Grid Bottlenecks Threaten Southeast Asia’s Energy Transition, Report Finds

SOUTHEAST ASIA — Investment in power generation is accelerating across Southeast Asia, but transmission infrastructure, energy storage, and cross-border connectivity are emerging as the region’s next major energy challenges, according to a report by TBH.

The report examined the energy transition across Malaysia, Thailand, Indonesia, Vietnam, the Philippines, and Singapore, highlighting the need for generation, transmission, storage, and cross-border connectivity to be planned and developed in parallel.

Rising electricity demand driven by industrial growth, urbanisation, and the rapid expansion of data centres is placing increasing pressure on the region’s power systems.

“Southeast Asia’s energy transition is entering a new phase,” said Ali Nami, Director and Energy Lead at TBH. “Many countries are making significant investments in generation capacity, but the focus is increasingly shifting towards transmission, storage, and connectivity.”

Grid Modernisation and Storage Take Centre Stage

The report said transmission upgrades, grid modernisation, and energy storage are becoming increasingly important as more solar and wind capacity comes online.

Energy storage is expected to play a critical role in supporting renewable energy deployment by managing peak demand, improving system reliability, and maintaining grid stability.

The report also highlighted growing momentum behind regional energy integration through the ASEAN Power Grid and the ASEAN Plan of Action for Energy Cooperation 2026–2030.

Greater cross-border connectivity could strengthen energy security, improve network resilience, and enable more efficient electricity distribution between countries with different renewable energy resources, demand profiles, and generation capacities.

Singapore and Malaysia Positioned as Early Movers

Singapore and Malaysia are identified as potential early movers in regional interconnection, supported by their existing infrastructure networks, institutional capabilities, and established roles in regional energy and digital markets.

The report also highlighted Indonesia’s strategic importance in cross-border power flows, given its geographic proximity to Singapore and the scale of its electricity market.

At the individual-market level, different infrastructure challenges are emerging across Southeast Asia.

In Malaysia, the rapid expansion of the data centre industry is increasing pressure on grid reliability and long-term power planning.

Vietnam’s industrial expansion is placing additional strain on transmission networks, while Indonesia faces significant investment requirements across generation, transmission, and storage due to its geographically dispersed island network.

Meanwhile, the Philippines is focusing on grid resilience and network modernisation, with offshore wind emerging as a potential long-term growth opportunity. Thailand continues to expand solar and other renewable energy capacity while balancing affordability and energy security.

Coordinated Investment Needed

“Electricity demand is increasing rapidly across the region, driven by industrial growth and the expansion of digital infrastructure,” said Michael Tan, Country Manager for Malaysia at TBH.

Tan added that meeting this rising demand will require careful planning, coordinated investment, and a long-term approach to future electricity needs.

The report ultimately points to a broader shift in Southeast Asia’s energy transition: expanding generation capacity alone will not be sufficient. As renewable energy deployment accelerates, the region will increasingly need stronger transmission networks, flexible energy storage, modernised grids, and greater cross-border electricity connectivity to ensure that new power capacity can be effectively integrated and delivered to consumers.