ASEAN Clean Energy Investment: 16–19 GW Storage Gap Exposes Project Financing Bottleneck

Southeast Asia’s clean energy transition faces a growing mismatch between available investment and projects capable of securing it. Large solar plants can already deliver competitive returns, but distributed solar, battery storage and transmission infrastructure struggle to generate the predictable revenues investors require.

A new Ember report released on October 7, 2026, identifies project bankability as the next major challenge for ASEAN renewable energy investment. Its assessment draws on 50 utility-scale non-fossil projects that reached financial close, techno-economic modelling and an evaluation of storage market readiness across five countries.

The findings highlight three financing challenges: high transaction costs for small solar installations, limited revenue opportunities for batteries and transmission returns below private investors’ expectations.

Utility-Scale Solar Can Deliver 13.2% Equity Returns

Large solar projects demonstrate that commercially viable clean energy investment is already possible in ASEAN.

Ember’s modelling shows that a 20 megawatt-peak (MWp) solar project can generate a 13.2% equity return at a 7% interest rate. An electricity tariff of $72 per megawatt-hour (MWh) would allow the project to meet the report’s 12% investor return benchmark.

That tariff is broadly consistent with country-level estimates:

These figures suggest that utility-scale solar can attract commercial investment at tariffs close to prevailing market levels, provided financing conditions remain stable.

However, the economics weaken as projects become smaller. The financing structures supporting large plants do not automatically work for village-level systems or other distributed installations, according to the Ember report prepared by Dinita Setyawati and Alnie Demoral.

Small Solar Projects Face a Transaction-Cost Disadvantage

Permitting, grid connections, legal work and investor due diligence create costs that do not decline proportionately with project capacity. A small installation must still complete many of the same development steps as a larger plant, spreading those expenses over fewer megawatts.

Ember estimates that each additional megawatt of solar capacity increases equity returns by approximately 0.5 percentage points within its modelled range.

By comparison, reducing the interest rate from 9% to 5% improves returns by 4.4 percentage points. Cheaper borrowing helps, but does not fully resolve the structural disadvantage facing smaller projects.

This challenge is particularly relevant to Indonesia’s solar ambitions. The country’s strategy envisages approximately 100 GW of solar capacity, including roughly 80 GW of distributed systems across more than 80,000 villages.

For remote communities, local electricity demand determines the appropriate project size. Increasing capacity solely to improve investment returns may therefore be impractical.

The report recommends combining small projects into financeable portfolios and targeting transaction costs directly. Aggregation could allow developers to organise financing and due diligence across multiple installations while retaining systems sized for individual communities.

ASEAN Battery Storage Pipeline Falls 16–19 GW Short

Energy storage presents another substantial bankability gap.

Regional transition scenarios indicate that ASEAN needs 23–26 GW of energy storage by 2030, while publicly announced projects total only approximately 7 GW.

The difference implies a 16–19 GW gap between announced capacity and projected requirements. The existing pipeline represents approximately 27–30% of the capacity needed.

Ember’s five-country assessment places the Philippines and Singapore furthest ahead in storage market readiness. Vietnam and Indonesia are in transition, while Malaysia remains at an early stage.

A 51-point spread in readiness scores reflects differences in market rules rather than an inability to build battery systems.

The central problem is revenue. No ASEAN country has a dedicated capacity market, according to the report, and batteries in most markets cannot combine earnings from electricity trading, ancillary services, capacity provision and congestion management.

Allowing these revenues to be combined—known as revenue stacking—could improve storage economics by paying batteries for several services they provide to the electricity system.

Transmission Returns Remain Below the 12% Benchmark

Transmission infrastructure faces a different financing problem: much of the value it creates is captured elsewhere in the power system.

Using the planned 128 km, 230 MW Sarawak–West Kalimantan connector as an illustration, Ember estimates an equity return of 7.2–8.8%.

That leaves returns 3.2–4.8 percentage points below the report’s 12% benchmark.

Cross-border transmission can enable renewable electricity trade, ease congestion and improve energy security. Yet the resulting benefits flow to generators, consumers and the wider system, while the transmission asset depends on regulated revenues.

Cost-recovery tariffs offer limited opportunities for investors to capture that broader value. This creates a challenge for the ASEAN Power Grid: economically useful infrastructure may still struggle to meet private financing requirements.

Market Reform Must Match Each Clean Energy Asset

The report argues that ASEAN needs financing and regulatory reforms tailored to the economics of individual asset classes.

For distributed solar, the priorities include project aggregation, simpler development processes and lower transaction costs. For batteries, clearer payment mechanisms and access to multiple revenue streams are central to improving bankability.

Transmission requires revenue arrangements that better reflect its contribution to renewable integration and electricity trade, alongside financial guarantees and more flexible tariffs.

Ember also recommends reforming how single-buyer utilities procure electricity and harmonising technical standards through the ASEAN Consultative Committee for Standards and Quality.

As regional interconnection advances, investment could be pooled around specific categories, including transmission, solar-plus-storage and wind-plus-storage.

ASEAN’s Next Investment Challenge Is Predictable Revenue

The contrast between a 13.2% modelled return for a 20 MWp solar plant, an announced storage pipeline covering less than one-third of projected needs, and 7.2–8.8% transmission returns shows why a single financing approach cannot support every part of ASEAN’s energy transition.

Large renewable plants have made progress in attracting capital. Expanding that progress to village solar systems, batteries and cross-border grids will require projects with manageable development costs, credible electricity buyers and revenues that investors can assess over their operating lives.

BABURAJAN KIZHAKEDATH