The global transition toward renewable energy has positioned the ASEAN region as a focal point for international investors. With a population exceeding 700 million and sustained economic growth, ASEAN’s energy demand continues to rise. At the same time, the collective commitment of ASEAN Member States to the Paris Agreement and net zero emission targets has accelerated the pace of green investment across the region.
The period from 2025 to 2026 is expected to mark a critical momentum. ASEAN is projected to attract green investment of up to IDR 830 trillion annually through 2030. Despite this significant opportunity, cross-border renewable energy projects face complex legal challenges. Regulatory divergence among Member States, foreign ownership regimes, and dispute resolution mechanisms are critical factors that both investors and governments must anticipate and manage.
Green Investment Potential in the ASEAN Region
The potential for green investment in ASEAN has become increasingly prominent alongside growing demand for clean energy and firm commitments to energy transition. According to reports cited by Kumparan Bisnis, green investment in ASEAN is estimated to reach approximately Rp 830 trillion per year until 2030, reflecting the region’s attractiveness as a rapidly expanding renewable energy market.
Stable economic growth, rapid urbanization, and rising electricity demand in major cities such as Jakarta, Bangkok, and Ho Chi Minh City are key drivers of clean energy demand. These conditions create substantial opportunities for global investors to participate in renewable energy projects, including solar, wind, and hydropower generation.
Beyond domestic factors, regional commitments under the ASEAN Plan of Action for Energy Cooperation (APAEC) further strengthen green investment prospects. The target of achieving a 23 percent renewable energy mix by 2025 has acted as a catalyst for more ambitious cross-border initiatives, including cross-country power interconnections and the development of renewable energy corridors. Investor confidence is reinforced by the active participation of energy companies from Europe, Japan, and the United States, which view ASEAN as a strategic market for clean energy expansion. A concrete example is the planned export of solar-generated electricity from Batam to Singapore via subsea cables, illustrating how cross-border projects can serve as models for regional energy integration.
Carbon market integration has also enhanced ASEAN’s investment appeal. With the introduction of carbon trading regulations in Indonesia and several other Member States, renewable energy projects can generate not only electricity but also tradable carbon credits. These credits may be sold in international carbon markets, providing additional value for investors while supporting global emission reduction commitments. Regional initiatives such as the Laos–Thailand–Malaysia–Singapore Power Integration Project (LTMS-PIP) and hydropower cooperation between Vietnam and Cambodia demonstrate ASEAN’s gradual shift toward a more comprehensive energy integration model.
The economic and social impacts of green investment in ASEAN are equally significant. Renewable energy projects generate employment in construction, technology, and energy management, while improved access to affordable and reliable clean energy enhances industrial competitiveness and strengthens ASEAN’s position in global supply chains. Environmentally, green investment contributes directly to carbon emission reductions, supports net zero targets, and improves overall quality of life.
Nevertheless, several challenges persist. Regulatory gaps among Member States often hinder the implementation of cross-border projects. Divergent rules on foreign ownership, fiscal incentives, and licensing procedures can delay investment realization. Limited cross-border electricity interconnection infrastructure remains a major obstacle to regional energy integration, while political risk and policy volatility add further complexity for investors entering ASEAN markets.
Accordingly, while ASEAN’s green investment potential is substantial, its realization depends on the ability of Member States to harmonize regulations, strengthen infrastructure, and provide legal certainty for investors. This period represents a decisive opportunity for ASEAN to establish itself as a global clean energy hub while deepening regional economic integration through cross-border renewable energy projects.
Policies Driving Green Investment Flows
Green investment flows in ASEAN, particularly in Indonesia, are closely linked to increasingly progressive policy and regulatory frameworks. Indonesia has reaffirmed its commitment to energy transition through the ratification of the Paris Agreement, formalized in Law No. 16/ 2016 on the Ratification of the Paris Agreement to the United Nations Framework Convention on Climate Change (“Law 16/2016”).
This ratification provides binding legal force and strategic direction for national policies aimed at reducing greenhouse gas emissions. On this basis, renewable energy has been prioritized within Indonesia’s national energy mix, offering a degree of certainty for investors entering the sector.
A key policy instrument is Presidential Regulation No. 112/2022 on the Acceleration of Renewable Energy Development for Electricity Supply (“Presidential Regulation 112/2022”). This regulation restricts the development of new coal-fired power plants, except under narrowly defined conditions, signaling a clear policy shift toward renewable energy. It also introduces more competitive pricing mechanisms for renewable electricity, enhancing investment attractiveness.
Further contractual certainty is provided by Regulation of the Minister of Energy and Mineral Resources No. 5/2025 on Guidelines for Power Purchase Agreements for Power Plants Utilizing Renewable Energy Sources (“Ministerial Regulation 5/2025”). This regulation standardizes Power Purchase Agreements (PPAs) for renewable energy projects and addresses key contractual protections, including take-or-pay schemes, force majeure clauses, and contract duration.
Specifically, Article 7 of the Ministerial Regulation requires the state electricity company or other offtakers to apply a take-or-pay mechanism, ensuring revenue certainty for project developers even in the event of reduced electricity demand. In addition, Article 4 of the same Ministerial Regulation mandates the inclusion of force majeure clauses, protecting both parties against extraordinary and unforeseeable events such as natural disasters or significant policy changes.
From a financial perspective, the Financial Services Authority (Otoritas Jasa Keuangan – OJK) plays a critical role through Financial Services Authority Regulation No. 14/2023 on Carbon Trading Through the Carbon Exchange (“OJK Regulation 14/2023”). This framework enables the integration of renewable energy investment with carbon market mechanisms, allowing projects to generate tradable carbon credits in addition to electricity output. The regulation strengthens Indonesia’s position within the global carbon trading ecosystem while enhancing project bankability.
Fiscal policies and incentives further support green investment, including import duty exemptions for renewable energy equipment, tax incentives, and government guarantee schemes for strategic projects. Public-private partnership (PPP) models are increasingly promoted to accelerate clean energy infrastructure development by leveraging private sector financing and expertise.
Comparable policy initiatives are evident across ASEAN. Vietnam offers feed-in tariffs for solar and wind energy, Thailand advances investment through its Alternative Energy Development Plan, and Singapore, facing land constraints, prioritizes cross-border electricity imports from Indonesia and Laos. Collectively, these policies indicate a gradual move toward regulatory harmonization in renewable energy, despite ongoing differences in implementation.
With supportive policies in place, green investment flows in ASEAN are expected to continue growing. Clear regulations, fiscal incentives, and strong political commitment provide a foundation for cross-border renewable energy investment. Nonetheless, success ultimately depends on consistent implementation and the ability of ASEAN Member States to align regulations across jurisdictions.
Key Legal Risks in Cross-Border Renewable Energy Projects
Cross-border renewable energy projects in ASEAN involve significant legal complexity due to regulatory divergence among jurisdictions. Investors must conduct multi-jurisdictional due diligence to ensure compliance with foreign ownership restrictions, licensing requirements, and tax regimes. Without thorough legal analysis, projects risk delays or failure due to regulatory incompatibility.
Ownership structures using Special Purpose Vehicles (SPVs) are a critical consideration. Law No. 40/2007 on Limited Liability Companies (“Company Law”) provides the domestic legal framework for shareholder rights, but in cross-border contexts, shareholders’ agreements must clearly regulate veto rights, profit distribution, and exit mechanisms. Risk mitigation also requires insurance and guarantees, including political risk insurance and performance guarantees, to address potential issues such as grid failure or abrupt policy changes.
Dispute resolution in cross-border projects is typically conducted through international arbitration. Law No. 30/19 99 on Arbitration and Alternative Dispute Resolution (“Arbitration Law”) allows parties to select arbitration as their dispute settlement mechanism. However, issues of choice of law and enforcement remain challenging. Article 66 of the Arbitration Law stipulates that international arbitral awards are enforceable in Indonesia only after recognition by the Central Jakarta District Court. As a result, investors often prefer established arbitral institutions such as the Singapore International Arbitration Centre (SIAC) or the International Chamber of Commerce (ICC) to enhance legal certainty.
Effective legal risk mitigation is therefore a determining factor in the success of cross-border renewable energy projects. Investors must ensure that each project phase, from planning to operation, is supported by a clear legal framework. Comprehensive cross-border due diligence, involving both local and international legal counsel, is essential to identify regulatory obstacles and develop appropriate mitigation strategies at an early stage.
In conclusion, green investment flows in ASEAN through 2030 offer substantial opportunities to accelerate clean energy transition and strengthen regional economic integration. However, the success of cross-border renewable energy projects depends on policy consistency, regulatory harmonization, and robust legal risk mitigation through thorough due diligence, well-structured SPVs, adequate insurance protection, and the selection of credible international arbitration forums. These elements are essential to provide legal certainty for investors and ensure the long-term sustainability of projects in pursuit of net zero emission goals.***
Also read: How Foreign Investment and Green Financing Are Powering Indonesia’s Clean Energy Transition
Regulations:
- Undang-Undang Nomor 16 Tahun 2016 tentang Pengesahan Paris Agreement To The United Nations Framework Convention On Climate Change (Persetujuan Paris Atas Konvensi Kerangka Kerja Perserikatan Bangsa-Bangsa mengenai Perubahan Iklim) (“UU 16/2016”).
- Peraturan Presiden Nomor 112 Tahun 2022 tentang Percepatan Pengembangan Energi Terbarukan untuk Penyediaan Tenaga Listrik (“Perpres 112/2022”).
- Permen ESDM Nomor 5 Tahun 2025 tentang Pedoman Perjanjian Jual Beli Tenaga Listrik dari Pembangkit Tenaga Listrik yang Memanfaatkan Sumber Energi Terbarukan (“Permen ESDM 5/2025”).
- Peraturan OJK Nomor 14 Tahun 2023 tentang Perdagangan Karbon Melalui Bursa Karbon (“POJK 14/2023”).
- Undang-Undang Nomor 40 Tahun 2007 tentang Perseroan Terbatas (“UU PT”).
- Undang-Undang Nomor 30 Tahun 1999 tentang Arbitrase dan Alternatif Penyelesaian Sengketa (“UU AAPS”).
References:
- Potensi Investasi Hijau di ASEAN Capai Rp830 T Per Tahun Hingga 2030. Kumparan. (Diakses pada 5 Desember 2025 pukul 14.40 WIB)
- Indonesia Dorong Investasi Hijau Melalui Rangkaian Regulasi Strategis. AntaraNews. (Diakses pada 5 Desember 2025 pukul 14.46 WIB)
- Laos-Thailand-Malaysia-Singapore Power Integration Project (LTMS PIP). Tenaga Nasional. (Diakses pada 5 Desember 2025 pukul 14.55 WIB)
- Sistem Manajemen Investasi dalam Pembangunan Infrastruktur Berbasis Pembiayaan Pemerintah dan Swasta. Kemenkeu. (Diakses pada 5 Desember 2025 pukul 15.04 WIB)
- THAILAND: Alternative Energy Development Plan 2018-2037 (AEDP 2018-2037). Asia Pacific Energy. (Diakses pada 5 Desember 2025 pukul 16.30 WIB)