Southeast Asia’s BESS developers must ‘engage early with regulators, utilities and communities’

Last year, ahead of the third edition of Energy Storage Summit Asia in 2025, the developer gave an interview on a similar theme of lessons learned in Japan that could be broadly applied in earlier-stage markets across Southeast Asia and the wider Asia-Pacific (APAC) region.    

At that time, in Q3 2025, Mahdi Behrengrad said that making money from energy storage in Japan could often be a difficult and “brutal” business, noting that high past revenues from opportunities like ancillary services were no indication of continued good fortune.

Speaking last week, the Pacifico Energy energy storage lead said the message is even clearer today.

“Japan has very interesting opportunities regarding the size [of the market], the inherent need for energy storage, the security stability it brings, while showing clear pitfalls that Southeast Asian nations should carefully watch,” Behrengrad said.

After an initial boom in development and a wave of excitement, “everything has become more strict, rather than more accommodating” in the space of about three or four years, beginning with the regulatory perception of storage.

“From the grid connection aspect, from the market participation aspect, from the environmental aspect, from the permitting aspect; everything got more strict in a matter of a few years,” he said.   

“That’s the pattern to be watched, and a lesson for Southeast Asia, that engaging this conversation with the regulators early on should be in the list, but it’s something that was not done in Japan, and Japan’s regulators and utilities got caught off guard by the immense amount of interest in energy storage, and instead of welcoming it, it backfired.”

Rules and regulations can sometimes change suddenly

One example is how the rules of the Long Term Decarbonisation Power Sources Auction (LTDA), Japan’s relatively new low-carbon capacity market mechanism open to batteries and pumped hydro energy storage (PHES), have already changed.

In the two previous years’ auctions, bids were open to energy storage projects in two duration categories, one for 3-hour to 6-hour assets, the other for 6-hour duration systems. In the most recent running, only 6-hour duration or more was eligible.

Along with regulators, utilities, inundated with grid connection requests and BESS project proposals, are also making adjustments to their processes that can create challenges for developers.

“[For example], utilities are seeing more and more proposals, so that when you start planning for a project, or even when you think you’ve secured the project, the utilities are using far more and more tiny clauses, written here and there, to come back with far more costs, far longer grid work or severe technical requests,” he said.

“I have seen projects where, around a year before grid connection work, they’re asking if the battery should not participate in the frequency regulation market because it’s going to destabilise the voltage. How should a project planner look into that?”

“It’s a very difficult thing to forecast in advance, because there are very tiny clauses in the grid connection that can be imposed, if they think that the operation is going to have an adverse effect on the utility.”

Securing a grid connections is getting harder and even grid connections that are secured in Japan have “far less value” than before because both charging and discharging are non-firm.

At the same time, Japan is heading in the same general direction of the world toward protectionism, or an approach to infrastructure assets that is more grounded in security-based concerns.

“While I’m not arguing it’s the right thing or the wrong thing, we all know that when you start having a security-based look at anything, the business gets denser and more difficult.”

In Japan, changes to cybersecurity standards can impact many aspects of a project, and the introduction of standards and the project development cycle are not synchronised, so to speak.    

Hype and speculation harm market development

Undoubtedly, there is a lot of activity in the market beyond the LTDA, with dozens of projects sized at around 2MW/8MWh announced or brought into operation across Japan’s 10 regional grid service areas, along with a smaller number of larger projects.

However, there is a mismatch between “hype and interest” and “actual hardcore cash or actual deals on the market,” Behrengrad said. Some of the 2MW projects could also be considered “speculative and opportunistic” assets designed to make money, rather than infrastructure that truly benefits the grid.

With many of the larger projects developed through the LTDA, in which developers win long-term contracts to underwrite revenue from OCCTA, Japan’s association of transmission operators, but have to give back 90% of the revenue they earn through merchant operation, Behrengrad said there is no real motive to optimise market operation.

“You just install it, you operate it, no matter how optimally you do so, you’re going to get almost the same amount of money. The difference between a terrible operation and super smart optimal operation is just 10% of revenue that you keep after deduction.”

It isn’t just regulators or utilities that developers must engage with. Communities that will host these BESS assets are arguably just as important, or even more so.

Between battery storage and data centre developments, there is a boom in real estate acquisitions, which again, Mahdi Behrengrad argues, is a speculative effort, a “land grab,” which is taking place even as communities become more “skittish” and reluctant to host projects.

Even the concept of gaining approval from a local community is largely an as-yet-undefined term.

“It pits companies against local communities that might not have a techno-economic look at these things. It’s going to start a source of friction. This is the story we’re seeing, but I’m not naïve enough to think this is just Japan [it applies to].”

Energy storage enjoys high-level support that must filter downwards

Many Southeast Asian countries, much like Japan, have governments that have been openly supportive of the roles energy storage can play: in decarbonisation and integrating higher shares of renewable energy, in enhancing energy security and stability of the grid.

“It’s hard to argue against energy storage in the big scheme of things, if you are an energy specialist or even regulator, because it’s hard to find any asset like energy storage that is as fast to deploy, and the supply chain is very well shaped,” he said.

“It’s very hard to find any asset that is this versatile in energy infrastructure. So, it’s very hard to argue against it, but the devil is in the details. When you want to implement the projects, there are so many stakeholders with conflicting values, with different objective functions.”

Engagement with the full spectrum of stakeholders is essential, Behrengrad said, even before rapid deployment growth inevitably encounters deepening regulatory complexity, the concerns of local communities, and bottlenecks from a lack of a skilled workforce.    

“Developers, before jumping into business in developing countries, should see if they have that reach, lobbying power, or orchestration mechanism to prepare these diverse stakeholders: of utilities, of regulators, of local communities, to create a more supportive environment. It’s a team effort.”

Energy-Storage.news publisher Solar Media (part of the Informa Group) will host the Energy Storage Summit Asia 2026 on 1-3 July at QSNCC, Bangkok, Thailand. The conference takes place during ASIA Sustainable Energy Week 2026 (ASEW), the region’s most influential platform for driving clean energy. For more information, visit the official website.