Southeast Asia faces a pivotal energy crossroads as it prepares its 2025 Nationally Determined Contribution climate action plans. Despite heavy reliance on coal and natural gas, the region’s abundant solar and wind resources offer a path to a cleaner future. Accelerating renewable energy deployment requires stronger policies, regional cooperation through the ASEAN Power Grid and innovative finance models. Leaders’ decisions will shape whether the region will achieve its renewable energy goals.

As Southeast Asian countries undertake their 2025 Nationally Determined Contribution climate action plans, the region stands at a pivotal moment. The question is whether ASEAN leaders will seize this opportunity to accelerate renewable energy deployment or whether they will reinforce their reliance on fossil fuels.

The global energy landscape is experiencing a seismic shift. Since 2021, electricity generation from coal and gas has remained stagnant, while solar power generation has grown significantly, signalling a decisive move towards clean electricity as ageing fossil fuel plants phase out. At the heart of this transformation is China’s manufacturing dominance in solar panels, wind turbines, electric vehicles and batteries, positioning the nation as a central force in the global green energy supply chain.

But Southeast Asia has relied heavily on fossil fuels to power its development. Only 15.6 per cent of ASEAN’s total primary energy supply was renewable energy in 2022. For a more balanced perspective, it is worth noting that in ASEAN, the cost of electricity from hydro, solar and geothermal is becoming cheaper than bioenergy and coal, reflecting a growing momentum in the power sector. In the region, solar power capacity increased from 11 gigawatts in 2019 to 26 gigawatts in 2023. But coal remained dominant in the region’s energy mix, accounting for 30.5 per cent and natural gas — often cited as a ‘transition’ fuel — contributed 19.7 per cent.

Despite early calls for a phase-down, baseline scenario projections forecast that coal and natural gas will remain substantial components of ASEAN’s energy mix up until 2050 — though the region can expect advancements in renewable energy technologies, declining costs and growing renewable energy investments.

Southeast Asia is emerging as a significant exporter of liquefied natural gas and coal. By 2023, natural gas and coal exports exceeded the region’s imports, with export values reaching 29 million tonnes of natural gas equivalent and 146 million tonnes of coal equivalent, respectively. The region ranks among the top global liquefied natural gas exporters, shipping to China, Japan and South Korea.

But while ASEAN is projected to become a net importer of natural gas by 2027, coal exports are anticipated to continue until at least 2050, though their balance will likely decline.

ASEAN governments are caught between safeguarding the revenues they raise from coal and gas exports — and preparing for when those markets dry up or become costly imports — and reaching for a cleaner, more secure future.

Yet the human and environmental costs of continued fossil fuel reliance grow harder to ignore. Cities like Jakarta and Bangkok wake up under haze while farmers in the Mekong Delta watch fisheries collapse as river ecosystems experience both drought and flood. Without targeted and systematic decarbonisation efforts, climate events are expected to increase in frequency and severity.

But change is not easy. For fossil fuel companies and lenders to the fossil fuel industry, retiring those assets early would require them to forego cash flows.

Renewable energy investment in ASEAN is influenced by factors including costs, environmental awareness, social norms, energy consumption habits and the attribution of responsibility for environmental outcomes.

Yet, there is reason for cautious optimism. Sun and wind resources are abundant in Southeast Asia and solar panel and wind turbine costs continue to fall. Ambitious targets already exist — ASEAN aims to lift renewable capacity to 35 per cent in installed power capacity by 2025, a goal that would require a 15 per cent jump from the region’s post-Paris baseline. If ASEAN governments hold firm on policies like competitive auctions, feed-in tariffs and streamlined permitting, they could unleash a wave of investment in renewables.

On the finance side, new partnerships are taking shape. Blended finance models — mixing concessional loans from development banks with private capital — can lower risks for early renewable projects. Indonesia and Vietnam are adopting Just Energy Transition Partnership financing packages despite the United States’ withdrawal from these agreements leading to a reduction in funding. With well-structured deals, coal sector workers can access retraining programs and social support, while stranded asset funds buy out plants and channel resources into green industries.

But a truly regional approach could be most potent. ASEAN leaders must increase the share of green energy in the ASEAN Power Grid initiative. By harmonising regulations and sharing research and development on battery storage between member states’ business sectors, ASEAN countries can smooth variable output and cut costs for everyone. Joint procurement of panels, turbines and pumped hydro could deliver bulk discounts — just as the European Union does in various sectors. Operationalising Article 6 of the Paris Agreement by establishing a regional carbon market mechanism would enable member states to mobilise climate finance.

As countries sharpen their climate pledges in the run-up to COP30 in Belem, they should enshrine precise coal phase-out dates, stop developing new coal power plants and establish firm renewable energy ratio targets. Stronger Nationally Determined Contributions would not only signal global ambition but unlock new pools of multilateral funding and spur domestic reforms that would boost investor confidence.

Southeast Asian leaders’ decisions will determine whether the region can break free from the chains of fossil fuel dependency and join the global renewable energy movement to achieve the ASEAN 2045 Vision.

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Irvan Tengku Harja is Research Lead and Program Manager for Just Energy Transition and Climate Action at The Habibie Center, Jakarta.

This article was published on eastasiaforum.org on 09 August 2025

https://doi.org/10.59425/eabc.1754776800