While momentum builds for ASEAN Power Grid (APG), the regional initiative designed to interconnect the electricity grids of Southeast Asian nations to enhance energy security, sustainability, and reliability, BMI Country Risk And Industry Research sees financing, geopolitical and supply chain remain bottlenecks.

BMI said in a note on Thursday that the APG has long been characterized by ambitious vision but slow execution.

Over the past year, however, governance under the APG is strengthening as the region moves towards harmonized rules for subsea interconnectors.

In October 2025, ASEAN energy ministers have endorsed the Terms of Reference (ToR) for the ASEAN Submarine Power Cable Development Framework, a necessary foundational step towards the laying of physical cross-border infrastructure subsea power cables across the region.

For BMI, this is a key milestone as the APG integration consists in linking offshore renewable resources and archipelagic systems to demand centers through subsea transmission corridors.

The framework is intended to establish a common regional approach across four core pillars, including legal and regulatory harmonization, commercial and financing structures, technical standards and interoperability, as well as governance and project development pathways.

“The framework is expected to be completed during the 2026 Philippines Chairmanship of ASEAN, a timeline we believe to be fairly ambitious given the complexities of issues across the four key pillars,” said BMI.

Separately, the ASEAN Center for Energy (ACE) has been designated to play a coordinating role for APG implementation.

“Though this could strengthen governance and execution timelines, it lacks regional enforcement mandate and continues to hinge on member states’ voluntary cooperation, limiting its powers，

”In addition, substantial challenges remain across financing, supply chains, political risk and governance，” said BMI.

According to the research house, financing will remain the primary bottleneck for cross-border grid infrastructure, requiring strong government support to unlock capital.

According to the research house, cross-border submarine cables involve capital-intensive assets spanning multiple jurisdictions, with uncertain revenue streams and complex sovereign risk exposure.

Its key unresolved issues include ownership models for cross-border assets, wheeling tariff structures, allocation of utilization risk and curtailment risk, foreign exchange exposure and sovereign/state-utilities credit risk.

As high voltage direct current (HVDC) corridors are high risk, BMI opined that high capital expenditure (CAPEX) multi-bullion dollar assets, the government’s involvement, either via direct funding or loan guarantees, is crucial in unlocking capital.

“To this end, emerging ASEAN markets with constrained fiscal space and weaker utility balance sheets will face acute financing challenges for interconnector infrastructure,” it said.

For example, Indonesia – Singapore HVDC import projects that have been awarded conditional licensing have ownership structures
linked to the government.

Singapore–Indonesia electricity import projects are sponsored by multinational consortia combining private infrastructure investors and government-linked strategic entities such as Temasek-controlled companies and Chinese state-owned utilities.

While structured as project-financed private assets, the presence of sovereign-linked sponsors reflects the strategic nature of cross-border power infrastructure in ASEAN and the need for government backing, said BMI.

“It is worth noting that multilateral financing initiatives linked to APG are beginning to emerge, but these alone are far insufficient,

“Asian Development Bank (ADB) has committed up to $10 billion for the ASEAN Power Grid over the next ten years, far below estimates of at least $100 bilion required by 2045 for transmission infrastructure alone,” it said.

Meanwhile, BMI sees global grid supply tightness and cost inflation pressures will weigh on procurement, increasing the risk of project timeline delays.

According to the research house, 2025 has seen record levels of investment in grid spending globally, which it expects to exacerbate over the coming years.

It noted submarine interconnectors rely on specialized components- including high-voltage cables, converter stations and offshore installation vessels- with limited global manufacturing capacity.

It sees two structural risks are emerging: lead time risk and cost inflation risk.

In terms of the lead time risk, BMI said delivery timelines for HVDC submarine cables and associated infrastructure can exceed 3–5 years due to constrained global supply and competing offshore wind demand.

It noted key grid suppliers’ order backlog value for grid equipment has been growing significantly and is projected to continue.

This is because supply is structurally constrained by manufacturing capacity which takes a long time to expand, as shown by the relatively constant order intake in the chart on
the right, resulting in a widening gap between demand and supply.

As for cost inflation, BMI highlighted that rising copper, steel and aluminum prices and tight manufacturing capacity increase the risk of cost escalation during project development.

According to the research house, copper and electrical steel prices have surged by 55 percent 70 percent and 80 percent to 100 percent respectively since 2020.

This is reflected in the global surge in price for grid equipment, with Europe leading at a 20 percent to 30 percent increase for transformer prices.

Though Asia Pacific (APAC) has seen similar increases of 15 percent to 25 percent, it opined that the prices still remain much lower than that of its Western counterparts.

It sees this will reinforce Europe’s strategic pivot toward Asian suppliers, as consumers are prioritizing delivery certainty and price over origin.

“We expect APAC’s dominance to strengthen and believe that the market could be increasingly bifurcated, where premium-priced Western production will serve domestic policy-mandated projects, while competitive Asian manufacturing will serve global commercial demand, adding to the procurement challenges to APG projects,” said BMI.

BMI also noted political and regulatory volatility will remain a structural headwind on APG progress, with multilateral corridors most vulnerable to disruption.

According to the research house, political dynamics remain a defining risk for APG implementation, as cross-border electricity trade depends on stable policy alignment across all wheeling and exporting states.

“Notably, political instability in Thailand added to the delay in progressing LTMS-PIP Phase 2 arrangements, which we estimate prolonged the scale up from 100MW to 200MW by six months,” it said.

BMI’s Asia Country Risk team also expects cross-border clashes between Thailand and Cambodia to occur periodically.

“This highlights how political uncertainty can stall multilateral power trade and disrupt supply stability for the importing market,” it noted.

Adding to that, because subsea corridors involve long-term infrastructure across jurisdictions, perceived political risk directly affects financing and project timelines.

Overall, it said ASEAN has made notable institutional progress for the APG, with the subsea interconnectors framework marking a step in the positive direction.

However, it sees financing structures, supply-chain constraints and political risk remain key barriers to implementation.

“We believe that APG expansion will likely proceed gradually and unevenly, driven by project-specific economics, financing capabilities and the degree of reliance on power imports,” it said.

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