Southeastasia Energy Out Look 2022

Southeast Asia
Energy Outlook 2022

INTERNATIONAL ENERGY AGENCY
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Southeast Asia Energy Outlook 2022 Foreword
Foreword
This fifth edition of the Southeast Asia Energy Outlook underscores Ministers Meeting, we commemorated ten years of excellent IEA-
the close relationship that the International Energy Agency (IEA) ASEAN collaboration. As I have long said, Southeast Asia is an
enjoys with the countries of the Association of Southeast Asian emerging heavyweight in global energy. As such, supporting the
Nations (ASEAN). region in tackling key energy challenges will continue to be a central
part of the IEA’s mission, both by working with individual countries
This work is the first region-focused energy outlook to be published
and at the ASEAN level. Indeed, the findings and insights contained
by the IEA since the onset of the Covid-19 pandemic and the 26th
in this report have been underpinned by and are a reflection of the
Conference of the Parties in Glasgow, where participants reaffirmed
strength of our partnerships with all of the countries in Southeast
their commitments to tackle climate change. The challenges facing
Asia.
energy policy makers – to provide clean, secure and affordable
energy to all – have been made even more urgent by Russia’s This report was a collaborative effort across the IEA under the
invasion of Ukraine. This report highlights how countries in Southeast outstanding direction of Tim Gould and the World Energy Outlook
Asia can respond to the current energy crisis in ways that improve team. I take this opportunity to thank everyone, inside and outside of
their energy security and also advance worldwide efforts to mitigate the IEA, whose support and expertise helped make it possible.
climate change.
Dr. Fatih Birol
The IEA and ASEAN began formal cooperation in energy-related
Executive Director
activities in 2011. In 2019, the IEA was named a “key strategic
partner” to ASEAN in recognition of its extensive support in all International Energy Agency
aspects of Southeast Asia’s energy priorities under the ASEAN Plan
.
of Action on Energy Cooperation. At last year’s ASEAN Energy
PAGE | 1
Southeast Asia Energy Outlook 2022 Table of contents
Table of Contents
Key findings ..................................................................................................... 4

Energy in Southeast Asia .............................................................................20
Today’s energy trends..................................................................................21
Factors shaping the energy outlook .............................................................34
Southeast Asia’s Energy Prospects ............................................................47
Scenarios to 2050 ........................................................................................48
Implications ..................................................................................................84
Southeast Asia’s Energy Perspectives .......................................................91
Investment for clean energy transitions .......................................................92
Low emissions fuels in Southeast Asia’s transition ...................................103
The role of flexibility in boosting power sector decarbonisation ................114
Critical minerals in Southeast Asia ............................................................125
Annex ............................................................................................................137
PAGE | 2
Southeast Asia Energy Outlook 2022 Introduction
Introduction
The Southeast Asia Energy Outlook 2022 is the fifth edition of this The Stated Policies Scenario (STEPS), which reflects the countries’
World Energy Outlook Special Report. Building on its important current policy settings based on a sector-by-sector assessment of the
partnership with Southeast Asia, the International Energy Agency specific policies that are in place or have been announced.
(IEA) has published these studies on a regular basis since 2013. The
The Sustainable Development Scenario (SDS), which delivers on
studies offer insightful prospects for the ten member countries of the
the Paris Agreement goal to limit the temperature to “well below 2°C”,
Association of Southeast Asian Nations (ASEAN) – Brunei
alongside the goals on energy access and air pollution. This scenario
Darussalam, Cambodia, Indonesia, Lao People’s Democratic
is consistent with Southeast Asia’s current announced climate
Republic (Lao PDR), Malaysia, Myanmar, the Philippines, Singapore,
aspirations.
Thailand and Viet Nam.
The Net Zero Emissions by 2050 Scenario (NZE Scenario), which
Since the last edition of this report, the energy prospects for
sets out a pathway for the energy sector to achieve net zero CO2
Southeast Asia have been affected by the Covid-19 pandemic, new
emissions in 2050. It also achieves universal access to modern
energy and climate policy commitments and, most recently, high and
energy by 2030 and reduces energy-related air pollution significantly.
volatile prices exacerbated by the Russian Federation’s (hereafter,
The NZE Scenario provides a global benchmark against which
“Russia”) invasion of Ukraine. Covid-19 led to a major economic
changes at the regional level can be assessed. The NZE Scenario
shock for countries in Southeast Asia and the economic recovery now
would limit the rise in global average temperatures to 1.5°C (with a
risks being slowed by higher energy prices. In the run up to the UN
50% probability).
Climate Change Conference (COP26) in November 2021, several
governments in Southeast Asia announced ambitious targets for After a scene-setting discussion in the first chapter, the second
reaching neutrality and curbing reliance on coal-fired power. chapter describes scenario projections across all fuels and
technologies. The third chapter analyses four key areas in depth:
Against this backdrop of new uncertainties and ambitions, this IEA
investment for the clean energy transition, power sector
report explores possible trajectories for Southeast Asia’s energy
decarbonisation focusing on system flexibility, low-carbon fuels, and
sector, differentiated primarily by the policies pursued by
the supply and demand of critical minerals.
governments across the region. It relies on the scenarios included in
the latest edition of World Energy Outlook, namely:
PAGE | 3
Southeast Asia Energy Outlook 2022 Key findings
Key findings
PAGE | 4
Southeast Asia has developed rapidly over the past two decades and the region is a major
engine of global economic growth, but there are strong country-by-country variations
Total primary energy supply by country, by fuel, in Southeast Asia, 2000-2020

Total primary energy supply by fuel Total primary energy supply by country
30
25
20
15
EJ
10
2000 2005 2010 2015 2020 2000 2005 2010 2015 2020 e
Renewables Traditional use of biomass Lao PDR Brunei Cambodia Myanmar
Natural gas Oil Singapore Philippines Malaysia Viet Nam
Coal Thailand Indonesia
IEA. All rights reserved.
Note: EJ = exajoule; 2020e = estimated values for 2020.
PAGE | 5
Southeast Asia’s policy choices will have huge implications for its future energy mix
Energy demand trends in Southeast Asia by scenario, 2020-2050

Oil demand Natural gas demand Coal demand Renewables in power
10 400 600 2 800
7.5 300 450 2 100

mb/d
mtce
TWh
bcm
5 200 300 1 400
2.5 100 150 700
0
2020 2030 2040 2050 2020 2030 2040 2050 2020 2030 2040 2050 2020 2030 2040 2050
STEPS SDS
PAGE | 6
With today’s policies, energy demand, fossil fuel imports and emissions are set to increase; the
region would also fall short on its target to provide access to clean cooking for all by 2030
Key energy indicators in Southeast Asia in the Stated Policies and Sustainable Development scenarios, 2020-2050
Primary energy demand CO2 emissions Share of population with

Fossil fuel net imports
access to clean cooking
60 3.0 100% 30
Gt CO2
EJ
EJ
30 1.5 50% 15
0.0 0% 0
2020 2030 2050 2020 2030 2050 2020 2030 2050 2020 2030 2050
STEPS SDS
Note: Fossil fuel imports are net imports of coal, oil and natural gas.
PAGE | 7
Governments can introduce policies and measures to boost energy security and affordability,
reduce emissions and ensure energy access for all
Energy demand in Southeast Asia has increased on average by Governments across Southeast Asia have set out long-term plans for
around 3% a year over the past two decades, and this trend continues a more secure and sustainable future. For example, six Southeast
to 2030 under today’s policy settings in the STEPS. Southeast Asian Asian countries have already announced net zero emissions and
countries are in different stages of their development, but almost all carbon neutrality targets. The SDS maps out a way to achieve these
of their economies have more than doubled in size since 2000. The goals in full, and also sees enhanced efforts to achieve universal
Covid-19 pandemic disrupted these trends but economic growth is access to energy in 2030. Fossil fuel subsidies are phased out,
set to return: the region’s economy expands in all our scenarios by efficiency improvements temper the growth in overall demand, and
5% a year on average until 2030 before slowing to an average of 3% there are concerted efforts to boost clean energy technology
between 2030 and 2050. deployment in power generation and end-use sectors. For example,
in the SDS, 21 GW of renewable capacity are added on average each
Three-quarters of the increase in energy demand to 2030 in the
year to 2030 (triple the level of recent years) and nearly 25% of the
STEPS is met by fossil fuels, leading to a near 35% increase in CO2
cars sold in the region by 2030 are electric. These efforts also help
emissions. Energy access has been improving in Southeast Asia in
reduce the region’s fossil fuel import bill. Delivering electricity and
recent years: around 95% of households today have electricity and
clean cooking access to all by 2030 is achieved with an investment
70% have clean cooking solutions such as liquefied petroleum gas
of USD 2.8 billion a year (about 2% of average annual energy sector
and improved cook stoves. However, these shares remain very low
investment in the region to 2030).
in Cambodia and Myanmar, and the recent surge in commodity prices
threatens to set back progress. In the STEPS, universal access to Each country has its own pathway, and the range and diversity of
electricity is achieved around 2030, but even by 2050, more than 100 countries and situations in Southeast Asia mean that delivering on
million people in the region do not have access to clean cooking. The these interrelated goals will be a challenge. Intraregional co-
region also sees a steady worsening in its energy trade balance as operation and international support will be critical, especially to boost
fossil fuel demand outpaces local production. innovation and support the development of related infrastructure.
PAGE | 8
The region’s fuel import needs and energy security vulnerabilities will rise sharply in the
decades to come without a strong effort to accelerate transitions
Crude oil and natural gas trade to Southeast Asia by scenario and origin (for STEPS), 2020-2050
Crude oil Natural gas

8 160
billion cubic metres

million barrels per day
6 120
4 80
2 40
2020 2030 2050 2020 2030 2050

Total SDS STEPS (by origin) Middle East Africa North America Central and South America
Russia Australia Other
PAGE | 9
Russia’s invasion of Ukraine highlights the importance of mechanisms to safeguard the

region’s security of supply, alongside policies to reduce energy security risks over time
Seaborne crude oil trade to Southeast Asia Oil stockpiles required by companies and refineries
from around the world, 2020 operating in Southeast Asia
Country Mandatory operational oil stockpiles
Brunei 31 days for refineries
Cambodia 30 days for companies importing oil

14 days (crude oil) and 23 days (oil products) by
Indonesia
the national oil company
21 days for companies importing oil and 10 days
Lao PDR
for distributers
Malaysia 30 days by the national oil company
Myanmar 6 days for oil companies

30 days for refineries (crude) and 15 days (oil
Philippines
products) for companies importing oil
Singapore 90 days (oil products) for power companies
21.5 days (oil crude) and 3.5 days (oil products)
Thailand
for refineries and traders
10 days (oil crude) and 40 days (oil products) for
Total 2.6 mb/d Other Viet Nam
oil companies
Note: “Mandatory operational oil stockpiles” in the table are as of March 2019 and exclude LPG.
Source: IEA analysis; IEEJ (2020).
PAGE | 10
Well-managed energy transitions will shield Southeast Asia from the impacts of volatile
international markets, but energy security during transitions does not come for free
Russia’s invasion of Ukraine has had profound consequences for gas imports in 2050 are 50% lower than in the STEPS. This occurs
energy markets, leading to high and volatile prices for fossil fuels and because of the enhanced efficiency measures that are deployed in
greater near-term competition for non-Russian supplies. The market the SDS.
turbulence has shone a spotlight on the energy security
Targeted investments in energy security remain critical throughout
vulnerabilities of Southeast Asian countries and their mechanisms in
energy transitions. Electricity demand rises rapidly in all our
place to weather supply disruptions.
scenarios, as does output from variable renewables (wind and solar
The region has been an aggregate oil importer since the mid-1990s PV). Ensuring electricity security under these circumstances requires
and high oil prices put significant strains on consumers and the large-scale investments in networks, demand side management,
broader economy. In 2020, the region imported around 2.6 mb/d of digitalisation, enhanced cyber resilience as well as inter-regional
oil (Thailand and the Philippines accounted for 40% of total oil imports planning. Even as the region takes policy steps to move away from
to the region), mainly from the Middle East and Africa. In the STEPS, oil, oil stockpiles remain an important mechanism to protect against
oil imports continue to rise to 4.6 mb/d in 2030 and 6.2 mb/d in 2050. supply disruptions. There are a number of mandatory operational oil
Based on today’s policies, the region becomes a net natural gas stockpile regimes for companies operating in Southeast Asia. These
importer by 2025, importing more than 130 bcm per year by 2050. are generally equivalent to fewer than 40 days of oil use (and in some
However, the 2021 price increases – further accentuated by the cases as few as 6 days). Many countries in Southeast Asia have
invasion of Ukraine – may have long-term repercussions for the role studied or discussed establishing strategic reserves, and a reserve in
of natural gas in the region, by changing perceptions on affordability Viet Nam has already started operation. International cooperation
and policy attitudes towards investments in gas import infrastructure. can also play a role by helping to build oil-sharing arrangements with
neighbouring countries.
Accelerating clean energy transitions is the key way to reduce today’s
energy security vulnerabilities. In the SDS, for example, both oil and
PAGE | 11
Southeast Asia must attract much higher levels of energy sector investment to accelerate its
clean energy transition and meet the rising demand for energy services
Average annual energy investment in Southeast Asia, 2016-2030 Share of Southeast Asia in the global market, 2016-2030
200 100%
Power investment End-use
Billion USD
End-use
Renewables for end-use
10%
EVs EV
150 75% sales
Efficiency
8%
Sewrie
Po ers10 AC
Grids stock
100 50% Networks 6%
Fossil fuels w/o CCUS Renewables
Other low-carbon 4%
50 25% Solar and wind Solar &
wind
2%
FuSe ries11
els
Low emissions fuels Batteries
Fossil fuels 0%
STEPS SDS
2016-20 2026-30 2016-20 2026-30
2016-20 2026-30 Share of clean energy

Note: Fossil fuels w/o CCUS = power generation from fossil fuels without carbon capture, utilisation and storage.
PAGE | 12
Energy investment: attracting finance requires upgrading clean energy policy and regulatory
frameworks and addressing a wide range of financial hurdles across the sectors
Southeast Asia faces the twin challenges of increasing total mechanisms and tariff levels for renewable output, which affect risk
investment in the energy sector while increasing the share of this perceptions and the cost of capital for clean energy projects.
investment going to clean energy technologies. Between 2016 and Commitments and policies to phase out unabated coal plants and
2020, annual average energy investment in Southeast Asia was deploy low-carbon fuels would send important long-term signals to
around USD 70 billion, of which around 40% went to clean energy investors.
technologies – mostly solar PV, wind and grids. Energy investment in
Cross-cutting issues such as unpredictable regulatory frameworks,
the STEPS reaches an annual average of USD 130 billion by 2030
restrictions on foreign direct investment and currency risks all hamper
and in the SDS it reaches USD 190 billion.
investment flows. Many countries have shallow financial and capital
Improving regulatory and financing frameworks would help Southeast markets, and domestic banks have limited experience in financing
Asia reduce the costs of clean energy projects. For example, the clean energy assets. Long-term, low-cost debt is often not available
levelised cost of energy (LCOE) of solar PV in Indonesia could be and access to international private capital can be a challenge.
around 40% lower if its investment and financing risks were Sustainable debt issuance by countries in Southeast Asia comprises
comparable to advanced economies. Boosting investment in clean around 3% of the global total, less than half the region’s share of
energy technologies requires strengthening clean energy policy and global GDP (more than 80% of sustainable debt is issued in
regulatory frameworks and addressing a wide range of financial advanced economies).
hurdles.
International development finance has a key role to play in
Well-designed frameworks – including clear policy targets, catalysing private funds, especially for projects at early stages of
independent regulation, least-cost system planning and cost recovery development, new technologies (e.g. CCUS, or carbon capture,
tariffs – are crucial to attract investors. There has been progress on utilisation and storage), and technologies with specific risks (e.g.
policy and regulation in many parts of Southeast Asia, including more exploration risk in geothermal). Improving access to finance would
ambitious climate targets announced by Indonesia, Malaysia, enhance investment by households and small-and-medium
Thailand and Viet Nam, updated expansion plans for renewables, enterprises (e.g. establishing credit ratings for end-users and
and changes in power purchasing agreements (PPAs). However, bundling small transactions).
uncertainties remain in many countries over remuneration
PAGE | 13
Low emissions fuels: a key part of transitions in Southeast Asia…
Total demand for unabated fossil fuels, and low-emission and abated fossil fuels in Southeast Asia in the SDS, 2000-2050
Fuels demand for end-use and power generation Changes of low-carbon and abated fuels
12 000
PJ
10 000
8 000
6 000
4 000
2 000
2000 2010 2020 2030 2040 2050 2000 2020 Buildings Transport Industry Power 2050
End-use Power generation

Low-carbon and abated fuels Low-carbon and abated fuels Modern bioenergy Hydrogen and hydrogen-based CCUS
Unabated fossil fuels Unabated fossil fuels
Note: Low emissions fuels include modern solid, liquid and gaseous bioenergy, low-carbon hydrogen and hydrogen-based fuels such as ammonia or synthetic
hydrocarbons. Abated fossil fuels include inputs to industry or power generation where the resulting CO2 emissions from fuel combustion are captured, utilised
and/or stored. Hydrogen production involving the use of CCUS is included in the hydrogen category. PJ = petajoule.
PAGE | 14
…as the region is well-placed to tap into significant resources of bioenergy and hydrogen as
well as CO2 storage potential
Southeast Asia’s energy transition depends primarily on the rollout of feasibility studies to co-fire ammonia in coal power plants, and there
renewables, improvements in efficiency and the electrification of end are plans to do so in Singapore, Thailand and Viet Nam.
uses; together, these close well over 50% of the emissions gap
CCUS can reduce CO2 emissions from the production of low-carbon
between the STEPS and SDS in 2050. There is also a significant role
hydrogen from natural gas and during fuel production or combustion.
for low emissions fuels, such as modern bioenergy, hydrogen,
At least seven large-scale CCUS projects are in planning in
hydrogen-based fuels, and CCUS. Including natural gas – when it
Southeast Asia, including several linked to enhanced oil recovery and
replaces coal and oil – low emissions fuels close 30% of the
natural gas processing with offshore storage.
emissions gap between the STEPS and SDS in 2050.
In the SDS, the share of low emissions and abated fuels reaches 50%
Modern forms of bioenergy can displace fossil fuels in transport,
of total liquid, solid and gaseous fuel demand by 2050. Investment in
industry, clean cooking and power generation. Several countries in
these fuels averages around USD 10 billion per year to 2050, around
Southeast Asia have robust mandates to blend transport biofuels and
half of the level of today’s investments in fossil fuels.
policies to support co-firing, biogas and biomethane, as well as
modern cookstoves. To ensure the environmental benefits of Several regulatory hurdles and market risks must be addressed in
bioenergy, feedstocks need to be sustainable, and avoid competition order to scale up the deployment of low-carbon fuels in Southeast
with food production and negative impacts on biodiversity. Asia. Even with higher fossil fuel prices, affordability remains a
concern and several low emissions technologies and fuels are not yet
Low-carbon hydrogen and hydrogen-based fuels such as
mature or cost competitive. International collaboration and support
ammonia and synthetic hydrocarbons can help reduce emissions
are crucial to encourage investment and mitigate financial risks.
from long-distance transport and heavy industry. Co-firing ammonia
Indonesia and Malaysia are cooperating with Japan to develop
in thermal power generation can also help provide a dispatchable
hydrogen, ammonia and CCUS supply chains. Similar initiatives are
low-carbon generation fuel. Brunei Darussalam has started exporting
underway in Thailand and Singapore. Some major oil and gas
small quantities of hydrogen to Japan, while Indonesia, Malaysia, the
players, such as Petronas, Pertamina and PTT have formulated
Philippines and Thailand are piloting green hydrogen and fuel cell
plans to invest in hydrogen supply chains and carbon capture
systems for power provision. Malaysia and Indonesia are conducting
projects, often in partnership with international oil companies.
PAGE | 15
Power flexibility: growing deployment of wind and solar will require a more flexible power
system – this must be a higher priority for governments and regulators
Power generation and shares of variable renewables in Southeast Asia, SDS, 2020-2050
Power generation, SDS
3 200 60%
Other
TWh
Wind
Solar PV
2 400 45%
Geothermal
Bioenergy
Hydro
1 600 30%
Ammonia
Oil
Unabated natural gas

800 15%
Unabated coal
Variable renewables share
blank
(right axis)
SDS
0%
2020 2030 2040 2050
STEPS
Note: Other includes coal with CCUS, nuclear and marine energy.
PAGE | 16
Power flexibility: less rigid contracts for power generation and fuel supply can play a vital role,
alongside strengthened and more integrated regional grids
Electricity demand is set to grow rapidly in the coming decades in renewable capacity increases. Further policy efforts to increase the
Southeast Asia and an increasing share will be met by variable flexibility of PPAs and fuel contracts are needed, for example through
renewable sources. In the SDS, for example, the generation share of voluntary auctions.
variable renewables increases from 2% in 2020 to 18% in 2030. The
The IEA analysed contractual flexibility issues in Thailand and
need for flexibility outpaces electricity demand growth.
found that cost savings from shifting towards more flexible PPAs and
Coal and gas-fired power plants are the region’s main sources of fuel contracts could be significantly greater than the savings from
electricity today but they can also play key roles in providing flexibility. investing in technical flexibility resources. Designing contracts with
Achieving this role change requires changing existing contracts. sufficient flexibility leaves headroom for lower operational-cost
There is a heavy reliance on physical PPAs in Southeast Asia, variable renewables, and technical assets that provide critical system
especially in vertically integrated power systems such as Indonesia services to participate in the market, resulting in overall cost savings.
and Thailand, where many plants were financed with physical PPAs
Regional integration and multilateral power trading can also help
with large capacity payments and/or take-or-pay obligations. If assets
increase power system flexibility in Southeast Asia. This would
or entities have a contract that ensures operators a minimum daily
expand balancing areas, allowing for efficient resource sharing,
load, the assets have no incentives to act flexibly.
particularly for renewable resources. ASEAN has a major programme
Most of these PPA contracts extend beyond 2030. In Thailand, for devoted to developing multilateral power trade – the ASEAN Power
example, minimum-take capacity in all contracts decreases by only Grid (APG) – encompassing both building physical infrastructure and
10% to 2030. Without any changes, it will not be easy to repurpose creating markets for multilateral power trade.
existing assets to offer flexibility, even as the share of variable
PAGE | 17
Global demand for critical minerals in clean energy technologies is set to grow rapidly,
providing a big opportunity for Southeast Asia to make the most of its large mineral resources
Potential revenue from selected minerals in Southeast Asia, SDS, 2020-2050

100
Billion USD (2020)
80
Total
60 Rare earth elements
Tin
40 Copper
Nickel
20
2020 2030 2050 2050

With current market share Higher market share
(15%) (25%)

Note: Revenue is potential value of metal products made from mined output in Southeast Asia. We used 2021 average prices for prices in 2030 and 2050.
PAGE | 18
Critical mineral resources can be successfully and sustainably exploited by enhancing capacity
building across the region and attracting investment in a wide range of projects
Southeast Asia is set to play a major role in clean energy supply industries. If the region can develop domestic value chains for
chains, both as a consumer of low-carbon technologies and as a key multiple industries, the revenue from the production of nickel, tin,
supplier of critical minerals. Today, Indonesia and the Philippines are copper and rare earth elements in Southeast Asia could grow by
the two largest nickel producers in the world; Indonesia and Myanmar almost 2.5-times to nearly USD 60 billion by 2050 in the SDS.
are the second and third largest tin producers; Myanmar accounts for
Ensuring high environmental, social and governance (ESG)
13% of global rare earth elements production; and Southeast Asia
standards is crucial for the region as consumers and investors
provides 6% of global bauxite production.
increasingly demand that manufacturers use minerals that are
The mining sector has historically been an important contributor to sustainably and responsibly produced. For example, high-pressure
government revenues, GDP and employment in Southeast Asia. Yet acid leaching (HPAL) projects are expected to supply battery-grade
investment in mineral exploration has declined in recent years: the nickel products in this region, but these projects need to resolve
region’s share of the global mineral exploration budget has halved concerns over their high levels of emissions and water consumption.
since 2012. This trend will need to be reversed if Southeast Asia is to In the downstream sector, encouraging recycling is key: secondary
realise its potential in the critical minerals sector, and offset likely production of aluminium accounts for just 2.5% of total refined
future declines in coal mining jobs. consumption in the region, compared with 25% globally.
Investment in processing and manufacturing to develop critical- Enhancing capacity building efforts across the region is central to
mineral based industries can help extract additional value from ensure the sustainable development of mining industries and to
Southeast Asia’s natural resources. Malaysia and Viet Nam are the attract investment in a wide range of projects. This includes technical
world’s second and third largest manufacturers of solar PV modules. capacity building (e.g. geological surveys, reserve estimation,
Thailand is the 11th largest vehicle manufacturer in the world and sustainable mining practices) and institutional capacity building (e.g.
could also become a key hub for the manufacturing of EVs. Indonesia regular ESG assessments) for sound governance and transparent
is implementing policies to attract mid to downstream battery regulations.
PAGE | 19
Southeast Asia Energy Outlook 2022 Energy in Southeast Asia
Energy in Southeast Asia
PAGE | 20
Today’s energy trends
PAGE | 21
Countries in Southeast Asia have developed their economies and expanded energy use rapidly
over the past two decades, but there are strong country-by-country variations
GDP and energy demand per capita in Southeast Asia in 2000 and 2019
GDP per capita Energy demand per capita
Singapore Brunei Darussalam 2000

Brunei Darussalam Singapore 2019
Malaysia Malaysia
Thailand Thailand
Indonesia Viet Nam
Viet Nam Indonesia
Philippines Lao PDR
Lao PDR Philippines
Myanmar Cambodia
Cambodia Myanmar
Southeast Asia Southeast Asia
OECD OECD
World World
20 40 60 80 100 100 200 300 400 500

Thousand USD (2019, PPP) PJ

Note: OECD = Organisation for Economic Co-operation and Development, PPP = purchasing power parity.
PAGE | 22
Southeast Asia is a major engine of global economic growth and energy demand
Southeast Asia’s growing population and economy put its energy hard by the pandemic, resulting in a 4% fall in GDP and a 3% drop in
sector outlook firmly in the global spotlight. Its population has energy demand in 2020 (followed by a smaller rebound in 2021). The
expanded by around 10% over the past 10 years and today there are major rise in oil and gas prices in the second half of 2021, intensified
around 660 million people across the region. Southeast Asia’s by Russia’s invasion of Ukraine in early 2022, has underscored risks
economy grew by around 4.2% on average each year between 2010 to energy security and affordability and the region’s rising reliance on
and 2019. imported oil.
Each of the 10 countries in ASEAN is distinctive in terms of its stage Increased vulnerability to climate change is also a serious threat to
of development, industrial output, politics, history and geography. For countries in Southeast Asia. Typhoons and floods are predicted to
example, energy demand per capita in Myanmar or Cambodia is become increasingly violent and frequent. The Intergovernmental
about one quarter of the world average, while in Singapore it is about Panel on Climate Change (IPCC) highlights that Southeast Asia is
three times larger than the world average. Increases in manufacturing one of the planet’s most vulnerable regions to climate change.
have been the driving force behind the economic development in
This chapter explores the current energy landscape in Southeast
Thailand and Malaysia, while the Philippines has seen much more
Asia. Total primary energy demand in the region has increased
growth in its service industry. Energy policy priorities also differ from
rapidly over the past two decades, with large increases in coal, oil
country to country, with different approaches to securing new energy
and natural gas use, as well as in renewable energy use. Industry
supplies to meet expanding energy demand, achieving climate goals
has seen the largest level of growth of any sector, fuelled mainly by
and ensuring access to affordable, reliable and modern energy for all.
the cement and iron and steel sectors; power generation has almost
Nonetheless, a common denominator is a commitment to regional
tripled since 2000, with the largest increase coming from coal-fired
cooperation as a way to secure future prosperity and security.
power plants. In buildings, the traditional use of biomass has been
Much has changed since our last regional energy outlook was displaced, mainly by electricity, as a result of economic development
published in 2019. In many countries, the level of policy ambition for and urbanisation.
energy has stepped up considerably. Southeast Asia has been hit
PAGE | 23
Coal has accounted for the largest share of the growth in total energy supply since 2000
Total energy supply by fuel in Southeast Asia, 2000-2020

35
Modern renewables
30
25 Traditional use of biomass
20
Natural gas
EJ
15
Oil
10
5
Coal
0
2000 2010 2019 2020
PAGE | 24
The energy story in Southeast Asia varies widely by country, depending on resource
endowments, the structure of the economy and policies
Total energy supply by fuel, by country in Southeast Asia, 2019

EJ
3 6 9 12
Indonesia Coal
Thailand
Oil
Malaysia
Viet Nam Natural gas
Philippines
Renewables
Singapore
Myanmar Total energy supply

(top axis)
Cambodia
Lao People's
Democratic Republic
Brunei Darussalam
25% 50% 75% 100%

Notes: Shares of total energy supply includes power generation for electricity trading across borders. Renewables include traditional use of biomass.
PAGE | 25
Since 2000, fossil fuel use has grown rapidly, modern renewables have more than doubled, and
the traditional use of biomass for cooking and heating has dropped by more than 50%
As the economy and population of Southeast Asia have grown, total The energy supplied by modern renewable forms of energy more
energy supply expanded by around 80% between 2000 and 2020, than doubled between 2000 and 2020. Solar PV and wind have
even though demand fell temporarily in 2020 due to the Covid-19 increased rapidly in recent years, but modern bioenergy, geothermal
pandemic. energy and hydropower still comprise more than 98% of total modern
renewable energy in Southeast Asia today. Geothermal resources
Fossil fuels made up more than 90% of the growth in energy demand.
are mainly located in Indonesia and the Philippines; Cambodia, Lao
Coal demand alone expanded by a factor of six, and its share of total
PDR and Myanmar have continued to develop domestic resources of
energy supply increased from 8% to 26% between 2000 and 2020.
hydropower, taking advantage of their hilly terrains and high
Oil demand has increased by more than 40% since 2000, though its precipitation.
share of total energy supply dropped from 40% to 32%. Most of the
The traditional use of biomass as a cooking fuel has decreased
increase in oil use stemmed from an increase in passenger car
continuously over the past 20 years and total use halved over this
ownership (which went from 27 vehicles per 1 000 inhabitants in 2000
period. This resulted from firm policy action to boost access to
to 59 per 1 000 in 2020) and truck freight activity, offset slightly by a
electricity and to shift to alternative, clean cooking fuels: the share of
fall in oil-fired power generation. Power generation comprised 12% of
people with access to electricity increased by more than 35
oil demand in 2000, but fell to less than 3% in 2020 (oil provides less
percentage points in the last two decades, to reach 95% in 2020.
than 2% of total power generation in Southeast Asia today, down from
nearly 20% in 2000). Overall regional trends mask some very different situations at the
national level in individual countries. The share of fossil fuels, and
Natural gas consumption rose by more than 80% between 2000 and
reliance on coal, ranges widely across the region; in manufacturing
2020, and has maintained around a 20% share of the total energy
economies such as Thailand and Malaysia the share of fossil fuels
mix. The electricity and industry sectors collectively account for 70%
tends to be higher, while it is lower in economies that remain more
of natural gas use today.
reliant on agriculture such as Myanmar and Lao PDR.
PAGE | 26
The industry and transport sectors have led the growth in final energy consumption
Change in final energy consumption by fuel in selected end-use sectors in Southeast Asia between 2000 and 2020
5
EJ
Natural gas
4 Oil
Coal
3
Electricity
2
Liquid biofuels
1
Traditional use of
biomass
0
Other
-1
-2
Industry Transport Buildings Agriculture IEA.
All rights reserved.
PAGE | 27
Power generation has almost tripled over the past two decades, driven by a sixfold increase in
coal-fired generation, which accounted for more than 40% of total generation in 2020
Power generation mix and shares by fuel in Southeast Asia, 2000-2020
Power generation mix Share
1 250 Other 100%

TWh
renewables
Hydropower
1 000 80%
Gas
750 Oil 60%
Coal
500 40%
250 20%
2000 2010 2020 2000 2020
PAGE | 28
Industrialisation, motorisation and urbanisation have been the key drivers of increased fossil
fuel use and electricity consumption
Final energy consumption has increased by around 70% over the but oil products still account for more than 90% of total fuel use in
past two decades, with the industry and transport sectors accounting transport (see chapter on energy perspectives).
for the vast majority of this growth. In buildings, increased use of
The buildings sector has seen the largest increase in electricity
electricity has accompanied a decline in the traditional use of
consumption of any sector. Southeast Asia’s population has become
biomass.
increasingly urbanised (the number of people living in cities has
The industry sector saw the largest increase in energy use of any grown by around 70% since 2000), and there has been a large
sector, with rapid expansion in many of the energy intensive increase in air conditioner and appliance use. For example, the
industries over the past 20 years. This includes a near-quadrupling ownership of refrigerators has more than doubled in the last two
of steel production, including large increases in stainless steel decades (see next pages).
production, given the large quantities of domestic nickel resources in
Total power generation has almost tripled over the past two decades.
the region (see chapter on energy perspectives). Coal use across the
Coal-fired power generation expanded by a factor of six, and it made
industry sector expanded more than fourfold between 2000 and
up more than 40% of total generation in 2020. Generation from gas-
2020. Expansions in lighter industries, such as car assembly plants
fired power plants has more than doubled (although its share of
and garment factories, contributed to the 75% overall increase in
overall electricity generation has fallen marginally), oil generation has
electricity demand in the industry sector.
dropped by 80% and its share in the electricity mix has plummeted.
In transport, oil demand increased 80% between 2000 and 2020, due The largest share of renewable electricity generation is from
to a rapid increase in the stock of passenger cars and trucks, which hydropower; wind and solar PV have increased rapidly in recent
quadrupled over this period, as well as two/three-wheelers. There years, but renewables still comprised less than 10% of overall
has been some increase in locally-produced biofuels – Indonesia and generation in 2020.
Malaysia are the largest palm oil producing countries in the world –
PAGE | 29
Covid-19 hit Southeast Asia’s economy hard and caused major disruptions to the energy sector
Key indicators for energy demand, emissions and mobility in Southeast Asia
Change in key indicators for energy demand and emissions, 2020 Mobility indicator of Southeast Asia
130
Index (100=the first quarter of 2020)

CO₂
Electricity 115
Renewables 100
Natural gas
85
Coal
Oil 70
TES 55
GDP
40
- 8% - 6% - 4% - 2% 0% 2% 4% Jan Apr Jul Oct Jan
Change relative to 2019 2020 2021
2020 Southeast Asia 2020 EMDE except China

Notes: TES = total energy supply. EMDE = emerging markets and developing economies. The Mobility Indicator of Southeast Asia is a measure of changes in the
number of visits and length of stay compared with levels in early 2020. It was calculated for Malaysia, Thailand, Indonesia and the Philippines based on Google LCC
(2021).
Source: IEA (2021), Oil Market Report - December 2021.
PAGE | 30
Oil, natural gas and electricity use fell in Southeast Asia in 2020 due to the Covid-19 pandemic,
but the use of coal and renewables increased
Southeast Asian countries have been strongly impacted by the As in other parts of the world, the contribution from renewable energy
Covid-19 pandemic. The region managed to escape the worst of the was resilient through the pandemic, growing by more than 3% in 2020
pandemic in 2020, though preventative public health policies (such (although this growth rate was half the 7.5% annual growth seen on
as lockdowns) severely affected economic activity. The Delta variant average over the previous five years). Policy support – and deadlines
had a major impact on the region in the summer of 2021. The for the expiry of this support – have underpinned a major renewables
reported number of deaths from Covid-19 reached almost 3 000 per investment boom for solar and wind in Viet Nam in recent years. Viet
day in August 2021 (compared to the peak of less than 300 per day Nam has led the region’s renewable capacity growth, and the level of
during 2020), and the number of excess deaths is estimated to be renewable capacity added in 2020 was double the level of 2019.
around triple this figure. Severe restrictions were again implemented
In contrast to many other parts of the world, coal demand also
in 2021, significantly affecting manufacturing factories on which this
increased by around 1% in 2020 in Southeast Asia, mainly as a result
region’s economy relies. Many factories stopped operations, causing
of increased coal use in the power sector. Along with China, Viet Nam
disruptions within the region and for global supply chains. Southeast
was one of only two large coal demand countries to register an
Asia’s GDP fell by 4% in 2020, and recovered by only around 3% in
increase in coal use in 2020. Overall global coal consumption fell by
2021.
around 4% in 2020.
The economic disruption naturally impacted energy demand, and
In 2021, as the Delta variant swept across the region, mobility
total energy supply declined by about 3% in 2020. Oil was the most
indicators from July to October were even lower than in 2020.
affected: in total, oil use fell by around 6.5% in 2020. Natural gas
Nonetheless, mobility rebounded strongly after October and annual
demand fell by around 5% in 2020, mainly as a result of curtailed
energy demand in 2021 is estimated to have increased across the
activity in industry. Electricity demand also declined (by 1.8%), again
board, with annual oil use increasing by 4.5%, natural gas by 4% and
as a result of curtailed industrial activity, though the drop in electricity
coal by 4%. However, Covid-19 variants still cast a shadow of
use was moderated by resilient demand in residential buildings
uncertainty over the region.
during the region’s lockdowns.
PAGE | 31
Fuel prices have risen strongly since the onset of Covid-19. A number of planned policy
changes have been delayed or cancelled, and some subsidies have been increased
Retail prices of oil products in selected countries, 2020-2022 Road-transport policy reactions to commodity price surge
130
Country Policy
• In December 2021, the government cancelled plans
110 to end the sale of some lower grades of gasoline
Indonesia products (RON 88 and RON 90) that are currently
subsidised; these products are mainly consumed by
the most vulnerable households in rural areas.
January 2020 = 100
90
• In November 2021, faced with increased prices for
crude oil and palm oil, the government decided to
continue only a 7% blend of biodiesel in diesel (B7)
and to suspend 10% (B10) and 20% (B20) biodiesel
70
Thailand blends.
• In February 2022, the government announced that it
would temporarily replace B7 with a 5% biodiesel
(B5) blend to deal with further increases in
50 commodity prices.
1 2 3 4 5 6 7 8 9 101112 1 2 3 4 5 6 7 8 9 101112 1 2
2020 2021 2022 • In January 2022, the government announced that
Thailand (gasoline) Thailand (diesel) Malaysia retail prices of gasoline and diesel would remain
Philippines (gasoline) Philippines (diesel) unchanged through use of its subsidy scheme.
Malaysia (gasoline) Singapore (gasoline)
Viet Nam (gasoline)
Notes: For Thailand, prices are weighted average monthly prices of ULG 95 and HSD B7 in Bangkok. For the Philippines, prices are common prices of RON 95
gasoline and diesel in the first week of each month in Manila. For Malaysia and Singapore, prices are for RON93-96. For Viet Nam, prices are for RON below 93.
Source: IEA (2022), Energy Prices; Thailand, Ministry of Energy, 2022 and Philippines, Department of Energy, 2022.
PAGE | 32
High fuel prices cast a shadow over affordability, energy access and clean energy transitions
The surge in global commodity prices since mid-2021 has had a progress in 2020; current high fuel prices could further reverse or
major impact on countries in Southeast Asia. Benchmark crude oil slow this (see next chapter).
prices exceeded USD 100 per barrel in March 2022, the highest price
High fossil fuel prices can promote energy efficiency measures and
level in more than a decade. The initial rise in prices stems from the
the deployment of renewable energy technologies. But they can also
strong rebound in the global economy since the Covid-19 pandemic,
mean higher subsidies and fiscal burdens – most nations in
low levels of investments in new sources of production in recent
Southeast Asia are oil importers and subsidise fuel use – which can
years, planned and unplanned outages of key fuel infrastructure and
reduce governments’ capacity to promote clean energy policies.
artificial tightness caused by policies of some major producer
Fossil fuel subsidy reforms are ongoing in some parts of this region
economies. These strains were then intensified by Russia’s invasion
but subsidy levels are set to rise because of the large increase in
of Ukraine.
fossil fuel prices (see next chapter).
In the Philippines, diesel retail prices dropped nearly 40% from
A number of planned policy changes have been delayed or cancelled
January to May 2020 but have since increased steadily: diesel prices
as a result of the increase in prices. For example, the Indonesian
in February 2022 were almost double the level in May 2020. Higher
government cancelled its plans to end the sales of lower grade (and
prices challenge energy affordability, with important implications for
more emissions-intensive) gasoline products that are generally
practical policies and politics. In Thailand, for example, truck drivers
consumed by the most vulnerable people in rural areas. In Thailand,
protested about high diesel prices and blocked a major thoroughfare
faced with price surges in crude oil and palm oil, the government
in Bangkok in February 2022.
suspended policies to promote products with high levels of biodiesel
Rising fuel prices cast a shadow over recent progress in energy blending (B7, B10 and B20) and temporarily introduced a lower B5
access. Energy access in Southeast Asia has been improving for grade to control retail prices.
decades but the pandemic and economic crisis reversed some of the
PAGE | 33
Factors shaping the energy outlook
PAGE | 34
Steady economic growth has brought about a large expansion in consumer spending
GDP growth in Southeast Asia and consumer spending per capita for selected countries, 2000-2019 Real GDP growth assumptions
8 000 8% Compound average

Consumer spending per capita, USD (2019)
annual growth rate

7 000 7%
6 000 6% 2010-20 4.2%
5 000 5%
2020-30 4.9%
4 000 4%
3 000 3%
2030-50 3.2%
2 000 2%
1 000 1%
2020-50 3.8%
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018
Indonesia Malaysia Philippines Thailand GDP growth of Southeast Asia

Note: GDP in 2019 USD PPP.
Sources: United Nations Statistics Division (2021); IEA analysis.
PAGE | 35
Vehicle and appliance ownership trends have been reshaping energy use
Motorisation indicators and estimated ownership rates for appliances in Southeast Asia, 2000-2020
400 60
Ownership per 100 population

Index=100, 2000
50
300
40
200 30
20
100
10
2000 2005 2010 2015 2020 2000 2005 2010 2015 2020
Number of vehicles Paved road length Air conditioning units Refrigerators
PAGE | 36
The pace of economic growth, alongside structural and demographic changes, will play a key
role in determining the energy landscape of Southeast Asia
The expansion of energy demand in Southeast Asia over the past Energy access in Southeast Asia has improved significantly over the
two decades has been driven by strong economic growth (even if past 20 years. The share of population with electricity has risen from
trends were disrupted by the Covid-19 pandemic). The countries in 60% in 2000 to 95% in 2020. The share of those with access to clean
the region are in different stages of economic development, but cooking increased from 23% to almost 70% between 2000 and 2020.
almost all have more than doubled the size of their economy since
Commodity prices in this work, which follow those in the WEO-2021,
2000. Consumer spending per capita has grown even faster: in
are generally lower than at present. For example the oil price in the
Indonesia, it expanded nearly 20-fold between 2000 and 2019.
STEPS ranges between USD 60-90 per barrel. Russia’s invasion of
Economic growth has been accompanied by major changes in Ukraine will have an uncertain impact on long-term price levels as
societies across the region, notably the forces of urbanisation and supply restrictions and efforts to reduce exports from Russia could be
motorisation, which have had strong influences on patterns of energy offset by slower economic growth and permanent demand
use. In 2000, about 40% of the population in Southeast Asia lived in destruction from higher near-term prices. We will incorporate these
urban areas; by 2018, this share had risen to more than 50%. Home factors in the future analyses.
appliance ownership has increased sharply: the number of air
In our scenarios, we assume that the economies of Southeast Asia
conditioning units has tripled, and the number of refrigerators has
will continue to grow and mature. Annual average real GDP growth
increased by 150%. Given the tropical climate, increases in the
is 4.9% between 2020 to 2030 and 3.2% between 2030 to 2050. We
availability and use of air conditioning units are important indicators
hold this assumption constant across the different scenarios
of a higher quality of life (although ownership levels remain relatively
examined. However, the way to meet rising demand for energy
low in most countries), and have also pushed up electricity demand.
services differs substantially by scenario, primarily because of
In terms of motorisation, the number of vehicles on the road and the variations in policy settings – notably the strength of the region’s push
length of paved road has tripled over the past 20 years. Indonesia to limit the environmental impact of energy use while also ensuring
became the 11th largest vehicle market globally in 2019. There has secure and affordable energy supply. The Sustainable Development
been large levels of inward foreign investment directed towards the Scenario (SDS) assumes CO2 prices of USD 35 in 2040 and USD 95
automotive industry, which also helped to encourage this process. in 2050 for Southeast Asia. Other modelling assumptions are
Thailand is today the 11th largest car producing country in the world explained in the WEO-2021.
and the second largest pick-up truck market after the United States.
PAGE | 37
Pathways after the Glasgow Pact signed at COP26 in November 2021
Share of total energy supply covered by Sequencing of CO2 emissions reductions in Southeast Asia
carbon neutrality targets in Southeast Asia in the Sustained Development Scenario vs global emissions
reductions in the NZE Scenario
100% 100%
by 2040
80% 80% by 2030
by 2050
60% 60%
by 2050
beyond 2050
40% 40% by 2040
by 2060
towards
20% 20% 2060 and
beyond
by 2050
No target
Carbon neutrality target, Southeast Asia SDS, Southeast Asia NZE, Global

Notes: Thailand, Viet Nam, Malaysia and Lao PDR have targets to achieve net zero emissions or carbon neutrality by 2050; Singapore has a target to reach net zero
emissions beyond 2050; Indonesia has a target to reach net zero emissions in 2060. Brunei and Cambodia have mentioned net zero emissions or carbon neutrality
by 2050 but do not have targets. The Philippines and Myanmar have not made any net zero announcements. Targets include both detailed plans (e.g. Nationally
Determined Contributions [NDCs] and long-term strategies) and statements by government officials (e.g. at COP26).
PAGE | 38
The strength of emissions reduction targets, as well as efforts to ensure their implementation,
are crucial variables for the future, both within and outside Southeast Asia
The fuels and technologies used to meet expected growth in demand Nations Sustainable Development Goals (SDGs), in particular
for energy services in Southeast Asia vary across our scenarios. achieving universal access to electricity and clean cooking facilities
These choices are shaped in turn by the policies that are introduced by 2030, and achieving a substantial reduction in air pollution.
in countries across the region to support sustainable, secure and
This scenario is very ambitious, requiring a wholesale transformation
affordable energy.
of the region’s energy system over the coming decades. However, it
There has been a dramatic shift in long-term policy ambition in is not fully aligned with the goal of a fully net zero global energy
Southeast Asia since our last regional Outlook in 2019. Countries system by mid-century. As noted already, this global goal is modelled
responsible for around half of the CO2 emissions in the region have in our Net Zero Emissions by 2050 scenario (NZE Scenario), which
pledged to achieve net zero emissions by 2050 (some of these provides vital benchmarks and milestones for this report and for
pledges contain important caveats and conditions about the support global progress towards a 1.5°C stabilisation in rising global average
required to achieve of these goals). Indonesia, which accounts for temperatures.
about 35% of the region’s energy-related CO2 emissions, has
Commitments and pledges are of course not enough on their own –
announced a target to achieve net zero emissions by 2060 or sooner.
implementation is key. In the Stated Policies Scenario (STEPS), we
In aggregate, these ambitions for the region are broadly consistent do not take it for granted that governments reach their aspirational
with the pathway laid out in the IEA’s Sustainable Development targets, but take instead a granular sector-by-sector look at the
Scenario (SDS). The SDS is a “well below 2°C” pathway that existing energy policies and measures and those under development,
represents a gateway to achieving the outcomes targeted by the including the institutional and financial constraints that can affect how
Paris Agreement. In this scenario, advanced economies reach net these policies are realised in practice.
zero emissions around 2050, China’s emissions fall to net zero
There remains a large gap between the regional trends in the STEPS
around 2060 and global net zero emissions are reached before 2070.
and our ambitious normative scenarios. This report takes a close look
Emissions in Southeast Asia decline by around 60% between 2020
at what it would take for governments to close this gap, and the
and 2050. This scenario also meets key energy-related United
implications of doing so.
PAGE | 39
International co-operation is pivotal for clean energy transitions
Global CO2 emissions in the IEA Net Zero Emissions by 2050 (NZE) Scenario and the Low International Co-operation Case, 2010-2090
40
Gt CO₂
30
Low International Co-operation Case
20
10
NZE
2010 2020 2030 2040 2050 2060 2070 2080 2090

Source: IEA (2021).
PAGE | 40
International co-operation will be crucial both to mitigate and adapt to climate change in
Southeast Asia
For countries across Southeast Asia, achieving net zero emissions competitiveness, that have large or capital-intensive demonstration
will rely on support to ensure the deployment of key technologies and programmes, or that require support to create market pull and
infrastructure. This was explicitly referenced at the COP26 in standardisation to ensure inter-operability are deployed more slowly
November 2021 by the Prime Minister of Viet Nam, who indicated than in the NZE Scenario (with a delay of 5-10 years in advanced
that emissions reductions would rely on “the cooperation and support economies and 10-15 years in emerging market and developing
of the international community, especially from the developed countries).
countries, in terms of finance and technology”.
Global emissions reductions between 2020 and 2050 in the low
The international context for achieving net zero emissions is a vital international co-operation case are about half of the rate in the NZE
determinant of the speed and effectiveness of energy transitions. Scenario. Heavy industry is particularly affected, and it comprises
Scenarios that achieve net zero emissions, such as the SDS and the around 40% of remaining emissions in 2050.
NZE Scenario, rely on a collaborative international environment. Far-
Support for resilience and adaptation will also be critical to countries
reaching efforts to improve the domestic environment for clean
in Southeast Asia. This region is seen as one of the most vulnerable
energy investment in emerging and developing economies are
to climate change, and three countries in the region are ranked in the
accompanied by strong international efforts to accelerate inflows of
top ten of the most at-risk countries from it. It has been estimated that
capital and access to technology. Given the range and diversity of
Southeast Asia is at risk of losing over 35% of its GDP in key sectors
countries and situations in Southeast Asia, intraregional cooperation
such as agriculture, tourism and fishing by 2050. The Glasgow
also plays an important role in the SDS and NZE Scenario.
Climate Pact urges countries to “provide enhanced support, including
If this collaborative environment is missing, then transitions will be through financial resources, technology transfer and capacity-
slower and more expensive. In the NZE Scenario report, a “low building, to assist developing country Parties with respect to both
international co-operation case” examined this risk in detail. In this mitigation and adaptation”.
alternative case, technologies that rely on international trade and
PAGE | 41
Selected energy policies in Southeast Asian countries
The STEPS is our assessment of today’s policy landscape, including the impact of existing and announced policy measures and targets. There
are also collective targets agreed at the regional level in the ASEAN context, notably the ASEAN Plan of Action for Energy Cooperation (APAEC).
Country Sector Policies and targets
Reduce total energy consumption by 63% from business-as-usual (BAU) levels by 2035. 60%
Efficiency
EV share of total annual vehicle sales by 2035.
Brunei
Renewables Achieve 30% of electricity generation from renewables by 2035.
Darussalam
Reduce CO2 emissions from morning peak-hour vehicle use by 40% from the BAU level by
Climate change 2035.
Moving towards net zero by 2050.
Energy access At least 70% of households connected to the national grid by 2030.
By 2035 and relative to BAU, cut energy consumption by 20% (1 million tonnes of oil equivalent
Efficiency
[toe]) and reduce emissions by 3 MtCO2.
Cambodia
In an accelerated scenario, total installed capacity by 2030 at 55% hydro, 6.5% biomass and
Renewables
3.5% solar PV.
Reduce GHG emissions 27% from baseline emissions by 2030 with international support.
Climate change Aspirational official emissions reduction scenario reaching net-negative by 2030.
A scenario outlines a vision of a carbon neutral economy by 2050.
PAGE | 42
Selected energy policies in Southeast Asian countries (continued)
Energy access Achieve 100% electrification by the end of 2024.
Efficiency Reduce energy intensity by 1% per year to 2025.
Increase share of “new and renewable energy” in primary energy supply to reach 23% by 2025
Indonesia Renewables and 31% by 2050.
52% share of renewables in electricity capacity additions from 2021 to 2030.
Fossil fuels Consider accelerating phase out of coal in the 2040s conditional on international funding. *
Reduce GHG emissions 41% by 2030 from the BAU levels with international support.
Climate change
Set up the long-term strategy to reach net zero emissions by 2060 or sooner.
Energy access Achieve electrification rate of 98% by 2025.
Efficiency Reduce final energy consumption by 10% from the BAU level.
Lao PDR
Renewables 30% share of renewables in total primary energy consumption by 2025.
Climate change Conditional GHG emissions reduction target to reach net zero in 2050.
* Though announced by government officials at COP26 or other opportunities, these statements were not yet formulated in detailed plans such as NDCs or long-term
strategies as of April 2022.
PAGE | 43

Promote energy efficiency in the industry and buildings sectors with methods of standard setting,
Efficiency
labelling, energy audits and building design.
Renewables 31% share of renewables installed capacity by 2025.
Malaysia Fossil fuels No new coal-fired power plants.*
Transport Have 9 000 AC charging points and 1 000 DC charging points installed by 2025.
Reduce GHG intensity of GDP by 35% by 2030 from the 2005 level, increase to 45% reduction
Climate change with enhanced international support.
Carbon neutrality by 2050 *
Energy access Achieve electrification rate of 100% by 2030.
Myanmar Efficiency Reduce primary energy demand by 8% by 2030 from the 2005 level.
Renewables 20% share of renewables installed capacity by 2025.
PAGE | 44

Energy access Achieve 100% electrification by 2022.
Reduce energy intensity 40% by 2030 from 2010 level.
Efficiency Decrease energy consumption by 1.6% per year by 2030 from baseline forecasts.
Reduce energy intensity and total energy consumption by 24% relative to the BAU level by 2040.
Philippines
Renewables 15 GW renewables installed capacity by 2030.
Fossil fuels No new coal-fired power plants beyond those already approved.
Reduce GHG emissions by 70% from the BAU level by 2030 with the condition of international
Climate change
support.
Efficiency Improve energy intensity by 35% by 2030 from the 2005 levels.
Renewables 2 GW solar PV installed capacity by 2030.
Fossil fuels Phase out unabated coal generation by 2050.*

Singapore
Reduce GHG emissions by 16% below the BAU level by 2020, stabilise emissions with the aim
to peak around 2030.
Climate change Peak emissions at no higher than 65 MtCO2e around 2030.
Halve emissions from their peak to 33 MtCO2e by 2050, with a view to achieving net zero
emissions as soon as viable in the second half of the century.
PAGE | 45

Efficiency Reduce energy intensity by 30% by 2036 from the 2010 level.
Increase share of renewables to 30% in total final energy consumption by 2037; increase share of
Renewables renewables-based power to 36% in capacity and to 20% in generation by 2037.
Increase share of renewables in transport fuel consumption to 25% by 2036.
Thailand Transport Increase to 1.2 million electric vehicles and 690 charging stations by 2036.
Reduce GHG emissions by 20% from the BAU level by 2030, increase to 25% with enhanced
international support.
Climate change Aim to reach carbon neutrality in 2050 and net zero GHG emissions by 2065. Reach net zero
GHG emissions in 2050 with support of technology transfer/cooperation and availability of
financing.*
Targets on renewables share in TPES of 15–20% in 2030 and 25–30% in 2050.
Renewables 31-38 GW solar PV and wind installed capacity by 2030.
4 GW offshore wind installed capacity by 2030, 36 GW by 2045.
Phase-out of coal-fired power generation by 2040s.* Plan 31% share of coal installed capacity by
Fossil fuels
Viet Nam 2030.
Reduce GHG emissions by 9% by 2030 and by 27% from the BAU level with international
support.
Climate change Targets for GHG reductions from energy use: 15% by 2030 and 20% by 2045 from the BAU level.
Make use of domestic resources, along with international cooperation, to achieve net zero
emissions by 2050.*
strategies as of April 2022.IEA. All rights reserved.
PAGE | 46
Southeast Asia Energy Outlook 2022 Energy prospects
Southeast Asia’s Energy

Prospects
PAGE | 47
Scenarios to 2050
PAGE | 48
Future energy mix: the outlook for Southeast Asia depends critically on the strength of climate
policies. In the SDS, renewables grow to two-thirds of total energy supply by 2050
Total energy supply and CO2 emissions, 2010-2050

Stated Policies Scenario (STEPS) Sustainable Development Scenario (SDS)
60 3 60 3
Gt CO₂
Gt CO₂
EJ
EJ
40 2 40 2
20 1 20 1
2010 2015 2020 2025 2030 2035 2040 2045 2050 2010 2015 2020 2025 2030 2035 2040 2045 2050
Renewables Traditional use of biomass Nuclear Natural gas Oil Coal CO₂ emissions
PAGE | 49
Changes in the energy mix: the outlook for fossil fuels varies by time period and scenario, but
the main uncertainty for renewables is how fast they grow
Change in total energy supply by fuel, 2020-2030 (left) and 2030-2050 (right)
Change in total energy supply by fuel, 2020-30 Change in total energy supply by fuel, 2030-50
Coal Coal
Oil Oil
Natural gas Natural gas
Nuclear Nuclear
Traditional biomass Traditional biomass
Renewables Renewables
Other Other
- 10 0 10 20 - 10 0 10 20
EJ EJ
STEPS SDS
.
PAGE | 50
Improvements in energy efficiency and the deployment of renewables are the two critical levers
to move Southeast Asia to a sustainable energy future
In the STEPS, energy demand grows by just over 3% on average per In the SDS, the region’s total energy supply grows more slowly to
year to 2030, slightly lower than the 3.3% annual average increase 2030, by around 2.2% per year before reaching a plateau in the
seen in the decade before Covid-19. Growth moderates further after 2040s. The difference in energy demand between the two scenarios
2030 but it does not reach a plateau even by 2050. is more than 10 EJ in 2050, equivalent to the current total energy
supply in Indonesia.
This trajectory reflects the direction in which Southeast Asia’s energy
system is heading, based on our assessment of the sector-by-sector The difference in outcomes does not mean a reduction in the energy
policies that have been implemented or announced by governments. services available to the population of Southeast Asia. In practice,
There is a significant degree of continuity with past trends. Although modern energy is available more readily and quickly to all in this
renewables grow rapidly, fossil fuels meet most of the growth in scenario than in the STEPS. Lower demand is a reflection of much
demand. While growth in coal, oil and natural gas slows over time, greater efficiency. This includes the inherent efficiency gains
consumption of each of these fuels remains on a rising trend all the associated with energy transitions, as less energy is lost via thermal
way through to mid-century. The total share of fossil fuels in the electricity generation, and electric motors replace ones reliant on
energy mix remains above 70% in 2050, only slightly lower than the combustion. It also includes policy-driven improvements in end-use
77% seen today. equipment, such as air conditioners and other appliances.
The outcomes in the STEPS reflect the fact that long-term In terms of the energy mix in the SDS, there are near-term increases
decarbonisation targets have not yet been translated into detailed in oil and natural gas demand to 2030, but these are reversed
policies for their realisation. This is understandable to a degree, given thereafter. Coal demand soon peaks and falls back to the level of
that the aspirational targets are new. But the STEPS trajectory also 2018 by 2030. The share of fossil fuels in the energy mix declines to
underlines the importance for policy makers to grapple with the near- around one-third in 2050 (in the NZE Scenario, the share of fossil
term changes that will be essential to put the region’s energy sector fuels decreases to around one-third by 2040).
on a different course.
PAGE | 51
Final energy consumption: all end-use sectors see increases in both the STEPS and SDS, but
efficiency improvements and fuel switching shape future trends
Total final energy consumption by sector and scenario, 2020 and 2050
Industry Transport Buildings
16
EJ
12
2020 STEPS SDS 2020 STEPS SDS 2020 STEPS SDS

2050 2050 2050
Coal Oil Natural gas Electricity Bioenergy Other renewables heat Traditional use of biomass Hydrogen

Note: Hydrogen includes low-carbon gaseous hydrogen and hydrogen-based fuels such as ammonia and synthetic hydrocarbons. Transport excludes international
bunkers. Other renewables heat includes concentrating solar power and geothermal.
PAGE | 52
Electricity use rises strongly in all scenarios: in the SDS, bioenergy and hydrogen expand their
roles in meeting demand, especially after 2030
Change in total final energy consumption by fuel and scenario

Stated Policies Scenario
Sustainable Development Scenario
Coal
Oil
Natural gas
Electricity
Bioenergy and
other renewables heat
Traditional use of biomass
Hydrogen 2030-2050
-6 -3 0 3 6 2020-30 -6 -3 0 3 6
EJ 2030-50 EJ

Note: Hydrogen includes low-carbon gaseous hydrogen and hydrogen-based fuels such as ammonia and synthetic hydrocarbons.
PAGE | 53
With today’s policy settings, oil use for transport and electricity demand for buildings
constitute the main additions to final consumption
In the STEPS, total final consumption in Southeast Asia increases by 2050. In transport, energy consumption is limited to 7 EJ in 2030, and
40% to 2030 (an increase from 19 EJ in 2020 to 27 EJ in 2030) and the rise of EVs after 2030 and their higher efficiency means that
by 80% in 2050 (35 EJ). Energy consumption for transport sees the overall energy consumption in 2050 for all forms of transport is
largest increase among end-use sectors, more than doubling to 2050, marginally lower than in 2030. By 2050, more than 90% of new car
given increasing demand for mobility, especially for two/three- sales and around 10% of trucks are electric (in the NZE Scenario,
wheelers and passenger cars. Policy and infrastructure support for already by 2035 there are no new sales of internal combustion engine
the electrification of mobility is limited, and oil retains its dominance [ICE] cars or two/three-wheelers, and 50% of heavy truck sales are
in the transport sector in this scenario. There is an increase in the use electric). Biofuel consumption is around 20% higher in 2050 than in
of biofuels through to 2050 (reaching 0.4 mb/d in 2050) but oil the STEPS, and hydrogen makes significant inroads in the sector,
consumption for all types of road transport rises from 2.2 mb/d today providing 4% of demand for the sector in 2050.
to 4 mb/d in 2050. Rising demand for air travel leads to a sixfold
In industry, coal-to-gas and oil-to-gas switching plays an important
increase in jet fuel consumption.
role in reducing emissions from the sector to 2030. Higher recycling
In industry, energy consumption rises by nearly 40% in 2030 and by rates and more stringent efficiency standards for equipment halve the
80% in 2050, driven mainly by the region’s growing light energy intensity of industry from today’s levels (as a ratio of gross
manufacturing sector (e.g. automobiles) as well as increased value added) by 2050, supported by a structural change of the
production of iron, steel and chemicals. Natural gas and electricity economy towards less energy-intensive light industries. Energy
serve most of the demand growth. In buildings, rising household demand in 2050 is around 20% lower than in the STEPS. In buildings,
incomes translate into higher appliance ownership and demand for more stringent energy performance standards, particularly for cooling
cooling, driving up energy demand by 15% in 2030 and 60% in 2050. equipment, are the key lever to limit energy consumption and
Almost all of this increase is met by electricity, while the traditional emissions; by 2050, energy use in buildings is about a third lower in
use of bioenergy drops by half up to 2050, given improved energy the SDS than in the STEPS. Coupled with the phasing out of
access. traditional use of bioenergy in cooking, the rapid growth of electricity
boosts its share in the buildings sector’s final energy consumption to
In the SDS, stronger efforts to promote efficiency in energy end-use
70% in 2030 from just above 40% today.
limit total final energy consumption to 24 EJ in 2030 and 25 EJ in
PAGE | 54
CO2 emissions: in the STEPS, emissions grow steadily to mid-century, while a trajectory
consistent with the region’s declared ambitions would see a peak before 2030
CO2 emissions in Southeast Asia in the Stated Policies Scenario and Sustainable Development Scenario, 2010-2050
3 000 Cumulative CO2 emissions in Southeast Asia to 2050
Mt CO₂
and the remaining global carbon budget for 1.5 °C
2 500
Remaining global Additions
Additions SDS
carbon budget for in STEPS
in STEPS 9%
1.5 °C 6%
2 000
85%
Historical
1 500
1 000
500
SDS
2010 2015 2020 2025 2030 2035 2040 2045 2050
PAGE | 55
Southeast Asia is still a long way off the pathway consistent with its clean energy ambitions
Emissions of CO2 from the energy sector have increased steadily in recovers from the disruption of Covid-19, CO2 emissions peak in the
Southeast Asia in recent years. Indeed, the pace of emissions growth late 2020s, and then fall consistently, registering a 30% decline from
has been higher than previously projected in our Outlook, despite the 2020 levels by 2040 and a 60% decline from 2020 levels by 2050.
impact of the Covid-19 pandemic on energy use and emissions (see Between 2040 and 2050, emissions fall by an average of 11 Mt each
next pages). year. Cumulative emissions between 2020 and 2050 in the SDS are
just under 45 Gt CO2, around 40% lower than in the STEPS (in the
In the STEPS, emissions increase by slightly over 50 Mt CO2 each
NZE Scenario, at a global level, cumulative CO2 emissions between
year to 2035. This maintains the average annual increase seen over
2020 and 2050 are about 60% lower than the STEPS).
the last ten years. The growth in emissions moderates slightly after
2035 as energy demand growth slows and as renewables provide an These emissions reductions are led initially by the power sector,
increasingly large share of the overall increase in energy demand, thanks to large-scale deployment of low-emissions generation, led by
but there is no peak in emissions before 2050. solar PV and wind. Renewable sources provide more than 40% of
electricity by 2030, up from less than 25% today. After 2030,
Cumulative CO2 emissions between 2020 and 2050 in Southeast
decarbonisation is accelerated by electrification of the demand
Asia total just under 75 Gt CO2 in the STEPS. Southeast Asia has
sectors – notably via EVs that account for well over 80% of the
relatively limited responsibility for historical energy-related emissions,
passenger car stock in 2050, as well as further deployment of
accounting for 3% of the total over the past half century. Projected
renewables and phasing down of unabated coal plants. Emissions
emissions to 2050 in the STEPS are equivalent to around 15% of the
are reduced in hard-to-abate sectors, such as heavy industries and
remaining global CO2 budget that is consistent with limiting the
long-distance transportation, via improvements in energy efficiency
average temperature rise to 1.5 °C (with a probability of 50%); in
and then by the rollout of low-carbon fuels and CCUS, though these
2050, Southeast Asia comprises around 8% of the world’s population
take time to gain momentum: the share of hydrogen in industrial
and global GDP.
energy consumption is still about 1% even in 2050.
In the SDS, there is a major decoupling between emissions levels
and economic and population growth. As the region’s economy
PAGE | 56
A perspective of 2030 through a different lens: how do our latest projections compare with the
2017 Southeast Asia Energy Outlook?
Selected energy and emissions indicators in 2030 from the 2017 and 2022 Southeast Asia Energy Outlooks
Total final energy consumption by sector, by fuel Power generation by technology CO₂ emissions
Industry Transport Buildings

12 1 600 2.0
EJ
Gt CO₂
TWh
9 1 200 1.5
6 800 1.0
3 400 0.5
SAEO SAEO SAEO SAEO SAEO SAEO SAEO SAEO SAEO SAEO
2017 2022 2017 2022 2017 2022 2017 2022 2017 2022
Coal Oil Geothermal Bioenergy Wind
Natural gas Electricity
Solar PV Hydro Oil
Traditional use of biomass Hydrogen
Bioenergy and renewable heat Gas Coal
Note: SAEO2017 = New Policies Scenario from the Southeast Asia Energy Outlook 2017. SAEO2022 = Stated Policies Scenario from the Southeast Asia Energy
Outlook 2022.
PAGE | 57
Five years on: comparing the SAEO-2017 with the SAEO-2022
Since the publication of our first Southeast Asia Energy Outlook in Economic growth between 2016 and 2030 is around 20% lower in
2013, projections for the region have been revised on a regular basis, this year’s Outlook than in the 2017 Outlook, mainly because of the
given changes in economic growth, energy access, policy impacts stemming from the Covid-19 crisis. However, fossil fuel
preferences, commodity prices and the latest technology cost data. demand is still higher in a number of sectors, most notably in industry
Comparing projections in the STEPS from this year’s Outlook with and transport mainly because of a large reduction in annual efficiency
those from the New Policies Scenario in the 2017 Outlook highlights improvements. For example, projected coal use in industry in 2030 is
the longer-term implications of changes over the past five years (both around 50% higher than in the 2017 Outlook, largely due to higher
scenarios are based on prevailing policy settings). demand by the cement industry.
One of the largest changes is related to the traditional use of biomass, In the transport sector, oil demand in 2030 is 12% higher in this year’s
which in 2030 is around 60% lower in this year’s Outlook than in the Outlook than in the 2017 Outlook. This year’s projections include a
2017 Outlook. There has been strong policy progress in this area, much higher share of EVs and higher biofuel demand. However, we
including for example, Indonesia’s new subsidy programme that also project a significantly larger vehicle fleet by 2030 mainly
facilitates access by low-income communities to clean cooking fuels. supported by the recent trends in the vehicles market, and without an
increase in the strength of fuel efficiency standards, this leads to
In the power sector, lower technology costs and enhanced policy
higher overall oil demand.
support for key renewable technologies are also reflected in higher
projections for solar PV and wind: output from these sources in 2030 CO2 emissions in 2030 are around one-third higher in this year’s
is more than double the projections made in the 2017 Outlook. The Outlook compared with the 2017 Outlook. The countries of Southeast
overall picture for demand and the generation mix is otherwise quite Asia have taken longer to formulate and implement consistent
similar, with a continued large role for coal in meeting regional policies to limit the environmental impact of their energy use than was
demand. envisaged five years ago. This highlights the importance of policies
that can curb energy demand, fossil fuel use and emissions even as
the region industrialises and its vehicle fleet grows.
PAGE | 58
Universal energy access: major improvements in recent years stalled due to the pandemic. A
sharp acceleration is needed to achieve universal access by 2030
Energy access in Southeast Asia in the Stated Policies Scenario and Sustainable Development Scenario
Share of population with electricity/clean cooking Share of people gaining access by technology by 2030
100% Electricity
100%
Electricity Grid
Minigrid
75%
75% Stand alone
Clean cooking Renewables
50% 50%
Clean cooking
ICS
Biogas
25% 25%
Electric
LPG
2000 2010 2020 2030 Electricity Clean cooking
STEPS SDS

Note: ICS = Improved cook stove. Renewables here means that renewable electricity is provided by grids, minigrids or stand-alone systems.
PAGE | 59
Access to electricity for most of Southeast Asia is within reach, but access to clean cooking
fuels remains a key challenge
Updated IEA estimates suggest that 5% of the population in emphasises the importance of interoperability for the off‐grid and
Southeast Asia (around 33 million people) do not have access to mini‐grid systems built today. Only the most remote users do not have
electricity today. The number of people without access fell by 50 a grid connection by 2050. Achieving full access to electricity in
million people between 2015 and 2019, but progress stalled in 2020 Southeast Asia in 2030 requires an annual investment of over
and 2021. The pandemic slowed the growth in new connections and USD 2.4 billion a year; the stated policies are on track to meet just
weakened the ability of households to pay for electricity. over 90% of this total.
Despite the setbacks of the pandemic, most countries in Southeast Access to clean cooking has improved in Southeast Asia over the
Asia achieve near universal access to electricity by 2030 in the past decade, with the share of the population using clean fuels and
STEPS; this requires connecting just over 3 million people every technologies rising from 45% in 2010 to nearly 70% in 2019. As with
year. Nonetheless, there would still be 1.3 million people, mostly in electricity, the pandemic set back progress, with the number of
rural settlements in remote areas in Cambodia and Myanmar, who do people lacking access rising by one million in the past two years.
not have access to reliable and affordable electricity by 2030.
To reach full access to clean cooking by 2030, more than 23 million
The SDS offers a pathway to deliver electricity to all by 2030. About people each year need to gain access, meaning double the pace of
45% of households gain access to electricity with a grid connection, new connections recorded prior to the pandemic. This does not
while mini‐grids provide access to around 30% and stand‐alone happen in the STEPS, in which some 170 million people in the region
systems provide the remaining 25% of new connections. Over 55% cook with the traditional use of biomass, coal or kerosene in 2030.
of stand-alone systems and around 40% of grid solutions deployed
In the SDS, universal access to clean cooking is achieved by 2030.
between now and 2030 use electricity generated by renewables. The
In total around 200 million people gain access via liquefied petroleum
most appropriate route depends on local resource availability and
gas (LPG) or improved biomass stoves, while biogas or electric
factors such as population density and distance from the existing grid.
stoves provide for the remaining 15 million people. Around
Where grid extension is very expensive or where there is high
USD 360 million annual spending through to 2030 is required to
reliance on costly diesel-based options, falling costs for renewables
achieve this. The policies stated by the governments deliver less than
are opening new doors for cost-effective access. After 2030, grids
a quarter of this investment, even though it is less than 0.2% of total
expand to connect most customers using off‐grid solutions ; this
energy investment to 2030 in Southeast Asia in the SDS.
PAGE | 60
Fossil fuel subsidies: in the absence of major reforms, these subsidies are set to increase
alongside higher oil and gas prices, bringing significant fiscal risks
Fossil fuel subsidies in Southeast Asia and oil prices, 2010-2020

70 140
Fossil fuel
subsidies
60 120
Electricity
USD per barrel (2020)

50 100 Coal
Billion USD (2020)
40 80 Gas
high crude prices Oil

30 60
IEA crude oil price

20 40
(right axis)
Historical
10 20
subsidy reforms
2010 2012 2014 2016 2018 2020 2030 2050
PAGE | 61
Reforming fossil fuel subsidies can go hand-in-hand with providing clean and affordable energy
access for all
The countries of Southeast Asia have made some progress in implemented a programme to switch the use of cooking fuels away
phasing out fossil fuels subsidies, but this process is far from from kerosene towards less-polluting LPG by reducing the subsidies
complete. Seeing it through is essential to spur more sustainable for kerosene and increasing the subsidies for LPG. This programme
consumption and investment decisions. Moreover, the structure of reduced kerosene consumption by more than 90% over the following
fossil fuel subsidies in many parts of the region means that benefits decade; nearly 12.5 million households started to use LPG.
accrue mainly to wealthier segments of the population (who use more Nonetheless, more than 55 million households still continue to use
of the subsidised fuel) rather than to the poorest. At COP26 in firewood for cooking and in 2020 the government formulated a new
November 2022, the Glasgow Climate Pact reaffirmed the goal to policy to replace the LPG subsidy with targeted assistance for poor
accelerate efforts towards “the phase-out of inefficient fossil fuel and vulnerable groups. This programme includes providing a direct
subsidies”. transfer to the accounts of eligible households, micro businesses,
fishers and farmers. This proposed reform is expected to reduce
The IEA has been measuring fossil fuel subsidies in a systematic way
poverty and inequality directly, enhance energy access and increase
for more than a decade. In Southeast Asia, these subsidies were
government budget savings by IDR 20.7 trillion (USD 1.44 billion).
estimated to average USD 32 billion in total between 2010 and 2020.
Most of the largest changes in the level of subsidies over this period In the STEPS, despite the implementation of stated reforms on fossil
were associated with changes in international fossil fuel prices. For fuel subsidies, the increase in crude prices and greater fuel
example, the total level of fossil fuel subsidies in 2020 was the lowest consumption means that fossil fuel subsidies would rise back towards
since 2010, but this was due to the very low crude prices in 2020, and the levels seen in the 2010s. In the SDS, there are greater efforts to
with the strong rebound in crude oil prices in 2021 and 2022, reform inefficient fossil fuel subsidies and, combined with lower crude
subsidies are also likely to soar. prices, this results in a much lower level of subsidies. The reduction
in fossil fuel subsidies between the two scenarios is significantly
There have been some reforms in parts of Southeast Asia. Subsidies
greater than the additional investment needed to achieve universal
for cooking fuels in Indonesia have been undergoing reforms since
access to affordable energy by 2030.
2007 through a step-by-step process. In 2007, the government
PAGE | 62
Energy efficiency: considerable untapped potential for improvements across Southeast Asia
Indicators of energy demand, 2020-2050 Final energy consumption and avoided energy use through
energy efficiency in the Sustainable Development Scenario
Buildings
150 Final energy
Index (2020=100)
2020 consumption
2030
125 2020
2050
Energy demand per capita Road transport
100 2020
2030 SDS
75 2050
Light industry
50 2020
Energy intensity (TPED/GDP) 2030 Avoided demand by
25 2050 efficiency savings
Heavy industry
Additional
2020
savings
2020 2025 2030 2035 2040 2045 2050 2030 in SDS compared
2050 to STEPS
STEPS SDS -3 0 3 6 9
EJ
Note: TPED = total primary energy demand. SDS final energy consumption already accounts for efficiency savings.
PAGE | 63
Improving the efficiency of end uses – particularly for cooling and the light industry sector – is
a key element of the transition
The countries of Southeast Asia have collectively endorsed ambitious as more stringent minimum energy performance standards (MEPS)
targets that seek to boost the rate of improvements in energy for appliances and particularly for cooling equipment.
efficiency.
In transport, the average fuel economy of both heavy trucks and
In the STEPS, the energy intensity of GDP in Southeast Asia falls by passenger cars is around 10% better in 2030 in the SDS than in the
an average of 1.7% each year between 2020 and 2050. The stated STEPS, avoiding in total around one EJ (0.5 mb/d) of fuel
energy efficiency policies and measures keep energy consumption consumption. Strengthened fuel economy standards, a larger uptake
around 10% lower in 2030 and around 12% lower in 2050, compared of electric vehicles and stricter regulation of ICE sales all play a role
to a trajectory without these measures. Most of the energy savings in the SDS. Industry, particularly the light industry sector, has
occur in the light industry and road transport sectors. Yet, despite potential for additional efficiency gains in the SDS, reflecting the
these improvements, Southeast Asia’s total primary energy demand current lack of policies and measures to support efficiency
per capita grows by more than 50% over the period to 2050. improvements in the sector. Energy efficiency measures such as the
electrification of low‐temperature heat through heat pumps and the
There still remains untapped potential to reduce energy demand
introduction of more stringent standards for boilers, electric motor
further through efficiency. In the SDS, greater efforts to improve
systems and other industrial equipment as well as a more efficient
energy efficiency mean that energy intensity falls by 2.6% per year
use of heavy industry materials help to cut industrial energy demand
on average to 2050. This is about 50% greater than the average rate
by almost 10% in the SDS relative to the STEPS in 2050.
of the previous decade, and significantly reduces the cost and
difficulty of reducing emissions from energy demand. However, it is Stronger frameworks for monitoring and evaluation will be key to
still short of the 3% average annual decrease achieved in the NZE assessing the status and impact of policies. A renewed focus on
Scenario. realising the full potential of energy efficiency not only is a pillar of
sustainable energy use but also eases energy security concerns by
In buildings, energy efficiency measures save around one EJ (15%
reducing imports, while keeping consumer energy bills in check, and
of demand) in the SDS relative to the STEPS in 2030. This reflects
delivering employment opportunities.
stronger buildings regulations for new and existing buildings, as well
PAGE | 64
Regulations, actions and incentives to support efficiency improvements and emissions

reductions in buildings in Southeast Asia
Status of key existing policy instruments (left) and a proposed policy package (right) to improve energy efficiency in buildings
Status of building energy codes and Regulation

certification in ASEAN Product standards Procurement regulations Regulations on materials
Labelling for Framework regulations Building Energy Codes and Building Standards
appliances
• Minimum energy and thermal performance requirements, requirements
for renewable energy systems installation or utilisation, covering all
building types, new and existing buildings.
• Mandatory minimum energy performance standards (MEPS) for all types
of appliances and building systems that are progressively and regularly
updated, etc.
Information
Certification Labelling Disclosure & benchmarking Training programmes
Education programmes Awareness raising Digital tools and data

• Certification of energy and carbon performance for new and existing
buildings; Mandatory rating labels, disclosure and benchmarking schemes
for new and existing buildings based on energy and carbon performance;
• Mandatory labelling for appliances based on their energy efficiency;
• Training on integrated policy portfolios and solutions for net zero carbon
buildings; Accreditation systems for professionals; Awareness raising
programmes for consumers on benefits of net zero carbon buildings.
Incentives
Financial incentives Non-financial incentives Tariff policies
• Grants, preferential loans, tax rebates, tied to energy and carbon
performance levels of new or renovated buildings, building materials,
systems, appliances, reflective energy pricing, etc.
Note: “Mandatory” status presumes that there is regulation in place that enforces energy efficiency requirements of the building energy code or certification;
“Mandatory for all buildings” means that there are mandatory requirements for both residential and non-residential buildings; “Mandatory for certain building types”
means that such requirements apply to a specified group of buildings, e.g. buildings owned by the government or buildings with the floor area larger than a certain
threshold.
PAGE | 65
Well-designed policies are key to making the buildings sector more energy efficient
Effective policies play a pivotal role in improving energy efficiency in To support policy makers in developing and enforcing energy
buildings. While the level of implementation varies among countries, efficiency policies in buildings, the IEA in collaboration with the
governments have been introducing relevant policy actions – e.g. ASEAN Secretariat, Energy Efficiency Subsector and Conservation
Singapore has been enforcing a mandatory building energy code for Network and the ASEAN Centre for Energy, published in 2022 the
residential and non-residential buildings for almost a decade. Roadmap for Energy-Efficient Buildings and Construction and the
Roadmap towards Sustainable and Energy-Efficient Space Cooling.
As for building energy codes and standards, there remains a lack of
These Roadmaps outline milestones for the short-, mid- and long-
mandatory energy efficiency requirements across the region.
term, and provide key components for a policy package for net zero
Governments often introduce such policies either on a voluntary
carbon buildings (NZC) and cooling. The IEA is also analysing the
basis or for specific building types, with the intention of allowing the
opportunities for digitalisation to enhance the buildings sector’s
industry to adapt and with the vision to expand the scope and
energy efficiency and demand side flexibility in Southeast Asia.
increase the stringency of requirements in the future. The market for
green building certification is growing across the region, with several Some countries have already embarked on a journey towards NZC
national and international certification and rating programmes buildings. In November 2021, the Malaysia GBC Carbon Score
currently in use. (MCS) initiative was launched, providing a comprehensive
assessment protocol to measure operational and embodied GHG
There are ongoing efforts within Southeast Asia to harmonise MEPS
emissions associated with new and existing buildings. At the regional
for appliances and equipment, which could further enable energy
level, a new Zero Energy Building category was added to the ASEAN
efficiency improvements in the buildings sector. As space cooling is
Energy Awards that provides a platform for raising awareness on
one of the fastest growing sectors, MEPS in this sector are
energy efficient best-practices and private sector engagement. Such
particularly important. Most countries in the region have already
actions can give the market important signals to accelerate
introduced mandatory MEPS for air-conditioners, but it is important
decarbonisation of the built environment, which are essential for the
that these MEPS are regularly updated to increase the stringency of
region to get on track for the SDS.
their requirements and to ensure that they are supported by other
policies, like labelling.
PAGE | 66
Electricity demand: electricity grows in importance in all scenarios, more than doubling its
levels in both the STEPS and SDS…
Drivers of change in electricity demand (left chart) and total electricity demand and its share in TFC (right chart)
in the Stated Policies and Sustainable Development Scenarios, 2020-2050
1 500 3 000 40%
TWh
TWh
1 000 2 250 30%
500 1 500 20%
0 750 10%
- 500
2020 2050 2050
STEPS SDS
-1 000
STEPS SDS STEPS SDS STEPS SDS STEPS SDS
Industry Transport
Buldings Industry Transport Hydrogen Buildings Hydrogen production
production
Other Share of electricity in
Activity Access Electrification Efficiency Net change TFC (right axis)
Note: TFC = total final consumption.
PAGE | 67
...but the underlying drivers of electricity demand growth differ by scenario
In both scenarios, the demand for electricity in Southeast Asia grows achieving those savings and reducing household bills and carbon
at a rate of 3% per year, with electricity capturing over a quarter of footprints.
total final consumption by the year 2050. It will continue to grow
Electrification of the transport and industry sectors is a profoundly
rapidly, by nearly 260% in STEPS and 280% in SDS by the year
important trend in the SDS. The share of electricity in TFC doubles in
2050. While demand growth under both scenarios is within the same
comparison to today’s levels and reaches 37% in the SDS (in the
order of magnitude, the drivers are quite different. Increased demand
NZE Scenario, the global share of electricity expands to almost 50%
from the buildings and industry sectors underpins demand growth in
by 2050). The electrification of transport leads to an increase of
the STEPS. Increased appliance ownership and uptake of ACs are
490 TWh in electricity demand – an amount almost equal to current
the main factors behind the rise in demand in buildings. Together with
electricity demand in Brazil. Electric vehicles reach nearly 50% of
higher industrial activity, they add over 400 TWh to today’s electricity
total vehicle sales by 2030 and almost 95% by 2050. In the industrial
demand by the year 2050.
sector, electrification in the SDS adds another 330 TWh by 2050, led
In the SDS, these drivers are joined by increased electrification of by the iron and steel industries in which electricity demand triples
end-use sectors, notably for transport. However, improved energy from current levels. Hydrogen demand,lthough modest compared to
efficiency offsets a large portion of that growth. In the SDS, overall what it is in other parts of the world, adds another 100 TWh by 2050
demand grows by over 1 500 TWh by 2050, an amount greater than in the SDS.
today’s electricity demand in India. Industrial demand accounts for
Smart electrification of end-use sectors and the uptake of hydrogen
35% of that demand growth, followed by transport and buildings with
in the SDS present new opportunities to contribute to the stability and
29% each.
reliability of the electricity system, with demand response contributing
In the SDS, the buildings sector accounts for about 350 TWh of to nearly a quarter of the flexibility in high demand hours by the year
overall demand growth. This increase would have been much higher 2050.
without energy efficiency improvements that avoid around 70% of the
potential rise. A combination of reformed building standards,
information measures and direct funding are a pre-requisite towards
PAGE | 68
Electricity supply: meeting rising demand while bringing down emissions will require a major
additional push to deploy a range of renewable technologies
Electricity generation and emissions in the Stated Policies Scenario and Sustainable Development Scenario, 2010-2050
Stated Policies Scenario Sustainable Development Scenario
Mt CO2
TWh
3 000 1 000
2 250 750
1 500 500
750 250
2010 2020 2030 2040 2050 2010 2020 2030 2040 2050
Unabated coal Unabated natural gas Oil Ammonia Hydro Bioenergy
Geothermal Solar PV Wind Other low emissions Emissions (right axis)

Note: “Other low emissions” includes nuclear, CCUS and other forms of renewables.
PAGE | 69
A secure low emissions transformation of the power sector is a first-order challenge and
responsibility for the region’s policy makers
Demand growth and a steep rise in coal use have led to a tripling of Nam has signalled its intention to phase out unabated coal by 2050.
electricity emissions in Southeast Asia over the last two decades. The However, even if few new plants are added to the mix, there are still
power sector now accounts for more than 40% of the region’s energy- nearly 90 GW of existing coal-fired plants, many of which are still
related emissions. Trajectories for generation and emissions vary relatively new and which would, under typical circumstances, have
substantially across the STEPS and SDS. In the STEPS, emissions substantial operating lifetimes ahead of them. Currently, there is
more than double by 2050 as unabated fossil fuel generation keeps about 18 GW of coal-fired power under construction and the existing
growing. Conversely, in the SDS, emissions peak as early as 2024, fleet has an average age of about ten years.
coincident with the peak of unabated coal-fired generation. By 2050,
In the SDS, unabated coal-fired generation peaks before 2025 at a
emissions fall by over 50% as the share of unabated fossil fuels in
level of 500 TWh, and is gradually phased out by 2050 (in the NZE
generation falls to 5%.
Scenario, unabated coal-fired generation is phased out globally by
Unabated fossil fuels currently account for three-quarters of total 2040). Of the current 87 GW of coal capacity, over 26 GW retires
generation, the majority coming from coal. Moving to 2050 in the earlier in the SDS than in the STEPS; the modalities that can
STEPS, this share falls to 60%, split nearly evenly between coal and underpin unabated coal phase-out, including financing and social
natural gas. Unabated coal-fired generation continues to increase aspects, are critical and will be considered in detail in forthcoming
until the end of the 2040s, with some replacement of subcritical coal IEA analysis. Alongside early retirements, some capacity is re-
plants with high-efficiency designs such as ultra-supercritical and purposed to provide flexibility or is retrofitted to bring down coal
integrated gasification combined cycle (IGCC). emissions while maintaining electricity security. High potential
options include co-firing using ammonia and retrofitting plants with
Coal-fired power is coming under increasing pressure in the long
CCUS – the two reach an installed capacity of about 50GW by 2050
term, with decisions to move ahead with new plants drying up, and
in the SDS – equivalent to today’s hydropower capacity in the region.
financing becoming more difficult to obtain. In the run-up to COP26,
Where coal plants are retired, there are opportunities to take
the countries of Southeast Asia, including Indonesia and the
advantage of existing grid connections to deploy lower-emissions
Philippines, announced that no new unabated coal-fired power plants
sources of electricity generation.
will receive a green light beyond those already approved, and Viet
PAGE | 70
Rapid deployment of renewables, alongside some coal-to-gas switching, kick-starts the

transition away from coal-fired electricity
The countries of Southeast Asia benefit from a diverse range of to boost solar PV and wind deployment through strong policy support
renewable electricity options, including hydropower, wind, solar PV, such as feed-in tariffs (FiTs) and open tenders (for example, the
bioenergy and geothermal. Renewables currently account for nearly Large Scale Solar [LSS] competitive bidding programme in
a quarter of total generation, the majority coming from hydropower. Malaysia). Extending the scale of support mechanisms such as
In the STEPS, the share of renewables steadily rises until it reaches competitive auctions and FiTs, the governments could help boost
nearly 40% by 2050. In the SDS, additional efforts are needed to solar PV and wind uptake. In the STEPS, solar PV and wind increase
accelerate the deployment of renewables, which collectively reach their share in total generation from 2% in 2020 to 8% in 2030 and
85% of electricity generation by 2050 (in the NZE Scenario, 19% in 2050. This level requires over 10 GW deployed every year on
renewables account for nearly 90% of global electricity generation in average, of which three-quarters is solar PV.
2050). To achieve a level of 85% in 2050, countries need to deploy
Alongside rapid deployment of renewables, natural gas plays an
1 100 GW of renewable capacity in the next 30 years – this is
important role in enabling the switch away from coal. In 2020, natural
equivalent to the total renewable capacity of China and India
gas accounted for nearly a third of the total electricity generation in
combined today. The countries of Southeast Asia have set renewable
Southeast Asia. In the STEPS, the share of natural gas stays broadly
generation or capacity targets, aspiring to achieve 35% renewable
constant to 2050, but with generation levels that more than double in
electricity capacity by 2025. This target is met ahead of schedule in
parallel with electricity demand. In the SDS, natural gas replaces coal
the SDS, but is met a few years later with the current market and
as the largest source of electricity in the mid-2020s, but its share of
policy settings.
the total begins to decrease by the mid-2030s. Thereafter, gas-fired
The amount of solar PV and wind generation varies within the region, generation levels decline with capacity factors falling from their 50%
with some countries like Thailand and Viet Nam benefitting from the peak in the mid-2030s to about 10% by 2050 – leading to its share of
scope to deploy utility scale installations. Most countries, however, generation falling to 5%. This signals the changing role of gas from
rely more on distributed resources. This is due to the combination of bulk generation to supporting the integration of variable renewables
land and population density constraints, and renewables through the provision of different system services to support
support/incentive structure. In recent years, efforts have been made electricity security.
PAGE | 71
Electrical capacity more than triples by 2050, with renewables accounting for the bulk of new
capacity in all scenarios, and almost all of the new capacity in the SDS
Change in electricity capacity in the Stated Policies Scenario and Sustainable Development Scenario, 2020 to 2050
1 500
GW
1 200
900
600
300
2020 2050 2020 2050

STEPS SDS
Unabated coal Unabated natural gas Oil Ammonia Hydro Geothermal Solar PV Wind Batteries Other low emissions

Note: “Other low emissions” includes nuclear, CCUS and other forms of renewables.
PAGE | 72
The integration of variable renewables requires a variety of low-emissions solutions and is

pivotal for a reliable and orderly transition
In the SDS, the share of wind and solar PV in electricity generation increase in hydropower capacity by 2050. Other energy sources such
reaches 18% in 2030 and 44% in 2050. More than 25 GW of solar as geothermal and bioenergy are abundant in parts of Southeast Asia
PV and wind capacity is added on average every year to 2050 – this but their deployment has been slower. The share of geothermal and
is similar to total capacity that has been installed to date in the region. bioenergy generation is currently at about 6% and increases to about
Annual solar PV capacity additions exceed 20 GW in the mid-2030s, 8% by 2050 in the STEPS and 16% in the SDS. Stronger policy
compared with 12 GW in 2020, mostly led by a surge in Viet Nam as support to those sources would be required to further tap their
a result of the expected expiry of an existing FiT scheme. Wind potential, as well as controlling social and environmental impacts.
generation, due to its different generation pattern, complements solar
The countries of Southeast Asia are well placed to integrate large
PV and makes up a fifth of electricity generation by 2050 in the SDS.
shares of variable renewables due to rich hydro resource potential.
The north-eastern part of the region has a strong resource potential,
However, geography and network bottlenecks require supplemental
with Viet Nam spearheading wind deployment with plans to reach
low emissions solutions, as well as a supporting regulatory
36 GW of offshore wind capacity by 2045. The implications of
framework. In the SDS, 54 GW of coal plants co-fired with ammonia
operating systems with high shares of variable renewables are
or retrofitted with CCUS provide reserve and stability services.
discussed in the next chapter.
Storage, networks and demand response are also key to tap more of
Hydropower remains the largest source of renewable electricity in the variable renewables’ potential. In the SDS, 45 GW of battery
both the STEPS and SDS to 2050. In 2020, hydropower generated storage capacity is in operation by 2050, which alongside tripling the
15% of electricity in the region, with 6 GW of new capacity added, length of the electricity network, provides the conditions necessary to
mostly in Lao PDR that has export contracts in place to neighbouring integrate large shares of variable renewables. Enhanced
regions. Additional projects and ambitious targets for the next decade interconnectivity between the countries enables them to take
further increase hydropower, largely financed through China’s Belt advantage of the diverse renewables dispersed across the region
and Road Initiative. However, the share of hydropower generation and brings substantial benefits as explored in next the chapter. In
falls to 12% by 2050 in the STEPS as electricity demand growth is addition, demand response could provide up to a quarter of flexibility
larger. In the SDS, hydropower gathers momentum with its share needs, helping to shift demand to periods when the output of variable
rising to 26% by 2050. Such an increase requires a nearly fivefold renewables is high and away from it when it is low.
PAGE | 73
Oil: consumption grows robustly over the next decade, but there is a major divergence between
the scenarios after 2030
Changes in oil demand by sector and product, 2020-2050

By sector By product
2
mb/d
-1
-2
-3
STEPS SDS STEPS SDS STEPS SDS STEPS SDS
2020-30 2030-50 2020-30 2030-50
Road transport Other transport Petrochemicals LPG/Methane Naphtha Gasoline
Other industry Buildings Power Diesel Kerosene Fuel oil
Others
Other
Note: Other includes agriculture, energy sector own use and non-energy uses apart from petrochemical feedstock.
PAGE | 74
In the SDS, stronger fuel economy standards, the uptake of electric vehicles and policies to
tackle plastic waste bend the oil demand curve down after 2030
While recent high crude oil prices have cast a shadow of uncertainty, The average fuel economy of road vehicles in 2050 is around half the
the global market is stabilised in the STEPS and oil demand in level in the STEPS, curbing demand by an additional 0.5 mb/d in
Southeast Asia continues to grow rapidly to 2030. Oil use rises by 2050.
40% to 6.6 mb/d by 2030 – a rate of increase that is exceeded only
There is also a growing role for electric trucks (initially for light-duty
by India and Africa – primarily due to transport demand. A
segments) and buses. In the SDS, one in three trucks sold in the
combination of rapidly growing conventional vehicle sales across all
region in 2050 is electric (in the NZE Scenario, half of heavy truck
vehicle types (passenger cars, trucks, two/three-wheelers) and
sales globally are electric in 2035). The improvement in fuel efficiency
relatively limited penetration of electric car sales (around 6% in 2030)
and the uptake of biofuels also play a major role in displacing oil use
makes road transport the largest contributor to oil demand growth.
in trucks. As a result, road transport becomes a major factor in putting
The lack of widespread fuel efficiency standards for vehicles also
the overall oil demand trajectory on a downward path, with demand
poses upward pressure on oil demand. Rising demand for
declining by 1.7 mb/d between 2030 and 2050.
petrochemical feedstock is another major force – especially for
naphtha – as the region’s steam cracking facilities are mostly Oil demand for petrochemicals stays flat after 2030 in the SDS,
configured to process this product. helped by effective and widespread plastic collection and recycling
policies. It is estimated that some 75% of the material value of plastics
In the SDS, oil demand continues to increase by 20% through to
is being lost today, resulting in USD 6 billion of wasted economic
2030, but stronger fuel efficiency standards, electrification and
opportunities every year. The region also suffers from large quantities
expanded mass transit infrastructure begin to dampen oil demand
of plastic waste ending up in the ocean. In 2021, countries in
growth after that. Sales of electric cars begin to outpace the sale of
Southeast Asia adopted a joint action plan to phase out single-use
conventional cars from around 2030. The share of electric cars in the
plastics and harmonise policies on recycling and packaging
number of cars on the road reaches 75% by 2050 and this cuts oil
standards. The implementation of these plans reins in the growth of
demand that year by 0.8 mb/d (including electric two/three-wheelers).
oil demand for petrochemicals in this scenario.
PAGE | 75
A structural decline in oil production puts the region on track for a sharp increase in oil imports
Oil production and imports, 2015-2050
Oil production and import dependency Oil net trade by type
2.5 100% 2030 2050

mb/d
2015 2020 STEPS SDS STEPS SDS

2.0 90%
1.5 80% -2
1.0 70% -4
0.5 60% -6
50% -8
2015 2020 STEPS SDS STEPS SDS
mb/d
2030 2050
- 10
Indonesia Brunei Malaysia
Thailand Viet Nam Others Oil products Crude oil
Import dependency (right axis)

Note: Import dependency = net oil imports divided by demand including international bunkers.
PAGE | 76
Efforts to promote fuel efficiency, electrification and plastic recycling can help moderate the
pace of growing import dependency
Oil production in Southeast Asia has been on the decline since 2000 on imports remains similarly high in the SDS though the absolute
and continues to decline by a third to 1.4 mb/d by 2030 in the STEPS. import volumes are smaller and start to decline after 2030.
Alongside supply chain and staffing disruptions associated with the
Today, Southeast Asia is a net importer of oil products as the region’s
pandemic, a major drop in sanctioned crude oil volumes since the
refining capacity additions have not kept up with the pace of demand
mid-2010s weighs on production levels, further pressured by high
growth. In both STEPS and SDS, refinery runs grow at one of the
decline rates at mature fields. In Indonesia, though a few projects
fastest rates in the world over the period to 2030, supported by
have been sanctioned in recent years, they are not sufficient to stem
several planned capacity additions such as the 280 kb/d expansion
the declines from major producing fields such as Duri and Minas.
project in Brunei Darussalam. While helping to constrain an increase
Malaysia faces a similar outlook as output from its large fields such
in product import volumes, this raises the need for crude oil imports,
as the Gumusut-Kakap begins to slide and new projects are not
a large part of which is likely to come from the Middle East, via major
sufficient to compensate for the decline. The two countries
chokepoints such as the Straits of Hormuz and Malacca, raising
nevertheless remain the top producers in the region, accounting for
concerns around energy security.
more than two-thirds of the output over the projection period. In the
SDS, the weakened environment for new investment and the slowing With domestic upstream prospects uncertain, demand-side actions
pace of demand growth accelerate the output declines. As a result, become the key to alleviate import dependence: these include a push
oil production falls considerably from over 2 mb/d today to 0.4 mb/d for electric mobility, efficiency and recycling. These measures, as
by 2050. reflected in the SDS, reduce the absolute amount of oil import bills
USD 80 billion by 2030 and more than USD 200 billion by 2050
Growing oil demand and structural production declines put the
compared to the STEPS. While this helps make the region’s economy
region’s oil imports on a continued growth trajectory. In the STEPS,
less vulnerable to global oil-supply disruptions, security concerns do
the region’s import requirements double to 7 mb/d by 2030, raising
not vanish even in this scenario, and a broad and sustained approach
import dependency from around 60% today to over 80%. The reliance
to fuel security is required.
PAGE | 77
Natural gas: uncertainty over the long-term trajectory has been exacerbated by today’s market
turbulence
Natural gas demand change with breakdown by country and sector
By country By sector
150
bcm
100
50
-50
-100
-150
2000 2010 STEPS SDS STEPS SDS 2000 2010 STEPS SDS STEPS SDS
-10 -20 2020-30 2030-50 -10 -20 2020-30 2030-50
Other Indonesia Viet Nam Thailand Malaysia Other Power Buildings Industry

Note: Other includes transport, agriculture and other non-energy use and other energy sector (i.e. use of energy by transformation industries and losses).
PAGE | 78
A mixed picture for gas demand, whether looking back or looking forward
Natural gas has seen mixed fortunes in Southeast Asia over the past affordable prices. Yet, if global gas balances stabilise, there are
two decades. From 2000 to 2010, gas satisfied one-third of total reasons to expect renewed growth in gas use in Southeast Asia. Gas
energy demand growth in the region, on par with the share taken by use increases by 40% between 2020 and 2030 in both the STEPS
coal. Since 2010, however, coal has gained the upper hand, eclipsing and SDS, similar to the pace of growth seen in the 2000s. Industry
gas as the dominant means of generating electricity in 2017, and and power generation cover more than 80% of the growth. There
satisfying 40% of the region’s industrial energy demand from 2010 to remain significant opportunities to use natural gas in place of oil and
2020, compared with 15% for natural gas. biomass as a source of process heat in light industry and
manufacturing. The high level of projected growth in electricity
Slowing gas demand growth – particularly since 2014 – has been a
demand underpins a 4% annual increase in gas use in power
consequence of plateauing domestic production and the weakened
between 2020 and 2030 in the STEPS, faster than the rate of growth
competitiveness versus coal and renewables in the power sector.
in coal use. In the SDS, the growth rate of gas use for electricity is
The Covid-19 pandemic caused a 4.5% decline in demand in the
only marginally lower, as the potential decline in gas due to the
region in 2020, compared to a less than 2% drop globally.
acceleration of renewables is offset by a faster reduction in coal
Indonesia and Thailand led the growth in demand from 2000 to 2010, consumption.
accounting for over 50% of the increase. This was underpinned by
In the STEPS, gas demand continues to increase after 2030, almost
strong production growth in these two countries (which also
doubling today’s levels by 2050, with the power and industrial
represented around 50% of the region’s output growth). The picture
sectors still representing the lion’s share of the gas growth. By
changed after 2010 when domestic production in Indonesia declined
contrast, the SDS sees a peak in gas demand before 2040 and a
by around 30%, accompanying a 10% decline in consumption to
steady decline thereafter. A gas-to-renewables switch in the power
2020. In Thailand, production declined by about 10%, but gas
sector covers more than 25% of the reduction in emissions from
demand kept increasing, albeit at a slower pace.
natural gas between the STEPS and SDS from 2030 to 2050. In the
The rapid rise in natural gas prices since the end of 2021 – industry sector, growing activity is offset by efficiency improvements,
accentuated by Russia’s invasion of Ukraine in February 2022 – has resulting in a slight decline between 2030 and 2050.
shaken confidence in the ability of countries to import gas at
PAGE | 79
Southeast Asia is on the cusp of becoming a net importer of natural gas
Natural gas demand and production and net natural gas trade
400 400 Other

bcm
bcm
Viet Nam
Thailand
300 200
STEPS Malaysia
Production
Indonesia
200 0 Net trade
Demand
SDS
100 -200
-400
2010 2015 2020 2025 2030 2035 2040 2045 2050 2020 STEPS SDS STEPS SDS
Demand Production 2030 2050

Note: In the chart on the right side, positive values are production and negative values are demand; for net trade, positive values are exported volumes and negative
values are imported volumes.
PAGE | 80
Near-term growth in the region’s natural gas output falls short of rising demand, increasing the
call on LNG markets
Natural gas production is projected to remain broadly flat in both tonnes per annum (mtpa) in total. Many are to be commissioned in
scenarios between 2020 and 2030, in a range between 190-210 bcm. order to compensate for the depletion of domestic gas fields (as in
In the STEPS, production grows by almost 50 bcm between 2030 and Myanmar and Thailand) or as a first foray into global gas markets (as
2050. Indonesia accounts for most of the growth in the STEPS as in the case of Viet Nam and the Philippines). However, several
new resource developments broadly keep pace with demand. projects have been shelved or delayed, largely due to permitting and
Malaysia also adds to the regional balance, but Thailand’s gas output regulatory hurdles or difficult market conditions. In places such as the
is reduced by more than 75%, down to 6 bcm, in 2050. In the SDS, Philippines or Viet Nam, LNG ambitions hinge on navigating the
weaker gas prices and declining demand accelerate production complex commercial and financial structures needed to underpin
decreases across all Southeast Asian countries, and production ends LNG-to-power projects. In addition, buyers are likely to face tough
up 94 bcm lower in 2050 compared to 2020 levels. competition in the LNG market with Europe, which is looking to rapidly
phase out Russian gas imports, and Northeast Asia, which has been
Southeast Asia as a whole is projected to become a net gas importer
traditionally willing to pay a premium and sign longer-term contracts
by 2025 in both the STEPS and the SDS (five years earlier than
to ensure the availability of imports (see chapter on energy
projected in the Southeast Asia Energy Outlook 2019). With limited
perspectives).
prospects for pipeline interconnections (and with Indonesia recently
announcing a halt to pipeline exports to Singapore), LNG is likely to The projections in the STEPS and SDS rely on a reversion to gas
become the dominant source to meet gas demand growth. In the prices ranging between 7 and 10 USD per million British thermal units
STEPS, LNG imports expand from 13 bcm in 2020 to 128 bcm by (USD/MBtu) over the next decade. As such, there are downside risks
2050. This is a major turnaround for a region that has been home to to demand if the natural gas prices seen in 2021 and to date in 2022
some of the major LNG exporting countries – Malaysia, Indonesia are sustained over a longer period (e.g. Indonesian consumers pay
and Brunei – which together have accounted for more than 10% of regulated gas prices in the order of 3-6 USD/MBtu). In the STEPS,
the total volume of global LNG exports. the net trade balance for gas is expected to decline from a USD 10
billion surplus in 2020 to a deficit of USD 10 billion by 2030, eventually
The turn towards imports has however proven challenging. Southeast
ballooning to a USD 32 billion deficit by 2050. In the SDS, import bills
Asia has LNG import terminal projects, of which capacity is 50 million
after 2030 begin to plateau at an average value of USD 7 billion.
PAGE | 81
Coal: contrasting positions between Indonesia, the world’s largest exporter of thermal coal, and
import-reliant Viet Nam, Malaysia, Thailand and the Philippines
Coal demand, production and net trade between 2020 and 2050 in the Stated Policies Scenario and Sustained Development Scenario
Historical Stated Policies Scenario Sustainable Development Scenario
600
mtce
Production
400
200
- 200
Demand
- 400
- 600
2020 2030 2040 2050 2030 2040 2050
Indonesia Viet Nam Other ASEAN countries net trade (excl. Indonesia) Indonesia's net trade
PAGE | 82
Coal: how fast will the policy headwinds blow?
Coal has grown in importance across Southeast Asia over the past coal imports. Domestic policies naturally affect the region’s exports,
decade but faces an increasingly uncertain outlook, threatened by e.g. efforts by Indonesia in early 2022 to prioritise domestic deliveries
growing policy headwinds as governments take on increasingly over exports. In the SDS, production plunges to 150 Mtce in 2050, a
stringent climate goals, as well as increasingly competitive renewable production drop eight times larger than in the STEPS.
options in the power sector. Despite the pandemic, coal demand set
Dwindling export opportunities mean that Indonesia’s coal net trade
a new record of 257 million tonnes of coal equivalent (Mtce) in 2020.
balance deteriorates over the coming decades, with associated
In the STEPS, while demand growth slows, coal continues to play an revenues declining from about USD 23 billion in 2020 to about USD
important role in regional energy balances, reaching 340 Mtce in 16 billion in 2050 in the STEPS. In the SDS, revenues fall by another
2030 and 390 Mtce in 2050. In stark contrast, the SDS sees demand USD 9 billion in 2050.
decline to 210 Mtce in 2030 and 80 Mtce in 2050. In the power sector,
Countries relying on coal to satisfy their growing energy needs have
renewables and gas-fired generation replace coal. In the industry
to reconcile long-term sustainable objectives with short-term energy
sector, demand is reduced by coal-to-gas fuel switching and
security and affordability goals, while addressing the social
efficiency improvements.
consequences of change. The recent wave of net zero pledges and
From a supply-side perspective, nearly 90% of Southeast Asia’s announcements of “no new coal” and “no more funding for overseas
production comes from Indonesia, the third largest coal producer in coal projects” clearly point towards a declining future for coal. The
the world, followed by Viet Nam. About half of the coal produced in task for governments is to ensure that the energy services provided
Southeast Asia is consumed domestically, with the rest being by unabated coal – including not only power but also key industrial
exported mainly to China and India. Future trends in coal production outputs like cement, iron and steel – are met affordably, reliably and
in this region depend strongly on the outlook for Indonesia. securely in other ways. This means scaling up alternative fuels and
technologies, demand-side measures and efforts to curb emissions
In the STEPS, production gradually falls over the next decades.
via CCUS and co-firing with ammonia. This topic will be examined
Between 2020 and 2050, it decreases by about 40 Mtce from 480
further in future IEA analyses.
Mtce, reflecting recent efforts by China and India to further reduce
PAGE | 83
Implications
PAGE | 84
Energy imports: Southeast Asia faces huge payments and energy security challenges from
rising fossil fuel imports, led by oil
Fossil fuel trade balance in Southeast Asia, by scenario, 2000-2050

100
Import bill (STEPS)
Billion USD (2020)
Oil
Coal
0
Gas
-100 Total net trade

STEPS
SDS
-200
Historical
-300
-400
2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050
PAGE | 85
Energy security concerns reinforce the case for rapid energy transitions
Russia’s invasion of Ukraine has been a strong reminder of the continues to rise after 2030, albeit at a slightly slower pace, but
importance of energy security. In the STEPS, rapidly growing fuel exceeds USD 300 billion by 2050. In the SDS, the import bill is
demands raise concerns about increasing the dependency on considerably smaller, peaking at the beginning of the 2030s below
imports which could render the economy more vulnerable to fuel USD 120 billion and declining to USD 80 billion in 2050.
supply disruptions outside the region. In the SDS, import dependency
The expansion of imports is not accompanied by a diversification in
is reduced, but this does not guarantee immunity from energy
the sources of supply. Given the low costs of oil production in the
security hazards, including the risk of investment imbalances or
Middle East and relative proximity to the Southeast Asian market, the
bottlenecks in the availability of critical minerals (see next chapter).
Middle East reinforces its position as the predominant supplier to
In the early 2000s, Southeast Asia was a net exporter of fossil fuels, importers in this region – not only in STEPS but also in SDS. This
but the cost of rising oil imports now more than offsets the revenue means Southeast Asia is exposed to even larger risks arising from
from exports of coal and gas. The average import bill over the past physical or geopolitical events in the Middle East or accidents near
decade has stood at about USD 43 billion or 1.7% of GDP. In the trade chokepoints.
STEPS, this vulnerability is exacerbated by rising imports, especially
Considering the dynamically growing economies in Southeast Asia,
of oil. The energy import bill rises to about USD 190 billion by 2030,
securing reliable energy supply chains is a critical issue for the
which is equivalent to almost 4% of the region’s GDP (and this
region’s prosperity: energy security must be considered as a high
assumes that oil and natural gas prices drop significantly from the
priority whichever scenario the region is in.
very high levels seen in 2021 and so far in 2022). The import bill
PAGE | 86
CO2 emissions: much stronger policy action will be essential to put the region on track for
carbon neutrality
CO2 emissions with intensity and share of electricity in selected sectors, Sustainable Development Scenario, 2020-2050
CO2 emissions from selected sectors, SDS CO2 intensity and share of electricity in selected sectors, SDS
2 000 100% 125
Demand share of electricity
CO2 intensity (year 2020 = 100)

80% 100
1 500
60% 75
Mt CO2
1 000
40% 50
500
20% 25
0
2020 2030 2050 2020 2030 2050
Power emissions
Electricity share Road transport Industry
Coal power generation Gas power generation Other (power)
Non-power emissions CO2 intensity Road transport Industry
Road transport Industry Other (non-power) (Right axis)
Power generation
Note: CO2 intensity = the amount of CO2 emitted per unit of electricity generated (kWh) (power sector) or energy consumed (MJ) (industry and road transport sector).
CO2 intensities in road transport and industry do not include CO2 emissions released from the electricity consumed in these sectors.
PAGE | 87
The power sector has to lead emissions reductions, but the harder task is to bring down
emissions from all parts of the transport and industry sectors
In Southeast Asia, 40% of the emissions in 2020 came from power improvements and coal-to-gas switching, but a slower pace in
generation, followed by industry (29%) and road transport (18%). As transport.
the industry sector consumes 40% of electricity, this sector accounts
An accelerating pace of transition from 2030 onwards is seen first
for more than 40% of total emissions if indirect power emissions are
and foremost in the power sector, as unabated coal-fired plants are
included. The SDS shows a pathway for these sectors to reduce the
retired, repurposed or retrofitted and gas-fired plants change their
emissions in the decades to come, while the NZE Scenario provides
role from bulk generation to supporting the integration of renewables.
a global framing for ambitious policy actions.
As a result, the emissions intensity of power generation in 2050 falls
In the power sector, coal-fired plants alone account for 30% of total by more than 95% compared with today, and power accounts for only
energy-related emissions in this region, followed by gas-fired plants 10% of total CO2 emissions in 2050. Clean electricity helps to bring
(10%). In the industry sector, the largest direct sources are coal use down industry and road transport emissions as well, underpinned by
in the cement industry (7% of all energy-related emissions) and oil electrification of industrial processes and a share of EVs in the
use for manufacturing (3%). In the road transport sector, emissions passenger vehicle stock that approaches 90% by mid-century.
from passenger vehicles and two/three-wheelers account for 7% and
Some sectors are difficult to electrify and these account for a rising
3% of total emissions, respectively. Heavy-duty trucks account for
share of total emissions; in 2050, direct emissions from industry
6%. Other sectors include fossil fuel use in buildings, navigation and
account for half of total emissions in the region. The iron and steel
aviation.
industry becomes the single largest emissions source in industry,
In the 2020s, a key indicator of progress is the CO2 emissions accounting for 7% of total emissions. Heavy-duty trucks account for
intensity of power generation. With rising deployment of renewables, 55% of the emissions from road transport, equivalent to 14% of total
the emissions intensity of electricity generation falls by 40% to 2030 emissions. Alongside clean electricity, low carbon fuels, including the
in the SDS. However, the absolute amount of emissions falls by only use of bioenergy, hydrogen and hydrogen-based fuels, are key in
10% as demand increases substantially during the same period. For attaining the full and far-reaching decarbonisation of Southeast Asia
non-power emissions, there is a 16% improvement to 2030 in the (see next chapter).
emissions intensity of industrial energy use, driven by efficiency
PAGE | 88
Air quality: a vital co-benefit of strong climate action
Change in air pollutant emissions from combustion activities by fuel and scenario in Southeast Asia relative to 2020
Sulphur dioxide Nitrogen oxides PM2.5
75%
Bioenergy
Gas
50%
Oil
Coal
25%
0%
-25%
-50%
-75%
-100%
STEPS SDS STEPS SDS STEPS SDS STEPS SDS STEPS SDS STEPS SDS
2030 2050 2030 2050 2030 2050
PAGE | 89
Combustion of coal for power generation and of oil for transport, as well as the continued use
of biomass for cooking are major sources of air pollution in Southeast Asia
Several countries in Southeast Asia have established air quality fuels and to travel to liquefied petroleum gas (LPG) refilling stations
standards that comply with World Health Organization guidelines. Yet during lockdowns, and more time spent at home increased exposure
enforcement is limited and the recommended concentration limits are to air pollution and the associated health risks.
often exceeded. In 2020, Southeast Asia experienced around
As a consequence, the STEPS sees the numbers of premature
450 000 premature deaths associated with the adverse effects of air
deaths from indoor and ambient air pollution in Southeast Asia rising
pollution, with significant economic costs.
to more than half a million per year by 2030. Air pollution also leads
In the STEPS, the strong position of fossil fuels in the energy mix and to multiple serious diseases, placing an extra burden on healthcare
relatively weak pollution controls lead to a strong rise in emissions of systems dealing with the Covid-19 pandemic.
two major air pollutants, sulphur dioxide (SO2) and nitrogen oxides
In the SDS, despite a modest rise in energy demand, rapid cuts in all
(NOX). SO2 emissions increase by 13% to 2030 due to expanding
major air pollutants are achieved. SO2 emissions are halved by 2030
coal use in power generation and the sparse deployment of sulphur
compared with 2020, and NOX emissions are down by 15%. Reduced
removal technologies. Emissions of NOX also increase by almost
coal in electricity generation is the single largest contributor to the
30% over the period, resulting from the increases in oil use in
reduction in SO2 emissions, while electrification of road transport
transport. Fine particulate matter (PM2.5) emissions fall by 12% by
reduces NOX emissions the most. The largest improvement can be
2030, reflecting reductions in the traditional use of solid biomass as
seen in PM2.5 emissions, which are reduced by two-thirds in the SDS,
cooking fuel. But the damaging effects of the reliance on solid
brought about by a variety of technologies that end the harmful use
biomass remain acute in some countries, especially in Lao PDR,
of solid fuels for cooking and reduce greenhouse gas (GHG)
Myanmar and Cambodia.
emissions and other climate-forcing agents (e.g. black carbon). This
Affordability is a significant issue: solid biomass is often free, except dramatically improves human health prospects; premature deaths
for the time spent gathering it, while even the cheapest improved linked to outdoor and household air pollution together are reduced by
cookstoves can cost a poor household several weeks of income. The half compared to the situation in the STEPS.
pandemic further diminished the ability of many to pay for modern
PAGE | 90
Southeast Asia Energy Outlook 2022 Energy Perspectives
Southeast Asia’s Energy

Perspectives
PAGE | 91
Investment for clean energy

transitions
PAGE | 92
Annual clean energy investment has never exceeded USD 30 billion but must rise by a factor of
five this decade to get on track for the SDS
Clean energy investment in Southeast Asia (left) and energy investment by region as a share of GDP (right), 2015-2030
150 100% Low 8%

emission
120 80% fuels 6%
Billion USD (2020)
Efficiency
90 60%
and end-use 4%
60 40%
Clean 2%
30 20% Electricity
0% Share of 2016 2018 2020 2026-30

clean (right SDS
2015
2016
2017
2018
2019
2020
2021E
2026-30
2026-30 axis) India Southeast Asia

MENA Sub-Saharan Africa
STEPS SDS Eurasia
Notes: STEPS = Stated Policies Scenario; SDS = Sustainable Development Scenario. Low emissions fuels include modern solid, liquid and gaseous bioenergy, low-
carbon hydrogen and hydrogen-based fuels that do not emit any CO2 from fossil fuels directly when used and also emit very little when being produced. Clean
electricity includes low-carbon generation, power infrastructure grids and batteries. MENA = Middle East and North Africa; 2026-30 shows annual averages. “Share
of clean” = clean energy investment as a share of total energy investment. Investment is measured as ongoing capital spending in energy supply capacity (fuel
production and clean electricity) and incremental capital spending above a baseline for energy end-use and efficiency sectors (in buildings, transport and industry).
The scope and methodology for tracking energy investments are available in the methodology document.
PAGE | 93
Clean energy investment levels remain well below the region’s potential and its needs, across
power, efficiency and end use
Clean energy investment in Southeast Asia – in power, efficiency and Recent levels of investment in clean energy in Southeast Asia are far
end use, and low-emission fuels – was estimated at USD 27 billion in short of the requirements of all our scenarios. In the Stated Policies
2021, similar to 2015 levels . The amounts spent on clean energy in Scenario (STEPS), there is a near threefold increase in investment
2021 comprised just over 40% of total energy investment, a higher by the late 2020s up to an annual average of USD 80 billion. The
share than in 2015 (when it was around one third). This increase was Sustained Development Scenario (SDS) requires a steeper rise, to
mainly a result of a steady decline in oil and gas supply investment, more than five times current levels, with annual average spending of
on the back of lower oil prices since 2014, amplified by recent more than USD 150 billion by the late 2020s. The majority of this
demand-side uncertainties around the Covid-19 pandemic. spending in the SDS goes to clean electricity, though efficiency and
end use comprise increasing shares, driven by rising urbanisation
Investment in clean power and grids made up around 80% of clean
and the need for more efficient buildings, cooling appliances and
energy investment over the 2015-2021 period. Transmission and
transport alternatives. The stock of air conditioners in Southeast Asia
distribution networks represented more than half of the clean
increases from 332 million units today to 450 million by 2030 in the
electricity spending in 2015, though this balance has shifted in recent
SDS, adding 48 TWh or 7% per year between 2021 and 2030 for
years as investment in low-carbon generation has increased. Viet
energy consumption. EVs account for 1% of passenger cars sold
Nam, for example, mobilised substantial capital for the renewable
today, but 22% by 2030 in the SDS. Investment in low-emission fuels
power sector, with around 6 GW of renewable projects (mostly solar
remains low, though it starts picking up in the SDS.
PV) deployed in 2019 and more than 10 GW in 2020. Still, spending
on low-carbon generation has trended downwards since a peak in Investment in all forms of energy in Southeast Asia increases as a
2018 (aided by lower technology costs). share of GDP, though this increase is less than is seen in a number
of other regions. For example, energy investment in Southeast Asia
Investing in energy efficiency and end-use assets has accounted for
in the SDS is around 4% of GDP by the late 2020s, compared with
around one-fifth of total clean energy spending and less than 10% of
5% in India, and 6% in Africa and the Middle East. A major challenge
the total energy investment in the region, despite some increases in
for the region will be to meet its domestic energy needs by scaling up
recent years.
clean investments rather than a focus on investments in fossil fuels.
PAGE | 94
Investment in renewable power in Southeast Asia is low compared with other regions: capital
costs are relatively high given uncertainties about remuneration
Average annual investment spending, 2016-2020 (left)

and capital costs of utility-scale solar PV and onshore wind in selected emerging economies (right)
Solar PV Onshore wind

150 2 500 Indonesia
Billion USD (2020)
USD/kW
120 2 000 Brazil
90 1 500 South Africa

China
60 1 000
India
30 500
Advanced China Latin Southeast India Sub-Saharan 2016 2020 2016 2020
economies America Asia Africa
Wind Solar PV Hydro Other renewables Fossil fuels

Notes: Fossil fuels = Fossil fuel-based generation without CCUS.
Source: IEA analysis based on S&P Global Platts (2021).
PAGE | 95
For every dollar invested in renewable power in Southeast Asia in recent years, another was
invested in unabated fossil fuel generation
Around three quarters of Southeast Asia’s electricity generation today Wind and solar PV have experienced major cost reductions over the
comes from unabated fossil fuels, mainly coal. Average annual last decade, but costs remain relatively high in Southeast Asia,
spending in renewables over the 2016-2020 period was mainly due to unclear and slow moving policies which have
USD 12 billion, a level similar to India’s and half of the level in Latin hampered long-term predictability for investors. Capital costs for
America. Together with India, Southeast Asia had the highest ratio of utility-scale solar PV and wind in Indonesia, for example, are higher
fossil fuel-to-renewable power investment. For every dollar invested than in South Africa or Brazil, and much higher than in China or India.
in renewable power capacity in Southeast Asia, another dollar was In response, Regulation 4/2020, adopted in Indonesia in early 2020,
invested in unabated fossil fuels, compared with USD 0.5 in Sub- introduced changes such as priority dispatching for renewables and
Saharan Africa, USD 0.3 in China and USD 0.2 in Latin America. replaced the need to develop renewable projects on a build, own,
operate and transfer (BOOT) basis for a BOO scheme (the transfer
Average annual investment in solar PV and wind amounted to USD
requirement created difficulties for developers to own land and
7 billion. This is higher only than the level in sub-Saharan Africa, and
access financing). Nonetheless, there are still uncertainties about the
the majority was mobilised in just one country (Viet Nam). The
remuneration mechanism and the tariff level for renewables, affecting
modular and scalable nature of solar PV and wind should mean they
revenue risk perceptions and the cost of capital of these
are reliable and cost-effective solutions for Southeast Asia, which
technologies. If financing conditions in Indonesia fell to the average
includes a unique mix of islands, peninsulas and pockets of densely
level in advanced economies today, the levelised cost of electricity
populated areas, separated by uplands and mountainous areas.
(LCOE) of solar PV would be around 40% lower.
Average annual investment in renewable power in Southeast Asia in
the SDS is almost USD 50 billion by 2026-30. Of this, almost USD 30 In the SDS, the increase in electricity demand and penetration of
billion goes to solar PV and wind electricity, four times more than intermittent renewable energy sources mean transmission and
current levels. In recent years, there have been equal levels of distribution investment triples (reaching USD 33 billion in the late
investment in renewable power and fossil fuel power; between 2026 2020s). The rapid deployment of solar PV in recent years in Viet Nam
and 2030 in the SDS, investment in renewable power is nearly 25 means that there is a need for more network investment to assist the
times higher than investment in fossil fuel power. balancing of electricity demand and supply and to improve system
flexibility.
PAGE | 96
Clean energy investments today rely heavily on public sources of finance but over 70% of
spending needs in the SDS must come from private capital
Sources of finance for clean energy investment, 2016-2030 (left)

and investment by source of finance in the SDS by technology (right) in Southeast Asia
200
Low-carbon power
Billion USD (2020)
150
Grids and storage
100 Buildings
50 Industry
Transport
2016-20 2026-30 2026-30
Low-carbon fuels
STEPS SDS
Public (SOE spending)
50% 100%
Public (financial institution spending)
Private
Note: SOE = State-owned enterprises.
PAGE | 97
Mobilising this capital will depend on how countries address both cross-cutting and sector-
specific issues
Around half of the energy investment in Southeast Asia in recent high transaction costs. Investments in buildings is typically made on
years came from public sources of finance (including both publicly- the balance sheet of the developer or the tenant, mostly using equity.
owned financial organisations and state-owned enterprises). State-
Financing future energy investments in Southeast Asia will require
owned enterprises play a key role in many regulated markets such
that private capital plays a stronger role. By the late 2020s, the share
as electricity networks (although there are some exceptions, such as
of private capital in clean energy spending is 65% in the STEPS and
in the Philippines where there is a private concession) and in the
75% in the SDS. Mobilising this capital will depend on addressing
development and utilisation of fossil fuel assets. Some clean energy
cross-cutting issues and issues that are specifically affecting the
sectors have been less reliant on public sources, and private sector
energy sector.
finance was crucial to the rapid rollout of renewable projects in
Thailand and Viet Nam in recent years. Private capital accounted for Cross-cutting issues include developing robust investment
almost 60% of the spending in low-carbon power in Southeast Asia frameworks to provide certainty for investors through improving the
over the 2016-2020 period, compared with almost 45% for fossil fuel general rule of law and contract sanctity, the operation of markets,
generation plants. This level of private finance is far below the level and country-level energy strategies. Despite progress over the last
in advanced economies, where the average share of private finance two decades, most countries in Southeast Asia rank in the lower half
in low-carbon generation was almost 90% over the same period. of worldwide governance indicators such as political stability, rule of
law and governments’ effectiveness. While government debt-to-GDP
The underlying business models of clean energy assets, and their
levels in many Southeast Asia countries are lower than in most
ability to raise private capital, vary widely. Renewable power has
countries in Latin America or sub-Saharan Africa, as well as general
been largely developed through long-term contracts, as well as
macroeconomic performance, access to long-term finance can still
project finance structures in the case of solar PV and wind. In
be a challenge given the relatively low levels of government revenues
contrast, efficient cooling appliances and EVs tend to be financed by
and private credit in most countries in the region. Expansion of capital
households, which generally have lower credit capacity and rating
markets could be very important in Indonesia and Viet Nam, for
(especially in developing countries). The smaller size of end-use
example. Sector-specific factors are discussed in more detail below.
transactions is also less appealing to the banking sector given the
PAGE | 98
Despite some recent progress, persistent risks continue to slow the scale-up of investment in
energy, especially in clean energy
Main changes to policy ambitions since 2019 and key investment priorities and risks in selected countries in Southeast Asia
Main changes in sector policy ambitions since

Investment Priorities
Market Power sector Project Financing and Integrated
2019 Outlook
sustainability bankability cost of capital approaches
Planning for NZE by 2060. More renewable power in
Indonesia long-term plan, though coal still represents almost 65%
of generation by 2030.
Government announced goal to become carbon neutral
Malaysia by 2050 and stop building new coal-fired plants.
Philippines Long-term strategy not updated.
Long-term strategy not updated, though a 2030 Green

Singapore Plan was published in early 2021 to expand a range of
clean energy initiatives.
Announced intention to develop plan for NZE by 2065.
Thailand Updated power expansion plan has reduced dependency
on coal in favour of natural gas.
NZE by 2050 target announced at COP26. Substantial
Viet Nam capital is mobilised to renewable power, especially solar,
while coal capacity is still planned to expand by 2030.
Long-term strategy not updated, though no new coal
Cambodia power plants to be developed (beyond committed ones).
Low risk/supportive factor for investment Improvements since SEAO 2019

Potential risk factor/barrier for investment Regressions since SEAO 2019
High potential risk factor/barrier for investment No changes since SEAO 2019
PAGE | 99
Ambitious announcements on clean energy in 2021 are a positive signal, but financial system
sustainability and project bankability need further work…
Clear strategies and policies are key to creating long-term signals for tariffs have been frozen since 2017, and government discounts to
investment in energy and there was progress on this front in a number certain consumer groups have added to the pressure on PLN’s
of countries in Southeast Asia in 2021. For example, as set out in finances.
Chapter 1, Viet Nam committed to achieve net zero emissions by
Regulatory frameworks for planning and pricing continue to be weak.
2050, Indonesia has a target to achieve net zero emissions by 2060,
Independent regulation, least-cost system planning and cost
and Thailand announced its intention to achieve carbon neutrality by
recovery tariffs are rare in most countries. The de jure regulatory
2050 and net zero emissions by 2065. Viet Nam and Indonesia
frameworks are well-designed, but putting them in practice – like
pledged to phase out coal by the 2040s – conditional on obtaining
determining electricity tariffs – has been challenging. A regulatory
additional international financial and technical assistance – as did the
framework index by the World Bank shows 25 percentage points of
Philippines that also signed the Global Coal to Clean Power
divergence between the de jure and perceived scores of Viet Nam.
Transition Statement (albeit with conditions). These pledges need
firmer ground and implementation plans, but provide positive signals There has been some progress on regulation, like changes to
for clean energy markets. Ministerial regulation 4/2020 in Indonesia and efforts to boost clean
energy deployment in Viet Nam, though project bankability is still a
Issues around the financial sustainability of the energy sector remain
major issue. Viet Nam introduced a favourable feed in tariff (FiT)
a large bottleneck for investment, and the economic consequences
scheme, combined with currency indexation and government
of the Covid-19 pandemic have worsened the situation. Power
guarantees to mitigate risks such as inflation or non-performance of
utilities in particular have been affected by lower demand and
off-take. Most of the rapid recent deployment of solar PV and wind
reduced payment capability by consumers. Take-or-pay contracts
capacity in Viet Nam was financed by domestic and regional
meant costs remained high while revenues dropped. Given most
financiers. Attracting more international capital, in Viet Nam and
payments to fossil fuel suppliers and IPPs use US dollars, the
elsewhere, will depend on reducing the risks associated with
reduction in demand and currency depreciation resulted in a loss for
permitting, land acquisition, curtailment protection or international
Indonesia’s State Electricity Utility PLN of IDR 12.2 trillion (USD
arbitration in PPAs. Transitioning to competitive auction-based
890 million) between January and September 2021 (compared with
systems could also boost private finance levels while also supporting
a profit of IDR 10.8 trillion over the same period in 2019. Electricity
price reductions.
PAGE | 100
…alongside dedicated financial instruments and support from development finance institutions
Domestic financing has been more important in a number of countries The more effective use of international and development finance
in Southeast Asia than in many other emerging market and would catalyse private investment, especially in nascent clean energy
developing economies. Singapore, Thailand and Malaysia have sectors and riskier countries. In the Philippines, InfraCo Asia, a
access to finance that is above the global average (based on a Singapore-based company of the Private Infrastructure Development
composite indicator of the share of private bank credit to GDP and Group (PIDG), is providing USD 8 million in early-stage equity to a
the share of stock market capitalisation to GDP (IEA, 2021)). These 35 MW solar PV and storage mini-grid project that will electrify
countries also have a relatively developed corporate bond market. 200 000 households. Once the connection of the first 4 000
households is completed, InfraCo Asia will sell the project to another
Access to international private capital is harder to obtain elsewhere.
party who will then provide equity and debt to support the remainder
There is limited availability of long-term debt, which can be useful to
of the project. In Indonesia, concessional loans from the US
match finance with the lifetime of long-term clean energy projects
International Development Finance Corporation and the Asian
such as renewable projects or building investments. The average
Development Bank (ADB) helped to mobilise commercial debt and
duration of a loan in Southeast Asia is just over six years, though
support from private sponsors to enable the development of the
longer duration loans can be obtained for projects with PPAs.
country’s first two utility-scale wind farms (totalling 140 MW). The
Sustainable debt issuance – an instrument that can attract new ADB, together with Indonesia and the Philippines, is working on an
sources of finance to clean assets – has been on the rise globally, Energy Transition Mechanism, a platform to accelerate the retirement
but has been heavily concentrated in advanced economies. Issuance of unabated coal power using blended finance, and to support
by countries in Southeast Asia comprises around 3% of the global investment in renewables through a market-based approach.
total, though various countries are increasing efforts to grow the
SMEs and households still struggle to access debt to finance small-
availability of sustainable finance. For example, Indonesia released
scale projects. Mechanisms to establish credit ratings for end users
its sustainable finance taxonomy in 2022, the financial sector
and bundle small transactions could boost investment in energy
regulator in Malaysia is discussing a green taxonomy draft, and
efficiency and electrification. Bulk procurement programmes – with
various banks have been developing their own frameworks, notably
financial and technical support from development banks – could help
in Singapore and Thailand.
aggregate demand and bring down costs for households.
PAGE | 101
Four priorities to unlock investment in Southeast Asia
Clean energy investment in Southeast Asia increases by a factor of Ensuring an effective use of international development finance
five in the SDS by the late 2020s. This requires major efforts from to catalyse private funds. Blended capital (using concessional
private and public actors in four priority areas: funds to attract private capital) is needed to mobilise private funds in
the region, especially for sectors in the early stages of development
Addressing cross-cutting investment issues. These issues
(e.g. solar PV in countries with little deployment), new technologies
include restrictions on foreign direct investment and currency
(e.g. offshore wind, low-carbon hydrogen, ammonia and CCUS), and
convertibility, risks of currency devaluations or high inflation, and low
to address specific risks (e.g. exploration risks in the case of
capabilities and financial depth of domestic banks or capital markets.
geothermal power). Development finance is also critical in the riskier
These extend beyond the control of energy policy makers but need
countries of the region. International institutions can provide technical
to be incorporated in the efforts to fight climate change as they drive
assistance to improve investment frameworks and design financial
risk perceptions and affect financing costs.
instruments, particularly guarantees.
Improving the policy and regulatory frameworks to enable wide-scale
Implementing unabated coal phase-outs and preparing the
financing of clean electricity and efficiency and end-use sectors.
ground for investment in low-carbon fuels. Reducing emissions
Better living standards and economic development in Southeast Asia
from the existing coal fleet requires strong policy support. Plants may
will be powered by more electricity. The amount of capital mobilised
be retrofitted (e.g. co-fired with low emissions fuels), repurposed (e.g.
for these sectors depends on policy and regulatory conditions,
for system adequacy) or retired. Regulatory changes will need to go
including clear renewable targets and bankable PPAs in clean power
hand-in-hand with financial solutions and deal with labour impacts.
that clearly define the returns for investors and financiers. Well-
Deployment of low-carbon fuels is at a very early stage (see next
enforced performance standards are critical in end-use sectors.
section of this chapter), and attention to the required technical skills,
Improving these conditions is key to accelerating private funds but
partnerships and business models is essential to scaling them up.
also to optimising the use of local governments’ limited public funds.
PAGE | 102
Low emissions fuels in Southeast

Asia’s transition
PAGE | 103
The role of natural gas in emissions reduction efforts is not straightforward, and changes over
time
Changes in natural gas demand and their effect on emissions in Southeast Asia in the Sustainable Development Scenario, 2000-2050
Change in natural gas demand Effect of changes in natural gas demand on CO₂ emissions
3 000 150
PJ
Mt CO2
2 000 100
1 000 50
0 0
-1 000 - 50
-2 000 - 100
-3 000 - 150
2000-10 2010-20 2020-30 2030-40 2040-50 2000-10 2010-20 2020-30 2030-40 2040-50
Increased gas demand Reduced gas demand
Activity variables NG to renewables/low-carbon
Power Industry Energy sector own use Other Net change Renewables/low-carbon to NG Improved efficiency of NG
Coal/oil to NG NG to coal/oil
Net change
Note: NG = natural gas. Activity variables reflect underlying drivers of energy service demand, such as population increases or economic growth. Low-carbon and
renewable forms of energy include wind, solar, geothermal, hydrogen and hydrogen-based fuels, bioenergy and electricity.
PAGE | 104
Tapping into Southeast Asia’s potential for coal-to-natural gas switching can yield benefits for
emissions, but its potential is not easy to realise
Natural gas occupies a difficult space in Southeast Asia’s energy potential lies in Indonesia, Thailand and Malaysia. Based on average
transition. It results in lower CO2 emissions and air pollutants than coal and gas prices over the period 2016-2020, a CO2 price in the
coal or oil, meaning it can avoid emissions and improve air quality range of USD 40-60/t CO2 would be needed to incentivise this switch.
when substituting for these fuels. But the emissions reductions from The prospect of higher gas prices, as the region moves towards net
fuel switching in the region have been modest, and can be easily importing status, can challenge the economic case for switching:
reversed. Substituting gas for coal and oil avoided around 20 Mt CO2 applying the record spot gas prices seen in 2021 would raise the
emissions in 2010 compared to 2000, yet switching from natural gas required CO2 price to more than USD 150/t CO2. There are also
back to coal between 2010 and 2020 meant that emissions were contractual restrictions as power plants operate on bilateral PPAs
nearly 40 Mt CO2 higher in 2020 than in 2010. that are not easy to change (see section on power system flexibility).
Most of the increase in natural gas consumption since 2010 stems In the SDS, unabated coal phase-out policies and restrictions on
from increases in energy service demand from economic and finance for new unabated coal projects give a boost to gas: demand
population growth, rather than from fuel switching. Overall, natural grows by 70 bcm between 2020 and 2030, helping to fill the gap left
gas has been responsible for 16% of the total growth in energy- by coal which declines by 18%. Around one- third of total energy
related CO2 emissions in Southeast Asia since 2010, and has met demand growth in the SDS over this period is met by gas, a level
20% of total energy demand growth. higher than the STEPS (where both gas and coal each account for
20% of total growth). In the SDS, around 15 bcm of the additional
From a detailed assessment of existing gas and coal-fired power
natural gas demand in 2030 is attributable to coal substitution,
plants in the region and taking into account plant capacities,
resulting in around 25 Mt CO2 of avoided emissions.
utilisation profiles, efficiencies and location factors, it is technically
possible for one-third of coal-fired power output to be substituted by In the SDS, the window for coal-to-gas switching to bring positive
existing gas-fired power capacity (which totals around 100 GW and emissions outcomes closes by 2030, after which renewables and low
currently runs at a 45% annual load factor). Maximising this potential emissions fuels such as hydrogen and bioenergy start displacing
could avoid around 120 Mt CO2, equivalent to 22% of emissions from natural gas (in addition to remaining coal) while wider efficiency
coal-fired power plants in Southeast Asia. The majority of this improvements dampen any further increases in natural gas demand.
PAGE | 105
Natural gas grows strongly in both the STEPS and SDS to 2030, though pathways begin to
diverge thereafter…
LNG and gas-fired power generation capacity in Southeast Asia

in the Sustainable Development Scenario and Stated Policies Scenario, 2020-2050
250
SDS
200
Under construction
150
Operational
100
STEPS
50
2020 2030 2050 2020 2030 2050 2020 2030 2050

Liquefaction (Mtpa) Regasification (Mtpa) Power plants (GW)

Note: Mtpa = million tons per annum.
PAGE | 106
…adding to the challenges of developing long-lived, capital-intensive gas infrastructure
Natural gas demand increases by 40% between 2020 and 2030 in A detailed assessment of LNG regasification projects in the region
the STEPS and SDS and virtually all of this is met by imports. In many shows that net present values are, on average, around 30% lower in
parts of the region, including in the Philippines, Cambodia and parts the SDS than in the STEPS. This adds to other challenges standing
of Indonesia, there is little pipeline infrastructure to deliver gas to in the way of developing new LNG import capacity, including credit,
smaller industrial, commercial and residential consumers. There are currency and commodity price risk. Many project sponsors in
around 15 000 km of gas transmission pipelines across Southeast Southeast Asia have low credit ratings, which can make access to
Asia today and a further 6 000 km have been proposed or are under project finance difficult for capital-intensive LNG projects (see
construction. In the STEPS and SDS, LNG regasification terminal previous chapter).
capacity grows from 32 Mtpa in 2021 to more than 100 Mtpa by 2030.
Gas infrastructure is important for ensuring security of electricity
Around USD 120 billion is spent on gas infrastructure (including supply in the SDS: 70 GW of new gas-fired generation capacity is
maintaining liquefaction and building new regasification capacity and commissioned between 2030 and 2050, even as the share of gas in
transmission and distribution networks) from 2020 to 2030 in the the power generation mix falls from 35% to 5%. The region will have
STEPS and SDS. This implies a lower near-term risk of stranded to source adequate volumes of flexible gas supplies to meet this
capital in the event of accelerated climate ambition. While such demand while meeting a minimum level of baseload requirements
infrastructure is capital-intensive with operational lifetimes typically from industrial consumers that continue to rely on gas as a feedstock
exceeding 30 years, payback periods are often shorter, typically in 2050.
around 8-12 years.
There are ways for investors and governments to overcome
Trends diverge after 2030: in the STEPS, natural gas demand grows investment hurdles and adapt to changing asset utilisation profiles.
steadily to 2050 while in the SDS, demand peaks in 2035 and is 15% Floating storage and regasification units (FSRU) are cheaper and
below 2020 levels by 2050. Between 2030 and 2050, cumulative quicker to build than land-based terminals and can be flexibly
investment in gas infrastructure in the STEPS is USD 200 billion, redirected to areas in need of short-term gas supply. While
while it is less than USD 80 billion in the SDS. Capital committed in commercial arrangements can be complex, projects are being
the late 2020s may therefore be at risk if climate policy signals are developed in Indonesia, Myanmar and Viet Nam.
misread, especially if long development lead times mean new
projects are commissioned at a time when demand starts to fall back.
PAGE | 107
A low emissions energy system still needs solid, liquid and gaseous fuels, but with much lower
emissions intensities
Changes in the emissions intensity and demand for solid, liquid and gaseous fuels in Southeast Asia
in the Sustainable Development Scenario, 2020-2050
Solid fuels Liquid fuels Gaseous fuels
100% 15
EJ
80% 12
60% 9
40% 6
20% 3
2020 2030 2050 2020 2030 2050 2020 2030 2050
Methane reductions Other Use of CCUS Modern bioenergy Hydrogen Demand (right axis)

Note: Other includes reduction in CO2 emissions from oil, gas and coal supply, and growth in the use of non-combustion uses of fossil fuels. Solid fuels include coal,
modern solid bioenergy, traditional use of biomass and industrial and municipal wastes. Liquid fuels includes oil, liquid biofuels (expressed in energy-equivalent
volumes of gasoline and diesel), synthetic oil and ammonia. Gaseous fuels include natural gas, biogas, biomethane, hydrogen and synthetic methane.
PAGE | 108
Robust incentives and international collaboration are needed to support the large-scale uptake
of advanced bioenergy, hydrogen and carbon capture, as well as methane avoidance
Even as electricity provides a growing share of energy consumption, bulk of the reductions in the SDS, but this is complemented by efforts
fuels still make up half of total energy demand in 2050 in the SDS. to capture and use coal mine methane from subsurface mining.
But this depends on a major reduction in their emissions intensity.
There is significant potential to capture CO2 that is otherwise vented
The emissions intensity of solid fuels in Southeast Asia today is to the atmosphere during gas production; Malaysia and Indonesia in
0.27 tCO2/MWh and this falls by 80% to 2050 in the SDS. This is particular are pursuing efforts to this end. The region also has
mainly due to the decline in unabated coal consumption, industrial clusters well suited to capture projects, and there is large
accompanied by a large uptake of modern solid bioenergy in power potential for CO2 storage capacity in depleted oil and gas reservoirs.
generation and industry. The emissions intensity of liquids is around In the early phase of deployment, international collaboration and
0.20 tCO2/MWh today and this drops by 40% to 2050, due to a financial support are essential, examples being the creation of the
fourfold increase in transport biofuel production that occurs alongside Asia CCUS Network in 2021 and the activities of multilateral
the drop in oil demand. Finally, the fuel intensity of gases today is development banks such as the ADB. In the SDS, the focus of
0.17 tCO2/MWh, which falls by 45% to 2050. There is a 1 000 PJ rise investment in CCUS turns from upstream oil and gas towards
in production of biogases and a 400 PJ rise in low-carbon hydrogen. addressing emissions in industry and power generation, including
those associated with coal use. Investment in carbon capture
Avoiding methane emissions helps to provide large near-term
averages USD 2.5 billion each year between 2030 and 2050. By
reductions in the emissions intensity of fuels in the SDS. In 2020,
2050, around 230 Mt CO2 are captured each year, equivalent to 40%
fossil fuel operations in the region emitted about 110 Mt CO2-eq of
of remaining CO2 emissions.
methane, double the amount of emissions from all of the region’s
buildings. Several major emitters in Southeast Asia have joined the Low-carbon hydrogen helps to reduce emissions associated with
Global Methane Pledge, including Indonesia (which accounts for liquid and gaseous fuels, especially after 2030, as the region takes
around half of the region’s estimated energy-related methane advantage of anticipated cost reductions from technological learning
emissions), that commits them to contribute to a 30% reduction in effects in the SDS. The use of ammonia for co-firing in power
global methane emissions (from all anthropogenic sources) by 2030. generation forms the largest share of low-carbon hydrogen use in the
Over half of energy-related methane emissions in Southeast Asia region by 2050. Hydrogen begins to play a significant role in the
come from coal mines. Declining coal consumption accounts for the transport sector: by 2050, around 10% of road transport vehicle sales
(primarily bus fleets) are hydrogen fuel cells.
PAGE | 109
The growth in bioenergy should be accompanied by a shift towards sustainable feedstocks and
modern production pathways, which avoid negative effects on biodiversity and human health…
Bioenergy demand in Southeast Asia in the Sustainable Development Scenario, 2010-2050
Solid bioenergy Liquid bioenergy Gaseous bioenergy

5 000 1 000 1 000
PJ
4 000 800 800
3 000 600 600
2 000 400 400
1 000 200 200
2010 2020 2030 2040 2050 2010 2020 2030 2040 2050 2010 2020 2030 2040 2050
Traditional use of solid biomass Conventional biofuels

Biogas Biomethane
Modern solid biomass Advanced biofuels
Note: “Modern solid bioenergy” refers to the use of solid bioenergy in improved cook stoves and the use by modern technologies of processed biomass such as
pellets. Conventional biofuels are fuels produced from food crop feedstocks, including sugar cane ethanol, starch-based ethanol, fatty acid methyl ester (FAME),
straight vegetable oil (SVO) and hydrotreated vegetable oil (HVO) produced from palm, rapeseed or soybean oil. Advanced biofuels are produced from non-food
crop feedstocks. Biogas is a mixture of methane, CO2 and small quantities of other gases produced by anaerobic digestion of organic matter, i.e. in an oxygen-free
environment. Biomethane is a near-pure source of methane produced either by “upgrading” biogas or through the gasification of solid biomass.
PAGE | 110
… but transitioning to sustainable bioenergy is not straightforward
Southeast Asia has significant quantities of sustainable feedstocks – oil fuels can compete with oil use for cooking. In April 2022, Indonesia
such as agricultural residues or municipal waste – that can be used suspended palm oil exports to protect domestic consumers from
for energy. Modern solid bioenergy is already significant and there is surging prices for cooking oil.
nearly 20 GW of co-firing potential across the region. Indonesia is the
There have been ongoing efforts to develop consistent and
world’s third-largest biofuels producer, producing 8.1 billion litres of
harmonised certification schemes that accurately reflect the lifecycle
biodiesel each year (of which 500 million litres is exported); Malaysia
impacts of biofuels. However, establishing the sustainability of
produces 1.5 billion litres and exports 500 million litres. Malaysia is
bioenergy feedstocks is complex. Even feedstocks classified as
targeting a 20% biodiesel blending rate in 2022 while Indonesia has
“waste”, such as used cooking oil, can have unintended effects on
a 30% mandate; many other countries in the region have ambitious
biodiversity, e.g. when its use as an animal feed is displaced by virgin
targets for transport biofuels. The share of biofuels in road transport
oil. To achieve the scale needed in the SDS, incentives are needed
fuel in Southeast Asia is 7%, 50% higher than the global average,
that encourage industry and agriculture to develop sustainable
though recent high commodity prices could set back progress.
bioenergy supply chains based on full lifecycle emissions
In the SDS, modern bioenergy provides 15% of total final assessments (e.g. through robust certification schemes,
consumption in 2050, double the level in 2020. In parallel, the use of performance-based subsidies, targeted tax breaks, inclusion in
traditional biomass falls to zero in 2030. Power generation use of sustainable finance frameworks or low-emissions fuel standards).
solid modern bioenergy grows from 40 TWh in 2020 to 200 TWh by
In the SDS, there is a rapid shift towards sustainable feedstocks
2050. Although its share of total power generation remains modest,
which avoid competition with food production and have minimal
the use of bioenergy – in combined heat and power (CHP) plants and
adverse effects on land use or biodiversity. There is a shift from palm
co-firing units – provides a stable source of renewable electricity. By
oil-derived biofuels in favour of wastes, which progressively become
2030, biofuels make up 15% of total liquid fuel transport demand.
cheaper to produce. By 2050, around 70% of transport biofuels in the
Bioenergy targets need to be carefully weighed against the region are “advanced”, relying on non-food feedstocks such as
sustainability of feedstocks. Nearly all biofuel production in Malaysia agricultural waste or used cooking oil. Methane recovery from the
and Indonesia is derived from palm oil feedstocks. These have a high wastewater resulting from palm oil processing is also used to produce
level of oil output per hectare of land use, but their use is controversial biogas, along with other sustainable feedstocks such as crop
due to their role in reducing biodiversity and causing deforestation residues and municipal solid waste. Biogas production grows more
when land is made available for palm oil cultivation. They can also than tenfold to reach 1 100 PJ by 2050, tapping into a total
result in additional emissions from indirect land use change, and palm sustainable potential of around 3 EJ.
PAGE | 111
A large share of emissions reductions in Southeast Asia requires investment in technologies

and fuels that do not immediately deliver zero emissions energy…
CO2 emissions reductions in the Sustainable Development Scenario relative to the Stated Policies Scenario, 2015-2030 (left)
and average annual energy investment by emissions reduction potential, 2022-2030 (right)
STEPS SDS
2500 80
Billion USD
Mt CO₂
STEPS
2000
60
1500
SDS
40
1000
20
500
0
2015 2020 2025 2030 Supply Power End-use Supply Power End-use
Low emissions
Contingent and transition
Other Low emissions Contingent Transition Unabated fossil fuels

Note: “Transition” refers to investments leading to incremental emissions reductions over time. “Contingent” refers to investments that enable emissions reductions
only with changes elsewhere in the energy system. “Low emissions” refers to investments which immediately provide zero or near-zero emissions. “Unabated fossil
fuels” only include investments in supply and in the power sector, such as coal mines and unabated coal-fired power plants, excluding ones in end-use sectors.
Other includes material efficiency improvement, behaviour changes and retirement of existing fossil fuel assets
PAGE | 112
…underscoring the importance of efforts to develop sustainable financing frameworks that can
support deep emissions reductions in fossil fuel supply chains and energy-intensive sectors
In the SDS, around USD 180 billion is spent per year on energy 2030 in the SDS compared to the STEPS. Both scenarios have a
supply, power and end use over the period from 2022-2030, about similar overall level of investment in supply to 2030, but in the SDS
30% more than in the STEPS. Most of this comes from private there is a major reallocation of capital away from fossil fuels towards
sources but is catalysed by governments, encouraging a huge shift low-emissions fuels and transitional investments. In the power sector,
in capital spending away from unabated fossil fuels towards solar PV repurposing coal plants to run less frequently helps to avoid around
and wind, bioenergy, hydrogen and CCUS. These fuels and 800 Mt CO2 to 2030 (while CCUS makes inroads after 2030). In
technologies provide zero or very low emissions regardless of how energy-intensive industries, material and energy efficiency
the energy system evolves. Around 60% of the emissions reductions improvements avoid 200 Mt CO2 over the same period, and pave the
that are achieved in the SDS compared to the STEPS over the period way for additional savings out to 2050.
to 2030 come from investment in zero or near zero emissions energy.
The scale of investments required in transitional and contingent
The remainder of emissions reductions are the result of investments activities – around USD 70 billion per year over the next decade, or
in fuels, technologies and infrastructure that do not immediately 40% of total spending on energy – underscores the importance of
deliver zero emissions energy or energy services. Such investments designing sustainable financial frameworks and taxonomies that do
either lay the groundwork for incremental emissions reductions over not preclude investments in emissions-intensive sectors out of hand.
time (defined here as transition investment), or only reduce emissions Recently, 18 commercial banks announced an initiative to create
if changes occur elsewhere in the system (contingent investment). guidelines that recognises the importance of financing investment in
Transition investment includes spending on improved efficiency of transition technologies. However, a careful balance needs to be
fossil fuel technologies, gas supply and infrastructure that enables struck: while investments in fossil fuel infrastructure can lead to
fuel switching from coal and oil, co-firing with low-emissions fuels, or greater efficiency, reduced methane or CO2 emissions or reductions
projects aimed at reducing emissions from upstream operations. in air pollution, they can also prolong asset lifetimes or otherwise
Contingent investments include electrifying end uses or investing in justify “business as usual” activities. Properly accounting for the full
electricity networks or storage technologies, where the emissions lifecycle emissions and the interlinkages between such activities is a
benefits depend on the availability of low-carbon electricity. crucial first step to designing robust financial frameworks that avoid
further emissions lock-in.
Overall, transitional and contingent measures reduce emissions by
around 1.4 Gt CO2, cumulatively, over the period between 2021 and
PAGE | 113
The role of flexibility in boosting

power sector decarbonisation
PAGE | 114
Power system flexibility is a key enabler of clean energy transitions
The building blocks of system flexibility
Power System Flexibility
Technical flexibility Contractual/Institutional Modern operational

flexibility practices
• Power plant flexibility
(ramp rates, minimum stable • Without take or pay • Forecasting requirements
level, startup time) obligations • Close to real time
• Electricity grids (PPAs, fuel contracts and scheduling and dispatch
• Storage cross-border power trade) • Sizing of operating reserves
• Demand response • Coordinating dispatch
• Curtailment conditions
(end uses including EVs) across balancing areas
• Digitalisation • Ancillary services
PAGE | 115
To integrate a growing share of variable renewables, it is critical to maintain flexibility through

technical, contractual and modern operational practices.
The power system of Southeast Asia today is dominated by baseload Prominent technical flexibility resources include power plants (both
fossil fuel generation technologies. In many cases, generation is conventional 1 and variable renewables); electricity grids (including
provided under rigid contractual arrangements subject to PPAs and cross-border interconnectors); energy storage and distributed energy
fuel supply contracts. An increasing proportion of electricity resources (including demand response and electric vehicles). It is
generation is set to be provided by variable renewable energy (VRE) likely that flexibility needs for the medium term (weeks to months) can
and installed renewable capacity will need to increase from 30% of be met by utilising existing assets, particularly power plants and grid
total capacity in 2020 to 50% by 2025 for the region to achieve its assets, by introducing new operational practices and changing the
renewables targets. In the SDS, VRE (wind and solar PV) provides way they operate, supplemented by investments in network
18% of electricity generation in 2030 (up from around 2.5% in 2020). infrastructure and storage options including demand response.
To integrate a growing share of variable renewable electricity against
the backdrop of rising electricity demand, it is critical to maintain the Contractual structures and institutions also play a key role in
reliability, flexibility and security of electricity grids. Flexibility is unlocking flexibility since they facilitate the optimal dispatch of power
required across a wide range of timescales from very short term (sub- plants in the system, though having a flexible contractual structure is
seconds to seconds), short term (minutes to hours), medium term not an easy task due to the long-term nature of the contract.
(days to months) and long term (seasons to years). Ensuring this Southeast Asia has a variety of different power sector structures:
flexibility requires a variety of approaches. Singapore and the Philippines have liberalised markets with retail
competition and system operations that are unbundled from
generation; Thailand and Indonesia have vertically integrated
1
“Conventional power plants” refer to coal, natural gas, nuclear, hydropower and bioenergy power
plants.
PAGE | 116
structures with state-owned utilities that are responsible for both facilitate the optimal use of the technical flexibility resources. For
generation and grid operation; and Viet Nam is currently transitioning example, PPAs could be adapted to better reflect the technical
towards a wholesale electricity market. For Indonesia and Thailand, flexibility of power plants such as ramp rates, minimum stable
electric utilities also act as the single buyer, purchasing bulk operating levels and start-up times in providing system services.
electricity from independent power producers (IPPs) under PPAs and
fuel supply contracts. Liberalised markets and unbundling can often Modern system operation practices provide another mechanism to
provide additional flexibility for power systems, but there are also foster the more flexible use of technical assets, particularly power
other contractual options to promote it for countries in this region that plants and grids. This includes real-time monitoring and dispatch,
do not have markets. forecasting and system services (i.e. ancillary services), which help
address the technical and economic concerns relating to a high share
Commercial flexibility, which is provided by underlying contractual of VRE.
structures and institutions in the power sector, plays a crucial role to
PAGE | 117
Fossil fuels are the main source of technical flexibility in the countries of Southeast Asia, but
low-carbon technologies and storage are set to play an increasing role
Share of generation technologies in providing energy, peak demand and system services in Indonesia, 2019 and 2030
2019 2030 SDS
Inertia
Ramping flexibility
Peak capacity /
adequacy
Energy
0% 20% 40% 60% 80% 100% 0% 20% 40% 60% 80% 100%
Coal Gas Hydro Geothermal Oil Bioenergy & other renewables Variable renewables Storage
IEA. All rights reserved

Note: The data are based on the Java-Bali and Sumatra systems. Ramping flexibility is based on hourly ramp capabilities of the fleet to meet hourly variation of
supply and demand during the top 100 hours. Inertia is the capability of the system provided by kinetic energy stored in rotational mass to keep the system stable if
there is a shortfall in power. Demand response is not included despite its having the potential flexibility.
PAGE | 118
Southeast Asia has a large and relatively young fleet of coal- and gas-fired power plants.
Minimum take generation and renewables will exceed peak demand to 2030 in many countries.
Capacity-weighted average age in 2021 and in 2030 of power plants in Southeast Asia (left) and minimum take obligations in a case of a
15% share of variable renewables in 2030 peak demand for Thailand during 2020-2030 (right)
60 000
Projected capacity and demand (MW)

Coal Subcritical
50 000
Coal IGCC
Coal Supercritical 40 000
Coal Ultrasupercritical 30 000
Gas Steam 20 000
Gas GT
10 000
Gas CCGT
5 10 15 20 2020 2022 2024 2026 2028 2030

Years Others @ 65% minimum take Others @ 45% minimum take
Co-gen @ 100% minimum take Hydro @ 55.6% capacity
2030 2021
Renewables @ maximum Peak demand
Note: Assumes that the technical lifespans of coal and gas plants are 40 years and 30 years, respectively. Others (right figure) include coal- and gas-fired
generation. Minimum take generation is the minimum quantity of generation to be purchased to secure revenue streams for the generator.
Source: IEA (2021), The Role of Low-Carbon Fuels in the Clean Energy Transitions of the Power Sector; IEA (2021), Thailand Power System Flexibility Study.
PAGE | 119
There are many technical options available to provide power system flexibility, but boosting
contractual flexibility is needed to make the best use of technical flexibility resources
Power generation capacity in Southeast Asia increases significantly been an efficient way to incentivise investment in regions dominated
in the coming decades in both the STEPS and SDS, and the bulk of by coal- and gas-fired power generation and that have seen rapid
generation capacity additions comes from VRE sources. This new growth in electricity demand (as experienced in Southeast Asia
capacity will require increasing levels of flexibility. In Southeast Asia, during the 1990s). However, if dispatchable assets or entities have a
coal and gas thermal power plants currently provide the major source contract that ensures operators a minimum load each day, then the
of electricity generation and flexibility. Many of these assets are assets have no incentives to act flexibly. The merit order is effectively
relatively young: for example, the current average age of the coal changed in these power systems, making it more financially attractive
plants in Thailand and Indonesia is between 5 and 10 years. for system operators to run baseload generation and curtail
renewables.
Southeast Asia also has a very diverse range of renewable energy
resource potential that could provide low-carbon sources of flexibility, Adapting contractual structures is important but this needs to be
including bioenergy, hydropower, geothermal and a potential for carried out carefully to avoid negatively impacting investor
ocean energy. Batteries can also be deployed to boost the flexibility confidence. One option is to hold auctions for lowering guaranteed
of countries’ power systems. minimum production levels. Plants willing to operate on these terms
at the lowest cost would be selected for restructuring; this would be
In Southeast Asia, there is a heavy reliance on physical PPAs, 2
voluntary and based on competitive bidding to allow generators to
especially in the vertically integrated power systems such as
provide flexibility to the system.
Indonesia and Thailand. Many of the existing coal- and gas-fired
power plants in the region were financed with physical PPAs with
large capacity payments and/or minimum take provisions, which are
subject to take-or-pay obligations. Physical PPAs have historically
2
In many countries in Southeast Asia, physical PPAs are long-term contracts (typically 20+ years) with agreed prices consisting of capacity and energy payments. Physical PPAs often agree on a
between electric utilities and a generator for the delivery of electricity and other services to the grid minimum quantity of generation to be purchased to secure revenue streams for the generator.
PAGE | 120
In Thailand, the potential cost savings from flexible PPAs and fuel supply contracts are
significantly greater than possible savings from flexible power plants and storage options
Operational cost savings from flexible fuel supply contracts in Thailand in 2030
60
Million USD
VOM cost
50
Start-up and
40 shutdown
cost
30
Ramp cost
20
Fuel cost
10
Flexible power plants and storage Flexible contracts

Note: VOM cost = variable operations and maintenance cost.
Source: IEA (2021), Thailand Power System Flexibility Study.
PAGE | 121
Adapting minimum-take obligations in PPAs and fuel supply contracts can help to make the
most of technical flexibility options
To analyse the effect of contractual flexibility issues in Southeast to continue to provide baseload generation. Fuel supply contracts can
Asia, the IEA conducted the Thailand Power System Flexibility Study, hinder flexibility even if the PPA structure has appropriate incentives
which shows that contractual inflexibility is the greatest barrier to for the producers to provide flexibility.
running a cleaner power system at an affordable cost since it
The cost savings from shifting towards more flexible PPAs and fuel
prevents the use of otherwise available and cost-optimal resources
supply contracts could be significantly greater than the savings from
in the system. For example, there are minimum-take obligations in
investing in technical flexibility resources. Designing fuel supply and
the physical PPAs between EGAT (the system operator in Thailand)
power purchase contracts with sufficient flexibility leaves headroom
and private power producers.
for lower-cost energy sources such as VRE and technical assets that
In a scenario with a high share of VRE (15% in 2030) and high wind provide critical system services to participate in the market, resulting
and solar PV production during peak demand, the combination of in overall cost savings.
minimum take generation and renewable production always exceeds
Portfolio approaches for fuel supply can also be implemented to
peak demand in all years to 2030. The inflexibility of PPAs prevents
increase flexibility in a cost-effective way. These approaches mix
the adjustment of this high level of minimum-take obligations,
less-flexible long-term contracts that hedge against price fluctuations
meaning that renewables would likely need to be curtailed to ensure
with more flexible shorter-term contracts. For example, while flexible
power system adequacy.
gas contracts may be more expensive than contracts with stringent
An additional factor impacting technical flexibility options is presented take-or-pay conditions, the overall system cost can be reduced with
by fuel supply contracts as many existing fuel contracts in Southeast a mixture of contract types to provide flexibility. A portfolio
Asia have strict minimum take-or-pay obligations. This means that procurement strategy can optimise fuel supply contracts with respect
coal- and natural gas-fired power plants have very low marginal costs to cost, risk and flexibility. It is therefore important to evaluate the cost
as the fuel is effectively a sunk cost. Even if the generation asset is effectiveness of approaches at the system level rather than individual
incentivised to provide system services, it may be more economical fuel supply contracts.
PAGE | 122
Cross-border interconnections and trade in Southeast Asia are developing
Electricity interconnections and trading partners in Southeast Asia and beyond

Country Interconnection(s) with… Trade Flows Domestic Market Structure
Brunei Darussalam None None Vertically integrated
Exports to Thailand
Cambodia Lao PDR, Thailand, Viet Nam Imports from Lao PDR, Thailand and Vertically integrated
Viet Nam
Indonesia Malaysia (from West Kalimantan)* Exports mainly to Malaysia Vertically integrated
Exports to Cambodia, Malaysia (via
Lao PDR Cambodia, Myanmar**,Thailand and Viet Nam Vertically integrated
Thailand), Thailand and Viet Nam
Imports from Lao PDR (via Thailand),
Thailand
Indonesia (to West Kalimantan)*, Singapore*,
Malaysia Vertically integrated
Thailand Exports to Singapore using existing
interconnector previously used for
non-financial exchanges
Myanmar Lao PDR**, Thailand** Vertically integrated
Philippines None Restructured market
Bidirectional, non-financial exchange
with Malaysia
Singapore Malaysia* Restructured market
Imports from Malaysia (pending) and
Lao PDR under LTMS-PIP
Import from Cambodia and Lao PDR
Thailand Cambodia, Lao PDR, Malaysia, Myanmar** Vertically integrated
Wheeling between Lao PDR and
Malaysia
Transitioning from vertically
Export to Cambodia
Viet Nam Cambodia, Lao PDR integrated to restructured
Import from Lao PDR
market
* Used primarily for security and back up.
** Distribution level connection servicing rural areas.
Note: All vertically integrated markets allow for independent power producer generation, but state-owned enterprises remain single buyers.
PAGE | 123
Multilateral trade arrangements for cross-border power trade can also boost flexibility
Power system flexibility can also be boosted in Southeast Asia and creating markets to allow for its efficient utilisation. Under the
through multilateral power trading. This can allow for efficient APG, the ASEAN Interconnection Masterplan Study III has been
resource sharing, particularly for renewable resources. For example, developed to provide a comprehensive update on cross-border
the hydropower resources in Lao PDR could provide flexibility to Viet interconnections with a high penetration of VRE. The IEA has also
Nam and Thailand via exports, and Viet Nam could in turn export published a study outlining the key steps for Southeast Asia to boost
power produced during times of high solar PV output to Lao PDR to multilateral power trade.
minimise curtailment. On Borneo, integration between Malaysia,
Indonesia and Brunei Darussalam can be highly complementary
given the high level of hydro resources in Indonesia's Kalimantan, Recent developments and plans of inter-regional grids
which could also be exported to other regions through The Lao-Thailand-Malaysia-Singapore Power Integration Project
interconnectors and cross-border trade. A more dynamic setup for (LTMS-PIP) was jointly agreed in 2014 to study the technical
multilateral power trade will increase flexibility in the region and viability of cross-border power trade of up to 100 MW through
facilitate the integration of VRE and reduce overall system costs. existing interconnections. In 2020, the ASEAN Ministers on Energy
Meeting announced that they would initiate the project in 2022. This
Institutional setups and contractual structures must be adapted to
was viewed as a significant step towards realising the APG.
facilitate multilateral cross-border power trade. There are a number
of fixed long-term bilateral transfer agreements which can limit Beyond the LTMS-PIP, Singapore announced that it plans to
flexibility as they are not designed to differentiate imports and exports import up to 4 GW of electricity by 2035 which would form about
on a daily or hourly basis. More flexible inter-regional market models 30% of total supply. This new supply is expected to be delivered
could be introduced, with elements such as continuous data sharing via new interconnectors and supply projects. There are also plans
across borders and frameworks to ensure ease of trade (to avoid for the Australia-Asia PowerLink project to be operational from
prolonged contract negotiations to change transfer schedules). 2028; this would be the first intercontinental power grid connecting
Australia to Singapore. Such projects will boost grid
Southeast Asia has a major programme of work devoted to
interconnectivity and potentially pave the way for setting up market
developing multilateral power trade – the ASEAN Power Grid
mechanisms for multilateral power trade in the future.
(APG) – which encompasses both building physical infrastructure
PAGE | 124
Critical minerals in Southeast Asia
PAGE | 125
Accelerated clean energy transitions in Southeast Asia could create huge market opportunities
for key clean energy technologies
Estimated market size for selected clean energy technologies in Southeast Asia
60
Fuel cells
Billion USD (2020)
50
Electrolysers
40 Batteries
30 Offshore wind
20 Onshore wind
Solar PV
10
2020 2030 2050 2030 2050

STEPS SDS

Note: Market share estimates are the product of anticipated average market prices and sales of tradeable units of the core technologies: solar PV modules, wind
turbines, lithium-ion batteries (for EVs and grid storage), electrolysers and fuel cells. This differs from investment or spending estimates that include, for example,
installation costs.
PAGE | 126
Southeast Asia is poised to play a major role in clean energy supply chains, both as a
consumer of low-carbon technologies and as a key supplier of critical minerals
Accelerating energy transitions in Southeast Asia requires a September 2021, construction began on Indonesia’s first EV battery
significant scale-up in the deployment of clean energy technologies. plant worth USD 1.1 billion. In January 2022, the Indonesian
In the SDS, new electric vehicle sales grow from a low base today to government signed a memorandum of understanding with several
nearly 20 million in 2050 (including seven million electric cars), companies to support EV battery manufacturing in the country.
accounting for over 90% of new vehicle sales. Solar PV and wind Thailand, the biggest vehicle manufacturer in the region – and 11th
account for nearly two-thirds of annual power capacity additions by largest in the world – could also become a key hub for the
2050 in the SDS and around 6.5 GW of battery storage is added in manufacturing of EVs. In February 2022, the Thai government
2050 – more than all battery storage additions globally in 2020. approved a package of incentives to promote a shift to EVs and boost
domestic EV production to 30% of all cars produced by 2030.
As a result, Southeast Asia is set to emerge as a major market for
clean energy technologies. In the SDS, the combined market for wind The region holds considerable potential as a reliable supplier of
turbines, solar panels, lithium-ion batteries, electrolysers and fuel critical minerals. However, helping to meet the growing global
cells represents a cumulative market opportunity to 2050 worth over demand for these minerals in the SDS presents a major challenge.
USD 800 billion. Southeast Asia holds large amounts of mineral reserves for key
energy transition minerals such as bauxite, nickel, tin and rare earth
The strong growth in clean energy technologies globally provides
elements. The region also produces cobalt, manganese, graphite,
huge opportunities for Southeast Asia to capture additional value in
silicon, copper, bauxite and alumina. The region is already a key
supply chains. Malaysia and Viet Nam are already the world’s second
participant in the supply and processing of some of these, and its
and third largest manufacturers of solar PV modules, and in
importance in global markets is set to grow.
aggregate accounted for one-fifth of global shipments in 2020. The
growth in Viet Nam has been especially fast since 2015, when its
share was less than 1%.
Indonesia and the Philippines have large nickel resources and they
are aiming to develop integrated battery and EV supply chains. In
PAGE | 127
Southeast Asia is a key player in supplying a range of critical minerals…
Production of selected minerals in Southeast Asia, by country, 2010-2020
Nickel Tin Rare earth elements Lao PDR

1 500 100% 150 100% 50 100%
kt
Malaysia
1 200 80% 120 80% 40 80% Viet Nam
Thailand
900 60% 90 60% 30 60%
Myanmar
600 40% 60 40% 20 40%
Philippines
300 20% 30 20% 10 20%

Indonesia
Share of global
2010 2015 2020 2010 2015 2020 2010 2015 2020 production
(right axis)
Source: USGS (2010-2022); World Bureau of Metal Statistics (2020).
PAGE | 128
...especially in the production of nickel, tin and rare earth elements
Nickel In Indonesia, the successful commissioning of planned high-pressure

acid leaching (HPAL) projects, which are capable of producing high-
Nickel is an important mineral for lithium-ion batteries, geothermal
grade nickel from its vast laterite resources, will have a significant
power and electrolysers. As high-nickel cathodes constitute a
impact on the near-term global supplies of nickel. The Philippines is
growing share in battery chemistries, nickel demand for clean energy
also trying to tap its large resources by lifting a ban on new
technologies is set to expand rapidly, growing by 20 times from 2020
developments. Major challenges for the two countries are to develop
to 2040 in the SDS. Indonesia and the Philippines are the two largest
their resources in a sustainable manner, given their high carbon-
nickel producers in the world. Their share of global production has
intensity of electricity and many issues around tailings disposal and
risen considerably since 2010, from 25% to around 50% in 2021. This
land-use and biodiversity impacts. Addressing these concerns will be
share is set to expand further in the coming years, as they are
crucial to positioning the region as a reliable and responsible supplier
responsible for around 70% of global production growth over the
of nickel.
period to 2025.
Indonesia alone accounts for around half of the total growth globally, Tin
so nickel supply chains are likely to be significantly affected by policy
Tin is used for soldering in a wide range of electronic components,
developments and other events in Indonesia. On 1 January 2020, the
including those in clean energy technologies. Indonesia and
government of Indonesia implemented a ban on nickel ore exports,
Myanmar are the second and third largest tin producers in the world
two years ahead of initial plans, as it intended to nurture a
after China, and Southeast Asia as a whole accounts for around 35%
downstream industry. Nickel ore exports to China dropped by nearly
of global production and a third of all reserves.
90% in 2020, forcing Chinese refiners to find new sources of ore
supply from the Philippines and New Caledonia, and to seek Tin demand is expected to surge on the back of growing clean energy
investment opportunities in Indonesia. Chinese companies invested deployment, but there are limited new projects planned, which raises
and committed some USD 30 billion in the Indonesian nickel supply concerns around potential market tightening in the years ahead.
chain, with Tshingshan’s investments in the Morowali and Weda Bay Indonesia is considering stopping tin exports in 2024, following
industrial parks being the most prominent examples. bauxite and copper ore,and this would pose additional challenges.
PAGE | 129
Rare earth elements together accounting for just over 3% of global production. Viet Nam
accounts for 0.5% of global graphite production.
Rare earth elements are used in certain types of EV motors and wind
turbines. They are one of the most geographically concentrated Silicon is a key mineral in the production of solar PV panels, and is
minerals in terms of extraction and processing, with China also increasingly used in EV battery anodes to increase energy
representing 60% of global mining operations. Nonetheless, density. Malaysia is the world’s ninth largest producer of silicon,
production in Myanmar has grown rapidly since the mid-2010s. accounting for 1% of global production in 2021.
Today it accounts for 13% of global production and is the world’s third
largest producer behind China and the United States. Myanmar is a Copper and aluminium are widely used in all clean energy
particularly important producer of heavy rare earths such as technologies, including solar PV modules, wind turbines, EVs and
dysprosium, and supplied about half of China’s heavy rare earth electricity networks. Indonesia, Myanmar and the Philippines are the
concentrates in 2020. On 1 February 2021, the coup d’état in major copper producing countries in the region, collectively
Myanmar that brought down the elected government and imposed accounting for around 4% of global production. Aluminium metal is
military rule triggered concerns of potential supply disruptions. Viet most commonly produced from alumina, which is in turn produced
Nam and Thailand are reported to have large resources, but there from bauxite. Southeast Asia accounts for 6% of global bauxite
has not yet been major progress in converting resources into production and 22% of global reserves.
production.
Separation and refining operations for rare earth elements are heavily
concentrated in China (90% market share in 2020); the only large
non-Chinese facility in operation today is the Lynas Advanced
Materials Plant in Malaysia.
Other critical minerals

Cobalt, manganese and graphite are important minerals for EV
batteries. The Philippines is the fourth largest cobalt producer in the
world, accounting for around 3% of global production. Myanmar and
Malaysia are the tenth and twelfth largest manganese producers,
PAGE | 130
Investment in the exploration and development of critical minerals in the region has declined in
recent years...
Southeast Asia mineral exploration budget, 2000-2021

1 000 5%
USD million
Exploration budget
800 4%
600 3% Global share (right axis)
400 2%
200 1%
2000 2005 2010 2015 2020

Source: S&P Global Intelligence (2022).
PAGE | 131
…hampered in part by limited geological information and lack of technical capacity
The mining sector has historically been an important contributor to of IT and technical resources and capacity as well as coordination
government revenues, GDP and employment in Southeast Asia. In issues with local government authorities and mining companies.
Indonesia, for example, the sector accounts for around 2.5% of
Governments can work to improve their national geological surveys
government revenues, 5% of GDP and provides over 1.4 million jobs.
in a number of ways, including increasing budget allocations,
Investment in mining and minerals development in the region have facilitating technical capacity building and training, and providing
declined in recent years and the region’s share of global exploration guidance and assistance to local governments. They could also
spending has halved since 2012. A lack of exploration investment consider leveraging digital technologies such as remote sensing and
could threaten the long-term future of minerals production in the machine learning techniques. These efforts can be complemented by
region. Foreign direct investment (FDI) in mining has also declined regional and international cooperation, such as working to improve
from an average of 6% of total FDI between 2012 and 2015 to just the quality and accessibility of the ASEAN minerals information
1.4% in 2020. system.
The ASEAN Minerals Cooperation Action Plan (AMCAP-III) Phase 2: Capacity building efforts can target specific technical needs and
2021-2025 identified several priority areas to promote investment in fields, such as geology, mining engineering and environmental
mineral exploration in the region. These include “developing new science, or regulatory and administrative skills of government levels
strategies and effective tools for collecting and processing data for at different levels, including local and subnational governments.
the ASEAN minerals information system to drive investments and Regional and international cooperation as well as public-private
sustainable development” and “building human, institutional and sector partnerships can complement domestic capacity building
technical capacities”. initiatives. Capacity building can have positive, long-term effects
across all parts of mineral development, including by improving the
High quality geological data and resource mapping are key decision-
quality and access to geological data, facilitating investment in
making tools to encourage greater investment in minerals
exploration and ensuring sustainable production and governance.
development. Governments in the region face a range of challenges
in improving geological surveys, including budget constraints, a lack
PAGE | 132
The region needs to address environmental, social and governance concerns
Southeast Asia is already a key supplier of several of the critical

minerals needed for clean energy transitions. However, as Battery-grade nickel production from HPAL
consumers and investors increasingly demand that manufacturers
Indonesia and the Philippines are rich in laterite resources, which
source minerals that are sustainably and responsibly produced, the
are typically used as a feedstock to produce lower-purity Class 2
region must improve its environmental performance and governance
products for stainless steel. Battery cathodes require higher-purity
systems to position itself as a reliable supplier in the coming years.
Class 1 products, typically produced from sulphide ores.
Hydrometallurgical processes such as HPAL can use laterite
Environmental concerns resources to produce Class 1 nickel.
There is a wide range of environmental issues associated with mining
HPAL faces several challenges such as high capital costs, a track
in the region, including GHG emissions levels, impacts on local air
record of cost overruns and delays, and major environmental risks.
quality, water use, water quality, biodiversity and land-use, as well as
HPAL can emit twice as many GHGs and use five times more water
handling of mining waste.
than nickel production from high-grade sulphide deposits. HPAL
Coal accounts for around 40% of power generation in the region, generates an acidic slurry which must be neutralised and properly
resulting in a grid with very high emissions intensities for GHG contained, but land-based tailing dams in the region are subject to
emissions and local air pollutants. Power is required for a variety of high precipitation and seismic activity, posing a contamination risk
mineral development activities, including energy-intensive operations to nearby waterbodies. Deep-sea tailings placement is being
such as smelters and projects employing HPAL (see box). considered, but this raises concerns for marine ecosystems.
Mining and processing activities also use large volumes of water. For Improvements to HPAL or alternative processing technologies to
example, producing one kilogram of nickel from limonite type laterites reduce costs and environmental risks could help Indonesia and the
through HPAL uses over 300 litres of water directly and 1 400 litres Philippines maximise the benefits from their nickel resources.
indirectly. Water pollution is also a serious concern, with rivers near
operating and abandoned mines contaminated by heavy metals.
PAGE | 133
Nickel deposits in Indonesia and the Philippines are typically mined companies are owned by those with close affiliations with politicians
using open-cut methods, since laterite ores are formed near the and top government officials. Women, particularly in rural and
surface and located horizontally in the soil. These deposits cover vast indigenous communities, face displacement and violence, as well as
areas, and are often located beneath rainforests with rich biodiversity exclusion from employment and consultative processes.
and carbon absorption. In 2021, the Philippines lifted a nine-year ban
International assessments of governance in extractive sectors in
on new mines as well as a four-year ban on new open-pit mines,
Southeast Asia show a mixed picture. The 2017 Resources
raising concerns for land use and water quality impacts.
Governance Index assessed the mining sectors of several countries
in the region: Indonesia (68, Satisfactory) the Philippines (58, Weak),
Social and governance concerns Lao PDR (38, Poor), Cambodia (30, Poor), Myanmar (27, Failing).
Social and governance concerns stemming from mining in the region The Extractive Industries Transparency Initiative (EITI) assesses
also need to be addressed. These range from adverse impacts on countries on their progress towards meeting the good governance
livelihoods and forced community displacement to poor safety standards. They found that the Philippines is making “satisfactory
standards and corruption. progress” as of 2018, while Indonesia is making “meaningful
progress” as of 2017. Myanmar was temporarily suspended in 2021.
Mining activities in the region have been linked to reduced fish
resources, negatively impacting livelihoods in coastal communities Myanmar’s military coup in February 2021 has not only sparked
through the disposal of sediments, wastewater with high concern regarding mineral supplies, but also broader concerns
temperatures and effluents with toxic substances, affecting coral around the implications of illegal mining activities. Illegal rare earth
reefs and limiting the productivity of nearshore areas. Mining mining poses health and environmental risks to neighbouring
activities can degrade air quality for communities (mostly due to communities and ecosystems, while poor governance and corruption
mining dust or coal dust), cause more frequent floods due to sediment could see profits funding armed conflict.
build-up, and pollute drinking water sources.
Additional concerns include human rights abuses, poor working

conditions and safety standards as well as corruption. Corruption at
different levels of government in the region has been well
documented. Indonesia Corruption Watch indicates that many mining
PAGE | 134
Southeast Asia’s metal recycling rates remain among the lowest in the world
Recycling input rates for aluminium and copper in selected regions

Aluminium Copper
100% 100%
80% 80%
60% 60%
40% 40%
20% 20%
Less
than 1%
North Europe Global China Southeast Europe China Global North Southeast
America average Asia average America Asia

Note: Share of secondary production in total refined product consumption.
Source: World Bureau of Metal Statistics (2020), World Metal Statistics Yearbook.
PAGE | 135
Priorities for Southeast Asia to realise its full potential as a reliable supplier of critical minerals
Address environmental, social and governance concerns globally, but recycling input rates for some metals in the region are
well below the global average. Secondary production of aluminium
Mitigating the wide range of environmental and social impacts from
accounts for just 2.5% of total refined consumption in the region,
mining requires a comprehensive approach and concerted action
compared with 25% globally. Copper recycling is almost non-existent.
from government and industry. Policies are needed to encourage the
displacement of unabated coal-fired power with low-carbon sources Recycling processes and infrastructure are still in the early stages of
to help reduce the emissions intensity of mineral production and development for many energy transition minerals such as battery
processing. Industry should conduct robust environmental impact metals and rare earth elements. The first battery recycling plant in the
assessments to identify and implement measures to mitigate impacts region was opened in Singapore in 2021, capable of processing
during and after mining, such as restoration and rehabilitation 5 000 tonnes of batteries per year. With EV sales, especially
activities to mitigate water pollution impacts on surrounding two/three-wheelers, growing rapidly in the region, additional recycling
ecosystems and communities. plants will be needed in the coming decades to extract critical
minerals from spent batteries. In addition to facilitating the
As a first step in improving governance and transparency, other
construction of new battery recycling plants, national and local
governments in the region with extractive industries are encouraged
governments should work together to build the necessary supporting
to join Indonesia and the Philippines to become “implementing
infrastructure to collect spent batteries and harmonise regulations.
countries” of the EITI. Implementing countries of the EITI undergo
regular assessments of progress and adhere to specific reporting
requirements. Enhance capacity building
Enhancing capacity building efforts across the region is central to
Develop and scaleup recycling ensuring the sustainable production and governance of mining
activities. This includes technical capacity building (e.g. geological
Recycling and other circular economy practices relieve pressure on
surveys, reserve estimation, sustainable mining practices) as well as
primary supply and significantly reduce the adverse environmental
institutional capacity building for sound governance and transparent
and social impacts associated with minerals extraction and
regulations.
processing. For bulk metals, recycling practices are well established
PAGE | 136
Southeast Asia Energy Outlook 2022 Annex
Annex
PAGE | 137
Southeast Asia Energy Outlook 2022 Acknowledgements
Acknowledgements
This report was prepared by the World Energy Outlook (WEO) team Timothy Goodson, Inchan Hwang, Pawel Olejarnik, Thomas Spencer
in the Directorate of Sustainability, Technology and Outlooks (STO), and Brent Wanner, as well as valuable guidance from Laura Cozzi,
in co‐operation with other directorates of the International Energy Chief Energy Modeller and Head of Division for Energy Demand
Agency (IEA). Toru Muta co‐ordinated the work and was the lead Outlooks.
author, and he designed and directed the report together with Tim
The report benefitted greatly from contributions from other experts
Gould, Chief Energy Economist and Head of Division for Energy
within the IEA: Yuya Akizuki, Christophe Barret, Alexandre Bizeul,
Supply and Investment Outlooks, and Christophe McGlade, Head of
Xiushan Chen, Chiara Delmastro, Carlos Fernandez Alvarez, Araceli
the Energy Supply Unit.
Fernandez Pales, Carl Greenfield, Akos Losz, Samantha Mcculloch,
The other principal authors and contributors from across the agency Ermi Miao, Gergely Molnar, Hidenori Moriya, Takashi Nomura,
were: Lucila Arboleya Sarazola (lead on investment), Charlene Bisch Amalia Pizarro, Uwe Remme, Melanie Slade, Jacob Teter and Tiffany
(modelling), Musa Erdogan (modelling), Shai Hassid (power), Pablo Vass. Kieran Clarke, the IEA’s programme manager for Southeast
Hevia-Koch (power flexibility), Craig Hart (power flexibility), Asia, and Nathaniel Lewis-George provided support and advice
Jérôme Hilaire (fuel supply), George Kamiya (critical minerals), throughout. Elspeth Thomson carried editorial responsibility.
Tae-Yoon Kim (critical minerals, oil), Vanessa Koh (power
Mary Warlick (Deputy Executive Director of the IEA and Acting
flexibility, country policies), Randi Kristiansen (power flexibility),
Director of STO) provided support and guidance throughout the
Laura Maiolo (natural gas), Lia Newman (economy and subsidies),
project. Valuable comments and feedback were provided by senior
Ksenia Petrichenko (efficiency), Ryszard Pospiech (modelling and
management and other colleagues within the IEA, in particular
data management), Rebecca Schulz (oil), Leonie Staas
Keisuke Sadamori, Toril Bosoni, Peter Fraser, Timur Gül, Cesar
(demand, efficiency and access), Peerapat Vithayasrichareon
Alejandro Hernandez, Tom Howes, Brian Motherway, Roberta
(power flexibility) and Peter Zeniewski (low-carbon fuels, gas).
Quadrelli and Masatoshi Sugiura.
Marina dos Santos and Eleni Tsoukala provided essential support.
Thanks go to the IEA’s Communications and Digital Office for their
The report relied on the scenario modelling and support from across
help in producing the report, particularly to Jad Mouawad, Astrid
the entire WEO team, in particular from Stéphanie Bouckaert,
PAGE | 138
Dumond, Gregory Viscusi, Jethro Mullen, Taline Shahinian, Therese express particular gratitude in this respect for funding and other
Walsh and Allison Leacu. support from the Ministry of Economy, Trade and Industry of Japan.
The analysis on power flexibility was made possible through the
The IEA would like to thank ASEAN member countries and the
Clean Energy Transitions in Emerging Economies programme, which
ASEAN Secretariat for their co-operation and support with numerous
has received funding from the European Union’s Horizon 2020
aspects of this analysis. The work could not have been undertaken
research and innovation programme under grant agreement No.
without the support and co-operation provided by many government
952363.
bodies, organisations and companies worldwide; we would like to
Many high-level government representatives and experts from Masazumi Hirono Tokyo Gas
outside of the IEA provided input and reviewed preliminary drafts of Masashi Hoshino Ministry of Economy, Trade and
the report. Their comments and suggestions were of great value. Industry (METI), Japan
They include: Shigeru Kimura Economic Research Institute for ASEAN
and East Asia (ERIA)
Rabiah Al Adawiyah T.Hussein ASEAN Secretariat (ASEC)
Agnes Koh Energy Market Authority (EMA),
Venkatachalam Anbumozhi Economic Research Institute for Singapore
ASEAN and East Asia (ERIA)
Ken Koyama The Institute of Energy and Economics,
Jun Arima The University of Tokyo Japan (IEEJ)
Scott Bartos United States Agency for International Nathan Lee National Renewable Energy Laboratory
Development (USAID), United States (NREL)
Harmeet Bawa Hitachi Energy David Lutman The UK-led Friends of Indonesia
Mick Buffier Glencore Renewable Energy (FIRE) Dialogues,
United Kingdom
Anna Dan Ministry of Foreign Affairs, Japan
Yuji Matsuo The Institute of Energy and Economics,
Muhammad Ery Wijaya Climate Policy Initiative (CPI) Japan (IIEJ)
Bert Fabian United Nations, Environment David Morgado Asian Development Bank (ADB)
Programme (UNEP)
Lamberto Dai Pra’ Enel
Marie Gail de Sagon ASEAN Secretariat (ASEC)
PAGE | 139
Mentari Pujantoro Agora Energiewende

Lourdes Sanchez International Institute for Sustainable
Development (IISD)
Hans-Wilhelm Schiffer RWTH Aachen University
Elvira Di Sibio Eni
Tharinya Supasa Agora Energiewende
Cecilia Tam Organisation for Economic Co-operation
and Development (OECD)
Pradeep Tharakan Asian Development Bank (ADB)
Ruengsak Thitiratsak Petroleum Institute of Thailand (PTIT)
Fabby Tumiwa Institute for Essential Services Reform
(IESR)
Nicholas Wagner International Renewable Energy Agency
(IRENA)
Matthew Wittenstein United Nations Economic and Social
Commission for Asia and the Pacific
(ESCAP)
Kelvin Wong DBS Bank
Peter Wood Shell plc
Akira Yabumoto J-power
Zulfikar Yurnaidi ASEAN Centre for Energy (ACE)
PAGE | 140
This publication reflects the views of the IEA Secretariat but does
not necessarily reflect those of individual IEA member countries.
The IEA makes no representation or warranty, express or implied, in
respect of the publication’s contents (including its completeness or
accuracy) and shall not be responsible for any use of, or reliance
on, the publication. Unless otherwise indicated, all material
presented in figures and tables is derived from IEA data and
analysis.
This publication and any map included herein are without prejudice
to the status of or sovereignty over any territory, to the delimitation
of international frontiers and boundaries and to the name of any
territory, city or area.
IEA Publications International Energy Agency
Website: www.iea.org
Contact information: www.iea.org/about/contact
Typeset in France by IEA - May 2022
Cover design: IEA - Photo credits: © Gettyimages

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Southeast Asia

Energy Outlook 2022

Key findings ..................................................................................................... 4

Total primary energy supply by country, by fuel, in Southeast Asia, 2000-2020

Energy demand trends in Southeast Asia by scenario, 2020-2050

10 400 600 2 800

7.5 300 450 2 100

5 200 300 1 400

2.5 100 150 700

Primary energy demand CO2 emissions Share of population with

Crude oil Natural gas

billion cubic metres

2020 2030 2050 2020 2030 2050

IEA. All rights reserved.

Russia’s invasion of Ukraine highlights the importance of mechanisms to safeguard the

Country Mandatory operational oil stockpiles

Brunei 31 days for refineries

Cambodia 30 days for companies importing oil

Myanmar 6 days for oil companies

IEA. All rights reserved.

Low emissions fuels: a key part of transitions in Southeast Asia…

End-use Power generation

Unabated natural gas

Potential revenue from selected minerals in Southeast Asia, SDS, 2020-2050

60 Rare earth elements

2020 2030 2050 2050

IEA. All rights reserved.

Energy in Southeast Asia

Today’s energy trends

GDP per capita Energy demand per capita

Singapore Brunei Darussalam 2000

20 40 60 80 100 100 200 300 400 500

IEA. All rights reserved.

Total energy supply by fuel in Southeast Asia, 2000-2020

25 Traditional use of biomass

IEA. All rights reserved.

Total energy supply by fuel, by country in Southeast Asia, 2019

Viet Nam Natural gas

Myanmar Total energy supply

25% 50% 75% 100%

Power generation mix and shares by fuel in Southeast Asia, 2000-2020

Power generation mix Share

1 250 Other 100%

750 Oil 60%

2000 2010 2020 2000 2020

IEA. All rights reserved.

Index (100=the first quarter of 2020)

2020 Southeast Asia 2020 EMDE except China

IEA. All rights reserved.

Factors shaping the energy outlook

8 000 8% Compound average

annual growth rate

6 000 6% 2010-20 4.2%

Indonesia Malaysia Philippines Thailand GDP growth of Southeast Asia

IEA. All rights reserved.

Ownership per 100 population

Number of vehicles Paved road length Air conditioning units Refrigerators

IEA. All rights reserved.

Pathways after the Glasgow Pact signed at COP26 in November 2021

40% 40% by 2040