While fossil fuels continue to dominate, the APAC region is set to continue on its promising renewables trajectory. But what sets it apart, and where are the emerging opportunities?

The International Energy Agency (IEA) projects “rapid expansion” in renewable energy in south-east Asia – and APAC more broadly – in the years ahead, driven by a surge in electricity demand as countries such as Vietnam, Indonesia, Thailand and Malaysia continue to increase their participation in global goods and services value chains. One of the biggest sources of new electricity demand will come from the construction of data centres, which the accounting firm KPMG projects will see a compound annual growth rate of 13.1 per cent between 2025 and 2030, making APAC the fastest-growing region in the world.

The latest data from the IEA shows hydro as the dominant form of renewable energy for electricity generation in south-east Asia, accounting for 204 terawatt hours (TWh) in total in 2023. That figure is forecast to keep rising but will eventually be overtaken by solar PV in 2042 and wind in 2049 under the IEA’s “State Policies” scenario. In the IEA’s “Announced Pledges” scenario, both solar and wind would overtake not only other forms of renewables earlier, but also coal and gas, becoming the dominant sources of electricity in the region – even while fossil fuels continue to play a role.

 

 

To meet Asia’s growth ambitions, investment across both fossil fuel and renewable energy systems will be necessary. In his opening remarks to the Energy Asia conference in June 2025, Tengku Muhammad Taufik, President and Group CEO of PETRONAS, the Malaysian global energy company, said: “Parts of Asia enjoy abundant solar irradiance. Here, we see long coastlines and annual monsoon winds, which present vast and untapped renewables potential.” The industry association SolarPower Europe says that APAC was responsible for 70 per cent of new solar capacity in 2024. The Global Wind Energy Council reports a similar growth outlook for wind; in November 2024, it forecast that 61 per cent of new investment worldwide between 2024 and 2030 would be in APAC.

Another, often overlooked, form of renewable energy with the potential to change the region’s energy mix is geothermal. Indonesia is estimated to sit atop around 40 per cent of the world’s geothermal capacity, owing to its volcanic and seismic activity. So far, it has struggled to attract the investment necessary to capitalise on this opportunity. Should it be able to meet the three needs – stable policies, capital deployment and cooperation – it could help to power not only itself, but also neighbouring countries, if and when the ASEAN Power Grid – an ongoing project to connect the electricity grids of the 10 ASEAN members – becomes operational.

 

 

While ensuring energy security and reducing emissions are the stated objectives of countries around the world, geoeconomic considerations are becoming equally important, if not more so, according to analysis by the ISEAS–Yusof Ishak Institute, a Singapore-based think tank. Most nations in APAC rely heavily on imports to meet their energy needs, making them vulnerable to supply disruptions caused by regional conflicts, trade wars and blockages to key trade routes for oil and gas. A hastened drive to increase renewables won’t completely alleviate this vulnerability because, outside of China, the critical minerals necessary for batteries and other components vital to the sector are in short supply. But it would lessen exposure.

 

“South-east Asia has a strong commitment to shape policies that are appropriate to the region, rather than policies that are coming from north-western Europe”

 

Daniel Yergin, Vice Chairman of S&P Global, argues that the APAC region’s role in the energy transition is to lead by example – taking its own approach to the energy mix between fossil fuels and renewables and, by doing so, showing others the way. “South-east Asia has a strong commitment to shape policies that are appropriate to the region,” he says, “rather than policies that are coming from north-western Europe.”

 

 

Whether south-east Asia’s surge in renewables will be as strong as forecast will depend on a number of factors. “We need [stable] policies, we need capital deployment,” says Tengku Taufik. “And we need people to act together across industries.” Those are complicated needs on their own, but, in combination, they present a far larger challenge – particularly in a region that is so economically, politically and geographically dispersed.

 

Source from Financial Times