The global energy transition is no longer a distant ambition, it’s a high-stakes race defined by urgency, innovation, and regional cooperation. For Southeast Asia, the challenge is uniquely complex: delivering affordable, reliable power to fast-growing populations while cutting emissions at scale towards climate resilience and long-term energy security.
Against this backdrop, cross-border electricity trade is emerging as a game-changer. The mechanism was once a niche concept mainly established in regions like the European Union (EU). Today, it is rapidly becoming a strategic pillar of regional energy policy and ASEAN is stepping into the spotlight.
As the 2025 ASEAN Chair, Malaysia stands at a pivotal crossroads. More than just hosting the bloc, it has the chance to forge a legacy: championing a unified, renewables-powered ASEAN energy grid that balances growth with sustainability. This is Malaysia’s moment to lead, not just by ambition, but by action.
The dream of integrating ASEAN’s energy systems has been on the drawing board since at least 1997 but only started to be realised over 20 years later with the ASEAN Power Grid (APG) initiative. The APG envisions the integration of ASEAN’s electricity markets through cross-border energy interconnections across the national grids of member nations.
It first took shape in 2018, when the Lao PDR-Thailand-Malaysia (LTM) Power Integration Project (PIP) took off, with the sale of electricity by Lao PDR to Malaysia. With Singapore entering the play in 2022, this leg of the APG became known as the LTMS-PIP, which has since been described as a “pathfinder” for multilateral power trading in ASEAN.
The LTMS-PIP was a success on many fronts, addressing various technical, legal and financial issues related to multilateral electricity trading. It also involved the harmonisation of technical codes of different national grids, creating a system that can be used for similar transactions in the future.
Early results of multilateral energy integration are evident from the LTMS-PIP, which has facilitated the trade of 266 GWh of electricity as of early 2024. Building on this success, Malaysia continues to play a pivotal role in its expansion as the project now progresses into its second phase (2024-2026).
Malaysia’s national utility, Tenaga Nasional Berhad (TNB) entered a cross-border agreement with Singapore’s Keppel to supply up to 100MW of renewable electricity . This effectively doubles the capacity of electricity traded from up to 100MW in Phase One to a maximum of 200MW in Phase Two, reinforcing the nation’s leadership in regional energy connectivity.
Expanding Malaysia’s role as a regional energy hub
Electricity demand in Southeast Asia is set to surge at an annual rate of 4% , on course to overtake that of the EU by mid-century. The APG can help turn things around by reducing system costs, increasing energy security, and enabling the integration of higher shares of renewable energy into the region’s energy mix.
Nonetheless, only nine out of the 18 key interconnection projects under the APG have been completed so far, with most of these interconnections being bilateral. Expanding the APG to include more ASEAN members, particularly Indonesia and the Philippines will be critical for creating a fully integrated regional grid.
By doubling down on its advanced transmission infrastructure and geographical centrality, Malaysia can play a unique role in facilitating enhanced interconnectivity. Its role as the ASEAN Chairmanship serves an opportune moment to highlight the nation’s neutrality and openness for partnerships that make it a natural hub for all.
Datuk Seri Fadillah Yusof, Deputy Prime Minister, who also helms the Energy Transition and Water Transformation (PETRA) Ministry, reinforced Malaysia’s commitment to ensuring the APG can be finalised by end of 2025 . To date, Malaysia has been indispensable to the LTMS-PIP, functioning as the intermediary node from Lao PDR to Singapore.
ASEAN’s second multilateral power trading scheme across Brunei, Indonesia, Malaysia and the Philippines (BIMP-PIP), will also depend on Malaysia to succeed . While the project is still at the feasibility stage, it is set to be the region’s first project that incorporates both overland and subsea cables. Beyond connecting energy systems, BIMP-PIP will be instrumental for positioning ASEAN as a green energy hub, capable of attracting international investments.
Building the APG is a major undertaking that entails the development of hard and soft infrastructure, including transmission facilities and electricity trading mechanisms. ASEAN’s success with the LTMS-PIP project has demonstrated the ability of member nations to cooperate in developing the region’s energy sector.
However, several challenges lie ahead before the full-scale APG can be realised, which includes overcoming technical and financial barriers. The variable and intermittent nature of wind and solar power generation makes it especially challenging to integrate these sources and maintain a reliable supply of electricity.
ASEAN states will need to invest in transmission grid upgrades to enable smarter, more flexible ways to transfer clean power precisely to areas where demand actually exists. To this end, deploying submersible high-voltage lines and other cross-border energy infrastructure alongside transmission upgrades will require funding, and lots of it.
By one estimate, ASEAN will need to invest as much as US$300 billion into upgrading domestic and regional energy infrastructures by 2040 . While the initial costs seem high, research shows that ASEAN countries could save up to US$800 billion from their collective decarbonisation costs with a truly integrated regional power grid.
ASEAN is already engaging with investors as well as multilateral development banks on financing projects for the APG. To create a more predictable and conducive environment for mobilising capital, Malaysia should champion the harmonisation of RE policies and standardisation of grid regulations across ASEAN.
The EU’s Renewable Energy Directive is among the most successful case studies of regional policy alignment to facilitate cross-border RE trade and integrated energy markets across member states. By adapting similar regulatory models , ASEAN can ensure smoother implementation of projects like APG and regional carbon markets.
Taking charge of ASEAN’s green destiny
The ASEAN region is moving towards ‘APG 2.0’, a new era of interconnections, where reliable and efficient grids facilitate multilateral, multidirectional energy trade. This shift will not only help meet the growing demand for clean energy but also enhance the region’s ability to integrate renewables like wind and solar, creating a more sustainable power system.
As the APG continues to evolve, Malaysia’s role as a connector and leader will be crucial in ensuring the project’s success. With decisive leadership and strategic collaboration, Malaysia can turn ASEAN’s energy aspirations into reality, creating a resilient and interconnected energy future for generations to come within the region.