Efforts by govts, insurers and innovative finance needed to reduce risks of Asean power grid

An Asean-wide electricity grid could result in cheaper, cleaner electricity for people across the region.

- Shabana Begum

But poor grid connectivity between countries and the lack of long-term demand for green electricity are among factors that could hinder investments in this area.

South-east Asia faces a significant green investment gap of more than US$210 billion (S$272 billion) a year, amid the higher perceived risk in making green investments, the Energy Market Authority's (EMA) assistant chief executive Low Xin Wei said on May 8.

This higher perceived risk leads to a higher cost of capital for renewable energy projects in the region. Every 2 per cent increase in the cost of capital can raise the cost of producing electricity from solar and wind plants—across their lifetime—by more than 20 per cent, Mr Low said at the Climate Group Asia Action Summit.

This is a key financing challenge that the region has to overcome before low-carbon electricity can be traded to help renewables-disadvantaged countries like Singapore reduce greenhouse gas emissions.

Achieving the vision of trading renewables across Asean would first require efforts by governments and insurers, as well as innovative financing methods, to reduce the risks so that investors are more willing to take the plunge, said Mr Low, who oversees EMA's markets and systems division.

Today, natural gas—a fossil fuel—accounts for around 95 per cent of Singapore's electricity generation. To meet the country's 2030 climate targets—which include the reduction of emissions to around 60 million tonnes—clean energy imports have been identified as an effective lever, alongside carbon capture and energy efficiency in industries.