Southeast Asia is emerging as a key player in the global clean energy transition, though fossil fuels—particularly coal—continue to dominate the region’s energy mix, according to the International Energy Agency’s (IEA) World Energy Investment 2025 report.
The region, classified as an IEA Association area, has seen energy demand surge more than 35% since 2015, propelled by rapid industrial growth, urbanization, and a rising middle class. Electricity demand has grown even faster, up over 60% during the same period.
Clean energy investment in Southeast Asia climbed to USD 47 billion in 2025, a significant increase from USD 30 billion in 2015. However, fossil fuels still accounted for 60% of total energy investment over the past decade, with coal absorbing USD 110 billion—mainly in Indonesia and Vietnam. The region’s installed coal capacity stands at 121 GW, with more than USD 130 billion in unrecovered capital, heightening stranded asset risks.
Despite this, momentum is shifting. The report notes that Southeast Asia ranks second only to China in solar manufacturing and is seeing increasing interest from global investors. Under the IEA’s Stated Policies Scenario (STEPS), clean energy investment in the region is projected to quadruple by 2035, reaching USD 373 billion.
Yet challenges remain. Fossil fuel investment in Southeast Asia is projected to fall by USD 20 billion over the next decade, while renewables, storage, and grid investments will need to double. Achieving this will require a significant scale-up in international finance and blended capital mechanisms, as domestic commercial lending—currently comprising 75% of clean energy finance—may fall short of meeting future needs.
“Catalytic capital and blended finance are critical tools to de-risk projects and attract private capital,” the IEA said. However, it warned of “policy and political inconsistencies,” citing retroactive subsidy changes in Vietnam that could jeopardize over USD 13 billion in investments.
Meanwhile, sustainable debt markets in the region are expanding, with issuances growing from USD 17 billion in 2020 to USD 60 billion in 2024, supported by frameworks like the ASEAN Taxonomy for Sustainable Finance.
Chinese energy and EV companies have also accelerated their push into Southeast Asia, with over USD 80 billion pledged to manufacturing facilities in Indonesia, Thailand, and other regional hubs. Notably, BYD and SAIC have established or expanded EV production bases in Thailand and Indonesia.
Country-specific developments are also significant:
Indonesia, the world’s largest nickel producer, has attracted USD 50 billion in greenfield mining investment and launched a coal-focused emissions trading scheme.
Vietnam and Thailand remain key solar manufacturing centers, though Vietnam faces investor uncertainty due to subsidy policy changes.
The Philippines is piloting the early retirement of coal plants via transition finance.
Singapore is playing a pivotal role in green finance innovation, while Malaysia continues to attract biofuel investments.
Despite growing renewable ambitions—eight out of ten Southeast Asian nations have announced carbon neutrality targets—coal remains entrenched. The region faces a projected USD 140 billion fossil fuel import burden by 2030 under more ambitious transition scenarios, increasing energy security concerns.
To meet its targets, Southeast Asia must accelerate the managed phase-out of coal, improve policy consistency, and unlock diversified capital flows for grid, storage, and end-use electrification, the report concludes.
