Rethinking power: From connection counts to high-tier reliability (Part 1 of 2)

This article is the first part of a two-piece series. Here, you can find Part 2

Introduction

The Association of Southeast Asian Nations (ASEAN) is caught in a crucial developmental paradox: many of its Member States (AMS) continue to struggle with low industrial competitiveness and ongoing underdevelopment, even in the face of nearly universal physical electricity connection rates. The reason for this discrepancy is that energy access has always been measured using a straightforward, politically convenient binary criterion that places more emphasis on the quantity of connections than on the dependability and quality of the service. This analysis dissects the absurdity of politicising such indicators, demonstrating how it permits systemic reliability deficiencies and persistent underinvestment in grid modernisation.

This commentary makes the case that reliable national grids are an urgent economic necessity rather than a luxury by analysing the Multi-Tier Framework (MTF), a multi-dimensional standard that evaluates access as a spectrum of service quality, and calculating the economic cost of power outages using the Value of Lost Load (VOLL). In order to fully realise the region's economic potential and uphold the principles of the ASEAN Power Grid (APG), an integrated strategy centred on high-tier dependability is necessary to achieve a resilient, clean energy future for ASEAN.

I. Deconstructing electricity access: The illusion of universal coverage

A fundamental developmental paradox confronts ASEAN: many Member States (AMS) still struggle with ongoing underdevelopment, impeded economic growth, and low industrial competitiveness, despite official statistics indicating that the region is quickly approaching or has already attained near-universal electricity access. The past emphasis on an insufficient and politically convenient criterion for assessing access, which puts quantity over quality, is the direct cause of this crucial mismatch.

The traditional binary metric and its flaw

In the past, the methodology used to measure energy access in ASEAN and many developing nations has been based on a crude binary approach: categorising a population or home as "having or not having" a physical connection to the electrical grid, Political leaders and politicians are naturally drawn to this indicator since it makes it possible to quickly announce advancements towards lofty goals like universal access. As a result, several AMS are pleased to announce high official electrification percentages; regional statistics often demonstrate connectivity of more than 95% in numerous locations.

However, the foundation of this success story is non-diagnostic. The binary approach's primary drawback is that it doesn't show whether linked households receive sufficient service. Even if there is a physical connection, it lacks the essential utility needed for modernisation and socioeconomic advancement if the electrical supply is inadequate, unstable, or prohibitively expensive. This methodological flaw enables governments to allocate scarce resources to visible connection projects, fulfilling a political objective (connection count), while systematically ignoring the infrastructure upgrades and maintenance required to turn electricity into a tool for economic development. The disconnect that results allows the high-access/low-development dilemma to persist.

Introducing the multi-tier framework (MTF): The granular standard

Under the Sustainable Energy for All (SEforALL) program (It was launched as a UN initiative in 2011 by former Secretary-General Ban Ki-moon and now operates as an independent organization with close ties to the UN), the Energy Sector Management Assistance Program (ESMAP) created the Multi-Tier Framework (MTF) in collaboration with international partners to solve the shortcomings of the binary metric. The MTF offers a revolutionary, multifaceted definition of energy access, evaluating access as a range of service levels rather than just the existence of a wire.

Access is defined rigorously by the framework as the capacity to receive energy that is sufficient, available when needed, dependable, of high quality, reasonably priced, lawful, convenient, healthy, and safe for all necessary applications across homes, businesses, and community organisations. Importantly, the MTF divides access into six different tiers (Tier 0 to Tier 5) according to how well each of the eight essential characteristics — capacity, duration, reliability, quality, affordability, legality, convenience, and safety — performs, which asks for "universal access to affordable, reliable, and modern energy," cannot be tracked without the implementation of the MTF. The MTF provides data that is clearly policy-relevant and prescriptive by exposing particular gaps in service delivery, such as determining that a population is Tier 4 in Duration but only Tier 2 in Quality. Governments and multilateral development banks (MDBs) are able to create highly focused and successful interventions because of this detailed insight. In order to stimulate the adoption of off-grid systems through creative funding based on household expenditure statistics, for instance, MTF survey results have been used to set baselines for national electrification projects and to guide project design.

The important dimensions examined by the MTF are shown in Table I below, which explains why the lack of such a thorough methodology results in false conclusions regarding the actual developmental status made possible by electrification.

Table I: The multi-tier framework (MTF) for household electricity access: Key dimensions and tiers

II. The reliability paradox and the development deficit in ASEAN

The Reliability Paradox — poor service quality — is the main issue facing ASEAN's growing economies. The service offered is often of a low tier, negating the economic gains that universal access offers, even in cases where the grid physically connects the great majority of the population.

The grid-connected reliability gap

A high-tier level of service does not always follow from obtaining a grid connection, according to MTF research conducted worldwide. For instance, the majority of grid-connected homes in MTF baseline surveys were in Tier 3 or higher, but availability, quality, and reliability limits were the main obstacles keeping them from achieving the highest level (Tier 5).

Chronic operational problems that actively stifle economic activity are a manifestation of this reliability gap. Residents of numerous urban and peri-urban informal communities frequently deal with extremely poor service quality and considerable electrical risks. Undervoltage, or persistently low voltages that fall much below the nominal voltage requirements, can occur for two to ten hours every day. This poor quality reduces the usefulness of delicate equipment, causes premature appliance breakdown, and compels households to forgo buying necessary gadgets that need a steady, steady voltage to operate properly. Suppressed demand is the term used to describe this phenomenon; it is not because consumers cannot afford to use more power, but rather because additional usage is impractical, risky, or economically

Quantifying reliability deficits across AMS

The disparity in service reliability varies significantly within the ASEAN area, underscoring the uneven character of infrastructure development. ASEAN's developed economies, like Singapore, Brunei, and Malaysia, exhibit exceptionally high reliability; Malaysia reports an average monthly power outage of just 0.1. In contrast, acute service disruptions are a problem for emerging AMS. For instance, Myanmar experiences 11 outages on average each month, which is indicative of serious ongoing grid development issues. In nations like Indonesia, the Philippines, and Vietnam, outages often last longer, seriously interfering with household and business operations. Myanmar, Lao PDR, and Cambodia typically have the longest outages.

Instead of being a genuine engine for development, these extreme dependability deficiencies turn power availability into a restricted social amenity. Economic competitiveness is subject to a substantial hidden charge due to the low power quality. In order to make up for the grid's failure, businesses and middle-class consumers are compelled to make significant investments in self-correction devices like diesel generators, uninterruptible power supplies (UPS), and voltage stabilisers. Significant funds are diverted from core productive investments by this expense, which raises operating costs and actively discourages energy-intensive industries like data centres and advanced manufacturing, which depend on a steady, clean supply. Long-term competitiveness is severely hampered by this structural weakness, which effectively transfers high-value employment and investment to areas with stronger grids.

Failure to support productive use of energy (PUE)

Enabling Productive Use of Energy (PUE) — moving usage from simple domestic lighting to equipment, irrigation pumps, modern manufacturing, and digital services — is the main objective of electrification as a developmental instrument. The reliability gap makes sure that the advantages of connectivity do not effectively result in "jobs, opportunity, or growth." An already insufficient and poor power infrastructure in terms of availability and reliability is put under pressure by the rising energy demand brought on by regional economic expansion and initiatives to improve the quality of life.

Users cannot depend on the grid to power expensive appliances or manufacturing processes when reliability is continuously low. Because of this structural imbalance, a nation cannot move from basic residential consumption to the high-value PUE needed to move up the developmental ladder, even when it reaches a high connection rate. In order to resolve this energy dilemma, regulatory agencies must go beyond estimating current loads and implement advanced planning models that take suppressed demand into account by forecasting growth based on Tier 5 dependability criteria rather than present, limited consumption patterns.

III. The political economy of metric distortion and chronic underinvestment

Metric distortion, financial repression, and misaligned regulatory incentives are the main causes of the persistent reliability deficiencies and ensuing economic stagnation in strongly connected ASEAN nations.

Politicisation and misaligned incentives

A system of misaligned incentives is produced by the significant domestic and international political attention on the straightforward binary measure of power access. In contrast to challenging, expensive, and frequently invisible grid maintenance and modernisation (e.g., smart meters, advanced monitoring, transmission upgrades), governments are encouraged to direct scarce public funds towards politically visible and easily verifiable connection projects ("maximising the number of consumer connections"). This strategy ensures long-term systemic collapse while satisfying short-term political cycles.

State-Owned Utilities (SOUs), which control the vertically integrated or single-buyer market structures prevalent in most ASEAN nations, are financially crippled as a structural result of this political distortion. These SOUs must meet politically mandated universal service goals, which will need significant capital expenditures for grid expansion. 

At the same time, they frequently function under low tariffs imposed by politicians in an effort to reduce consumer costs. This legislative trap restricts the internal capital accumulation needed for critical infrastructure maintenance and modernisation and hinders cost recovery. Due to severe financial restrictions, many SOUs are unable to invest in the capital-intensive cross-border interconnections that the ASEAN Power Grid (APG) envisions, as well as necessary domestic grid upgrades.

Regulatory uncertainty and high cost of capital

Due to their incapacity to finance essential infrastructure domestically, SOUs become dependent on private investment, which is actively discouraged by institutional and legal frameworks. A lack of unified regulatory bodies, disjointed institutional arrangements, and poor coordination among ASEAN energy committees (like the ASEAN Power Grid Consultative Committee and the ASEAN Energy Regulatory Network) hinder the implementation of ambitious energy initiatives, like the APG. Cross-border investment is further complicated by technical and commercial issues, such as the lack of bankable commercial agreements (such as standardised wheeling charge procedures), uneven permission requirements, and inadequate regulatory harmonisation.

Investor risk is increased when there is a lack of financial predictability and transparent governance. The fact that finance costs for renewable energy infrastructure in ASEAN are still much higher than in developed economies is indicative of this. This high cost of capital is a major obstacle to raising the total investment needed for low-carbon energy supply infrastructure, which is projected to be $2,100 billion by 2030, of which 46% is required in the power sector.

The inherent risk asymmetry in power purchase agreements (PPAs) is a fundamental regulatory failing. Protective de-risking strategies like price stability clauses and guaranteed purchase (offtake guarantees) are often advantageous for fossil fuel assets. Variable Renewable Energy (VRE) projects, on the other hand, are frequently subject to higher market risks, such as price volatility, profile risk (no offtake requirement), and curtailment risk. The decarbonisation process is slowed, and the grid modernisation efforts required to integrate renewable power are undermined by this regulatory bias, which also raises the financing costs for VRE. National grid operators in nations like Indonesia exhibit less urgency regarding grid fluctuations due to the current electricity market structure, which favours baseload fossil fuels. This delays investments in advanced infrastructure, flexibility, and storage, which are necessary to accommodate the rapid rise of renewable energy sources.

IV. Quantifying the cost of unreliability: The economic imperative for modernisation

Policymakers must change the conversation from the social consequences of energy poverty to the immediate and measurable macro-economic costs of grid failure in order to overcome the inertia brought on by persistent underinvestment. The Value of Lost Load (VOLL) is the analytical instrument used for this transformation.

VOLL: The economic measure of failure

A crucial planning parameter for estimating the financial harm resulting from power outages is the Value of Lost Load (VOLL). In contrast to tariffs, VOLL measures the economic activity lost as a result of a kWh of unsupplied power, including industrial output, commercial losses, and decreased competitiveness. Large-scale investments in redundancy, dependability, and more intelligent grid operations are strongly justified by a high VOLL estimate.

The average VOLL in ASEAN is expected to be $2.4 per kWh. On the other hand, certain developing economies face much greater dangers. VOLL predictions are higher than $3/kWh in Indonesia, the Philippines, and Myanmar. These differences show that in these particular economic circumstances, even brief, localised power outages result in disproportionately high costs. For instance, it was estimated that the January 2024 power outage on Panay Island in the Philippines resulted in daily losses of between $7 and $9 million USD. This illustrates how reliability gaps cause a significant decline in the country's economic output right away.

Macroeconomic damage and stifled growth

The overall economic impact of unreliability is enormous. According to forecasts, ASEAN may lose around $2.3 billion in GDP annually by 2040 as a result of missing industrial output, lost investment, and decreased competitiveness if current dependability gaps are not closed. This prediction emphasises that grid modernisation is an urgent economic need to protect future growth rather than a luxury of progress.

Grid reliability is becoming more widely acknowledged as a fundamental requirement for ensuring global economic development. High-value industries like digital industries, advanced manufacturing, and data-driven services, which all heavily rely on clean, dependable electricity, are driving ASEAN's rapid growth. A competitive disadvantage results from the inability to ensure supply. The guaranteed, dependable, low-carbon electrical supply found in places like Singapore is directly responsible for the concentration of multinational corporations and data centres there.

On the other hand, renewable developers point to inadequate grids in nations like the Philippines and Indonesia as the main obstacle to satisfying corporate demand for clean energy.

The VOLL analysis turns infrastructure investment into a matter of fiscal prudence by measuring the enormous economic cost of unreliability. The investment becomes economically necessary when the defined cost of inaction ($2.3 billion annual loss) clearly exceeds the capital expenditure needed for necessary modifications. ASEAN's smart-grid investment requirements are estimated to be between $4 billion and $10.7 billion.

Grid modernisation is a potent catalyst for job creation and economic stimulation in addition to reducing losses. It is anticipated that investments in the construction and upkeep of smart grids will generate hundreds of thousands of jobs in manufacturing, ICT deployment, technical services, and civil works. According to one estimate, smart-grid investments might boost local supply chains and technological capabilities, generating up to 650,000 jobs throughout ASEAN — a crucial, long-term developmental advantage.

illuminem Voices is a democratic space presenting the thoughts and opinions of leading Sustainability & Energy writers, their opinions do not necessarily represent those of illuminem.

Interested in the companies shaping our sustainable future? See on illuminem’s Data Hub™ the transparent sustainability performance, emissions, and climate targets of thousands of businesses worldwide.