Rystad Energy Insights: Forecasts Southeast Asia’s Renewable Investment to Exceed $76 Billion by 2025

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Southeast Asia is poised to become a major player in the global renewable energy market, with investments in cleaner and more environmentally friendly initiatives set to exceed $76 billion from 2023 to 2025, according to a comprehensive analysis by Rystad Energy. This commitment is expected to further escalate, reaching a projected total of $119 billion by the end of 2027. These investments are set to primarily revolve around wind, solar, and geothermal projects, marking a significant shift toward greener energy sources in the region.


National Oil Companies (NOCs) Lead the Charge
National Oil Companies (NOCs) in Southeast Asia are increasingly redirecting their focus towards sustainability. Notable examples include Indonesia’s Pertamina and Malaysia’s Petronas. Pertamina is expanding its involvement in geothermal energy, while Petronas is making significant strides in the carbon capture, utilization, and storage (CCUS) market. The Malaysian NOC, Petronas has announced plans to construct the world’s largest dedicated CCUS facility by 2025, a move that includes partnerships with international entities. This ambitious project aims to capture and securely store 3.3 million tonnes per annum (MTPA) of carbon dioxide (CO2) within Sarawak region reservoirs over 25 years.  Although the exact project cost has not been officially disclosed, estimates provided by Rystad Energy indicate that it may potentially reach $260 million by the year 2025. Additionally, Petronas subsidiary Gentari has invested heavily in solar capabilities, harnessing Malaysia’s vast renewable energy potential.

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Afiqah Mohd Ali, senior supply chain analyst at Rystad Energy, highlighted the importance of collaboration between private and public sectors to ensure the region’s sustainable growth. Ali stated, “Southeast Asia has historically seen slower progress in the development of clean energy projects. Effective collaboration between private and public sectors becomes crucial to ensure the region’s sustainable long-term growth. Asia is currently making significant strides in prioritizing the shift toward greener energy sources, supported by the renewed focus of NOCs. This strategic approach will be pivotal in driving Southeast Asia’s transition forward to sustainable energy.” 


Independent Power Producers (IPPs) Pave the Way
Among the key players in low-carbon expenditure, Pertamina Geothermal Energy (PGE), a subsidiary of the Indonesian NOC, leads the pack. PGE is committed to expanding geothermal projects, with investments totaling approximately $1.6 billion expected between 2023 and 2026. This contributes significantly to Indonesia’s growing geothermal capacity. Similarly, Petronas collaborates with international operators Eni and Euglena to explore decarbonization solutions, alongside its focus on the Kasawari CCUS project.

Global Interest and International Partnerships
While regional NOCs take the lead in Southeast Asian low-carbon initiatives, global giants like Shell and ExxonMobil are also showing interest in the Southeast Asian region and its low-carbon prospects. However, their immediate investments have primarily centered on Europe and North America.

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Petronas, for instance, has allocated $450 million for CCUS projects and $330 million for hydrogen developments between 2023 and 2026. Vietnamese NOC PetroVietnam is partnering with Danish company Orsted and T&T Group to launch the country’s first offshore wind projects. This partnership aims to generate approximately 13,665,600 megawatt-hours (MWh) annually using 20-megawatt (MW) turbines standing 150 to 200 meters tall. The estimated investment for the project ranges between $11.9 and $13.6 billion, underlining their unwavering commitment to sustainable advancement.

Oil and Gas Service Companies Pivot Towards Low-Carbon Ventures
Oil and gas service providers in Southeast Asia are adopting a dual strategy, capitalizing on the ongoing demand in the fossil fuel sector while strategically expanding into low-carbon markets. As Southeast Asian governments and financial institutions in the region extend incentives for renewable energy, service companies are increasingly motivated to participate in low-carbon ventures. This support is instrumental in strengthening the regional supply chain and addressing the growing demand for renewable energy infrastructure.

Diverse Approaches for a Sustainable Future
Southeast Asia’s transition to sustainable energy is driven by various countries within the region, each leveraging its unique advantages. Vietnam, the Philippines, and Indonesia are set to emerge as dominant forces in Southeast Asia’s low-carbon landscape between 2022 and 2026. Vietnam’s Power Development Plan VIII aims to significantly reduce reliance on fossil fuels by expanding both onshore and offshore wind capacity.

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The Philippines is making a resolute commitment to boost its reliance on renewables, targeting a 35% share in its generation mix by 2030 and pushing for 50% by 2050. These efforts are expected to attract substantial foreign investment in solar, wind, and energy storage projects.

Indonesia is offering fiscal incentives to catalyze investments across various low-carbon sectors, aiming for net-zero emissions by 2060. Additionally, Malaysia and Thailand have set their sights on achieving net-zero greenhouse gas emissions by 2050 and 2065, respectively. These countries’ strategies and incentives form the foundation of their energy transition goals, with a focus on attracting third-party investments to support their ambitions.

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