Southeast Asia sits at a crucial juncture in its energy transition. As the world pursues sustainable development, the demand for renewable energy products, services, and technologies continues to grow. Traditional energy powerhouses like China and the United States are pouring billions into renewable infrastructure and innovation, including hydropower, wind and solar. This shift is reshaping global energy markets and geopolitical power dynamics, creating challenges for fossil fuel-reliant developing regions like Southeast Asia which risk being left behind in an increasingly green economy.
Home to over 690 million people across 11 countries, Southeast Asia is one of the world’s most climate-vulnerable regions.1 It faces increasingly severe tropical storms, major floods and droughts, forest fires, landslides, cyclones, and rising sea levels that threaten coastlines, cities, and people.2 Growing concerns over climate change and a high dependence on fossil fuels mean renewable energy investment in Southeast Asia is essential. However, many countries in the region lack the financial resources, technology, and infrastructure needed for a large-scale transition to renewable energy.3 Complicating this, Southeast Asia’s energy demand is expected to surge in the coming decades due to strong economic growth, rapid urbanisation, and expanding manufacturing capabilities.4
This explainer provides an overview of Southeast Asia’s energy transition, identifying the region’s energy demands, consumption trends and policies, as well as key projects and partnerships currently undertaken by the United States and Australia.
Southeast Asia’s energy demands and consumption trends
Southeast Asia is the world’s fourth-largest energy consumer and growing.5 The region’s energy demand increased by an average of 3% annually over the past 20 years,6 and is expected to continue rising at this rate until 2030.7 Estimates suggest Southeast Asia will account for 25% of global energy demand growth between now and 2035, second only to India.8
The region’s current energy mix is reliant on fossil fuels, with natural gas and coal accounting for 81.9%.9 In 2022, renewable energy made up 15.6% of the mix, primarily from hydropower, with solar and wind contributing smaller amounts.10
Southeast Asia's energy consumption mix is expected to move toward wind and solar energy, with the goal to generate 23% of its primary energy from renewables by 2025.
Fossil fuels will continue to dominate Southeast Asia's energy mix long into the future and are projected to account for 88% of the region's primary energy supply by 2050.11 While this has provided affordable, reliable electricity and driven socioeconomic growth, it has also worsened air pollution and carbon emissions.12 If significant investments in local energy production are not made, Southeast Asia could become a net importer of natural gas by 2027.13 This would leave Southeast Asia vulnerable to fluctuating international energy prices and supply, such as oil and gas price increases arising from conflicts in Europe and the Middle East.
Southeast Asia's energy consumption mix is expected to move toward wind and solar energy,14 with the goal to generate 23% of its primary energy from renewables by 2025.15 However, Southeast Asia's renewable energy transition faces significant hurdles. There is limited local manufacturing capacity, heightening supply chain vulnerabilities, and outdated power grids struggle to accommodate variable energy generation from solar or wind — fostering an increased reliance on fossil fuels.16
Renewable energy policies in Southeast Asia
Against this backdrop, the Association of Southeast Asian Nations (ASEAN) is increasingly prioritising renewable energy and repeatedly acknowledged this challenge in various policy documents. The 2021 ASEAN State of Climate Change Report highlighted the urgent need for member states to enhance their climate science capabilities, foster greater cooperation and knowledge sharing, and prioritise the transition to net-zero emissions.17 These goals informed the ASEAN Strategy for Carbon Neutrality, a roadmap designed to guide the region towards a more sustainable energy future.18
In addition to regional targets, eight of the ten ASEAN member states have set net-zero emissions targets as of October 2024,19 with many integrating renewable energy generation targets into their national power development plans. There is variation among these targets, ranging from 30% renewable installed capacity up to 70%.20
Yet there is a significant gap between current policies and the levels required to meet climate goals. Despite efforts, Southeast Asia is far behind the 229GW of new wind and solar necessary in the region to meet the net-zero target in the Paris Agreement.21
Substantial disparities exist in renewable energy adoption across ASEAN countries. Cambodia,22 Myanmar,23 Laos,24 and Vietnam25 have renewable energy shares exceeding 35%, surpassing the ASEAN Plan of Action for Energy Cooperation target of 23% for 2021-2025.26 In contrast, Malaysia,27 the Philippines,28 Thailand,29 and Indonesia30 fall short of this target, with renewable energy shares of 18.4%, 22.1%, 18.3%, and 18.2%, respectively. Brunei31 and Singapore32 have the smallest renewable energy shares in the region, at 1% and 3.5%, respectively. The region’s energy landscape is complex, shaped by uneven resource distribution, energy needs, and varying national priorities.
Mainland Southeast Asia
In mainland Southeast Asia, hydropower plays a significant role in energy production.33 In recent years, the construction of hydroelectric dams on major transnational rivers like the Mekong has increased dramatically, particularly in Laos, Cambodia and Vietnam.34
As of recent estimates, there are over 661 operational dams in the Mekong basin, with 209 used for hydro-power.35 The total capacity of these operational dams has increased from 1242 megawatts (MW) in the 1980s to 36058 MW today.36 With 54 dams under construction and 331 more planned, this basin-wide capacity is expected to double by the 2030s, with Laos experiencing the highest growth.37
Countries in the Mekong region also export energy to neighbouring countries. Laos, often referred to as the ‘battery of Southeast Asia,’ has expanded its dam network to meet its domestic energy needs and to export electricity to Thailand and China.38
Maritime Southeast Asia
In maritime Southeast Asia (Brunei, Malaysia, Singapore, Indonesia, the Philippines, and Timor-Leste), there is less focus on hydropower.39 Given these countries are less equipped to generate large baseload power,40 there is greater emphasis on variable renewables like wind and solar. This will require grid modernisation investments. For example, Vietnam’s solar boom in 2020, which saw solar PV capacity reach 16.5GW, nearly 160 times higher than 2018, placed the energy grid under enormous strain.41
Renewable energy preferences differ across these countries. Brunei, Malaysia, and Indonesia are particularly focused on solar power, while Singapore, with its limited natural resources, relies on low-carbon energy imports.42The Philippines has made notable advances in wind power. Indonesia and the Philippines are rich in geothermal energy, collectively holding nearly 25% of the world’s geothermal generation capacity.43
Transition will require major investments
Estimates suggest that the region requires tens of billions of dollars of investment annually through 2030 to build the renewable capacity and grid infrastructure needed to meet the Paris Agreement’s 1.5°C target.44 Historically the public sector has funded ASEAN’s power development,45 but rising public debt levels will likely limit the fiscal resources available for renewable projects.46Therefore, private investment and development finance will be essential. The International Energy Agency estimates that over 70% of the necessary investment for the region’s energy transition in the next decade will come from private sources.47
The International Energy Agency estimates that over 70% of the necessary investment for the region’s energy transition in the next decade will come from private sources.
The private sector has increasingly invested in renewable energy globally, rising from US$1.2 trillion in 2019 to US$1.7 trillion in 2023.48 However, this growth has primarily concentrated in advanced economies and major developing countries.49 Southeast Asia attracts only 2% of global clean energy investment, despite accounting for 6% of global GDP, 5% of global energy demand and 9% of the world’s population.50
A lack of domestic and private sector finance means other countries are stepping in to fill the gap.
China’s influence in Southeast Asia
China is the largest international provider of renewable energy financing to the region,51 with Southeast Asia hosting 31% of China-financed global power generation capacity. Key countries include Indonesia (17.7 GW), Vietnam (11 GW), Myanmar (7 GW), and Malaysia (6 GW).
A dependence on Chinese technology and investment gives China significant geopolitical leverage in Southeast Asia. Despite a decline in Chinese development financing — disbursements dropped to US$3 billion in 2022, one-third of what was spent in 2015 — Beijing remains deeply involved in the region.52 It is financing 24 of the regions’s 34 major infrastructure megaprojects, ensuring its continued dominance as the primary infrastructure financier.53
However, China’s own hydroelectric dams on the Mekong river have faced significant scrutiny in the Southeast Asian downstream region, largely due to environmental, ecological, financial and geopolitical concerns.54 Hydropower dams have “inexorably” altered the river’s natural flow, with large dams worsening water shortages in downstream parts of the river basin during some of the worst drought years between 2019 and 2021.55 Notably, for part of 2019, while China experienced normal to above-average precipitation in most of its part of the Mekong River basin, its dams on the river's upper reaches held back more water than ever.56 This exacerbated the impact of an unprecedented wet season drought downstream, particularly in Thailand, Cambodia, and Vietnam. The water shortages had significant consequences for water security, food security, and livelihoods of the local populations in these countries.57
US engagement in renewable energy in Southeast Asia
Southeast Asia is the United States’ fourth-largest goods trading partner58 and the United States is the largest source of foreign direct investment in the region.59 The Biden administration increasingly focused on deepening US ties with Southeast Asian countries, recognising regional stability and prosperity to be crucial to achieving its broader strategic goals in the Indo-Pacific.
Although the second Trump administration has flagged significant changes to US policy on climate change, energy security remains a top priority for the new administration and was a key element of its engagement with Japan in February 2025.60 Southeast Asian engagement with the United States on energy issues framed in security and supply chain terms could continue to produce results for the region, even while climate-specific rhetoric is wound back in the coming months. China’s significant interests in Southeast Asian energy also provide a powerful impetus for greater US infrastructure investment in the region as part of its broader strategic competition strategy.61
For example, the first Trump administration saw the establishment of a new Japan-US Mekong Power Partnership (JUMPP) in 2019, which supports 101 technical activities, including market analysis, regulatory exchanges, and capacity-building workshops to support clean energy integration and build more resilient power systems.62
However, the Trump administration’s abrupt freeze of overseas aid and development funding and reported plans to dismantle the United States Agency for International Development (USAID) altogether places key initiatives at risk.
In 2023, USAID and ASEAN established the USAID Southeast Asia Smart Power Programme (SPP) to support Southeast Asia’s goal of achieving net-zero emissions by 2050.63 SPP is a five-year US$40 million project to mobilise a further US$2 billion to decarbonise power systems, boost regional energy trade, and accelerate the deployment of clean technologies.64
Similarly, USAID’s partnership with the Asian Development Bank (ADB) has been pivotal in financing clean energy projects in Southeast Asia, mobilising over US$7 billion in investment and installing more than 9 GW of clean power since 2019.65 In 2024, the partnership was extended until 2029, increasing USAID’s contribution by up to US$200 million.66 The US International Development Finance Corporation (DFC) loaned US$126 million for geothermal energy development in East Java, Indonesia.67
As top administration officials, and President Trump himself, cast doubt over the role of USAID, there is growing uncertainty about continued US engagement on these projects going forward.
Australia’s engagement in renewable energy in Southeast Asia
Australia has positioned itself as a key player in advancing renewable energy and sustainable development across Southeast Asia. Key government policies and documents emphasise the importance of investing in Southeast Asia, highlighting opportunities for private investment in the region’s energy sector. For instance, the Australian Government’s 2023 report Invested: Australia’s Southeast Asia Economy Strategy to 2040 underscores Canberra’s role in further developing the region’s renewable energy projects and clean energy supply chains.68
To support this, Australia’s US$832.8 million Overseas Development Agency budget from 2024-25 will be guided by eight new Southeast Asia Development Partnership Plans, focusing on the energy transition.69 Bilaterally, Australia has launched the US$129 million Australia-Indonesia Climate and Infrastructure Partnership70 and US$67 million to support Vietnam’s green economy.71 The US$142 million Mekong-Australia Partnership (MAP) focuses on clean energy through the Water, Energy, Climate (MAP-WEC) Program.72
Australia’s US$832.8 million Overseas Development Agency budget from 2024-25 will be guided by eight new Southeast Asia Development Partnership Plans, focusing on the energy transition.
Like the United States and Japan, Australia is also supporting Southeast Asia’s energy transition through technical assistance. The Partnerships for Infrastructure (P4I) program supports 28 partner agencies across eight Southeast Asian countries and ASEAN to help them address their substantial infrastructure investment and project needs, including for renewable energy.73 Australia is also supporting the establishment of the ASEAN Centre for Climate Change.74
One opportunity where Australia could provide valuable support is Timor-Leste, one of the world’s smallest and youngest economies. Despite its dependence on oil and gas reserves for revenue,75 Timor-Leste is aiming for renewables to account for up to 50% of its energy mix by 2030.76 Through the US$2.5 billion Australian Infrastructure Financing Facility for the Pacific, Australia can directly invest in Timor-Leste’s energy infrastructure and provide technical assistance, building on its work with Power Up and Master Electricians Australia to deliver clean solar energy to health facilities in Cova-Lima Province.77
Conclusion
As one of the world’s fastest-growing, but most climate-vulnerable regions, Southeast Asia will require major investment in infrastructure, and social and economic development, in the coming years. Australia and the United States have both supported Southeast Asia’s energy transition through efforts including technical assistance, infrastructure partnerships, and multilateral financing and private sector investment. However, going forward, Southeast Asia will continue to navigate shifting geopolitical dynamics, surging energy demand, and growing uncertainty over the future of US regional engagement and foreign assistance under the new Trump administration.