Tapping potential

The finance outcomes from the UN conference in Azerbaijan could benefit other developments in Southeast Asia, such as the future regional power grid and carbon trading, which can also benefit Singapore.

The funds pledged at COP29 could provide crucial support for accelerating the development of the ASEAN power grid.

One of the region's decades-long ambitions, the complex power interconnection will enable electricity trade across borders — for both energy security and access to greener energy.

The regional ambition made progress with the Laos-Thailand-Malaysia-Singapore electricity import pilot in 2022, which transmitted 100 megawatts of hydropower from Laos to Singapore, via Malaysia and Thailand. This was later extended to include another 100 MW from Malaysia's electricity grid in October 2024 but covers a mix of energy sources, including coal and natural gas.

ASEAN envisions a power grid by 2045 and climate finance has the potential to address the unique challenges of financing such a large-scale, multi-country initiative, said Beni Suryadi, acting executive director at the ASEAN Centre for Energy based in Indonesia.

Several key challenges make traditional financing for the ASEAN power grid difficult. One is cross-border investment risks, since the giant grid will involve multiple countries with different regulatory frameworks and tariffs.

Another is the high upfront capital required, especially for building the grid and transmission infrastructure. The resulting long payback periods can put off traditional investors, who seek quicker returns, Beni said.

Climate finance can alleviate these gridlocks, with these funds often coming in the form of concessional loans with low interest rates, grants, or guarantees which lower the financial risks for private investors, according to analysts.

When forms of finance like green bonds, blended finance and funding from the World Bank or the Asian Development Bank are injected into a mega-project first, the risks are lowered for private investors to participate.

Blended finance refers to bringing together monies from the public sector, the multilateral development banks, philanthropies and the private sector.

"This is where climate finance can step in — by bridging these gaps, mitigating risks, and enabling investments that otherwise might not materialize," he added.