Power without borders: Charting Asean’s path to an interconnected energy future

The recently concluded 46th Asean Summit in Kuala Lumpur has seen renewed interest in advancing regional efforts towards cross-border power integration.

Two landmark developments were announced: the signing of a deal to develop the new Singapore-Indonesia subsea interconnector for importing clean electricity an agreement between Vietnam, Malaysia and Singapore to jointly explore renewable energy export.

These announcements underscore growing political momentum and private sector interest, marking a significant step towards a more integrated and sustainable regional energy cooperation. Studies highlight that an interlinked Asean power grid could cut decarbonisation costs by US$800 billion compared to individual national efforts and boost investment opportunities by 1.5 times between 2025 and 2050.

The question remains: how might the power grid be accelerated given three decades of efforts that have yet to produce the kind of integrated systems proponents had hoped for?

Answering this question requires overcoming several barriers that have been identified for truncated efforts to date: political distrust, distribution of financial liabilities for massive infrastructure development, limited technical capacity to build advanced infrastructure for energy transfer and storage, misalignment of national energy market codes, and energy access concerns for vulnerable communities.

The purpose of this policy brief is to identify lessons from global case studies of power grid interconnectors around the world to assess what might diffuse, or generate lessons for, efforts in Southeast Asia. We focus on two relatively successful cases: the European Union Power Grid (EUPG) and the Southern African Power Pool (SAPP).

We identify factors that appear to have contributed to the successful implementation of multinational grid interconnectors and regional energy trade markets in these two case studies. We show that while there are distinct lessons from each, general patterns emerge as well, including the need to facilitate greater dialogue, transparency, and shared purpose.

We proceed by first identifying enabling governance structures; second, analysing financing models and project prioritisation strategies; and third, evaluating market integration mechanisms that enhance cross-border electricity trade.

Multinational grid interconnectors

European Union Power Grid (EUPG)

The EUPG, initiated in the 1950s with the expressed purpose of enhancing economic cooperation, now represents the world’s largest multinational power grid, connecting 27 countries and multiple European Union (EU) regions. It is managed by over 2500 distribution system operators (DSOs) and 30 transmission system operators (TSOs) to ensure synchronous grid operations and stable cross-border electricity flows.

The EU’s approach serves as a benchmark for energy market integration, including the formation of supranational agencies like the European Network of Transmission System Operators for Electricity (ENTSO-E) to coordinate cross-border cooperation, establishment of Projects of Common Interest (PCI) framework to accelerate grid infrastructure development, along with incremental market harmonisation through the Internal Electricity Market (IEM), day-ahead and intraday market codes.

Simultaneously, the Agency for the Cooperation of Energy Regulators (ACER) is the supranational body working with national regulators to ensure fair access to energy and market competition.

Southern African power pool

Similarly, the SAPP, established in 1995, represents one of the most advanced power pools among developing countries. Bringing together 12 national utilities, it aimed to improve economic integration and energy security in the region by facilitating the sale of surplus energy through cross-border electricity trade while promoting renewable energy deployment.

SAPP’s strive for coordinated regional development has been possible through targeted focus on infrastructure investment, leveraging international funds, decentralised regulatory authority to independent national regulators, market liberalisation to incentivise private sector participation, fostering market efficiency and transparency through day-ahead market mechanisms, bilateral contracts and imbalance settlement schemes. The regional electricity market is operated through a centralised platform at the SAPP Coordination Centre in Harare, Zimbabwe.

Lessons for Asean

Both the discussed regional grid interconnectors have been found to strengthen regional energy security and economic resilience. Several insights emerge from assessing these cases that may be considered for accelerating grid infrastructure development in Asean.

1. Political and economic synergies can enhance support for grid interconnection

When political and economic motivations are tightly integrated, countries tend to exhibit stronger and more sustained commitment to regional grid initiatives. In the EU, founding efforts were driven by Germany and France through the post-World War cooperation initiatives such as the European Coal and Steel Community (ECSC), eventually evolving into a broader energy cooperation and economic integration drive in the form of the EU Power Grid (EUPG). Following the 2020 Climate and Energy package, the EU’s electricity policies have increasingly focused on decarbonisation and renewable energy integration.

Similarly, the creation of the South African Power Pool (SAPP) was championed by South Africa, a dominant energy producer in the region, as part of post-apartheid regional cohesion, fostering intergovernmental cooperation (South African Development Community) and cross-border energy sharing. In addition, recognising the climate threat concerns amid rising energy demands, the SAPP has prioritised regional integration of power systems to enable harnessing clean energy resources at scale, while optimising the economic and financial costs of energy transition.

• By positioning the multiple co-benefits of APG in accelerating regional grid decarbonisation, energy security and revenue opportunities, renewables-rich Asean countries can lead collaborative dialogues to advance the APG vision.
• Factoring in the socio-economic benefits of grid interconnectors (such as jobs created, access to clean energy and emissions avoided), in addition to energy security and green transition push, could boost socio-political demand for APG.

2. Governance models that promote transparency and equitable benefits can enhance support

The EU Power Grid (EUPG) operates under a supranational governance structure, comprising the European Network of Transmission System Operators for Electricity (ENTSO-E) and the Agency for the Cooperation of Energy Regulators (ACER), promoting regulatory consistency, transparency, and cross-border cooperation.

In the EU, binding regulations through the Third Energy Package provided an enforceable legal framework, eliminating vertical integration of the energy sector by separating generation, transmission and distribution. ENTSO-E remains the supranational implementation authority, while national regulators are empowered to manage the local TSOs and DSOs. Further, cross-border electricity trade is facilitated through an integrated internal electricity market (IEM).

In contrast, the foundation of SAPP through Memorandums of Understanding (MoU) demonstrates that non-binding agreements can still drive integration when underlying operating guidelines are developed systematically SAPP follows an intergovernmental model through the Regional Energy Regulators Association of Southern Africa (RERA), emphasising capacity building, regulatory cooperation among member states to support a harmonised regional market while promoting green investment opportunities.

• The Heads of Asean Power Utilities/Authorities (HAPUA), with its dedicated working groups, mirrors the intergovernmental approach in Asean, but lacks real regulatory authority. Strengthening HAPUA’s mandate through progressive legal codification could enhance regional coherence.
• Stronger cooperation between regulators and governments could fast-track interconnector projects being developed by country sub-groups, bilaterally or regionally.

3. Project prioritisation framework can streamline fund allocation and incentivise private investments

The EU Projects of Common Interest (PCI) framework advances strategic projects addressing infrastructure gaps, energy security, social welfare gains and emissions reduction goals, which are prioritised for planning, expedited approvals, along with dedicated financial support.

The EU has derisked private grid investments by funding up to 50 per cent of capital expenditures for accelerating cross-border infrastructure. These strategies have ensured the successful implementation of key initiatives like the North Sea Wind Power Hub.

On the other hand, the SAPP centrally coordinates fund allocation through pooled member contributions, international development grants, loans and private investments.

Using a weighted scoring system for evaluating technical feasibility, regional benefits, grid decarbonisation goals, and cost-effectiveness, to prioritise projects like the Zambia, Tanzania, Kenya Interconnector, Mozambique, Zimbabwe, South Africa (MoZiSa) project, it focuses on projects with a strong regional impact. Furthermore, using a blended finance model, public funds are used to mitigate market risks to attract private investments.

• A structured project prioritisation framework for the Asean grid infrastructure could promote transparent and strategic allocation of resources. It can also enhance the bankability of cross-border projects by underscoring their political intent and policy certainty.
• Additionally, laying down uniform standards for clean energy projects can mobilise green finance mechanisms in the region.

4. Harmonised market integration can support regional electricity trade

In the EU, the Internal Electricity Market (IEM), coordinated by ENTSO-E and ACER, is guided by the day-ahead and intraday market codes. These market integration tools have enhanced competition while encouraging private sector participation in energy transmission.

Likewise, SAPP has also promoted cross-border electricity trade through bilateral contracts (purchaser is obligated to secure wheeling path), adoption of day-ahead and intraday market pricing schemes, that is monitored through a centralised platform, the SAPP Coordination Centre.

• A phased approach towards harmonisation of national electricity markets and developing a regional coordination centre can assist cross-border electricity trade.
• Bilateral agreements may resolve wheeling charge disputes between multiple parties.

This article was authored by Dr. Maitreyee Mukherjee (Research Fellow) and Ms Anmol Nayak (Student Research Assistant) at the Institute for Environment and Sustainability, Lee Kuan Yew School of Public Policy, NUS.