The recently signed Indonesia–Singapore electricity agreement has been widely welcomed as a milestone for Southeast Asia’s clean energy ambitions. The agreement builds on years of bilateral energy cooperation and aims to operationalise the Indonesia–Singapore Cross-Border Electricity Trade (CBET) project. Within 12 months of signing of the Memorandum of Understanding (MoU) on CBET in 2025, both governments have committed to developing the policies, regulatory frameworks, and business arrangements necessary to facilitate electricity exports. By enabling Indonesia to export renewable electricity to Singapore, the deal promises to strengthen bilateral cooperation while advancing ASEAN’s broader vision of regional electricity integration through the ASEAN Power Grid (APG). Yet its significance extends beyond cross-border power trade. The agreement also presents Indonesia with an opportunity to accelerate renewable energy deployment through new investment and infrastructure development—but only if the country can expand clean electricity supply fast enough to meet export demand without undermining its own energy transition.
The agreement is closely aligned with Singapore’s long-term energy strategy. With limited land for large-scale renewable energy projects and a rapidly growing electricity demand from economic growth and digital infrastructure, Singapore has increasingly turned to regional electricity imports to diversify its energy mix and achieve its target of importing up to 6GW of low-carbon electricity by 2035. As of October 2025, it had already granted conditional approvals for 11 import projects totalling 8.35GW from Australia, Cambodia, Indonesia, Malaysia, and Vietnam, with six Indonesian projects advancing to conditional licences. Singapore has described these projects as future building blocks of the APG, highlighting that the Indonesia–Singapore agreement is part of a broader regional strategy rather than an isolated bilateral initiative.
For Indonesia, this demand could unlock far more than electricity export revenues. Long-term export commitments provide investors with greater certainty, encouraging capital to flow into renewable generation, transmission infrastructure, and supporting industries. In principle, such investment could accelerate renewable energy deployment that might otherwise progress more slowly under domestic demand alone. If managed effectively, the agreement could reinforce Indonesia’s domestic energy transition while positioning the country as a regional supplier of clean electricity. The July 2026 deal targets the commercial deployment of at least 3.4GW of renewable electricity projects by 2035 and introduces a Cross-Border Renewable Energy Certificate (REC) Framework aligned with international standards. Together with earlier agreements supporting investments in solar photovoltaic and battery energy storage systems, the package provides stronger investment signals than previous memoranda alone. However, as of July 2026, key commercial details, including electricity pricing, long-term power purchase arrangements, and cost allocation for transmission infrastructure, remain unclear as the parties continue to study and negotiate under the MoU.
Beyond regulatory uncertainty, the agreement also raises important questions about Indonesia’s physical readiness to become Singapore’s renewable electricity supplier. Batam, specifically Bulan Island, is expected to serve as the first hub for cross-border electricity generation and trade due to its geographical proximity to Singapore and the relative feasibility of developing subsea transmission infrastructure. Yet the islands’ existing electricity system highlights the scale of the challenge. As of late 2025, Batam had an installed generation capacity of around 844.2 MW, with peak domestic demand reaching approximately 755 MW, leaving a surplus of only 79.2 MW—far below the scale required to support Singapore’s long-term import ambitions. Additionally, electricity in Batam is projected to increase, driven in part by the rapid growth of data centers. So, even if these regulatory hurdles are overcome, Indonesia must still ensure renewable electricity exports complement rather than compete with domestic priorities.
This means that this optimistic scenario depends on an important assumption: that Indonesia can expand renewable generation quickly enough to satisfy both export commitments and its own growing electricity needs. This remains far from guaranteed. In this sense, the agreement does not simply create opportunities; it also introduces new strategic trade-offs between export ambitions and domestic energy security.
The earlier bilateral agreements envisaging Singaporean investment in solar photovoltaic and battery energy storage projects are therefore important not simply because they provide financing, but because they could help address the underlying generation gap. New solar capacity combined with storage could increase the amount of electricity available beyond the islands’ existing surplus, while also improving reliability of renewable generation for both domestic and export demand. However, the extent to which these investments actually alleviate the generation constraint will depend on whether they represent genuinely additional capacity rather than projects that would otherwise have been developed to meet Indonesia’s own domestic electricity needs. This also raises questions about the financing of both the generation assets and cross-border transmission infrastructure. While the 2026 MoU signalled commercial demand for imported low-carbon electricity through agreements between Danantara Investment Management (DIM), Keppel Electric, and Sembcorp Utilities, the allocation of financing responsibilities remain unclear. If Indonesian public capital is expected to co-finance export-oriented renewable projects, policymakers will need to weigh these investments against competing domestic priorities, including grid expansion, electrification, and renewable deployment elsewhere in the country.
The key issue, therefore, is not simply whether Singaporean investment can finance renewable projects, but whether it can expand Indonesia’s overall electricity supply quickly enough to accommodate exports without widening the gap between generation capacity and domestic demand.
This therefore illustrates the central policy dilemma underlying the agreement. Singapore is effectively creating long-term demand for Indonesian renewable electricity. Whether that demand accelerates Indonesia’s energy transition will depend on whether it stimulates additional renewable capacity rather than redirecting financial resources and electricity supply away from domestic needs. If investment results in genuinely new generation capacity, the agreement could strengthen both Indonesia’s energy security and its clean energy ambitions. However, if renewable energy development does not keep up with export commitments, or if limited public investment is pulled away from more pressing domestic needs, the agreement could force Indonesia to choose between export revenues, industrial development, and its own decarbonisation goals.
Ultimately, the Indonesia–Singapore electricity agreement is about more than exporting electrons across a border. It represents an early test of whether cross-border electricity trade can catalyse renewable investment while strengthening both domestic energy security and regional integration. If Indonesia can leverage Singapore’s demand to expand renewable generation beyond what domestic markets alone would support, the agreement could become a model for the ASEAN Power Grid. If not, it may instead expose the difficult trade-offs that accompany Southeast Asia’s transition towards an increasingly interconnected clean energy future.
Recommended readings:
- MTI (2026) Joint Media Statement MTI & Danantara Indonesia Affirm Commitment to Expedite Cross-Border Electricity Trade Between Singapore and Indonesia
- MTI (2025) Singapore and Indonesia Sign Three Memoranda of Understanding on Cross-Border Electricity Trade, Carbon Capture and Storage, and Sustainable Industrial Zone
- MTI (2025) Low-Carbon Electricity Import
- PJM (2026) Powering Reliability Through Market Design: Addressing Rising Demand and Constrained Supply, and Stimulating Investment To Support Durable Reliability
- Alfatarah (2026) Plugging into reality: The ASEAN Power Grid