Southeast Asia will be one of the world's largest engines of energy demand growth over the next decade as rapid economic, population and manufacturing expansion pushes up consumption, according to a new report from the International Energy Agency (IEA), posing challenges to the region's energy security and efforts to meet national climate goals.
Based on today's policy settings, Southeast Asia will account for 25% of global energy demand growth between now and 2035, second only to India and more than double the region's share of growth since 2010. Southeast Asia's energy demand exceeds that of the European Union by mid-century.
Growth is led by the power sector. The report predicts Southeast Asia's electricity demand will surge by 4% a year, with rising use of air conditioning amid more frequent heat waves a big driver of increased power consumption.
Clean energy sources such as wind and solar, as well as modern bioenergy and geothermal energy, are expected to meet more than a third of the region's energy demand growth by 2035, the report said. That's an improvement over the past, but not enough to curb the region's energy-related carbon dioxide (CO2) emissions, which are expected to increase by 35% between now and mid-century.
To reverse this, the report finds, a major push is needed to align with the outcomes of the COP28 climate change conference and meet national targets set by the region, all of which mean cutting today's emissions in half by 2050. Today, the 10 economies that make up the Association of Southeast Asian Nations (ASEAN) are among the fastest growing in the world, with eight of them setting net-zero emissions targets.
"Southeast Asia is one of the most economically dynamic regions in the world, accounting for a quarter of global energy demand growth over the next decade as its population, prosperity and industry expand," said Fatih Birol, IEA Executive Director. "Countries in the region have a diverse energy mix, including highly competitive renewables. But clean energy technologies are not advancing fast enough, and continued heavy reliance on fossil fuel imports puts countries at high risk for the future. Southeast Asia has made great progress on issues such as energy access, clean cooking and developing clean energy manufacturing, but now must step up efforts to deploy these technologies domestically. Access to finance and investment in the region's fast-growing economies will play a key role in strengthening their energy security and meeting their emissions reduction targets."
The report emphasizes that scaling up clean energy investment is essential for Southeast Asia to reduce emissions. To date, the region as a whole has attracted 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. Current investment levels will need to increase fivefold - to $190 billion by 2035 - to put the region on a path consistent with achieving its announced energy and climate goals. Scaling up clean energy investment will also need to be accompanied by strategies to reduce emissions from the region's relatively young coal-fired power plants, which are less than 15 years old on average.
In addition to deploying technologies such as wind and solar, building the associated infrastructure is critical to ensuring a secure and flexible power system. The expansion and modernization of the region's grid to support a larger share of variable renewable energy will require a doubling of annual investment in the sector to nearly $30 billion by 2035, the report said. This includes regional cooperation initiatives such as the ASEAN Power Grid and renewable energy microgrids serving islands and communities in remote areas.
The report highlights how the benefits of an accelerated clean energy transition are being felt across Southeast Asia, with more than 85,000 jobs created since 2019, as well as further potential to expand clean energy technology manufacturing and critical mineral processing across the region. Indonesia, for example, has rich nickel reserves and is a major producer of lithium-ion batteries and components. Vietnam, Thailand and Malaysia are the largest manufacturers of solar photovoltaic systems after China. Singapore, as the world's largest bunkering port, can play a key role in efforts to reduce emissions from the transport of fuels such as ammonia and methanol.
At a time of rising geopolitical tensions and growing climate risks, international cooperation through organizations such as ASEAN is essential to advance a safe, people-centered clean energy transition. The IEA stands ready to support Southeast Asian countries in their efforts to achieve these goals. The opening of the IEA's new office in Singapore, the first outside of its Paris headquarters in the agency's 50-year history, is a concrete example of the IEA's deepening engagement with countries in Southeast Asia and beyond to strengthen energy security and accelerate clean energy transitions.