Energy trade – missing link to sustainable development in South-east Asia?
AS GLOBAL leaders convene at the World Economic Forum (WEF) in Davos this week, one of the five key themes they will explore is “reimagining growth”, looking anew at bold, innovative approaches to building stronger and more resilient economies. One promising avenue is energy trade – a transformative mechanism to bridge energy inequities and drive sustainable growth.
Across Asia and the Pacific, more than 350 million people grapple with unreliable electricity, while 150 million live entirely without it, according to the Asian Development Bank. This disparity in energy access highlights systemic inequalities that hinder progress in agriculture, manufacturing and broader development.
Tackling these issues requires new ways of collaborating with governments, corporates and society, aligning with the WEF’s 2025 sub-theme of reimagining growth.
South-east Asia, one of the most vulnerable regions to climate change, finds itself at a critical juncture. Energy demands in the region are projected to triple by 2050, straining existing systems and exacerbating development divides. Can regional energy trade offer a pathway to sustainable development while addressing economic growth and climate resilience?
The green energy paradox
South-east Asia is blessed with renewable energy potential estimated to be 40 to 50 times its current total electricity generation. The abundance of solar, wind, hydropower and geothermal resources presents a clear path to clean, sustainable energy. Yet, it trails behind other regions in transitioning to renewables.
Fossil fuels dominate energy production as South-east Asia balances economic development demands with the need for decarbonisation. The sluggish renewable transition stems from infrastructure gaps, inconsistent policy support and limited access to financing.
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Ensuring a “just transition” – one that protects vulnerable communities during the shift from fossil fuels – adds another layer of complexity.
This paradox highlights a crucial question: How can the region move beyond these barriers and embrace cross-border energy trade and investment to fast-track an equitable energy transition?
A transition that leaves no one behind
Strong government action, robust policy frameworks and regional cooperation are vital to overcoming the current inertia. It is not just about scaling up clean energy projects, but also ensuring that the transition benefits everyone.
By enabling the efficient sharing of renewable energy resources across borders, energy trade can break down systemic barriers and unlock South-east Asia’s potential for sustainable development.
Catalysing a new sustainable development model
The Lao PDR-Thailand-Malaysia-Singapore Power Integration Project offers a compelling blueprint for how regional green energy trade can drive sustainable development. Launched in 2022, it marks South-east Asia’s first multilateral electricity trading framework, setting a precedent for cross-border collaboration in renewable energy.
Under phase one, Singapore imported up to 100 megawatts of hydropower from Laos through Thailand and Malaysia. This project showcases the benefits of regional connectivity: Laos leverages its rich hydropower resources for economic growth, Singapore diversifies its energy supply and lowers its carbon emissions, while Thailand and Malaysia earn revenue by facilitating grid connections.
If the negotiations to extend this four-nation power project succeed, energy trade could potentially double, with additional supply coming from Malaysia.
The Laos-Vietnam Renewable Energy Cooperation, established in 2016 with the commissioning of the Xekaman 1 hydropower plant, highlights the potential of regional collaboration in green energy trade.
By October 2023, Vietnam Electricity had signed 19 power purchase agreements to import over 2.6 gigawatts (GW) from 26 of Laos’ hydropower plants. This collaboration boosts Vietnam’s energy security and advances its renewable energy goals while promoting sustainable development in the region.
Singapore is setting the momentum for more regional energy trade, with a goal to import around 6 GW of low-carbon electricity by 2035, up from the initial target of 4 GW.
The Energy Market Authority has issued conditional approvals to 10 projects to import low-carbon electricity from Australia, Cambodia, Indonesia and Vietnam. Five projects were awarded conditional licences, marking a significant step toward enhanced regional energy connectivity.
Private sector steps up
The private sector is increasingly recognising the economic and business opportunities in renewable energy and cross-border electricity projects.
According to a report by McKinsey and the Economic Development Board, to achieve net zero by 2050, the region must increase renewable capacity by seven to 12 times from its 2018 to 2021 levels. Currently, only 3 per cent of this target capacity is under construction.
Corporates must strive to be bold and innovative for renewables to leap forwards, driving bankable, commercially viable clean energy initiatives. By contributing to the broader green transition through impactful and scalable initiatives, businesses can thrive while advancing sustainable growth for all.
Derisking energy trade
Finally, there is an urgent need to establish robust market mechanisms to attract capital for renewable energy projects. While capital is widely available across the region, the challenge is building investor confidence and creating conditions that make cross-border energy trade and green electricity projects compelling investment opportunities.
Currently, investors hesitate to commit capital, citing risks such as infrastructure gaps and regulatory uncertainty. Governments must provide regulatory certainty through clear, consistent policies resilient to political and macroeconomic changes. Effective mandates and subsidies can further stimulate demand and encourage renewable energy adoption at scale.
The private sector can also manage risks within its control, such as securing land and bridging infrastructure gaps. These measures, combined with public-private sector collaboration, can unlock the large-scale renewable energy projects that South-east Asia urgently needs.
Ultimately, the success of South-east Asia’s energy transition hinges on its ability to create and optimise new avenues of growth. By enabling regional energy trade, the region can turn ambition into action – creating a sustainable development model that addresses today’s energy demands, drives job creation and secures a resilient future for generations to come.
The writer is managing director at RGE, a global enterprise operating in the bio-based resources and energy sectors. He chairs the Indonesian Chamber of Commerce and Industry’s Brazil committee.
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