Interconnection, not isolation, is Asean’s US$4.8 trillion lever

By accelerating the energy transition, Asean's gross domestic product is expected to be higher by an average of 2.6 per cent annually between 2023 and 2050, translating into a cumulative gain of US$4.8 trillion. Also, by 2050, renewable energy could create 4.6 million out of 14.3 million energy jobs in Asean, an analysis by the International Renewable Energy Agency (Irena) indicated.

This economic prize, however, is not guaranteed. It hinges on the region's ability to overcome an old reflex: the belief that energy security must be built though fossil fuels and within national borders.

As Asean countries enjoy post-pandemic growth, energy demand is rising sharply. But in an era defined by geo-economics and supply chain challenges, that instinct - while understandable - is outdated.

By now, it is clear that relying on fossil fuels is no longer an option. Countries around the world are racing to deploy renewable energy. In 2024, Asia overall became the biggest contributor of renewable power capacity addition. The region increased its total renewables capacity by 413 gigawatts (GW) to reach 2,374 GW - 53.4 per cent of global installed capacity.

Asean countries are endowed with different renewable resources with different capacity potential, which would compel countries to seek and share supply with neighbours

Energy security in Asean, therefore, will not be achieved by isolation, but by collaboration.

Shared resources for collective energy security

Asean's energy transition is about more than replacing fossil fuels. It is about balance. The region currently faces a triple challenge. It must navigate global economic shifts, advance a just and inclusive energy transition, and deepen regional integration through interconnected power infrastructure.

How Asean countries perform this balancing act will shape not only the region's energy future, but its economic outlook.

The path to unlocking US$4.8 trillion is by scaling up the region's renewable power capacity. Collectively, Asean has reached 113 GW of installed renewable power capacity by 2024, a 5 per cent increase from 2023.

Despite this encouraging growth, the current pace of progress is not sufficient, especially if Asean seeks to achieve its target of 45 per cent share of installed renewable power capacity by 2030, as laid out in its Action Plan.

Irena's analysis shows that the target is achievable as a substantial shift led by wind and solar is expected to increase Asean's share of installed renewables capacity to 57 per cent by 2030. With increased supply comes the need to distribute where demand exists. And this is where cross-border infrastructure fits in.

An advanced power network that links national grids will allow neighbours that are rich in different renewable sources to supply each other with renewable power. The Asean Power Grid has the potential to turn 11 fragmented markets into one integrated, networked economy capable of attracting investment at scale.

Interconnection, a crucial driver for inclusive growth

The ability of nations to connect their power systems, pool resources, and trade clean electricity will determine whether the region's transition delivers both growth and resilience.

South-east Asia has the opportunity to strengthen its competitive edge in the renewable power sector through the Asean Power Grid. With increased, targeted investments in renewable power capacity, grids, infrastructure and energy efficiency, the region is set to see growth in different dimensions, including the mass creation of jobs.

Private investment emerges as one of the key drivers of the economies' growth. Already, South-east Asian economies attracted over US$234 billion in 2023 in foreign direct investment (FDI), with Singapore maintaining its position as the top FDI recipient in the region.

This surge reflects growing confidence in South-east Asia's capacity to move up the clean energy value chain. But more is needed: Around US$105 billion of investment must be directed towards regional and domestic transmission by 2030.

Coordinated action for shared prosperity

For Asean, the energy transition will undoubtedly bring benefits. The question is how this transition will be shaped to ensure the benefits.

Interconnection is not just infrastructure; it is the foundation of shared prosperity. Interconnection provides the hardware for a unified energy market. Harmonised rules and power trading frameworks provide the software.

Real transformation will come from coordinated action. Asean has already shown it can work together in trade and diplomacy. Energy must follow that path.

Asean's strength lies not in isolation but in the grid that connects it, and in the shared resolve to sustainably power the future - together. To that end, Irena is supporting Asean with a new regional partnership to accelerate the renewables-based energy transition. It will foster regional interconnectivity and stimulate green industrialisation.

I also encourage Asean policymakers to coordinate energy policies for grid integration, procurement, and investment. With these in place, they can establish energy systems that will underpin the region's next phase of growth: one built on connectivity, not isolation.

This commentary was first published on The Business Times: https://www.businesstimes.com.sg/opinion-features/interconnection-not-isolation-aseans-us4-8-trillion-lever