Southeast Asia's fragile grids threaten billions in clean energy investment

Southeast Asia's energy transition is facing a significant challenge due to the region's fragile grids. A recent power outage in Indonesia's Sumatra highlights the huge challenge facing the country and its neighbors in maintaining and upgrading inadequate grid capacity.

The power outage, caused by damage to cables on a high-voltage transmission line, left millions without power in the humid heat for up to a day. Failed traffic lights caused chaos on the streets of Medan, one of the country's biggest cities, and restaurants and shops had to shutter or throw out food after fridges stopped working. Four people were reported to have died from carbon monoxide poisoning from generators.

Experts say that the grid resilience is not there, and that climate change will bring more frequent episodes of extreme weather. Wai-Shin Chan, Hong Kong-based head of research at Asia Research & Engagement, a consulting firm, warned that the grid failures should not have happened.

The Indonesian Air Force helped state-owned utility PT Perusahaan Listrik Negara (PLN) transport emergency power towers to restore electricity supplies within 24 hours. However, the two incidents could cause longer-lasting damage to investor confidence, hurting the delivery of much-needed reliable clean electricity supplies.

## Grid Bottlenecks and Projects Stuck on Hold

In Southeast Asia, energy experts say inadequate grid capacity and maintenance is already proving a major factor in the region's stuttering rollout of new clean energy projects. About 50% to 60% of renewable energy projects in Vietnam, Thailand, and Indonesia were cancelled or stalled between 2021 and 2025, according to a recent report by consultancy Bain & Company and Standard Chartered.

Progress in the region is also being hampered by issues ranging from unclear power purchase agreement (PPA) structures, a failure of power policies to keep up with investor needs, permitting and licensing approval delays, grid connection constraints, limits to private sector involvement in electricity markets, and policy and tariff uncertainty.

## The Need for Investment

The International Energy Agency (IEA) has warned that electricity grid and storage investment in the region was higher in 2015 at $15 billion compared with $12 billion in 2025, even as electricity demand and renewable energy growth accelerated. Bain researchers found that grid infrastructure was the biggest bottleneck for Southeast Asia's energy transition, with about $18 billion per year needed in investment for modernisation and upgrades.

"If these risks - grid curtailment, policy uncertainty, permitting and PPA - are not adequately addressed, investors just don’t have the confidence to hit the final investment decision button," said Wai-Shin Chan.

## A Stuttering Energy Transition

Ramping up progress on solar, wind, hydro, and geothermal projects is vital for Southeast Asian nations to hit their targets on cutting planet-heating carbon emissions. Indonesia has pledged to reduce emissions by 31.9% by 2030 compared with business-as-usual levels, or by 43.2% with international support, on the way to reaching net zero by 2060.

Renewables accounted for about 18% of Indonesia's energy mix in April 2026, falling short of the country's initial 23% target for 2025, with the majority of its energy needs met by coal, oil, and gas.

| Country | Renewable Energy Projects Cancelled or Stalled (2021-2025) | | --- | --- | | Vietnam | 50-60% | | Thailand | 50-60% | | Indonesia | 48% |

| Year | Electricity Grid and Storage Investment | | --- | --- | | 2015 | $15 billion | | 2025 | $12 billion |

| Year | Clean Energy Investment | | --- | --- | | 2022-2026 | 25% of new solar projects postponed or cancelled |

The region's stuttering energy transition is not only threatening the delivery of reliable clean electricity supplies but also pushing net zero targets further out of reach. Every delay in renewable energy deployment extends dependence on fossil fuels and pushes net zero targets further out of reach.