Southeast Asia accounts for 9% of the world's population, 6% of the world’s GDP and 4% of world energy consumption. The region’s population is expected to grow to nearly 800 million by 2050; together with continued economic growth this will have strong implications for energy demand. Investment will determine how this rising demand is met, with implications for security, affordability and alignment with sustainability goals. Eight out of 10 countries in the region have announced target dates of carbon neutrality: Singapore, Malaysia and four others in 2050; Indonesia in 2060; and Thailand in 2065.

For the moment, there are significant gaps between investment trends and the region’s long-term goals. Southeast Asia’s spending on clean energy represents only about 2% of the global total. Annual average energy investment over the last three years was USD 72 billion, but would need to increase to over USD 130 billion to align with the APS by the end of the decade. There would also need to be a shift in the allocation of investment towards cleaner technologies: clean power would be the largest share of investment – nearly 40%.

Some countries are signalling a shift in priorities. Viet Nam, for instance, approved its 8^th Power Development Plan in 2024, which seeks to reshape its energy system, including extensive development of renewable technologies as well as the use of low-emissions hydrogen and ammonia and a reduction in reliance on unabated coal. However, the implementation plan is not yet fully clear and over 10 GW of new coal-fired capacity remains in the pipeline.

Updated expansion plans for low-emissions power and infrastructure, and changes in power purchasing agreements, are an important signal to investors. However, uncertainties remain in many countries over remuneration mechanisms for renewable output, which continue to affect risk perceptions and the cost of capital. 

International development finance and support is crucial to Southeast Asia’s energy transitions. The Just Energy Transition Partnerships (JETPs) launched in 2021 in Indonesia and Viet Nam provide a framework to mobilise capital for investments in clean energy and support the phasing out of coal-fired power generation. The release of the Indonesia Comprehensive Investment and Policy Plan in November 2023 was an important milestone for the JETP and is expected to mobilise USD 97 billion in power sector investments in Indonesia. The Asia Zero Emission Community initiative by Japan provides financial support of up to USD 8 billion to 2030 for energy projects in participating countries: Indonesia, Philippines, Thailand and Viet Nam. The ASEAN Taxonomy and ASEAN Transition Finance Guidance provide a valuable framework for the financial industry to improve credibility and transparency to capital providers.