The US-Israel war on Iran has triggered the most severe global energy supply shock in decades, if not “the greatest threat to global energy security in history”¹. The closure of the Strait of Hormuz, through which roughly 20% of the world’s oil trade and significant volumes of liquefied natural gas (LNG) pass, has caused sweeping disruption to fuel supply chains worldwide, sending prices surging and forcing governments into emergency response mode. 

Making matters worse, this is now the third major energy shock in six years. COVID-19 exposed the fragility of global supply chains in 2020. Russia’s invasion of Ukraine in 2022 turned around assumptions about energy security and fuel availability. Emergency stockpiles and short-term market interventions have softened some of the immediate impacts of the current crisis, but the options available to governments are becoming increasingly limited.  

Recognising the risks posed by recurring global energy disruptions, ASEAN leaders have identified regional energy integration as a strategic priority. In their May 2026 statement on the Middle East crisis, they committed to strengthening cross-border power trading and accelerating the development of the ASEAN Power Grid (APG).² ASEAN leaders also linked the APG to broader efforts to support renewable energy deployment, strengthen regional energy cooperation, and reduce dependence on vulnerable global fuel supply chains. 

ASEAN’s Energy Security Problem is Structural 

ASEAN’s energy demand is projected to increase by 2.6 times between 2022 and 2050, yet fossil fuels are expected to continue meeting around 82% of that demand.³ At the same time, declining domestic oil and gas production is increasing the region’s structural reliance on imports. The concern is particularly acute for natural gas: Although endowed with domestic gas resources, ASEAN is expected to become a net gas importer by as early as 2027, while import dependence could reach 93% by 2045, potentially resulting in annual import bills exceeding US$200 billion.  

However, ASEAN is not resource-poor.  

Rather, its renewable energy resources are distributed unevenly across the region. Viet Nam has significant offshore wind potential, Lao PDR possesses substantial hydropower resources, and Indonesia has some of the world’s largest geothermal resources, while other Member States have varying solar, hydro and biomass potential.  

The challenge is therefore not resource scarcity, but a) untapped potential of electrifying much of ASEAN’s industry, transport and building sectors, and b) the limited ability to move electricity efficiently across borders. 

A more interconnected regional electricity system could help address this challenge by enabling countries to access renewable energy resources located elsewhere in the region, improving system flexibility and reliability, reducing dependence on imported fossil fuels, and facilitating the integration of variable renewable energy across a larger geographic area. By leveraging these geographic shifts, solar power generated during early sunrise in Western Papua could be instantly transmitted westward to meet morning demand in Yangon, Myanmar, with the same cross-border balancing benefit repeating at sunset. To ensure stability, Laos’s flexible hydropower reserves could act as a regional baseline backup, instantly scaling up to balance any sudden fluctuations in variable RE availability. 

Situation in ASEAN 

According to the ASEAN Centre for Energy (ACE), the surge in global energy prices following disruptions to Middle Eastern supply routes increased ASEAN’s oil and gas import bill by approximately US$3.36 billion per month. Brent crude prices rose from an expected range of US$60-70 per barrel to around US$105 per barrel, while LNG prices increased by more than 80%, from US$9-12/MMBtu to approximately US$16.5/MMBtu.⁴These impacts extend well beyond energy markets, depreciating local exchange rates, creating fiscal pressures on governments, increasing inflationary risks, and raising costs for households and industry. 

The analysis also demonstrates the limitations of short-term crisis responses. Governments across ASEAN have relied on subsidies, tax reductions, fuel rationing, price controls, and alternative sourcing arrangements to cushion the immediate impacts of the shock. However, such measures largely address the symptoms rather than the underlying vulnerability: structural dependence on globally traded fossil fuels. 

The scale of this exposure is considerable. ACE estimates that disruptions to Middle Eastern oil supplies could directly affect up to 28% of ASEAN’s final energy consumption.⁵ Even under an optimistic scenario in which shipping routes reopen quickly, maritime tanker traffic could take up to two months to normalize and reach Southeast Asian ports, while the restoration of damaged export infrastructure to pre-war production levels may require an additional four to six months. ⁶Demand-management measures and supply diversification can partially mitigate these disruptions, but they are unlikely to fully close the supply gap.

Resilience as paradigm for energy security 

Diversification is often presented as the primary response to energy insecurity. ⁷ Countries facing LNG supply risks are encouraged to source gas from a wider range of exporters, sign additional contracts, or expand storage capacity. While these measures can reduce exposure to individual suppliers, they do not address a more fundamental vulnerability: dependence on the same global fuel market. ⁸ 

A resilience-orientated approach asks a different question. Rather than focusing solely on where fuel comes from, it asks whether countries have access to alternative sources of electricity when fuel markets are disrupted. 

Connected electrification of Southeast Asia – ASEAN Power Grid (APG) 

For the longest, the APG had been a dream of ASEAN and its members, conceptualized as a huge physical infrastructure project supported by a policy framework. It envisions a web of overland and subsea transmission links connecting the power systems of all ASEAN countries, progressively evolving from bilateral power purchase agreements to sub-regional trade and ultimately to a fully integrated multilateral power market.  

The APG is at a pivotal juncture: political commitment is at an all-time high, financing mechanisms are being put in place, and the technical and regulatory groundwork is being laid for a genuinely integrated Southeast Asian electricity market that can support the region’s clean energy transition.⁹

The ASEAN Power Grid (APG) is entering a new phase of implementation, supported by renewed political commitment and stronger financial backing. A defining milestone came at the 43rd AMEM in October 2025, when ASEAN ministers endorsed the Enhanced APG Memorandum of Understanding, marking a renewed commitment by all member states to strengthen regional electricity connectivity. ¹⁰ The enhanced MoU goes beyond the original 2007 framework, focusing on standardising rules and regulations, aligning technical requirements, and establishing a financial model. It also supports the ASEAN Submarine Power Cable Development Framework, recognising that subsea interconnections are critical for linking the archipelagic nations of the region. The same meeting saw the launch of the ASEAN Power Grid Financing Initiative (APGF) by the Asian Development Bank and the World Bank. ¹¹ Further progress was made in April 2026 with the establishment of the Regional Connectivity Fund for Energy in Southeast Asia (RCF) by the Asian Development Bank under the ASEAN Infrastructure Fund.¹²

At the ASEAN Special Senior Officials’ Meeting on Energy in January 2026, member states endorsed the region’s annual energy priorities and reaffirmed support for implementing the Enhanced APG Memorandum of Understanding signed in October 2025.¹³ The Philippines chairman has also prioritised the development of operational guidelines for the Submarine Power Cable Framework, covering regulatory, technical, financial and governance aspects to support cross-border infrastructure and investment in multilateral power trade. ¹⁴

Existing infrastructure demonstrates what is possible  

Political commitment and financing are now beginning to translate into physical infrastructure. 

The Lao PDR-Thailand-Malaysia-Singapore Power Integration Project (LTMS-PIP) is the landmark achievement of the APG and the only fully operational multilateral power trade arrangement in ASEAN today. Since 2022 trading at up to 200 MW today using existing interconnections, the LTMS-PIP demonstrated that multilateral and multidirectional cross-border power trade is operationally feasible in ASEAN. ¹⁵ The project sends hydropower from Lao PDR to Singapore via Thailand and Malaysia and also facilitates Malaysia-to-Singapore flows. Its success has made it a cornerstone of the APG and a model for scaling up to broader regional electricity trading. 

The project was further expanded in January 2026 through the signing of the Energy Wheeling Agreement (EWA) Phase 2 between Tenaga Nasional Berhad (TNB), Electricité du Laos (EDL) and the Electricity Generating Authority of Thailand (EGAT). Signed under LTMS-PIP 2.0, the agreement enables the transmission of up to 100 MW of additional renewable electricity from Malaysia to Singapore through Thailand, increasing total traded capacity under the project from 100 MW to up to 200 MW.^16  17The agreement is particularly significant because it formalises the role of Thailand and Malaysia in facilitating cross-border electricity trade. While both countries act as transmission “wheelers”, Malaysia also becomes an electricity supplier, representing an important milestone for multilateral power trade in Southeast Asia. ¹⁸As such, it represents an important practical step towards the wider implementation of multilateral power trade envisaged under the APG. 

The success of the LTMS-PIP has helped build confidence in the feasibility and value of multilateral electricity trade within ASEAN. Several additional interconnection projects are now under consideration, including the Viet Nam-Malaysia-Singapore interconnection, the Sarawak-Peninsular Malaysia-Singapore link, and expanded interconnections between Malaysia, Thailand and Singapore.^{19 20}

The next phase requires major new infrastructure 

While these projects demonstrate early success, they represent only the first step. Achieving a truly integrated ASEAN Power Grid will require significant investment in new cross-border transmission infrastructure, particularly to connect the region’s island and mainland electricity systems. 

Several major projects are currently under development. These include a proposed 3.4 GW high-voltage direct current (HVDC) subsea link between Indonesia’s Riau Islands and Singapore to export large-scale renewable electricity;²¹ a 1.6 GW subsea cable connecting Sarawak and Peninsular Malaysia across the South China Sea²²; and new interconnections under the Brunei–Indonesia–Malaysia–Philippines Power Integration Project (BIMP-PIP) to strengthen electricity trade across eastern ASEAN.²³

At the national level, countries are also investing in domestic transmission networks to prepare for regional integration. Indonesia’s planned 48,000 circuit kilometres of new transmission lines, ²⁴ will connect major islands into a unified domestic network capable of linking with neighbouring countries in the future. These expanded domestic networks serve as the essential foundational backbone for the broader ASEAN Power Grid (APG). 

Recent developments across Southeast Asia also demonstrate how cross-border electricity cooperation is gaining momentum. In May 2026, Indonesia’s sovereign wealth fund Danantara announced plans for a Rp522.79 trillion (approximately US$30 billion) clean electricity export project linking solar generation in the Riau Islands to Singapore through a subsea transmission network. ²⁵ The project is expected to develop 3 GW of solar generation capacity while creating a new channel for renewable electricity trade between the two countries. By connecting areas with abundant renewable energy resources to markets with growing electricity demand, such projects can support both economic opportunities and energy security objectives. 

More broadly, these projects illustrate how the APG is evolving from a collection of bilateral connections into a more integrated regional network. ²⁶Their significance extends beyond electricity trading alone.  

Despite this progress, infrastructure remains the greatest bottleneck to a fully integrated ASEAN Power Grid. The interconnected transmission networks of continental Southeast Asia, together with Peninsular Malaysia and Singapore, are already relatively well developed and are increasingly being optimised for regional electricity trading. However, many of the high-capacity subsea interconnections needed to link maritime Southeast Asia remain at the planning stage. 

Expanding transmission networks, both within and between countries, will be critical to unlocking larger-scale renewable energy trade, strengthening regional energy security and delivering the full benefits of Southeast Asia’s energy transition. 

Linking regionally with national benefits 

One of the most strategically important aspects of the APG is the understanding that regional integration does not come at the expense of national interest. The APG is designed to benefit the region as a whole, but crucially, it works because it also delivers clear, tangible benefits to each country individually.²⁷

A sub-regional, not a supranational, approach.  

The idea is not to fully integrate every country’s grid into a single, centrally controlled system from the outset. That kind of deep integration could understandably be viewed by member states as yet another form of dependency, particularly for countries that have long prioritised energy self-sufficiency. Instead, the APG follows a stepwise path: countries start by interconnecting with neighbouring ASEAN member states, ideally at the sub-regional level, and build on from there.²⁸

The core value proposition is straightforward: countries share surplus electricity when it is cheaper to buy from a neighbour than to generate domestically, and vice versa. Because each ASEAN member state has a different electricity generation profile and different natural resource endowments, the direction of trade can shift depending on time of day, season, or water levels. 

Thailand might find it cheaper to import hydropower from Lao PDR during the rainy season when its own gas-fired generation is expensive²⁹, while Malaysia might export solar power to Thailand at other times when it has surplus capacity. This two-way flexibility is a natural hedge. Every country has idle or underutilised capacity at some point, and the APG turns that idle capacity into a revenue stream for the seller and lower-cost electricity for the buyer. 

Studies show that all income groups in ASEAN benefit from APG expansion. High-income countries (Brunei, Malaysia, Singapore) capture about 32-36% of the new income generated, middle-to-upper-income countries (Indonesia, Philippines, Thailand, Viet Nam) capture 47-52%, and lower-income countries (Cambodia, Lao PDR, Myanmar) capture 12-21%. Net exporters capture larger benefits than net importers, but every segment gains.³⁰

A common concern surrounding regional energy integration is that it may create new forms of dependence, with countries becoming reliant on their neighbours for electricity supply. However, the emerging APG model is not based on surrendering control over national power systems. Recent ASEAN studies instead emphasise a flexible and voluntary approach to multilateral power trade, recognising that ASEAN Member States are at different stages of power sector development. Participation is intended to be gradual, allowing countries to determine their own level of engagement, trading volumes and market access according to national priorities and circumstances. Rather than requiring full integration into a regional market, the APG is designed to enable countries to participate while retaining sovereignty over their electricity systems. 

This approach allows regional cooperation to reinforce, rather than undermine, national energy security. Countries would continue to operate and plan their own grids, while developing interconnections with neighbouring systems that provide additional options for electricity supply. During periods when electricity can be sourced more affordably from a neighbouring country, power can be traded across borders; during supply shortages or disruptions, interconnections can provide access to alternative sources of electricity.  

The ability of the APG to deliver these benefits will depend not only on the construction of physical interconnections, but also on the extent to which planning processes become more coordinated across the region. Historically, electricity planning has been undertaken largely at the national level, reflecting the domestic focus of power systems and energy policy. ³¹However, as cross-border electricity trade expands, decisions regarding generation investment, transmission development, system reliability, and resilience increasingly have regional implications.  

In response, ASEAN has begun developing an Integrated Resource and Resilience Planning (IRRP)³² framework to support more coordinated regional decision-making. The proposed approach does not replace national planning processes but seeks to provide a common framework through which Member States can assess future electricity needs, identify opportunities for regional cooperation, and evaluate investments that deliver benefits across multiple jurisdictions. The IRRP framework represents an attempt to ensure that the development of the APG is guided by a longer-term regional perspective rather than a collection of independent national plans. 

Groundwork has been laid out 

The regional momentum described earlier is real, and some ASEAN member states are already pushing ahead. The LTMS-PIP has proven the multilateral model works at 200 MW. Malaysia is actively studying the socioeconomic benefits of its participation in the APG across multiple scenarios, modelling everything from GDP gains to household income effects.³³

Integrate into national plans. For an interconnection to move forward, it needs to be embedded in each country’s national power development plan and grid expansion strategy. This is what makes a project real, not just a regional idea.  

Unlock international financing. Once a project is in a national plan, it becomes bankable. This opens the door to financing from multilateral development banks. The ASEAN Power Grid Financing Initiative (APGF), launched in October 2025 by the ADB and the World Bank, is designed specifically for this purpose: ADB committed up to $10 billion over ten years, and the World Bank provided an initial $2.5 billion plus a $12.7 million seed grant to ACE for project preparation. The World Bank has since added another $7.7 million grant to ACE, bringing total World Bank support to $12.7 million under the ASET programme. ³⁴

Access technical support. The ASEAN Power Grid – Advancement Programme (APG-AP), implemented by ASEAN Centre for Energy (ACE) in partnership with the Southeast Asia Energy Transition Partnership (ETP-UNOPS), GIZ through the Clean, Affordable and Secure Energy for Southeast Asia (CASE), and UNESCAP, provides the APG Roadmap to identify priority investments and sequencing, advancing the next version of the ASEAN Interconnection Masterplan Studies – as “technical backbone”, supporting the ASEAN subsea cable framework and a subregional cost-benefit analyses (VN-TH-MY-SN). A key concrete achievement has been the establishment and operationalisation of the APG Project Management Unit (PMU) at the ASEAN Centre for Energy (ACE), laying the institutional foundation for a future APG Secretariat as the central coordination body for all regional interconnection efforts. 

Recognising this, the project CASE on behalf of the APG-AP, is undertaking a study to assess the potential benefits, challenges, and strategic implications of participation in the APG for Indonesia, the Philippines, Thailand, and Viet Nam. The study will examine the technical, economic, energy security, climate, and political economy dimensions of regional power integration, providing country-specific analysis to support national decision-making. 

Written by Palita Srichaisuphakit, Communication Officer, and Sascha Oppowa, Project Director, with inputs from Maximilian Heil, Project Coordinator, all from the project Clean, Affordable and Secure Energy for Southeast Asia (CASE) at GIZ.

1. The Middle East and Global Energy Markets – Topics – IEA  ↩︎
2. ASEAN Leaders’ Statement on the Response to the Middle East Crisis – ASEAN Main Portal  ↩︎
3. Energy Security in Transition: ASEAN’s Path to Strategic Resilience – ASEAN Centre for Energy (ACE) ↩︎
4. ASEAN Energy Security Insights: Implications of the Middle East Situation – ASEAN Centre for Energy (ACE)  ↩︎
5. Ibid., ↩︎
6. Ibid., ↩︎
7. Diversification as a Method of Ensuring the Sustainability of Energy Supply within the Energy Transition ↩︎
8. Report back cover ↩︎
9. Plugging into Reality: The ASEAN Power Grid – The Diplomat ↩︎
10. Joint-Media-Statement-JMS-of-the-43rd-AMEM_Final.pdf ↩︎
11. ADB and World Bank Group Launch the ASEAN Power Grid Financing Initiative with the ASEAN Secretariat and the ASEAN Centre for Energy (ACE) – ASEAN Main Portal ↩︎
12. ADB Launches New Trust Fund to Accelerate Progress on ASEAN Power Grid | Asian Development Bank ↩︎
13. ADB Launches New Trust Fund to Accelerate Progress on ASEAN Power Grid | Asian Development Bank ↩︎
14. 1766846415_ASEAN-Plan-of-Action-for-Energy-Cooperation-APAEC-2026-2030.pdf ↩︎
15. Joint-Media-Statement-JMS-of-the-43rd-AMEM_Final.pdf ↩︎
16. tnb.com.my/announcements/tnb-edl-egat-advance-asean-power-grid-through-energy-wheeling-agreement-pha ↩︎
17. Singapore Doubles Power Import Capacity Under LTMS-PIP Phase 2 ↩︎
18. Tenaga inks Phase 2 agreement for Laos–Singapore electricity transmission  ↩︎
19. Singapore Doubles Power Import Capacity Under LTMS-PIP Phase 2 ↩︎
20. Regional Power Grids | EMA ↩︎
21. Southeast Asia has five proposed subsea power cable projects by 2040 – but the first link it needs is governance | Ember  ↩︎
22. Ibid., ↩︎
23. ASEAN POWER GRID ADVANCEMENT PROGRAMME (APG-AP) – CASE for Southeast Asia  ↩︎
24. Indonesia invests Rp600 trillion in ASEAN interconnection transmission network – tanahair.net  ↩︎
25. Tech in Asia – Connecting Asia’s startup ecosystem ↩︎
26. Fast-tracking the ASEAN Power Grid Amid Global Energy Turmoil – ASEAN+3 Macroeconomic Research Office – AMRO ASIA ↩︎
27. Unlocking Regional Power Trade: Policy Pathways for the ASEAN Power Grid – Home | ASEAN-BAC  ↩︎
28. 2022/19 “The Intractable Challenges Facing Energy Trade in Southeast Asia” by Ryan Wong and Lee Poh Onn – ISEAS – Yusof Ishak Institute ↩︎
29. Locked In – Why Thailand Buys Electricity from Laos | Earth Journalism Network ↩︎
30. Powering-Green-Energy-in-Southeast-Asia_V4.pdf ↩︎
31. ember-energy.org/app/uploads/2024/10/Report-ASEANs-clean-power-pathways-2024.pdf ↩︎
32.  ASEAN Interconnection Masterplan Study (AIMS) III Phase 3: Implementation Strategy for Multilateral Power Trade in ASEAN  ↩︎
33. 2025-06-02-Malaysia-APG-Study_ACEF-2025_DDW-on-APG-BN_rev1.pdf ↩︎
34. ADB and World Bank Group Launch the ASEAN Power Grid Financing Initiative with the ASEAN Secretariat and the ASEAN Centre for Energy (ACE) – ASEAN Main Portal ↩︎