Primary energy demand in south-east Asia will continue to grow at 3% annually to 2030, according to the IEA, driven by regional growing economies, industrial activities, population and incomes. This backdrop offers healthy opportunities for grid investment in Asia.

But key challenges could upend this. The biggest is a technical one — specifically integrating renewables into the grid, resulting in poor performance and resilience of transmission and distribution (T&D) systems. The uncertain nature of wind and solar power generation makes it difficult to integrate renewable power sources into traditional power systems while maintaining a reliable power supply. Traditional large-scale electricity delivery systems are also centralised. Integrating different renewable energy from solar photovoltaic (PV) farms and wind farms at different places will require power systems to be more flexible and smarter. 

A second challenge is financial. It will be incredibly costly to create a regional grid across the Association of Southeast Asian Nations (Asean). Just think of the difficulty and cost of setting up a submersible high voltage line from Singapore to Sumatra, Kalimantan, Malaysia, Sabah, Sarawak and Brunei to the Philippines. 

A third challenge is government policy and regulatory frameworks. Profitability was traditionally focused on power generation rather than T&D, resulting in underinvestment in transmission and energy storage systems. Regulators should  address the weak financial situation of some T&D companies, improve investment frameworks with performance-based regulation, create more cost-effective system plans and correct the way tariffs work across the network.  

Moving forward, policymakers should also increase incentives for T&D asset investment, renewables and encourage new business models using smart grids.  

Smart grids are important enablers, supporting modern power systems and clean energy transitions. Thus, we can expect more investment in the digitalisation of power transformers, substation automation, flexible alternating-current  transmission systems and advanced sensors. This will allow for a faster and more flexible operation, and improved control, monitoring and optimisation of the power grid.  

Australia just started its 20-year transition to a smart grid developing its sensor and IT infrastructure as well as opening its power sector to new players. Most of Asean has already implemented a smart grid roadmap. In another two decades, much of Asia will have smart grids. A whole new exciting world awaits.

Lawrence’s previous columns: 

• The Europeanisation of south-east Asia
• The glimmers of light for Asia in 2023
• Vertical integration is back on the agenda
• The nuance of remote working’s spoils
• Less regulation, more collaboration

This article first appeared in the April/May 2023 print edition of fDi Intelligence.