 452 solar projects which had been announced in the region experienced delays or were given up between 2022 and early 2026; in Indonesia, 48 per cent of the projects that had been announced were dropped. The projects in question were not usually the ones that had failed to raise money. Many of them had been unable to obtain a grid that could handle them. [4]
The capital problem has mostly been settled, but the delivery question is still without a solution — and that is precisely where the grid comes into play now.
A physical bottleneck, and a widening one
The network failed to keep up as generation advanced quickly. In fact, investment in the grid decreased — falling from about USD 15 billion in 2015 to USD 12 billion in 2025 — even though demand went up and the amount of renewable energy grew. The IEA estimates that the region's requirement is actually closer to USD 18 billion per year for modernisation, and that the total amount needed for grid investment between 2025 and 2040 is over USD 300 billion, which is a 72% increase on the previous fifteen years. [4][2]
The fact that the situation is apparent can be seen in the form of reduced capacity, overcrowding, and vulnerability. Indonesia has reached only 18% renewable energy by April 2026 whereas its target of 23% has now been postponed to 2030. As Wai-Shin Chan from HSBC pointed out, grid resilience “is really not there”, and the pressure will soon increase since demand from data centres and AI is expected to rise across the region, thereby introducing a new and intense demand on networks which are already finding it difficult to keep up. [4][5]
The cross-border prize — and a fifty-year execution gap
The most important initiative is at the same time the most difficult one, namely connecting up the national power grids so that electricity in surplus in one country can be used in another that has a deficit. The concept — the ASEAN Power Grid — originated many decades ago, but the real progress achieved is unsatisfactory. Since the first connection between Laos and Thailand was initiated in the 1970s, investment in cross-border interconnectors has amounted to only about USD 2 billion. In 2024 alone the region spent nearly double that sum — USD 3.6 billion — on domestic transmission. [2]
The International Energy Agency has stated that ASEAN will require an investment of 27 billion US dollars in interconnectors by 2040 — this amount being a twentyfold increase on the 100 million US dollars per year which was spent on such projects between 2019 and 2024. Four of the proposed links will each be longer than the longest subsea interconnector currently in operation. Since 2018 transformer and cable prices have nearly doubled and the specialist vessels used for laying the cables are now fully booked. [2]
The situation is growing more promising. In May 2026 the Asian Development Bank launched the Pan-Asia Power Grid Initiative with a funding sum of 50 billion US dollars, the objective being to secure financing and achieve coordination by 2035. It has already been demonstrated that multilateral cross-border trade can work in practice via the Lao PDR–Thailand–Malaysia–Singapore Power Integration Project. The question at present is not whether it is possible, but whether it can be achieved on a large scale and on time. [3][6]
This is an execution problem, not a financing problem
It is tempting to see a figure of 300 billion US dollars as proof that more capital should be raised, but that would be a misinterpretation of the actual bottleneck. The cost of capital in the region is roughly twice that in advanced economies, so each grid project is more difficult to finance — yet the main difficulties are structural. There is no standardised regional power-trading agreement and cross-border trade still relies on individual bilateral contracts. Transmission tariffs, wheeling charges and the rules regarding third-party access differ from country to country. Financing models which have been developed for assets located within a single jurisdiction find it hard to be applied to multi-country subsea links that involve sovereign and geopolitical risks across several balance sheets at the same time. [1][2]
Deliveries come to a halt precisely in those areas which are situated between capital, risk and capability — and the gaps in these areas are closed by the way in which the institutions are structured, not by writing a larger cheque.
What actually closes the gap
- The frameworks for commercial activity have been harmonised, with regional tariff methods and standardised trading agreements taking the place of individual bilateral arrangements. [2]
- As a result of de-risking, the cost of capital falls because the government-backed guarantees, together with the credit enhancement and catalytic finance offered by the multilateral banks, attract private capital rather than drive it out. [2]
- There should be new arrangements for ownership and systems concerning the recycling of capital, with separate transmission models featuring shared ownership so that the early investors can exit and re-invest, thereby keeping the pipeline going. [2]
- To coordinate the supply chain, long-term framework agreements should be concluded for transformers, cables and vessels so that the scarce hardware is not made into a limiting factor. [2]
- The capability of achieving all this — the series of procedures covering project preparation, procurement and implementation which turns a signed MoU into an energised line — is the least impressive item on the list and at the same time the most important one.
The bottom line
The extent to which Southeast Asia moves forward won't be determined by how much capital is announced; that part is already mostly decided. It will depend on how much of that capital in fact gets to the ground — and the grid is the check point that each dollar has to go through. The region is advancing rapidly. Whether or not construction takes place at this time will, more than anything else, come down to the wires.
Ezra & Macquarie gives advice to governments, utilities and investors about de-risking and the delivery of this kind of infrastructure, including aspects such as bankability and market structure as well as project preparation and capability building. Explore our capabilities →
Sources
- IEA — Southeast Asia Energy Outlook 2026 (Executive Summary).
- IEA — Financing the ASEAN Power Grid (Executive Summary).
- The Global Economics — “Asia's $50 Billion Grid Race” (ADB Pan-Asia Power Grid), 12 August 2026.
- Climate Change News — “Southeast Asia's fragile grids threaten billions in clean energy investment”, 5 August 2026.
- Wood Mackenzie — “Southeast Asian data-centre power demand is set to explode”.
- LTMS-PIP — Lao PDR–Thailand–Malaysia–Singapore Power Integration Project (Single Buyer, Malaysia).
This is Edition #2 of the Ezra & Macquarie Southeast Asia Outlook, our quarterly briefing on where capital, risk and capability are moving across the region's energy and infrastructure landscape.
