By Eric J. Lam and Tae Hyun Lee
THE AMBITION and market interest to achieve the ASEAN Power Grid is here, but sponsors, governments, and financing partners need to address early-stage risks so projects can secure scarce manufacturing capacity before conventional project financing becomes available.
Subsea power cables are increasingly important to interconnected economies. They link electricity systems across seas, allowing power from one area to reach consumers and businesses through the grid in another. More connections can also reduce reliance on any single supply source — such as hydropower during an El Niño-related drought. For Southeast Asia, subsea links are central to the ASEAN Power Grid (APG), the region’s ambition to connect national networks.
The APG could strengthen energy security, support cross-border electricity trade, help countries use more renewable power, and meet rising demand.
But developers may need to commit substantial capital to undertake technical studies and reserve cable-manufacturing capacity years before a project has the approvals, commercial agreements, and financing needed to proceed. This creates an early-stage risk that is challenging for many investors and lenders to bear. Without resolution, potentially viable projects are delayed — or stalled indefinitely.
Long-distance subsea interconnections require high-voltage direct current (HVDC) cables, specialized cable-laying vessels, and converters, as well as surveys, permits, and engineering work. Demand for equipment and services is growing. Offshore wind and interconnection projects worldwide are squeezing a supply chain concentrated among a few suppliers. Many are already committed to projects for years to come.
A project may have policy support and interested financiers yet struggle to secure a production slot. Suppliers want credible demand, a clear procurement timetable, firm plans for purchasing the electricity, a predictable path through regulatory approvals, and sponsors able to cover early costs. Without these signals, projects may wait for years or lose out to more advanced projects elsewhere.
Southeast Asia’s energy demand is expected to almost triple by 2050, driven by industrialization, digitalization, and electrification, and improving living standards. The APG could help countries meet growing electricity needs by trading power across borders, strengthening energy security, integrating renewables, and lowering system costs.
WHY HVDC CABLES ARE KEY
Subsea HVDC cables will be central to that vision. Of the 18 interconnector projects identified under the ASEAN Interconnection Masterplan Study III, five involve subsea cables. Other opportunities exist along corridors connecting Cambodia, Indonesia, Peninsular Malaysia and Sarawak, the Philippines, and Vietnam. At least 12 gigawatts (GW) of subsea interconnection capacity, spanning more than 4,000 kilometers, may be needed by 2040 to support the region’s power trade ambitions, our research and analysis show. Singapore’s target of importing around 6 GW of low-carbon electricity by 2035 is a clear signal of demand and will require multiple subsea interconnections linking renewable energy resources to the city state.
The fundamental challenge is who bears the early risk. Subsea cable suppliers often require reservation fees or deposits years before a project reaches a final investment decision, with the period from reserving manufacturing capacity to commissioning extending to around five years.
Booking deposits can reach up to 20% of the value of the cable contract, while marine surveys and engineering design also require early funding. These commitments may be needed before any final decision to go ahead, when a project could still be delayed, changed, or canceled. Without a way to share the risk, sponsors may lose their production slots or face costly delays.
Individual sponsors cannot carry all this early risk. Regional connectivity can benefit many countries. Governments, regional institutions, and development partners therefore have a reason to share those risks.
THREE WAYS TO MOVE PROJECTS FORWARD
1. Align rules and technical requirements. Common approaches to planning, data sharing, cost-benefit analysis, technical standards, environmental reviews, cybersecurity, and marine surveys could reduce uncertainty and make projects easier to develop.
Encouragingly, such work is gaining momentum through efforts of the ASEAN Centre for Energy and its APG Secretariat, the ASEAN Power Grid Consultative Committee, and newly formed regional task forces for policy, regulatory, and technical matters.
2. Coordinate demand for cable capacity. Project sponsors or several countries could combine requirements in joint tenders or pooled procurement, giving suppliers a clearer picture of the work ahead. Framework agreements and pre-qualified supplier panels are other options. In Europe, for example, TenneT signed framework agreements that covered around 7,000 km of HVDC cable for its 2 GW program.
3. Support early commitments. Suppliers interviewed for our research recommended the establishment of a facility to absorb early-stage financial risks in APG projects — including supplier booking deposits — helping projects secure critical manufacturing capacity and advance toward a final investment decision. That could build on the separate Regional Connectivity Fund for Energy in Southeast Asia Trust Fund, launched under the ASEAN Infrastructure Fund in April 2026, which provides grants for some project preparation work, such as feasibility studies and engineering design.
The APG’s success will depend on sharing the financial risk of securing scarce cable-manufacturing capacity before projects reach conventional bankability. Governments, project sponsors, development finance institutions, and other financing partners will need mechanisms that help viable projects manage this early exposure and progress toward a final investment decision.
(This blog entry draws on ADB’s ongoing analytical work and consultations with industry stakeholders on subsea cable supply for the ASEAN Power Grid.)
Eric J. Lam is infrastructure specialist of ADB’s Southeast Asia Department. Tae Hyun Lee is energy specialist (Finance) of ADB’s Energy Sector Office.