The Battery Of Southeast Asia: Challenges To Building A Regional Transmission Grid – Analysis

By Jessica C. Teets, Anujin (AJ) Byambasaikhan, Yui Sze (Joyce) Kam, Wei Liang and Lindsey Morrow

The mighty Mekong River, a life source for millions across Southeast Asia, now faces an existential threat. An ambitious regional plan developed by ASEAN incorporates Lao PDR as the “Battery of Asia” to generate hydroelectric power for export across the region. However, this massive engineering project could trigger severe ecological consequences, disrupting vital sediment flows, devastating wild fisheries that feed over 60 million people, and increasing the risk of droughts, floods and saltwater intrusion that threaten the global rice basket of the Mekong Delta.

Southeast Asian nations face immense pressure to develop renewable energy as they balance economic growth with goals of net-zero emissions (NZE) by 2050 under the Paris Agreement. While ASEAN has identified hydropower exports from Laos through an integrated regional transmission grid as a way to balance growth with reduced emissions, this strategy overlooks the significant environmental impacts of large dams. To truly achieve sustainable energy security, ASEAN must facilitate a diverse renewable energy mix beyond hydropower dependence and foster transboundary cooperation – especially with upstream power China – through strengthened regional governance mechanisms. On the other hand, the U.S. has strategic interests in promoting a just energy transition in this globally vital region through increased investment and technical capacity building.

Connecting the Battery of Southeast Asia to Consumers

In response to the need to comply with their climate commitment, ASEAN’s Centre for Energy has adopted regional goals for transitioning energy and reducing emissions through achieving 23 percent share of renewable energy (RE) target in the ASEAN total primary energy supply. For example, at COP 28 in Dubai in December 2023, Malaysia committed to a 45 percent reduction in greenhouse gas (GHG) emissions and Singapore committed to hitting a NZE target by 2050. However, many of these nations do not have the solar or wind energy capacity necessary to meet energy demand, and thus the ASEAN Plan of Action for Energy Cooperation (APAEC) outlines a strategy for regional cooperation on energy transition.

Initially created in the late 1990s, the ASEAN Power Grid (APG) is currently being promoted as a way to continue economic growth while reaching NZE goals. ASEAN calls this plan of an integrated power grid a “silver bullet that ensures reliable electricity access for its citizens”, but it is important to note the severe environmental consequences and significant transboundary issues, as the plan catalyzed a vision for Lao PDR to serve as the “Battery of Asia” by linking their increased hydropower production to a regional transmission grid first in Thailand, Malaysia, and then Singapore and Indonesia.

Lao PDR’s “Battery of Southeast Asia” development strategy, first proposed by the Laotian government in the early 2000s, is based on the Least-Cost Optimization (LCO) scenario in the ASEAN Energy Outlook as a means to provide abundant, cheap, and stable electricity to its neighboring countries to achieve its economic development as well as the region’s net-zero emission target. The final form of the APG will encompass all 10 members of ASEAN, divided into three sub-systems: (1) The Upper West System, located in the Greater Mekong Sub-region (GMS), will encompass Cambodia, Lao PDR, Myanmar, Thailand, and Vietnam; (2) the Lower West System will cover Thailand, Indonesia (Sumatra, Batam), Peninsular Malaysia and Singapore, and (3) the East System will include Brunei, Malaysia (Sabah and Sarawak), Indonesia (West Kalimantan), and the Philippines. At this time, most of the development has been on the Lower West system terminating in Singapore to construct a regional transmission grid, termed the Lao-PDR-Thailand-Malaysia-Singapore Power Integration Project (LTMS-PIP) This project, originally proposed in November 2020, officially commenced on June 23, 2022.

Currently, Lao PDR suffers from high inflation and public debt but is expected to ‘graduate’ from its least developed country status in 2026. Today, around 80 percent of the power generated in Laos is sold to neighboring Thailand and Vietnam, accounting for 30 percent of the country’s exports by value. Laos started power exports to Singapore in 2022 and completed building transmission infrastructure for selling electricity to Cambodia in 2023. Most energy is exported instead of used domestically, amounting to more than half of all electricity consumed in Laos and 77 percent of total hydropower generation in 2019. Given that the Laotian economy relies on the export of its electricity resources, becoming the main exporter of renewable energy in the region will be beneficial both for the Lao PDR and the broader region. This is vital for the future energy outlook of the ASEAN region as a whole.

The Ecological Challenges:

The key goals of the “ASEAN Power Grid” program under APAEC are “to expand regional multilateral electricity trading, strengthen grid resilience and modernisation, and promote clean and renewable energy integration.” However, many challenge the claims that imported energy from Laos is clean and renewable. Large dam construction reduces vital sediment flows that erode riverbanks, degrade agricultural soil quality, and destroy wild fisheries that many Mekong communities rely upon as a key source of protein. As emphasized by the Stimson Center, the Mekong Basin produces 2.6 million tons of freshwater fish annually which supports the diets and livelihoods of more than 60 million people living in the basin. In addition, hydropower facilities disrupt the normal high-low water cycles, thereby triggering unexpected droughts and floods as well as increased saltwater intrusion in the delta and decreasing rice yields. This is important beyond the region as rice produced in the Mekong Delta—often referred to as Vietnam’s “rice bowl”—feeds the rest of the country and makes Vietnam the world’s third biggest rice exporter. More hydropower development will likely increase poverty and malnutrition, as well as require costly remediation like riverbank stabilization for Mekong Basin nations. 

As hydropower is the cheapest and most stable form of clean energy, it remains the dominant source of renewable energy in The 7th ASEAN Energy Outlook 2020 – 2050, and in the APAEC (varying from 19 percent to 37.5 percent) despite its potential negative impacts.

The Transboundary Challenges:

In addition to ecological challenges, the construction of the APG faces many transboundary issues. Power connections will first be developed on cross-border bilateral terms, then expanded to a sub-regional basis before being augmented into an integrated regional power architecture. The main challenges to the APG are developing a common legal framework and financial investment. Southeast Asian nations must address these challenges to guide APG projects that can help address overlapping claims on territories utilizing cross-border energy trade. This could be established through an existing international institution like the United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP). Alternatively, ASEAN could create a new regional energy institution or treaty specifically focused on harmonizing policies and regulations around the APG.

Difficulties in acquiring financial investment pose additional issues for standardizing the national energy grids across Southeast Asia. Each state has varying levels of economic development, meaning that their capacity to build a regional grid differs. Vietnam’s energy transmission grid, for instance, does not possess the capacity required to effectively transmit Vietnam’s domestically generated energy. According to the manager of a Chinese hydropower equipment company in Hanoi, the grid’s effectiveness is further hindered by its inability to transmit or store additional solar and wind energy, meaning that Vietnam’s energy production predominantly relies on coal and hydropower. For example, in the summer of 2023, Northern Vietnam experienced a series of blackouts, concentrated around its industrial parks. These blackoutshighlighted Vietnam’s need to import more energy to meet the increasing demands of its manufacturing sectors, according to Dr. Nguyen Linh Dan, a former National Bureau of Asian Research Clean EDGE Asia Fellow.

Before being able to participate in the construction of a regional grid, the Communist Party of Vietnam (CPV) must first improve Vietnam’s domestic grid system. However, the CPV has neither the domestic funds nor the ability to attract the foreign investment required to implement these wide-scale changes. Other members such as Thailand face fewer issues in this regard as its economy has experienced steady growth and, from an interview with the Thailand Board of Investment, foreign investment into its clean energy sectors is relatively strong.

Economic inequality has further contributed to general power asymmetry within ASEAN as larger, more developed economies tend to hold greater sway within the organization compared to their smaller neighbors. Unequal representation of state interests within ASEAN has resulted in a lack of support for smaller economies in the region, with each state generally left to secure funding or the resources required to improve its national grids. For the APG to achieve the most success, the region must tackle existing economic inequalities among participating states and seek greater collaboration between members of ASEAN.

The absence of the People’s Republic of China (PRC), a major regional power, poses a significant obstacle to ASEAN’s endeavors to establish an integrated regional power grid system. Occupying the most upstream position along the Mekong River, China is an essential economic partner of ASEAN members but not a member of ASEAN itself. Although China is the main investor in Laos PDR and Cambodia’s hydropower sectors and supports ASEAN’s “Batteries of Asia” scheme, ASEAN cannot bind China to any lasting agreement on its energy investments within the Mekong. Additionally, ASEAN cannot manage how China manages its dam operations upstream, negatively affecting Lower Mekong riparian states. China’s effective control over the Mekong River means that even if ASEAN can cooperate on the construction of a regional grid, ASEAN members will still be subject to China’s energy policy. For a stable clean energy plan to be implemented, ASEAN must balance Chinese influence in the region by strengthening regulations of existing regional institutions such as the Mekong River Commission (MRC). The MRC is an inter-governmental institution created to manage shared water resources among its members Cambodia, Laos PDR, Thailand, and Vietnam and sustainably develop the Mekong River, while the Lancang-Mekong Cooperation (LMC) is an organization that aims to promote communication between riparian states, including China, along the Lancang and Mekong Rivers. Moreover, ASEAN members could opt to pursue bilateral collaboration with the Chinese government to maximize the proposed benefits of instituting a regional grid system.

Policy Implications for a Regional Transmission Grid 

Ambitious plans to designate hydropower-rich countries like Laos and Cambodia as net exporters of renewable electricity among Southeast Asian nations to meet energy demands through an integrated regional market relies heavily on expanded hydropower development across the Mekong River basin. This strategy allows ASEAN to exploit the relative affordability and reliability of hydropower compared to intermittent clean energy alternatives like solar and wind that remain expensive to scale up within individual member states.

Yet the consequences of extensive damming and diversion of the Mekong continue to impact downstream ecology and communities dependent on fishing and agriculture. Although many ASEAN member states have acknowledged calls for environmental impact mitigation, they have yet to meaningfully invest in developing new technologies to produce a low-carbon energy supply that will also improve the livelihoods of rural populations.

Instead of investing solely in the “Battery of Asia”’ scheme as a silver bullet, Southeast Asian nations should explore a diverse mix of renewables. For example, after pricing negative externalities of all renewable sources of energy, Dr. Apisom Intralawan finds that adding floating solar arrays on existing hydropower projects generates the most energy at the least cost. Other new technologies might also help amplify the production of solar and wind, like investing in green hydrogen production and the development of better storage capacity batteries. The Net Zero Emissions by 2050 Scenario envisions the massive deployment of variable renewables like solar PV and wind power, and this requires a large increase in grid-scale storage, particularly batteries. These will be essential to handle the hourly and seasonal variations in renewable electricity output while keeping grids stable and reliable in the face of growing demand. Investing in these new technologies will generate economic development and increase the sustainability of renewable energy in the region. The United States should play an important role in funding non-hydro renewable energy projects through USAID and by encouraging its regional allies and domestic private companies to invest.

Furthermore, Southeast Asian states must negotiate transboundary cooperation among themselves and with their upstream neighbor, China. Ultimately, China’s lack of participation hinders other riparian states from forging an enduring, mutually beneficial consensus on how to equitably share the benefits and burdens of developing the Mekong River basin. With control over key upstream dam assets, Beijing retains ultimate influence over the cross-border energy and water flows that Southeast Asian nations hope to utilize and integrate. Until ASEAN can credibly bring China into substantive agreements to ensure responsible oversight of future upstream dam operations, fears will persist over disruptive policy shocks or sudden restrictions of water releases downstream.

The United States can play an important role in facilitating dialogue through the Mekong River Commission (MRC) and Lancang-Mekong Cooperation (LMC) mechanisms. These are the key regional platforms for information sharing and communication between upper and lower riparian states regarding dam operations and their transboundary impacts. U.S. support for strengthening these institutions’ technocratic capacity and convening power could help ASEAN members negotiate sustainable water resource management with China. This would enable more transparent data sharing on precipitation, river flows, and dam reservoir levels to better manage drought, flood, and energy supply risks throughout the basin.

Looking ahead, progress towards a fully integrated regional power grid in Southeast Asia may fluctuate due to varying fiscal and technical capacities among states. Smaller economies may rely on infrastructure investment from regional leaders like Thailand or Singapore. While civil society resistance to certain dam projects could pose challenges, state-driven development priorities are likely to prevail. Geopolitically, relations between ASEAN and China will influence the bloc’s ability to ensure sustainable water resource access. Reconciling tensions between national development strategies and regional energy security will be an ongoing process, with a focus on hydropower initially but a gradual shift towards non-hydro renewables. A comprehensive approach involving regional cooperation, innovation, technology investment, and public awareness is crucial for ASEAN’s climate initiatives, along with constructive engagement with China to secure sustainable energy futures.

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The views expressed in this article are those of the author alone and do not necessarily reflect the position of the Foreign Policy Research Institute, a non-partisan organization that seeks to publish well-argued, policy-oriented articles on American foreign policy and national security priorities.

About the authors:

• Jessica C. Teets is a Professor at Middlebury College and China Program Fellow at the Wilson Center. She previously served as a 2023 Templeton Fellow with the FPRI Asia Program.
• Anujin (AJ) Byambasaikhan is pursuing a B.A. in International Politics and Economics at Middlebury College.
• Yui Sze (Joyce) Kam is a Master of Arts student in International Trade and Economic Diplomacy at the Middlebury Institute of International Studies at Monterey.
• Wei Liang is Gordon Paul Smith Chair of international policy in the School of International Policy and Management at the Middlebury Institute of International Studies.
• Lindsey Morrow is currently a Rohatyn Global Fellow at Middlebury College pursuing a B.A. in International & Global Studies: East Asia.

Source: This article was published by FPRI