Jakarta supports regional electricity integration but wants fairer pricing before signing, highlighting the commercial hurdles behind Southeast Asia’s shared-grid ambitions.
Indonesia has delayed signing a commitment linked to the ASEAN Power Grid, saying the proposed electricity pricing does not yet offer a sufficiently balanced return.
Energy and Mineral Resources Minister Bahlil Lahadalia said negotiations were continuing, including discussions with Malaysia. Indonesia supports regional collaboration in principle, he said, but would sign only when the commercial terms provided equitable benefits for all parties.
The ASEAN Power Grid, or APG, is a long-running initiative to connect national electricity networks across Southeast Asia. Its aim is to allow countries with surplus generation—particularly renewable energy—to sell power to neighbours facing shortages or higher production costs.
Key figures:
- Existing ASEAN cross-border interconnection capacity: 7.7 gigawatts
- Estimated regional investment requirement: $764 billion
- Indonesia’s mapped grid-investment opportunity: Rp600 trillion
- Existing Malaysian electricity supplied to Indonesian Borneo: about 200 megawatts
- Indonesia’s planned transmission expansion: 48,000 circuit kilometres over 10 years
The pricing dispute reveals one of the project’s most difficult questions: how to divide the economic value created by cross-border electricity trade. Exporting countries want prices that cover generation, transmission infrastructure, financing and operational risks. Importers, meanwhile, need electricity to remain competitive against domestic alternatives.
For Indonesia, the calculation is especially sensitive. The country has substantial solar, hydro, geothermal and wind potential, while its vast archipelago places heavy demands on transmission investment. Accepting low export prices could weaken returns on new generation projects or leave Indonesia bearing a disproportionate share of infrastructure costs.
Domestic electricity prices are also politically important. State-owned utility PLN dominates Indonesia’s power system, while retail tariffs are regulated and some customer groups receive subsidies. Cross-border contracts must therefore distinguish between commercial export prices and tariffs paid by Indonesian households and businesses.
Indonesia is not starting from zero. It already imports about 200 megawatts from Malaysia for parts of Kalimantan near the border. The government has also identified roughly Rp600 trillion in potential investment for national grid development and ASEAN interconnection.
Regionally, however, the financial challenge is far larger. ASEAN estimates that building the necessary transmission and generation infrastructure could require $764 billion, while current cross-border capacity of 7.7 gigawatts must more than double by 2040.